WALNUT CREEK, Calif.,
Aug. 19, 2011 /PRNewswire/ -- The PMI
Group, Inc. (NYSE: PMI or the "Company") today announced that the
Arizona Department of Insurance (the "Department") has issued an
order, placing PMI Mortgage Insurance Co. ("MIC") and PMI Insurance
Co. ("PIC") under the Department's supervision, and appointing a
Supervisor. Pursuant to the order, MIC and PIC are required
to cease issuing new mortgage insurance commitments effective as of
the close of business today, unless otherwise approved by the
Director of the Department or the Supervisor.
Under the order, unless otherwise approved by the Director of
the Department or the Supervisor, MIC and PIC may issue mortgage
insurance policies under pending commitments through the close of
business on September 16, 2011. In
addition, pursuant to the order, MIC is required to cease making
interest payments on the $285 million
in aggregate principal amount of surplus notes that it has issued
in favor of the Company. During the period of supervision,
the order prohibits MIC and PIC from taking a variety of actions
without the approval of the Director of the Department or the
Supervisor, including lending funds, merging with another company,
entering into reinsurance contracts, paying dividends and entering
into affiliate transactions, and, except in the ordinary course of
business, conveying or encumbering assets, withdrawing from any of
its bank accounts, investing funds and incurring liabilities. The
order provides that, in order to end the supervision, MIC and PIC
must provide the Department with a plan satisfactory to it that
cures deficiencies in MIC's and PIC's financial condition,
including deficiencies in MIC's and PIC's policyholder position.
The order provides that, if MIC and PIC do not satisfy these
requirements within 60 days, the Director of the Department may
take appropriate action, including commencing conservatorship
proceedings.
Fannie Mae and Freddie Mac (collectively, the "GSEs") previously
approved the use of PMI Mortgage Assurance Company ("PMAC"), a
subsidiary of MIC, as a limited, direct issuer of mortgage guaranty
insurance in certain states in which MIC is unable to continue to
write new business. As a result of the order, pursuant to
restrictions contained in Fannie Mae's approval, PMAC is no longer
eligible to offer mortgage insurance. Accordingly, PMAC will
no longer issue mortgage insurance policies in any states.
Although the Company is exploring opportunities to further
capitalize PMAC and to obtain the restoration of the GSE's
approvals of PMAC as an eligible mortgage insurer, there can be no
assurance that these efforts will be successful.
The Department may at any time take further regulatory actions,
including initiating state court receivership proceedings for the
rehabilitation or liquidation of MIC. In a court-ordered
receivership, the Director would be appointed receiver of MIC and
would have full and exclusive power of management and control of
MIC. The Company cannot predict if or when the Department might
take any such actions. A court order appointing a receiver
could result in up to approximately $735
million of The PMI Group's outstanding indebtedness becoming
due and payable. The PMI Group does not have access to
sufficient funds or other sources of liquidity sufficient to enable
it to repay such obligations if they were to become due and
payable.
MIC and PIC will work with their customers, the Department and
the GSEs to facilitate run-off. In addition, the Company and
its subsidiaries are exploring potential capitalization and
restructuring alternatives, including potential options to address
the Department's findings, and have engaged Willis Capital Markets
& Advisory and Evercore Partners as financial advisors.
There can be no assurance that any of these potential
alternatives will be successful.
ABOUT THE PMI GROUP, INC.
The PMI Group, Inc. (NYSE: PMI), headquartered in Walnut Creek, CA, through its wholly owned
subsidiaries, is a provider of residential mortgage insurance and
credit enhancement products, currently engaged in a run-off of its
existing in-force book of business. For more information:
www.pmi-us.com.
Cautionary Statement: Statements in this press release and
supplement that are not historical facts, or that relate to future
plans, events or performance, are "forward-looking" statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Readers are cautioned that forward-looking statements by
their nature involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.
Many factors could cause actual results and developments to differ
materially from those expressed or implied by forward-looking
statements. Such factors include, among others:
- MIC no longer complies with minimum state regulatory capital
requirements. Without significant additional capital or capital
relief, MIC's policyholders' position will continue to decline, its
risk-to-capital ratio will continue to increase, and its net assets
will continue to be reduced.
- If the Department were to determine that MIC or PIC have failed
to take appropriate steps to cure the deficiencies noted in its
order of supervision, or if the Department were otherwise to
determine further actions were appropriate, the Department could
take further regulatory actions, which could include initiating
state court receivership proceedings for the rehabilitation or
liquidation of MIC. Actions taken by the Department could further
limit or eliminate our control of MIC. We cannot predict if or when
the Department may take any such further actions. If one or more of
such actions were taken by the Department, our financial condition
and results of operations could be materially adversely
affected.
- We may not be able to raise additional capital or achieve
capital relief in order to restore our ability to continue to write
new insurance business. We are exploring capital alternatives that,
if successful, could provide capital relief to MIC or capital to
other insurance subsidiaries, potentially including PMAC, so that
they may replace MIC as our primary writer of new insurance. The
amount of, and need for, additional capital could be affected by a
variety of factors. In addition, our ability to raise capital to
enable another insurance subsidiary to replace MIC as our primary
writer of insurance will depend on obtaining approval from the GSEs
of such other insurance subsidiary as an eligible insurer.
We cannot predict whether we will obtain such approval. Our
ability to raise capital is also limited as a result of, among
other factors, the substantial decline in our market
capitalization, the downgrades in the ratings of our debt
securities and our significant operating losses, combined with
difficult market conditions generally and in our industry
specifically. We may not be able to raise capital on
favorable terms and in the amounts that we require, or at all.
- The risk that an event of default could result with respect to
certain of The PMI Group's outstanding debt obligations if the
Department were to obtain a court order appointing, or MIC were to
consent to the appointment of, a receiver or similar official of
MIC.
- The magnitude of future losses as a result of a variety of
factors that are outside our control and difficult to predict and
the risk that future losses exceed our claims paying ability.
Other risks and uncertainties are discussed in our SEC filings,
including in Item 1A of our Annual Report on Form 10-K for the year
ended December 31, 2010 and Item 1A
of our Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 2011. We undertake no obligation to
update forward-looking statements.
SOURCE The PMI Group, Inc.