PMI to Sell Off Asia Mortgage Insurance Ops
A retrenching of operations around the troubled U.S. housing market at The PMI Group, Inc. (PMI) continued on Friday, with the company saying it had signed an agreement to sell its Asian operations to QBE Insurance Group Limited in a deal worth $56 million. The sale follows a separate agreement with QBE to sell PMI's Australian mortgage insurance operations on Aug. 14; that deal was worth an estimated $920 million. PMI established a branch of the PMI Mortgage Insurance Company in Hong Kong in 1999; PMI Asia was formed as a subsidiary in mid-2006, when it assumed all of PMI's Hong Kong reinsurance business. 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 was driven by a $225.9 million net loss in the company’s U.S. mortgage insurance operations. Like the previously announced sale involving Australian operations, the PMI Asia purchase price involves an 80/20 cash and promissory note split -- the structure of the deal means that while the purchase price at outset is 100 percent of net tangible asset value, it can be adjusted downward as much as 20 percent, depending on the performance of the existing insurance portfolio through 2011. The pending sale of both its Aussie and Asian operations are part of a plan at PMI to provide support for its ailing U.S. mortgage insurance operations; the company also has recently announced the closure of PMI Canada, as well as a series of cutbacks at PMI Europe. In addition, PMI's bond insurance subsidiary paid approximately $144 million of its excess capital to The PMI Group, and PMI has said it expects to reinvest at least 80 percent of the capital at the into its US mortgage insurance operations. Both the PMI Asia and Australian transactions are expected to close by October. For more information, visit http://www.pmigroup.com. Disclosure: The author held no positions in PMI when this story was published; indirect holdings may exist via mutual fund investments, as well. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.