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PMI Group Places Lender Services in New Subsidiary

The PMI Group Inc. here has created a new subsidiary, PMI Capital Corp., where all of its "diversification" businesses will reside.

This includes the company's international mortgage insurance units in Europe, Australia and New Zealand, its lender

services businesses such as Fairbanks Capital, Truman Fund and American Pioneer Title Insurance Co. and its financial guaranty business.

Bradley M. Shuster, most recently president, international and strategic investments for PMI, has been named as president of PMICC.

The primary reason PMI has put these businesses together, Mr. Shuster said, is to bring focus to the company in terms of its diversification strategy. In addition, the company was looking to bring transparency to investors.

PMI "reached a critical mass in terms of the capital we deploy and in terms of earnings" so it established a management group to watch these businesses.

There are no balance sheet implications for PMI Group at this time, but there could be in the future if PMICC were to become the legal owner of the various units in the future.

While it might seem logical to keep the international mortgage insurance businesses with the U.S. mortgage insurance businesses (which includes CMG, a joint venture with CUNA Mutual), the international insurers are considered to be part of the diversification efforts and putting them into PMICC would not divert focus from the company's core business, he said. Another issue is that mortgage insurance in other countries takes a different form than it does in the U.S.

The majority of the earnings from PMICC come from the international and lender services segments.

In its 2002 annual report, PMI said PMICC had net income of $90.7 million for the year, up from $54.6 million in 2001.

The percentage of PMI's consolidated net operating income from PMICC was 23% for the year, up from 16% the previous year. In the fourth quarter, this was 24%, slightly down from 27% posted in the fourth quarter of 2001.

The international mortgage insurance companies had $48.4 million of net income for the year and $12.9 million for the fourth quarter. APTIC had fourth-quarter income of $3.7 million and annual income of $13.4 million.

Most of APTIC's business is in Florida, Mr. Shuster noted. It will still concentrate on that market, which is a good one for the title insurance business. However, he added, APTIC is looking to get licensed nationwide and is considering writing business in selected markets.

Fairbanks Capital, which PMI has a 57% interest in, contributed $22.4 million to the parent's earnings.

Other companies in which PMI has an ownership stake in that are part of PMICC are Ram Re, which contributed $4.2 million to PMI's profits and Truman Fund, which added $6 million.

In addition to Mr. Shuster, the other executives named at PMICC include:

* John Fulford, executive vice president and managing director, lender services. He will oversee APTIC, Fairbanks Capital and the Truman Fund.

* Tony Porter, senior vice president and managing director, international mortgage insurance. This is in addition to his current job as managing director and chief operating officer of PMI Europe.

* Arthur Slepan, senior vice president and managing director. He will oversee the company's existing financial guaranty investments and PMICC's future financial guaranty strategy, both domestic and international.

* Joanne Berkowitz, vice president and chief risk officer. She will have expanded accountability for risk management monitoring, both credit and operational, and supervision for all the subsidiaries and investments managed by PMICC.

Copyright 2003 Thomson Media Inc. All Rights Reserved.

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