The PMI Group, Inc. said today that it expects to report a loss of $1.05 per share due to "continued weak housing and mortgage markets and associated dislocation in the credit derivative markets." The loss turned analyst expectations onto its head, with Reuters reporting that mean analyst expectations had pegged third quarter numbers at a $0.75 per share profit. From the press statement:
... credit performance significantly worsened during the month and now expects paid claims, loss adjustment expenses and additions to the reserve for losses for its U.S. mortgage insurance operations of approximately $350 million in the third quarter of 2007. As a result, the Company is withdrawing its full year total incurred loss guidance and other financial guidance. Credit conditions also had an adverse effect on the insured credit derivative portfolio of FGIC, in which PMI is the lead strategic investor, with a common equity ownership of 42.0 percent. FGIC conducted a fair value review of its outstanding credit derivative contracts at September 30, 2007 and estimates that mark-to-market adjustments will result in an unrealized loss of approximately $206 million, pre-tax, in the third quarter of 2007. FGIC anticipates that as a result of this adjustment it will report a net loss for the third quarter of 2007 of approximately $65 million.