Mortgage insurer the PMI Group Inc. (PMI) on Monday reported a $181 million loss -- or $2.22 per share -- for continuing operations in the fourth quarter, compared with a third-quarter loss of $149.3 million, or $1.83 per share. The company also reported it's full-year 2008 loss at $877.2 million -- or $10.90 per share. Losses in the U.S. mortgage insurance operations -- and specifically impairments of certain preferred equity securities in the segment's portfolio -- drove the loss, PMI said. The company had posted a $1.03 billion loss on continuing operations in the year-ago quarter. While Monday's announcement marked a narrowed loss from year-ago levels, PMI warned that a "deepening of the current economic recession; decreases in housing demand, mortgage originations or housing values" could cause widened losses going forward. Despite the narrowed loss, the company's consolidated premiums earned in the fourth quarter and full year were $184.1 million and $786.2 million, respectively, down from the year-ago levels of $210 million and $815.4 million. Consolidated losses and loss adjustment expenses, including paid claims and increased loss reserves, accounted for $404.5 million and $1.9 billion in the fourth quarter and full-year, respectively. These figures compare with $542.7 million and $1.12 billion in the year-ago periods. Loss reserves for the U.S. mortgage insurance operations rose by $274.9 million in the fourth quarter to a total $2.6 billion as a result of increased notices of default, partially offset by a $90 million-credit "from reinsurance recoverables, primarily from captive reinsurance agreements." Read the earnings statement. In mid-February, Moody’s Investors Services downgraded a handful of mortgage insurers and slashed PMI Mortgage Insurance Co. to Ba3 from A3, demonstrating a belief at the rating agency that “the franchise value among mortgage insurers generally has deteriorated in recent months, placing additional pressure” on the ratings of these companies, Moody’s said. Stocks were trading up as much as 18.32 percent as this story went to press early Monday after the announcement. Write to Diana Golobay at Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.