EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

The PMI Group, Inc.

     

LOGO

    NEWS RELEASE
    
    

Investor and media contacts:

Bill Horning / Beth Haiken

     925.658.6193 / 925.658.6192

 

THE PMI GROUP, INC. REPORTS FIRST QUARTER 2005 NET

INCOME OF $101.2 MILLION; NET INCOME PER DILUTED

SHARE OF $1.00

 

NET INCOME PER DILUTED SHARE FROM CONTINUING OPERATIONS

UP 20% OVER FIRST QUARTER 2004

 

Walnut Creek, CA, May 5, 2005, — The PMI Group, Inc. (NYSE: PMI) (the “Company”) today announced that consolidated net income from continuing operations totaled $101.2 million, compared to $85.6 million for the same period a year ago, an increase of 18 percent. The significant improvement in net income from continuing operations in the first quarter was driven primarily by net income increases in the U.S. Mortgage Insurance Operations and Financial Guaranty segments. In the first quarter of 2005, net income per diluted share from continuing operations was $1.00, compared to net income of $0.83 per diluted share for the same period a year ago, an increase of 20 percent. The net income results for the first quarter of 2005 led to a book value per share of $33.93 at March 31, 2005, compared to a book value per share of $30.70 at March 31, 2004.

 

Consolidated net income and net income per share were $101.2 million, or $1.00 per diluted share, for the quarter ended March 31, 2005, compared to net income of $119.5 million, or $1.16 per diluted share, for the first quarter of 2004. Included in the consolidated net income for the first quarter of 2004 was a $30.1 million ($0.29 per share) after tax gain on the sale of American Pioneer Title Insurance Company (“APTIC”).

RECONCILIATION OF EARNINGS PER SHARE

 

(Dollars and shares, except per share amounts, in millions)

    Q1 2005
    Q1 2004

Income from continuing operations after taxes

    $ 101.2    $ 85.6

Plus: Interest expense on contingently in convertible debt, net of taxes

      1.9      1.9
    
  

Net income from continuing operations after assumed conversion of contingently convertible debt

    $ 103.1    $ 87.5
    
  

Diluted weighted average shares after assumed conversion of contingently convertible debt

      103.5      105.0
    
  

Per Share Data:

              

Diluted net income from continuing operations per share:

    $ 1.00    $ 0.83

Income from discontinued operations after taxes

      —        0.04

Gain on sale of discontinued operations, net of taxes

      —        0.29
    
  

Diluted net income per share

    $ 1.00    $ 1.16
    
  

 

First Quarter 2005 Highlights

 

•   Combined1 insurance in force grew to $267.0 billion at March 31, 2005 from $244.0 billion at March 31, 2004;

 

•   Net income for the U.S. Mortgage Insurance Operations2 segment grew by approximately 24 percent to $66.3 million in the first quarter of 2005, compared to $53.6 million in the first quarter of 2004;

 

•   The U.S. Mortgage Insurance Operations segment realized a 10 percent increase in earned premiums over the same period in 2004. Also, expense savings of approximately $1 million to $1.5 million were realized in the quarter attributable to the U.S. Mortgage Operations segment field restructuring undertaken in 2004. The Company continues to expect a pre-tax expense savings of $5 million to $6 million in 2005;

 

•   U.S. credit trends: Delinquent loan inventory was down 9 percent from December 31, 2004; the primary default rate declined to 4.53 percent at March 31, 2005, compared to 4.86 percent at December 31, 2004;

 

1 “Combined” includes results from U.S. Mortgage Insurance Operations, CMG Mortgage Insurance Company and its’ affiliates (collectively “CMG”), PMI Australia and PMI Europe, primary insurance and credit default swap transactions.
2 “U.S. Mortgage Insurance Operations” includes the results of PMI Mortgage Insurance Co. and affiliated U.S. reinsurance companies and equity in earnings from CMG.

•   The International Operations3 segment benefited from a continuation of favorable credit trends in Australia, the signing of our first mortgage insurance contract with an Italian bank and robust growth in written gross premiums in Hong Kong.

 

•   The Company’s investment in FGIC Corporation (“FGIC”) yielded equity in earnings of $18.1 million (after tax) in the first quarter of 2005 compared to $12.7 million (after tax) in the same period last year.

 

Results for the Company include:

 

Mark-to-market losses related to the foreign currency put options purchased to mitigate the effects of a strengthening in the U.S. dollar spot rate at quarter end were $1.1 million in the first quarter of 2005. Net income was favorably impacted by $0.5 million for the quarter related to the translation gains from a change in the average foreign currency exchange rates compared to the same period a year ago.

 

The diluted weighted average common shares outstanding for the quarter were 103.5 million compared to 105.0 million for the same period a year ago. In the first quarter of 2005, approximately 832,200 common shares were repurchased at a cost of $33.3 million. The Company has $66.7 million in remaining capacity under its $100 million common stock repurchase program authorized on February 17, 2005.

 

Combined primary new insurance written for the quarter was $17.0 billion, compared to $18.1 billion for the same period a year ago. The decrease was due primarily to declines in new insurance written by our U.S. Mortgage Insurance Operations segment and by PMI Australia primarily attributable to slowdowns in mortgage originations in the U.S. and Australian markets. Combined insurance in force at March 31, 2005 was $267.0 billion, compared to $244.0 billion at March 31, 2004. The increase was due primarily to an increase in insurance in force for PMI Australia.

 

Consolidated net premiums written for the quarter totaled $193.7 million, relatively unchanged from $193.4 million for the same period a year ago.

 

Consolidated premiums earned for the quarter were $199.6 million, compared to $185.3 million for the same period a year ago. The increase for the quarter was primarily due to the recognition of premiums associated with loan cancellations under non-refundable single premium policies and the increase in premiums earned as a result of higher average premium rates for U.S. Mortgage Insurance Operations.

 

3 “International Operations” includes the results of PMI Australia, PMI Europe and the results of operations in Hong Kong.

