Private mortgage insurer PMI Group Inc. said it will postpone releasing of fourth-quarter and year-end financial results because of delays in financial reporting at another company it owns a large stake in — troubled bond insurer FGIC Corp.
PMI Group, which reported an $86.8 million third-quarter loss in October on increased claims and loss reserves, said it has compiled fourth-quarter results for its own U.S. mortgage insurance and international operations but is waiting on fourth-quarter results from FGIC that will affect the company’s bottom line.
According to its last quarterly report, PMI Group owns a 42 percent stake in FGIC Corp., the holding company of Financial Guaranty Insurance Co. FGIC has applied to New York regulators to spin off its municipal bond business into a separate company to insulate it from losses on riskier guarantees of securities with exposure to losses in mortgage lending.
FGIC is one of several “monoline” bond insurers contemplating reorganization if they are unable to raise enough capital to offset rising losses in guarantees of collateralized debt obligations (CDOs) and retain the AAA ratings they need to insure municipal bonds. Ambac Financial and MBIA are reportedly considering similar moves, which analysts say could force banks to write-down more losses on CDO investments.
PMI Group has problems of its own in the private mortgage insurance business, but it remains to be seen how drastically losses grew during the fourth quarter. Analysts polled by Thomson Financial expect PMI’s losses to rise from $1.04 a share in the third quarter to $1.41 a share in the fourth quarter, Dow Jones Newswires reported.
Competing mortgage insurers Radian Group Inc. and MGIC Investment Corp. have reported large fourth-quarter losses. MGIC last week reported $1.47 billion in fourth-quarter losses, with claims for the year rising 35 percent to $870 million (see Inman News story), while Radian group said losses for the quarter totaled $618 million.
In a regulatory filing today, PMI said primary flow insurance written during the fourth quarter totaled $8.7 billion, while structured finance new insurance hit $369 million. Primary insurance in force at the end of the year totaled $123.6 billion, up slightly from $120 billion at the end of the third quarter.
In another regulatory filing earlier this month, PMI said only one in five loans insured during the fourth quarter was a mortgage in which the borrower made a down payment of less than 3 percent. Such “above 97” loans (with loan-to-value ratios exceeding 97 percent) made up about one-third of new insurance for the year as a whole, the company said.
PMI said it was able to reduce its reliance on loans with down payments of less than 3 percent by raising prices and tightening underwriting standards, and said that after March 1 it will no longer insure any “above 97” loans.
MCIG next month is discontinuing coverage of loans with down payments of less than 5 percent in 30 markets where prices are falling, including Denver; Washington, D.C.; Atlanta; Honolulu; Chicago; Baltimore; Boston; Detroit; Minneapolis; Newark, N.J.; New York City; Portland, Ore.; Vancouver, Wash.; and all of California, Florida, Arizona and Nevada (see story).
PMI also announced today that it had promoted Arthur Slepian to executive vice president and chief enterprise risk officer for PMI Group, replacing Joanne Berkowitz, who was appointed executive vice president for risk management and operations of PMI Mortgage.
