PMI Pmi Grp. (The) Common Stock

The shares of  The PMI Group (PMI) have been trading at a price below $1.00 per share since August 1, 2011. As such, the New York Stock Exchange (NYSE) notified the company that it has fallen below the NYSE's continued listing standard of having a minimum average closing price of $1.00 per share over 30 consecutive trading days. The share price of PMI was $0.30 as of Friday close. It was on July 29 that PMI Group closed trading at $1.00.

Per the NYSE rules PMI Group will get six months to meet with the minimum requirement or till the annual shareholders meeting to cure the deficiency. However, the shares will continue to trade during the cure period subject to fulfillment of other listing requirements.

Also, PMI Group will be able to reclaim conformity with the requirement at any time during the six month cure period if the company closes at a price of at least $1.00 on the last trading day of any calendar month during the cure period and has an average closing share price of at least $1.00 over the 30 trading days ending on the last trading day of that month or on the last day of the cure period.

Furthermore, if PMI Group takes any action requiring approval of its stockholders by its next annual meeting, the condition will be considered cured if the share price exceeds $1.00 per share and remains above the level for at least the following 30 trading days. The NYSE will begin with its suspension and delisting procedures if the company is unable to reclaim conformity with the requirement.

As per NYSE rules, PMI Group will have to respond to the notification stating its intent to either cure this deficiency or be subject to suspension and delisting procedure. The company has already informed NYSE that it intends to cure the deficiency.

California based PMI Group provides insurance coverage to mortgage lenders, commercial banks and other financial institutions. The operation of PMI Group received a severe blow with the economic downturn that took place in the second half of 2008. Since then, the company has continued to incur losses till date. The company posted a loss of $1.76 per share in the last quarter as it continues to suffer from mortgage losses.

To add to its woes, PMI Group is not able to sell new policies. On top of it Arizona-based PMI Mortgage Insurance Co., the main subsidiary, is short of funds, which is required to meet regulatory requirements in Arizona. As such, the State insurance department will likely bar it from selling new policies, which might result in either rehabilitation or liquidation of the unit. Subsequent to the second quarter earnings release, PMI Group disclosed its concerns as it fears shuttering its business.

Recently, Arizona Department of Insurance has brought under its supervision PMI Mortgage Insurance Co. and PMI Insurance Co. by issuing an order. The order forbids PMI Mortgage Insurance Co. and PMI Insurance Co., the company’s subsidiaries, from issuing new mortgage insurance commitments unless approved by the Department of Insurance.

However, they may issue mortgage insurance policies under pending commitments through the close of business on September 16, 2011. The order also bars PMI Mortgage Insurance Co. to pay interest on $285 million in aggregate principal amount of surplus notes. The subsidiaries are also barred from making any financial transactions without the Department’s approval.

We retain our Underperform recommendation on PMI Group. The quantitative Zacks #4 Rank (short term Sell rating) for the company indicates downward pressure on the stock over the near term. The company's nearest peer is MGIC Investment Corp. (MTG).

 
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