Consolidated net investment income for the quarter totaled $43.8 million, compared to $40.0 million for the same period a year ago. The increase for the first quarter 2005 compared to the corresponding period in 2004, was due primarily to growth in our U.S. and Australian investment portfolios, partially offset by a decrease in the book yield of our U.S. investment portfolio.

 

Consolidated losses and loss adjustment expenses for the quarter totaled $64.5 million compared to $59.8 million for the same period a year ago. The increase, when compared to the first quarter of 2004, was primarily due to higher claims paid for U.S. Mortgage Insurance Operations and is consistent with the Company’s revised expectation for total incurred losses in 2005.

 

Consolidated reserve for losses and loss adjustment expenses totaled $364.8 million at March 31, 2005, unchanged from $364.8 million at December 31, 2004.

 

Amortization of deferred policy acquisition costs was $20.4 million in the first quarter of 2004, compared to $23.1 million for the same period a year ago. The decrease is due to the seasoning of the 2003 book year and increased efficiencies resulting from our field restructuring in 2004.

 

Consolidated other underwriting and operating expenses for the quarter totaled $45.6 million, compared to $50.3 million for the same period a year ago. The decrease for the first quarter of 2005 when compared to the same period a year ago was due primarily to the higher expenses incurred in the first quarter of 2004 that related to 2003 employee compensation and field restructuring costs of approximately $1.2 million (pre-tax) in the U.S. Mortgage Insurance Operations segment.

 

Consolidated income tax expense from continuing operations for the quarter totaled $33.5 million and was affected by an increase in the effective tax rate from 24.2% to 24.9% and the increase in pre-tax income from continuing operations. The increase in our effective tax rate for the first quarter of 2005 was primarily due to increases in our U.S. Mortgage Insurance Operations underwriting income which is taxed at 35.0%.

FIRST QUARTER 2005 SEGMENT HIGHLIGHTS

 

 

(Dollars in millions)

    U.S.
Mortgage
Insurance
Operations
    International
Operations
   

Financial

Guaranty4

    Other5
     Total
  

Net premiums written

    $ 154.5    $ 39.2    $ —      $ 0.0     $ 193.7  

Premiums earned

      164.1      35.4      —        0.0       199.6 *

Equity in earnings

      4.1      —        20.8      0.3       25.2  

Total revenues

      194.2      49.4      20.8      10.4       274.8  

Losses, expenses and interest expense

      102.7      12.8      —        24.6       140.1  

Net income

    $ 66.3    $ 25.1    $ 18.9    $ (9.2 )   $ 101.2 *
* Does not total due to rounding

 

U.S. Mortgage Insurance Operations

 

Net income for U.S. Mortgage Insurance Operations for the quarter totaled $66.3 million, compared to $53.6 million for the same period a year ago. The increase was due primarily to increases in premiums earned, decreases in underwriting and operating expenses and equity in earnings from unconsolidated strategic investments.

 

Net premiums written for U.S. Mortgage Insurance Operations for the quarter totaled $154.5 million, compared to $153.1 million for the same period a year ago. The increase was due to an increase in average premium rates and, to a lesser extent, higher primary risk in force.

 

Premiums earned for the quarter totaled $164.1 million, compared to $149.0 million for the same period a year ago. The increase was due primarily to the recognition of premiums associated with loan cancellations under non-refundable single premium policies, an increase in the average premium rate and, to a lesser extent, higher primary risk in force.

 

Net investment income for the quarter totaled $25.6 million, compared to $24.5 million for the same period a year ago due to year-over-year increases in cash, cash equivalents and investments, partially offset by lower book yields as a result of higher liquidity levels.

 

Equity in earnings from CMG Mortgage Insurance Company for the quarter totaled $4.1 million (pre-tax), compared to $3.3 million (pre-tax) for the same period a year ago. The increase was due primarily to the growth of insurance in force and premiums earned.

 

4 “Financial Guaranty” includes the equity in earnings from FGIC and RAM Re.
5 “Other” includes other income and related operating expenses of PMI Mortgage Services Co.; investment income, interest expense and corporate overhead of The PMI Group, Inc.; the results of Commercial Loans Insurance Co. and WMAC Credit Insurance Corporation; equity in earnings from SPS and certain limited partnerships; and the results from discontinued operations of APTIC.

Losses and loss adjustment expenses for the quarter totaled $63.1 million, compared to $59.0 million for the same period a year ago. The increase was due primarily to increases in the number of primary claims paid associated with the seasoning of the primary portfolio, partially offset by a decrease in the average primary claim size.

 

Amortization of deferred policy acquisition costs for the quarter totaled $16.0 million, compared to $19.4 million for the same period a year ago. The decrease was due primarily to the continued amortization of expenses related to policies originated in 2003, expense savings realized from the 2004 field restructuring and the decline in new insurance written (NIW) compared to prior periods.

 

Other underwriting and operating expenses for the quarter totaled $23.6 million, compared to $26.1 million for the same period a year ago. The decrease for the quarter was due primarily to expenses incurred in the first quarter of 2004 related to 2003 employee compensation, $1.2 million of field restructuring costs and, to a lesser extent, expense savings realized in the first quarter of 2005 as a result of the field restructuring.

 

DOMESTIC NEW INSURANCE WRITTEN

(Dollars in billions)

    Q1 2005
    Q1 2004

Domestic6 primary new insurance written

    $ 9.2    $ 9.8

Excluding CMG

      8.2      8.8

Bulk new insurance written

      1.9      0.3

Domestic pool new insurance written

      1.3      3.9

 

Domestic primary new insurance written for the quarter totaled $9.2 billion, compared to $9.8 billion for the same period a year ago. The decrease in the first quarter of 2005 compared to the corresponding period in 2004 was driven primarily by lower volumes in the residential mortgage origination and mortgage insurance markets, partially offset by increased bulk insurance writings.

