PMI: MI Losses Create Need to Raise Capital

The PMI Group, Walnut Creek, Calif., says it needs to raise capital because its U.S. mortgage insurance business is experiencing higher losses and those losses are eating into its net assets. In its 2008 10-K filing, which was made on March 16 — the same day it revealed it lost $179 million for the fourth quarter — the company declared, "Unless we raise capital to support PMI, its policyholders' position will likely continue to decline and its risk-to-capital ratio will likely increase beyond levels necessary to meet regulatory capital adequacy requirements and, if we are unsuccessful in renegotiating our revolving credit facility by April 15, 2009, meet certain credit facility financial covenants." PMI said it is "exploring capital alternatives to enhance our liquidity and capital." This includes seeking funds through the Troubled Asset Relief Program obtaining reinsurance for PMI's future book of business and/or debt or equity offerings. The 10-K added that because of those capital constraints, PMI, which had significantly cut it book of business in 2008, would continue to reduce new insurance written in 2009. The holding company also faces significant liquidity issues, the filing added.