PMI Links Shortfall to Jobs, Fairbanks, Etc.

The PMI Group Inc., Walnut Creek, Calif., says its 2003 net income will not meet the consensus First Call estimate of $3.96 per share, blaming its woes on higher-than-expected claims payments and problems at subservicer Fairbanks Capital Corp.In a conference call Thursday, PMI officials said the company's second-quarter earnings will be reduced by at least $400,000 because of Fairbanks, and that they no longer expect the subservicer -- the subject of a federal criminal probe into its servicing practices -- to contribute $32 million in earnings to PMI this year. (PMI, the nation's second-largest mortgage insurer, owns a 57% stake in Fairbanks.) Discussing the higher claim payments, company president Stephen Smith cautioned that "this is not a credit blow-up," adding that a "jobless recovery and lingering unemployment" have hurt mortgage borrowers, in particular first-time homebuyers. The company is forecasting second-quarter earnings in a range of $0.71 to $0.78 per share. Losses incurred in its U.S. mortgage insurance operation for 2003 are projected to be between $210 million and $230 million, exceeding previous guidance of $195 million to $205 million. In early afternoon trading, its stock was down almost 7% to $27.03. Other publicly traded MI firms, including MGIC and Radian, were trading down as well.