PMI Takes Net Loss

The PMI Group Inc., Walnut Creek, Calif., had a net loss in the fourth quarter 2007 of $1 billion (-$12.51 per share), compared with net income of $100.5 million ($1.19 per share) for the same period one year ago. Most of the loss can be attributed to PMI's 42% investment in FGIC Corp., New York. FGIC had a $1.89 billion net loss for the fourth quarter, which resulted in a loss of $776.1 million after-tax for PMI. PMI previously reported its U.S. mortgage insurance operations had a net loss of $236 million in the fourth quarter. PMI created a valuation allowance of approximately $168.1 million against a $214.3 million deferred tax asset associated with its investments in FGIC and RAM Re. The deferred tax asset is created upon the recognition of losses from FGIC and RAM Re in excess of its tax basis with respect to the investment in those companies. PMI took a $2.3 million loss on its RAM Re investment for the quarter. FGIC says it is ceasing writing new financial guarantee business for a period of time to preserve capital. It has hired Goldman Sachs to advise it on capital enhancement initiatives.