PMI Inks Deal to Sell Aussie Insurance Ops
Citing a desire to "focus on core U.S. mortgage insurance," The PMI Group, Inc. (PMI) said Thursday that it had entered into a deal to sell its Australian mortgage insurance operations to QBE Insurance Group Limited, Australia's largest international general insurance and reinsurance group. PMI's U.S. operations have been bleeding cash in recent quarters, and the sale will allow PMI to gain further cash to strengthen it's stateside MI business. The deal, expected to close at the end of the third quarter, is worth a total of $920 million; 80 percent of deal expected to come in the form of cash, with the rest financed via a variable-debt arrangement via QBE. The amount payable on the debt note will vary depending on the performance of the PMI Australia insurance portfolio, the company said in a press statement. "This transaction represents an important step in our five-point plan for progress, specifically maintaining our financial strength and focusing on our core U.S. mortgage insurance business," said Steve Smith, PMI CEO. The Walnut Creek, Calif.-based insurer said on Aug. 7 that it lost $246.3 million in Q2, or $3.03 per share, compared to income of $83.8 million, or $.95 per share, one year earlier. The loss, not surprisingly, was driven by a $225.9 million net loss in the company’s U.S. mortgage insurance operations; PMI also said it had closed its Canadian unit, and said it will close sales offices in Germany, Spain and Italy, as it looks to preserve and redeloy capital to prop up its ailing U.S. insurance business. Shares in the company jumped more than 50 percent to $4.31 in pre-market trading Thursday, when this story was published. Disclosure: No positions in PMI when 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.