 

PRIMARY INSURANCE AND RISK IN FORCE

 

 

(Dollars in billions)

   

As of

3/31/05

    

As of

12/31/04

    

As of

3/31/04

  

Domestic primary insurance in force

    $ 118.2     $ 119.4     $ 117.0  

Excluding CMG

      104.0       105.3       104.3  

Domestic primary risk in force

      28.8       28.9       27.4  

Excluding CMG

      25.5       25.7       24.5  

Domestic annual primary persistency rate

      61.7 %     61.8 %     48.6 %

Excluding CMG

      60.8 %     60.9 %     47.8 %

 

6 “Domestic” includes results from U.S. Mortgage Insurance Operations and CMG.

Domestic primary insurance in force totaled $118.2 billion at March 31, 2005, compared to $117.0 billion a year ago. Domestic primary risk in force totaled $28.8 billion, compared to $27.4 billion at the end of the first quarter of 2004 and was driven primarily by a greater number of high LTV loans with deeper coverage and higher average loan balances. The domestic annual persistency rate increased to 61.7% as of March 31, 2005 from 48.6% as of March 31, 2004.

 

Pool risk in force as of March 31, 2005 was $2.4 billion, compared to $2.6 billion at March 31, 2004.

 

DEFAULT RATES  
    

As of

3/31/05

    

As of

12/31/04

    

As of

3/31/04

  

Domestic primary mortgage insurance

    4.07 %   4.37 %   3.86 %

Excluding CMG

    4.53 %   4.86 %   4.26 %

Excluding CMG and bulk transactions

    4.04 %   4.30 %   3.71 %

Bulk transactions only

    8.17 %   9.19 %   8.68 %

Pool insurance

    5.65 %   5.50 %   4.39 %

 

At March 31, 2005, the Company’s U.S. primary insurance default rate, excluding CMG, was 4.53 percent compared to 4.86 percent at December 31, 2004. The decrease was primarily due to a decrease in primary loans in default from 39,054 at December 31, 2004 to 35,716 at March 31, 2005, partially offset by a decrease in primary policies in force from 803,236 at December 31, 2004 to 788,847 at March 31, 2005.

 

At March 31, 2005, the Company’s U.S. pool insurance default rate was 5.65 percent compared to 5.50 percent at December 31, 2004. The increase was due primarily to a 4 percent decrease in pool insurance policies in force.

 

CLAIMS PAID

 

(Dollars in millions)

    Q1 2005
    Q4 2004
    Q1 2004

Primary – flow

    $ 41.7    $ 36.9    $ 31.1

Primary – bulk

      13.8      10.8      12.5
    
  
  

Total primary

      55.5      47.7      43.6

Total pool and other

      4.7      4.4      3.9
    
  
  

Total claims paid

    $ 60.2    $ 52.1    $ 47.5
    
  
  

Primary claims paid for the quarter totaled $55.5 million, compared to $43.6 million in the first quarter of 2004. The increase in claims paid in the first quarter of 2005 was influenced by the seasoning of our primary insurance portfolio and higher claim rates associated with the portion of the portfolio that contain ARMs, high LTV, Alt-A and less-than-A quality loans. Performance in the first quarter of 2005 was consistent with the Company’s revised expectation for total incurred losses in 2005.

 

International Operations

 

Net income from International Operations for the quarter totaled $25.1 million, compared to $27.0 million for the first quarter of 2004. The decrease in net income in the first quarter of 2005 was due primarily to decreases in PMI Europe’s premiums earned and other income. The results of our International Operations are subject to fluctuations in the foreign currency exchange rate of the U.S. dollar, principally with the Australian dollar and the Euro. The change in average foreign currency exchange rates from the first quarter of 2005 to the corresponding period in 2004 favorably impacted net income from International Operation’s by $0.5 million.

 

In January 2005, PMI Australia and PMI Europe purchased Australian dollar and Euro put options, respectively, designed to partially mitigate the negative financial impact of a potential strengthening of the U.S. dollar relative to the Australian dollar and the Euro in 2005. For the quarter, International Operations recognized a charge of $1.1 million in other income due to the changes in fair value of the foreign currency put options.

 

Net investment income for International Operations for the quarter totaled $13.8 million, compared to $11.8 million for the same period a year ago. The increase was due primarily to an increase in the investment portfolio of PMI Australia and an increase in the yield on our investments in the PMI Australia investment portfolio, partially offset by a reduction in foreign currency remeasurement gains for PMI Europe.

 

Net income from PMI Australia for the quarter totaled $20.6 million, compared to $20.3 million for the same period a year ago. In local currency, net income from PMI Australia for the quarter totaled AU$26.5 million, unchanged from AU$26.5 million for the same period a year ago.

 

Credit trends continued to remain favorable for PMI Australia. Losses and loss adjustment expenses for PMI Australia continued at low levels of claim payments and default rates. PMI Australia’s default rate at March 31, 2005 was 0.13% compared to 0.16% at March 31, 2004. Claims paid totaled $0.3 million in the first quarter of 2005, compared to $0.2 million for the same period a year ago.

Premiums earned for PMI Australia for the quarter totaled $29.4 million, compared to $28.9 million for the same period a year ago. In local currency terms, earned premiums in the first quarter of 2005 of AU$37.8 million were unchanged from AU$37.8 million in the first quarter of 2004. This comparison also reflects a change in the rate at which PMI Australia is recognizing unearned premiums into net income for the current book year. This change is driven primarily by the continued low loss levels experienced by PMI Australia over the last year. The refinement of the premiums earnings pattern methodology had the effect of deferring higher premiums earnings into future periods and reducing net income in the first quarter of 2005 by approximately $1 million. PMI Australia’s unearned premiums at March 31, 2005 were AU$382.8 million compared to AU$330.5 million at March 31, 2004, an increase of 16 percent.

 

Primary insurance in force for PMI Australia was $117.4 billion at March 31, 2005, compared to $93.2 billion at March 31, 2004. Primary risk in force for PMI Australia was $106.7 billion at March 31, 2005, compared to $84.5 billion at March 31, 2004.

