Writing enough new business to derail the negative effects of additional operating losses could prove difficult for PMI Mortgage Insurance, an analyst for Standard & Poor's said Tuesday. At the same time, S&P credit analyst Miles Kaschalk added PMI has a safety valve in place. He explained the company plans to counter contraction by expanding: PMI hopes to drum up new business through a new mortgage insurance unit. "We believe that the new business written since second-half 2008 will be profitable and capital accretive," S&P analysts said." If PMI is unable to offer new business, the company's future earnings and statutory capital would be negatively affected." Standard & Poor's lowered ratings on PMI and placed its parent company, PMI Group (PMI), on negative credit watch, thereby maintaining its position that the private mortgage insurance business is facing headwinds. The ratings agency shifted its outlook on PMI after the private mortgage insurer's first-quarter earnings fell "well below" S&P's forecast for the period. As a result, analysts downgraded PMI Mortgage's counter-party credit and financial strength ratings to B-minus from B-plus and moved the credit and senior debt ratings of PMI Group to triple C-minus from triple C-plus. S&P now expects PMI Mortgage Insurance to report wider losses throughout the rest of the year and through 2012, and analysts said PMI's future results and capital levels could be negatively impacted if the insurer fails to write enough new business. The Walnut Creek, Calif.-based company reported a loss of $126.8 million, or 79 cents a share, for the three months ended March 31 compared to a loss of almost $157 million, or $1.90 a share, a year earlier. "In addition, we expect that in second-quarter 2011 PMI will breach the regulatory thresholds for writing new business, which regulators of 16 states have put in place," Kaschalk said. "Although PMI has obtained waivers from some of these states (and is attempting to obtain waivers from the others) to continue writing business in the event of a breach, these waivers will have to be extended periodically if PMI doesn't return to compliance." Write to Kerri Panchuk.