Mortgage insurer PMI Group Inc. said it lost $274 million in the first quarter, compared with a $102 million profit a year ago.
Most of the losses — $172.5 million — stemmed from U.S. mortgage insurance operations, while another $88 million was related to the company’s investment in bond insurer FGIC Corp.
PMI Group’s mortgage insurance operations include PMI Mortgage Insurance Co. and affiliated mortgage insurance and reinsurance companies, plus equity in earnings from a joint venture, CMG Mortgage Insurance Co.
"The significant weakening of the U.S. residential mortgage, housing, credit and capital markets continues to negatively affect our U.S. Mortgage Insurance Operations segment, and will continue to do so throughout 2008," PMI said in a regulatory filing.
Mortgage insurance operations generated $537 million in losses and loss adjustment expenses, with net loss reserves boosted by $368.2 million because of an increase in default inventory, higher claim rates and average claim sizes.
PMI’s primary default inventory increased to 69,718 at the end up March, up 10 percent from the previous quarter and 78 percent from a year ago. The primary default rate hit 8.78 percent, up from 7.9 percent in the previous quarter and 5.34 percent a year ago.
Higher claim rates were driven by home-price declines and the reduced availability of certain loan products, which made it harder for troubled borrowers to refinance, the company said. Average claim size has grown in part because of higher loan sizes and coverage levels, and because declining home prices limit loss mitigation opportunities.
On April 8, Standard & Poor’s analysts lowered their insurer financial strength ratings on PMI and rivals MGIC Investment Corp. and Radian Group Inc., prompting Fannie Mae and Freddie Mac to require the companies to submit remediation plans showing how they will restore the ratings required of "top tier" insurers (see story). PMI said it has submitted a plan to Freddie Mac, which has requested additional information, and expects to submit one to Fannie Mae this month.
PMI posted a $1 billion fourth-quarter loss and, like its competitors, has tightened underwriting standards — making it more difficult for borrowers making less than 20 percent down payments on a home to obtain funding (see story).
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