 

New insurance written for PMI Australia for the quarter totaled $7.7 billion, compared to $8.3 billion for the same period a year ago. The decrease in primary NIW generated by PMI Australia’s flow channel in the first quarter of 2005 compared to the first quarter of 2004 was primarily due to a lower mortgage origination activity combined with increasingly competitive pricing. PMI Australia’s primary new insurance written includes flow channel insurance as well as insurance written on residential mortgage-backed securities, or RMBS. RMBS transactions include insurance on seasoned portfolios comprising prime credit quality loans with loan-to-values principally below 80 percent. RMBS new insurance written for the quarter totaled $3.8 billion in the first quarter of 2005, compared to $3.0 billion for the same period a year ago.

 

Net income for PMI Europe for the quarter totaled $3.0 million, compared to $4.7 million for the same period a year ago. The decrease was due primarily to a decrease in premiums earned and other income. In local currency, net income from PMI Europe for the quarter totaled €2.3 million, compared to €3.8 million for the same period a year ago.

 

Net premiums written for PMI Europe for the quarter totaled $1.5 million, compared to $2.7 million for the same period a year ago. The decrease in net premiums written was due to the uneven nature of business activity in the European structured markets.

 

Premiums earned for PMI Europe for the quarter totaled $4.4 million, compared to $5.4 million for the same period a year ago. The decrease for the quarter was due primarily to a decrease

in premiums earned associated with the U.K. lenders’ mortgage insurance portfolio acquired by PMI Europe in 2004. As this portfolio continues to season, we expect premiums earned and risk in force associated with this portfolio to decline.

 

Net investment income for PMI Europe for the quarter totaled $2.5 million, compared to $2.7 million for the same period a year ago. Insurance in force (including credit default swaps) for PMI Europe was $31.4 billion at March 31, 2005, compared to $33.7 billion at March 31, 2004. Risk in force (including credit default swaps) for PMI Europe was $2.4 billion at March 31, 2005, compared to $3.3 billion at March 31, 2004.

 

Other income for PMI Europe in the first quarter of 2005 included a $0.4 million gain related to a change in fair value for credit default swaps, which are accounted for as derivative instruments.

 

PMI’s Hong Kong reinsurance premiums written for the quarter totaled $5.3 million, compared to $1.8 million for the same period a year ago. The increase was due primarily to an increase in mortgage origination activity in Hong Kong and product expansion.

 

Financial Guaranty

 

Financial Guaranty, which includes equity in earnings from the Company’s investments in FGIC and RAM Re, reported net income for the quarter of $18.9 million, compared to $13.5 million for the same period a year ago. Equity in earnings from FGIC totaled $19.6 million (pre-tax) in the first quarter of 2005, compared to $13.6 (pre-tax) million in the first quarter of 2004. The increase was due primarily to increases in refundings and premiums written combined with a reduction in loss reserves during the quarter, offset by higher underwriting expenses in the first quarter of 2005.

 

Equity in earnings from RAM Re for the quarter totaled $1.2 million (pre-tax), compared to $1.3 million (pre-tax) for the same period a year ago. The Company reports equity in earnings from RAM Re on a one-quarter lag.

Other

 

The Other segment consists of revenues and expenses of the holding company, PMI Mortgage Services Co., SPS Holding Corp. (SPS), and for the first quarter of 2004, the gain on sale and the discontinued operations of APTIC.

 

In January 2005, the Company signed a Summary of Terms granting Credit Suisse First Boston (USA) an option to buy 100 percent of the outstanding stock of our outstanding stock of SPS. As of March 31, 2005, our total investment in SPS was $123.1 million, consisting of $110.4 million carrying value of our equity investment held for sale and $12.7 million in related party receivables, which are current. As a result of reclassifying our investment in SPS as held for sale, effective January 1, 2005, we have recorded equity earnings of SPS in other income.

 

Net loss for the quarter totaled $9.2 million compared to net income of $25.3 million for the same period a year ago. The increase in the net loss for the quarter was due primarily to the effect of the $30.1 million (after tax) gain from the sale of APTIC recorded in the first quarter of 2004.

 

Equity in the earnings of SPS for the quarter totaled $0.9 million (pre-tax), compared to $0.3 million (pre-tax) for the same period a year ago. The increase for the first quarter of 2005 was primarily driven by a decrease in SPS’s total expenses, which exceeded the decrease in gross revenues during the quarter.

 

Other income totaled $5.6 million for the quarter, compared to $7.2 million for the same period a year ago. The decline was principally the result of a decline in contract underwriting volume and corresponding revenue at PMI Mortgage Services Co.

 

Other underwriting and operating expenses for the quarter totaled $15.1 million, compared to $17.3 million for the same period a year ago. The level of expenses reflects lower contract underwriting expenses due to decreased underwriting activity, partially offset by higher holding company expenses including compensation and interest expense.

 

ABOUT THE PMI GROUP, INC.

 

The PMI Group, Inc. (NYSE:PMI) headquartered in Walnut Creek, California is an international provider of credit enhancement products that promotes homeownership and facilitates mortgage transactions in the capital markets. Through its wholly owned subsidiaries and unconsolidated strategic investments, the Company offers residential mortgage insurance and credit enhancement products domestically and internationally as well as financial guaranty insurance and reinsurance.

 

The Company is an advocate of affordable housing and supports a number of organizations that foster greater access to affordable housing. The Company’s approach to affordable housing lending is to develop products and services that assist responsible borrowers who may not qualify for mortgage loans under traditional underwriting practices.

Cautionary Statement: Statements in this earnings release that are not historical facts, and that relate to future plans, events or performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include our expectations with respect to future expenses and incurred losses of U.S. Mortgage Insurance Operations and earned premiums of International Operations. Readers are cautioned that forward-looking statements by their nature involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Many factors could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. Risks and uncertainties that could affect the Company are discussed in our Form 10-K for the year ended December 31, 2004 and include changes in economic conditions such as interest rates, home values, employment rates and refinance activity. We undertake no obligation to update forward-looking statements.

