The PMI Group, Inc., who had delayed its full-year and fourth quarter earnings while waiting for financials from subsidiary FGIC Corp., said Monday that it lost $1.0 billion in the fourth quarter of last year. Driving the quarterly loss at PMI was a $776.1 million drag on earnings in the form of FGIC, which itself posted a $1.89 billion Q4 net loss earlier on Monday.
PMI owns part of the troubled bond insurer, which said that realized and expected losses on RMBS and associated CDO bond transactions it insured totalled $2.93 billion during last quarter. Outside of its interest in FGIC, PMI had earlier reported the results of its other operating segments, including its U.S.-based primary mortgage insurance business, which lost $236 million in Q4. Loss adjustments and paid claims totalled $549.3 million at PMI, while the company grew its insurance-in-force by 20 percent on a year-over-year basis. Insurance premium growth, however, is likely to slow dramatically into 2008. PMI — among others in the mortgage insurance industry — has pulled back strongly in key markets, as insured defaults have continued to rise and industry cure rates touch historic new lows. The company said in February that it would no longer insure loans unless borrowers contributed at least 3 percent equity into the purchase transaction. Part of the losses at PMI are being driven by where its policies are located: nearly 36 percent of risk-in-force is tied to loans in Florida, California, Texas, Illinois or Georgia. Nearly 25 percent — $7.6 billion — of risk-in-force is linked to loans where the loan-to-value ratio is greater than 97 percent. $7.1 billion of risk-in-force is also tied into problematic Alt-A loans, the company said; the loan class displayed a default rate of 13.9 percent across the 2004-2007 vintages by year’s end. Disclosure: The author owned no positions in any publicly-traded firms mentioned in this story when it was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.