Magazine article American Banker

Katrina-Related Charges Deal PMI Group a Blow

Magazine article American Banker

Katrina-Related Charges Deal PMI Group a Blow

Article excerpt

PMI Group Inc.'s third-quarter net income fell 6.7% to $95.7 million, dragged down by $8.9 million of unusual after-tax charges related to Hurricane Katrina.

The Walnut Creek, Calif., mortgage insurer and financial guarantor earned 97 cents a share, 9 cents short of the average analyst estimate. Excluding the Katrina charges, however, the results were mostly in line with expectations, analysts said, though signs of credit issues spooked some investors.

PMI's U.S. mortgage insurance operations experienced more delinquencies and credit expenses, and another 2% drop in primary insurance-in-force. But it also had higher overall premium rates and lower claims. The segment's profits rose 2.5%, to $69.5 million, as PMI cut more operational costs.

International mortgage insurance profits jumped 18.1%, to $28.0 million. Net from financial guaranty, including PMI's stakes in Financial Guaranty Insurance Co. and RAM Re, fell 17%, to $12.6 million.

Still, the company's shares were down 3.4% Thursday afternoon. Credit concerns were one reason. The primary default rate in PMI's U.S. mortgage insurance book climbed 45 basis points from a year earlier to 5.05%, as the number of loans in default jumped 11% from June 30. Losses and loss adjustment expenses in the segment climbed 2.6% from a year earlier to $61.7 million. PMI added $3.5 million to reserves for such losses.

On a conference call Thursday, executives said the higher delinquencies reflected seasonal factors; the aging of the portfolio; and the fact that PMI is insuring more bulk policies, alternative-A loans, and high loan-to-value mortgages. …

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