 

# # #

THE PMI GROUP, INC. AND SUBSIDIARIES

 

FINANCIAL RESULTS AND STATISTICAL INFORMATION FOR THE PERIOD ENDED MARCH 31, 2005

 

Contents

Consolidated Statements of Operations and Balance Sheets

    Page 2

Business Segments Results of Operations - Three Months Ended March 31, 2005 and 2004

    Page 3

Business Segments Balance Sheets

    Page 4

U.S. Mortgage Insurance Operations Analysis of Reserve for Losses and LAE and Statistical Information

    Page 5

U.S. Mortgage Insurance Operations and CMG Mortgage Insurance Company Statistical Information

    Page 6

PMI Australia and PMI Europe Statistical Information

    Page 7

Appendix A - U.S. Mortgage Insurance Operations Supplemental Statistical Information

    Page 8

Appendix B - PMI Australia and PMI Europe Quarterly Financial Information

    Page 9

Appendix C - Business Segment Results of Operations by Quarter

    Page 10

 

Please refer to the following when noted:

 

(1) For the quarter ended March 31, 2005, the Company’s equity earnings in unconsolidated subsidiaries include FGIC Corporation, CMG Mortgage Insurance Company (“CMG”), RAM Reinsurance Company, Ltd. (“RAM Re”), other limited partnership interests and the trust subsidiary that issued the Company’s preferred securities. As of December 31, 2004, the equity investment in SPS Holding Corp. (“SPS”) was reclassified from investments in unconsolidated subsidiaries to equity investment held for sale. Effective January 1, 2005, SPS’s equity earnings are reported in other income.

 

(2) The operating results, assets and liabilities of American Pioneer Title Insurance Company (“APTIC”) were reflected as discontinued operations in the fourth quarter of 2003 with prior period financial information reclassified accordingly. The Company completed its sale of APTIC in March 2004 and recorded a gain on sale of discontinued operations of $30.1 million, net of $17.1 million of income tax expense.

 

(3) In January 2005, PMI signed a letter of intent with Credit Suisse First Boston (USA), Inc. (“CSFB”) pursuant to which CSFB has an option to acquire 100% of PMI’s outstanding stock of SPS. In the fourth quarter of 2004, PMI recorded a write-down of its equity investment in SPS for $20.4 million (pre-tax). The write-down was recorded as a realized loss of discontinued operations of equity investment due to PMI’s decision to sell SPS. According to Statement of Financial Accounting Standards No. 144, Accounting for the Impairment and Disposal of Long-Lived Assets, we are not permitted to present the disposal of equity method investments as discontinued operations.

 

 

(4) U.S. Mortgage Insurance Operations include the operating results of PMI Mortgage Insurance Co. and affiliated U.S. mortgage insurance and reinsurance Companies. CMG and its affiliates are included under the equity method of accounting in equity in earnings from unconsolidated subsidiaries.

 

(5) International Operations include PMI Australia, PMI Europe and PMI’s Hong Kong results of operations.

 

(6) Financial Guaranty represents our equity investments in FGIC Corporation and RAM Re.

 

(7) The “Other” segment includes other income and related operating expenses of PMI Mortgage Services Co.; investment income, interest expense and corporate overhead of The PMI Group, Inc.; the results of Commercial Loans Insurance Co. and WMAC Credit Insurance Corporation; equity in earnings from SPS and certain limited partnerships; and the results from discontinued operations of APTIC.

 

(8) The expense ratio is the ratio, expressed as a percentage, of the sum of amortization of policy acquisition costs and other underwriting expenses to net premiums written. The loss ratio is the ratio, expressed as a percentage, of the sum of losses and loss adjustment expenses to premiums earned.

 

(9) Pool insurance includes modified pool, GSE pool, old pool and all other pool insurance products for U.S. Mortgage Insurance Operations.

 

(10) Statutory risk-to-capital ratio for PMI Mortgage Insurance Co.

 

Note: The interim financial and statistical information contained in this material are unaudited. Certain prior year information has been reclassified to conform to the current quarters’ presentation.

THE PMI GROUP, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

     Three Months Ended March 31,
     2005
    2004
     (Unaudited)    (Unaudited)
     (Dollars in thousands, except per share data)

Net premiums written

    $ 193,746    $ 193,404
    
  

Revenues

              

Premiums earned

    $ 199,567    $ 185,302

Net investment income

      43,790      40,041

Equity in earnings from unconsolidated subsidiaries (1)

      25,212      19,098

Net realized investment gains

      721      1,275

Other income

      5,535      8,851
    
  

Total revenues

      274,825      254,567
    
  

Losses and expenses

              

Losses and loss adjustment expenses

      64,481      59,820

Amortization of policy acquisition costs

      20,443      23,095

Other underwriting and operating expenses

      45,645      50,320

Interest expense

      9,553      8,515
    
  

Total losses and expenses

      140,122      141,750
    
  

Income from continuing operations before income taxes

      134,703      112,817

Income taxes from continuing operations

      33,545      27,254
    
  

Income from continuing operations after income taxes

      101,158      85,563
    
  

Income from discontinued operations before income taxes (2)

      —        5,756

Income taxes from discontinued operations (2)

      —        1,958
    
  

Income from discontinued operations after income taxes (2)

      —        3,798
    
  

Gain on sale of discontinued operations, net of income taxes of $17,131 (2)

      —        30,108
    
  

Net income

    $ 101,158    $ 119,469
    
  

Diluted weighted average common shares outstanding (shares in thousands)

      103,462      105,041
    
  

Diluted net income per share

    $ 1.00    $ 1.16
    
  

 

CONSOLIDATED BALANCE SHEETS

 

     March 31,
2005
    December 31,
2004
    March 31,
2004
     (Unaudited)         (Unaudited)
     (Dollars in thousands, except per share data)

Assets

                     

Cash and investments, at fair value

    $ 3,644,480    $ 3,621,550    $ 3,502,014

Investments in unconsolidated subsidiaries (1)

