The PMI Group Inc., a global provider of private mortgage insurance and the largest provider of mortgage insurance in the United States, reported net income for the fourth quarter of $100.5 million, a 6.8 percent drop from the $107.7 million reported for the fourth quarer of 2005. In spite of the fourth quarter loss, PMI’s annual net income for 2006 increased to a record $419.7 million, up from a reported $409.3 million in 2005. The company said that U.S. primary insurance in force grew to $102.6 billion and the persistency rate increased to 69.6 percent; incurred losses for the year were approximately $263 million, consistent with the company’s guidance. Interestingly, fourth quarter losses were driven by a 25.9 percent drop in income from international operations, which the company said was due to what it called “credit normalization” in the Australian market. U.S. mortgage operations at PMI yielded at 10 percent fourth quarter increase in earnings, relative to the fourth quarter of 2005. Other U.S. operational highlights included:
- Net premiums earned in the fourth quarter 2006 increased to $184.5 million from $166.8 million in the fourth quarter of 2005. The increase was due primarily to increases in average premium rates and average insured loan balances in 2006, the company said.
- Total incurred losses in the fourth quarter of 2006 were $72.0 million compared to $63.2 million in the fourth quarter of 2005 driven by higher claim rates and higher claims sizes.
- Primary claims paid increased to $58.4 million for the fourth quarter of 2006 compared to $51.5 million in the fourth quarter of 2005 driven by an increase in the average claim size.
Higher claim sizes were cited as the driving factor behind losses at key competitor Triad Guaranty, who recently reported a 35 percent drop in quarterly net income.