PMI Group, Walnut Creek, Calif., lost $135 million in the second quarter, but it could have been worse if the company was not able to record a $151 million gain on sale (net of tax) as it was finally able to recognize the note associated with the sale of its Australian mortgage insurance operations.
One year ago, PMI lost $151 million.
The company said its policyholders' position was $320.3 million below the minimum required by Arizona law and its risk to capital ratio was 58.1-to-1 as of June 30. It has advised the Arizona Department of Insurance, which is the MI unit’s primary regulator, regarding non-compliance with the required minimum policyholders' position.
PMI said it expects to further discuss with the Arizona DOI its primary U.S. underwriting unit’s financial condition and various capital initiatives it is pursuing.
PMI is already using a separately capitalized subsidiary to write new policies in states where it was unable to obtain a waiver or extension of a waiver of the risk-to-capital requirements. A footnote in its earnings release says the number of states where it is likely to use that subsidiary to write new business “is likely to significantly increase.”
Its U.S. MI business had a net loss of $338.4 million for the second quarter compared with a net loss of $115.6 million for the second quarter 2010.
The current quarter loss is driven by elevated losses and loss adjustment expenses (LAE), the lack of any material tax benefits and, to a lesser extent, lower premiums earned.
Total LAE for the second quarter was $430 million (versus $319 million in the second quarter of 2010) and was driven by decreases in the levels of expected future claim denials, net of reversals, and, to a lesser extent, higher claim rates. PMI said it took $187 million in reserves on new delinquencies in the U.S. MI portfolio.
During the second quarter, PMI Europe and PMI Canada repatriated $43 million and $5 million of capital, respectively, to PMI Mortgage Insurance Co.