      919,869      911,604      956,929

Equity investment held for sale (3)

      110,373      109,519      —  

Related party receivables

      13,764      18,439      27,664

Reinsurance receivables, reinsurance recoverables and prepaid premiums

      43,915      49,657      56,258

Deferred policy acquisition costs

      89,578      92,438      97,368

Other assets

      339,691      342,760      341,417
    
  
  

Total assets

    $ 5,161,670    $ 5,145,967    $ 4,981,650
    
  
  

Liabilities

                     

Reserve for losses and loss adjustment expenses

    $ 364,782    $ 364,847    $ 356,987

Unearned premiums

      474,761      484,815      480,576

Long-term debt

      819,529      819,529      819,543

Other liabilities

      330,427      339,021      390,299
    
  
  

Total liabilities

      1,989,499      2,008,212      2,047,405

Shareholders’ equity

      3,172,171      3,137,755      2,934,245
    
  
  

Total liabilities and shareholders’ equity

    $ 5,161,670    $ 5,145,967    $ 4,981,650
    
  
  

Basic shares issued and outstanding (shares in thousands)

      93,492      94,025      95,567
    
  
  

Book value per share

    $ 33.93    $ 33.37    $ 30.70
    
  
  

THE PMI GROUP, INC. AND SUBSIDIARIES

 

BUSINESS SEGMENTS RESULTS OF OPERATIONS

 

     U.S. Mortgage
Insurance
Operations (4)
     International
Operations (5)
     Financial
Guaranty (6)
    Other (7)
     Consolidated
Total
     Three Months Ended March 31, 2005 (Unaudited)
     (Dollars in thousands)

Net premiums written

    $ 154,538     $ 39,185     $ —      $ 23     $ 193,746
    
 
 
  
 

Revenues

                                      

Premiums earned

    $ 164,112     $ 35,435     $ —      $ 20     $ 199,567

Net investment income

      25,579       13,756       —        4,455       43,790

Equity in earnings from unconsolidated subsidiaries (1)

      4,074       —         20,846      292       25,212

Net realized investment gains (losses)

      420       340       —        (39 )     721

Other income (loss)

      4       (113 )     —        5,644       5,535
    
 
 
  
 

Total revenues

      194,189       49,418       20,846      10,372       274,825
    
 
 
  
 

Losses and expenses

                                      

Losses and loss adjustment expenses

      63,118       1,363       —        —         64,481

Amortization of policy acquisition costs

      16,026       4,417       —        —         20,443

Other underwriting and operating expenses

      23,553       7,006       —        15,086       45,645

Interest expense

      1       —         —        9,552       9,553
    
 
 
  
 

Total losses and expenses

      102,698       12,786       —        24,638       140,122
    
 
 
  
 

Income (loss) before income taxes

      91,491       36,632       20,846      (14,266 )     134,703

Income tax (benefit)

      25,149       11,485       1,956      (5,045 )     33,545
    
 
 
  
 

Net income (loss)

    $ 66,342     $ 25,147     $ 18,890    $ (9,221 )   $ 101,158
    
 
 
  
 

Expense ratio (8)

      25.6 %     29.1 %                     

Loss ratio (8)

      38.5 %     3.8 %                     

Combined ratio

      64.1 %     32.9 %                     
     Three Months Ended March 31, 2004 (Unaudited)
     (Dollars in thousands)

Net premiums written

    $ 153,064     $ 40,323     $ —      $ 17     $ 193,404
    
 
 
  
 

Revenues

                                      

Premiums earned

    $ 149,023     $ 36,259     $ —      $ 20     $ 185,302

Net investment income

      24,458       11,807       —        3,776       40,041

Equity in earnings from unconsolidated subsidiaries (1)

      3,328       —         14,928      842       19,098

Net realized investment gains (losses)

      1,087       225       —        (37 )     1,275

Other income

      81       1,602       —        7,168       8,851
    
 
 
  
 

Total revenues

      177,977       49,893       14,928      11,769       254,567
    
 
 
  
 

Losses and expenses

                                      

Losses and loss adjustment expenses

      58,956       864       —        —         59,820

Amortization of policy acquisition costs

      19,433       3,662       —        —         23,095

Other underwriting and operating expenses

      26,137       6,867       —        17,316       50,320

Interest expense

      21       1       —        8,493       8,515
    
 
 
  
 

Total losses and expenses

      104,547       11,394       —        25,809       141,750
    
 
 
  
 

Income (loss) from continuing operations before income taxes

      73,430       38,499       14,928      (14,040 )     112,817

Income tax (benefit) from continuing operations

      19,822       11,470       1,413      (5,451 )     27,254
    
 
 
  
 

Income (loss) from continuing operations after income taxes

      53,608       27,029       13,515      (8,589 )     85,563
    
 
 
  
 

Income from discontinued operations before taxes (2)

      —         —         —        5,756       5,756

Income taxes from discontinued operations (2)

      —         —         —        1,958       1,958
    
 
 
  
 

Income from discontinued operations after income taxes (2)

      —         —         —        3,798       3,798
    
 
 
  
 

Gain on sale of discontinued operations, net of income taxes (2)

      —         —         —        30,108       30,108
    
 
 
  
 

Net income

    $ 53,608     $ 27,029     $ 13,515    $ 25,317     $ 119,469
    
 
 
  
 

Expense ratio (8)

      29.8 %     26.1 %                     

Loss ratio (8)

      39.6 %     2.4 %                     

Combined ratio

      69.4 %     28.5 %                     

 

 

THE PMI GROUP, INC. AND SUBSIDIARIES

 

BUSINESS SEGMENTS BALANCE SHEETS

 

     U.S. Mortgage
Insurance
Operations (4)
    International
Operations (5)
    Financial
Guaranty (6)
    Other (7)
     Consolidated
Total
     March 31, 2005
     (Dollars in thousands)

Assets

                                    

Cash and investments, at fair value

    $ 2,212,968    $ 1,025,957    $ —      $ 405,555     $ 3,644,480

Investments in unconsolidated subsidiaries (1)

