The PMI Group (PMI) reported losses of $228.2m - or $2.76 per share - in Q409 as mortgage defaults continue to put financial pressure on the company's mortgage insurance business. News of the loss comes after PMI Mortgage Insurance Co. (MIC), the company's primary operating subsidiary, received approval from the Arizona Department of Insurance to continue writing new mortgage insurance business even if PMI falls below state capital requirements. PMI Group's quarterly loss widened from the year-ago quarter, when the company posted $181m of losses, according to the earnings statement. Losses were driven by the mortgage insurance operations, which widened to a $242m loss in Q409 from $174.1m of losses in the year-ago quarter. Primary insurance reserves grew by $236.7m to $2.9bn in the quarter, due to higher claim rates and higher default inventories. Although the number of primary loans in default at year-end - 150,925 - showed growth over a year earlier - 141,261 - PMI received 9% fewer new default notices received in Q409 than Q309, and 20% fewer than the year-ago quarter. Mortgage securitization giant Fannie Mae (FNM) approved PMI Mortgage Assurance (PMAC) to write new mortgage insurance in certain states, if any, where MIC is prohibited due to its financial condition. PMI said it is in discussions with Freddie Mac (FRE) regarding similar approval of PMAC, the unit formed to continue writing new business in cases where MIC cannot. PMI expects PMAC to hold about $28m in capital, following some internal restructuring including a $10m investment from MIC. At least in Arizona, the company can continue to write new insurance through MIC, rather than the PMAC unit. The chief insurance regulator in Arizona granted approval for MIC to continue writing new mortgage insurance business in the event it falls below state capital requirements. During Q309, Arizona and California passed legislation granting regulators the discretion to decide if a mortgage insurer can continue writing new business if it does no meet a required minimum risk-to-capital minimum level – which is generally 25 to 1. “[T]he Department’s action reflects the importance for MIC to continue to write new mortgage insurance in support of the US housing recovery, and affirms our view that MIC has the financial resources to pay its policyholder obligations during a very challenging economic environment," said PMI chairman and CEO Stephen Smith in a press statement. "PMI’s continued ability to write new mortgage insurance will enable qualified low-down-payment borrowers to purchase a home, fostering sustainable homeownership that strengthens communities across the nation.” Write to Diana Golobay. Disclosure: The author holds no relevant investments.