PMI Mortgage Insurance Co.
, the primary subsidiary for the PMI Group, Inc. (PMI)
, announced Friday that it sold its equity ownership in Financial Guaranty Insurance Company Corporation
(FGIC). PMI had owned a total of 42% of FGIC.
Head of Investor Relations, Bill Horning, said PMI wrote the investment down to zero, with no positive or negative financial obligations to FGIC, by Dec. 31, 2008. He did not comment on why the sale did not take place sooner than 2010.
PMI originally joined forces with other investors including The Blackstone Group
, The Cypress Group
, and CIVC Partners
in August 2008 to buy out mortgage guarantor FGIC, who was at the time suffering severe losses through "risky business;" bonds, credit derivatives, and default swaps. The sale price was $2.16bn.
FGIC repeatedly caused PMI to lose quarterly earnings including Q307 when PMI reported an estimated loss of $350m
or $1.05 per diluted share. PMI reported that because of FGIC's loss of approximately $65m, the company would be forced to suspend a full year total incurred loss guidance and other financial services.
Two quarters later, in Q108, FGIC lost its AAA-rating
even as the fourth largest monoline, down six notches by February to A3
. Shortly after the downgrade, FGIC asked to be split in two
in order to protect municipal bonds that it had insured.
PMI did not recognize losses from FGIC in 2009 or 2010 and the company still retains tax benefits. Horning told HousingWire
he could not disclose an explicit reason for the sale nor who FGIC was sold to.
"We saw an opportunity at this time to consummate the sale and preserve the tax asset to go forward," he said in an interview. "It's just a transaction and we hope to realize future benefit tax from it."
Horning said the transaction had no asset value and the proceeds were insignificant.
Write to Christine Ricciardi