      115,309      —        781,952      22,608       919,869

Equity investment held for sale (3)

      —        —        —        110,373       110,373

Related party receivables

      966      —        —        12,798       13,764

Reinsurance receivables, recoverables and prepaid premiums

      23,044      20,871      —        —         43,915

Deferred policy acquisition costs

      50,999      38,579      —        —         89,578

Other assets

      199,813      27,334      —        112,544       339,691
    
  
  
  
 

Total assets

    $ 2,603,099    $ 1,112,741    $ 781,952    $ 663,878     $ 5,161,670
    
  
  
  
 

Liabilities

                                    

Reserve for losses and loss adjustment expenses

    $ 338,477    $ 26,302    $ —      $ 3     $ 364,782

Unearned premiums

      146,816      327,904      —        41       474,761

Long-term debt

      —        —        —        819,529       819,529

Other liabilities

      247,917      63,408      14,187      4,915       330,427
    
  
  
  
 

Total liabilities

      733,210      417,614      14,187      824,488       1,989,499

Shareholder’s equity

      1,869,889      695,127      767,765      (160,610 )     3,172,171
    
  
  
  
 

Total liabilities and shareholders’ equity

    $ 2,603,099    $ 1,112,741    $ 781,952    $ 663,878     $ 5,161,670
    
  
  
  
 
     December 31, 2004
     (Dollars in thousands)

Assets

                                    

Cash and investments, at fair value

    $ 2,132,300    $ 1,030,751    $ —      $ 458,499     $ 3,621,550

Investments in unconsolidated subsidiaries (1)

      112,456      —        774,880      24,268       911,604

Equity investment held for sale (3)

      —        —        —        109,519       109,519

Related party receivables

      1,633      —        —        16,806       18,439

Reinsurance receivables, recoverables and prepaid premiums

      31,110      18,547      —        —         49,657

Deferred policy acquisition costs

      53,998      38,440      —        —         92,438

Other assets

      208,806      26,460      —        107,494       342,760
    
  
  
  
 

Total assets

    $ 2,540,303    $ 1,114,198    $ 774,880    $ 716,586     $ 5,145,967
    
  
  
  
 

Liabilities

                                    

Reserve for losses and loss adjustment expenses

    $ 338,620    $ 26,224    $ —      $ 3     $ 364,847

Unearned premiums

      152,685      332,091      —        39       484,815

Long-term debt

      —        —        —        819,529       819,529

Other liabilities

      237,431      71,740      12,424      17,426       339,021
    
  
  
  
 

Total liabilities

      728,736      430,055      12,424      836,997       2,008,212

Shareholders’ equity

      1,811,567      684,143      762,456      (120,411 )     3,137,755
    
  
  
  
 

Total liabilities and shareholders’ equity

    $ 2,540,303    $ 1,114,198    $ 774,880    $ 716,586     $ 5,145,967
    
  
  
  
 
     March 31, 2004
     (Dollars in thousands)

Assets

                                    

Cash and investments, at fair value

    $ 2,172,964    $ 884,839    $ —      $ 444,211     $ 3,502,014

Investments in unconsolidated subsidiaries (1)

      101,129      —        721,079      134,721       956,929

Related party receivables

      1,227      —        —        26,437       27,664

Reinsurance receivables, recoverables and prepaid premiums

      39,364      16,894      —        —         56,258

Deferred policy acquisition costs

      63,657      33,711      —        —         97,368

Other assets

      206,596      23,516      —        111,305       341,417
    
  
  
  
 

Total assets

    $ 2,584,937    $ 958,960    $ 721,079    $ 716,674     $ 4,981,650
    
  
  
  
 

Liabilities

                                    

Reserve for losses and loss adjustment expenses

    $ 334,252    $ 22,733    $ —      $ 2     $ 356,987

Unearned premiums

      185,400      295,130      —        46       480,576

Long-term debt

      —        —        —        819,543       819,543

Other liabilities

      199,390      57,989      7,498      125,422       390,299
    
  
  
  
 

Total liabilities

      719,042      375,852      7,498      945,013       2,047,405

Shareholders’ equity

      1,865,895      583,108      713,581      (228,339 )     2,934,245
    
  
  
  
 

Total liabilities and shareholders’ equity

    $ 2,584,937    $ 958,960    $ 721,079    $ 716,674     $ 4,981,650
    
  
  
  
 

 

 

THE PMI GROUP, INC. AND SUBSIDIARIES

 

U.S. MORTGAGE INSURANCE OPERATIONS (4) ANALYSIS OF RESERVE FOR LOSSES AND LAE

 

     March 31, 2005
    December 31, 2004
    March 31, 2004
     Loans in
Default
    Reserve for
Losses and LAE
    Loans in
Default
    Reserve for
Losses and LAE
    Loans in
Default
    Reserve for
Losses and LAE
     (Dollars in thousands)

Primary insurance

    35,716    $ 303,792    39,054    $ 306,023    34,762    $ 301,615

Pool insurance

    16,992      34,685    17,186      32,597    16,810      32,637
    
  
  
  
  
  

Total

    52,708    $ 338,477    56,240    $ 338,620    51,572    $ 334,252
    
  
  
  
  
  

 

Reconciliation of Reserve for Losses and LAE

 

     March 31,
2005
     December 31,
2004
     Reserve
Change
  
     (Dollars in thousands)  

Gross reserve for losses and LAE:

                         

Primary insurance

    $ 303,792     $ 306,023     $ (2,231 )

Pool insurance

      34,685       32,597       2,088  
    
 
 

Total gross reserve for losses and LAE

      338,477       338,620       (143 )

Ceded reserve for losses:

                         

Primary insurance

      (2,158 )     (2,289 )     131  

Pool insurance

      (89 )     (117 )     28  
    
 
 

Total ceded reserve for losses

      (2,247 )     (2,406 )     159  
    
 
 

Net reserve for losses and LAE

    $ 336,230     $ 336,214     $ 16  
    
 
 

 

U.S. MORTGAGE INSURANCE OPERATIONS (4) STATISTICAL INFORMATION

 

     Three Months Ended March 31,
  
     2005
     2004
  

Flow insurance written (in millions)

    $ 6,303     $ 8,454  

Bulk insurance written (in millions)

      1,865       345  
    
 

Primary new insurance written (in millions)

    $ 8,168     $ 8,799  

Primary new risk written (in millions)

    $ 2,069     $ 2,207  

Pool insurance written (in millions) (9)

    $ 1,306     $ 3,903  

Pool risk written (in millions) (9)

    $ 41     $ 75  

Product mix as a% of new insurance written:

                 

Above 97% LTV’s

      13 %     10 %

90.01% to 95% LTV’s

      24 %     32 %

85.01% to 90% LTV’s

      38 %     40 %

90.01% to 95% LTV’s with >= 30% coverage

      20 %     26 %

85.01% to 90% LTV’s with >= 25% coverage

      33 %     32 %

ARMs

      33 %     15 %

Monthlies

      98 %     96 %

Refinances

      37 %     34 %

Bulk transactions

      23 %     4 %

Premiums written (in thousands):

                 

Gross premiums written

    $ 201,129     $ 192,842  

Ceded premiums, net of assumed premiums

      (43,287 )     (36,186 )

Refunded premiums

      (3,304 )     (3,592 )
    
 

Net premiums written

      154,538       153,064  

Change in unearned premiums

      9,574       (4,041 )
    
 

Net premiums earned

    $ 164,112     $ 149,023  
    
 

 

 

THE PMI GROUP, INC. AND SUBSIDIARIES

 

U.S. MORTGAGE INSURANCE OPERATIONS (4) STATISTICAL INFORMATION

 

     March 31,
2005
     December 31,
2004
     March 31,
2004
  

Primary insurance in force (in millions)

    $ 103,997     $ 105,321     $ 104,304  

Primary risk in force (in millions)

    $ 25,507     $ 25,658     $ 24,545  

Pool risk in force (in millions) (9)

    $ 2,417     $ 2,408     $ 2,565  

Risk-to-capital ratio (10)

      8.1 to 1       8.2 to 1       8.8 to 1  

Insured primary loans

      788,847       803,236       816,624  

Persistency

      60.8 %     60.9 %     47.8 %

Primary loans in default

      35,716       39,054       34,762  

Primary default rate

      4.53 %     4.86 %     4.26 %

Bulk transactions only default rate

      8.17 %     9.19 %     8.68 %

Pool default rate

      5.65 %     5.50 %     4.39 %

Primary claims paid (year-to-date in thousands)

    $ 55,510     $ 193,178     $ 43,598  

Number of primary claims paid (year-to-date)

      2,413       8,335       1,840  

Average primary claim size (year-to-date in thousands)

    $ 23.0     $ 23.2     $ 23.7  

Percentage of flow NIW subject to captive reinsurance arrangements (year-to-date)

      61.1 %     63.3 %     57.3 %

Percentage of NIW subject to captive reinsurance arrangements (year-to-date)

      47.1 %     55.7 %     55.0 %

Percentage of IIF subject to captive reinsurance arrangements (year-to-date)

      53.7 %     53.7 %     51.3 %

Percentage of RIF subject to captive reinsurance arrangements (year-to-date)

      53.6 %     55.0 %     53.3 %

 

CMG MORTGAGE INSURANCE COMPANY STATISTICAL INFORMATION

 

     March 31,
2005
     December 31,
2004
     March 31,
2004
  

Primary new insurance written (year-to-date in millions)

    $ 1,071     $ 5,355     $ 1,021  

Primary insurance in force (in millions)

    $ 14,213     $ 14,037     $ 12,735  

Primary risk in force (in millions)

    $ 3,286     $ 3,219     $ 2,824  

Insured primary loans

      105,928       105,568       98,926  

Persistency

      69.1 %     69.1 %     55.8 %

Primary loans in default

      713       666       544  

Primary default rate (year-to-date)

      0.67 %     0.63 %     0.55 %

Primary claims paid (year-to-date in thousands)

    $ 892     $ 5,111     $ 1,124  

Number of primary claims paid (year-to-date)

      41       244       44  

Average primary claims size (year-to-date in thousands)

    $ 21.8     $ 20.9     $ 25.5  

THE PMI GROUP, INC. AND SUBSIDIARIES

 

PMI AUSTRALIA STATISTICAL INFORMATION

 

     March 31,
2005
     December 31,
2004
     March 31,
2004
  

Net premiums written (year-to-date in thousands)

    $ 32,388     $ 151,164     $ 35,796  

Premiums earned (year-to-date in thousands)

    $ 29,399     $ 109,071     $ 28,852  

Flow insurance written (year-to-date in millions)

    $ 3,922     $ 19,540     $ 5,276  

RMBS insurance written (year-to-date in millions)

      3,816       14,669       2,987  
    
 
 

New insurance written (year-to-date in millions)

    $ 7,738     $ 34,209     $ 8,263  
    
 
 

Insurance in force (in millions)

    $ 117,439     $ 113,628     $ 93,232  

Risk in force (in millions)

    $ 106,724     $ 103,135     $ 84,458  

Policies in force

      955,922       926,073       823,174  

Loans in default

      1,276       1,020       1,309  

Default rate

      0.13 %     0.11 %     0.16 %

Claims paid (year-to-date in thousands)

    $ 305     $ 1,111     $ 189  

Number of claims paid (year-to-date)

      18       65       14  

Average claim size (year-to-date in thousands)

    $ 16.9     $ 17.1     $ 13.5  
PMI EUROPE STATISTICAL INFORMATION  
     March 31,
2005
     December 31,
2004
     March 31,
2004
  

Net premiums written (year-to-date in thousands)

    $ 1,547     $ 9,568     $ 2,725  

Premiums earned (year-to-date in thousands)

    $ 4,353     $ 20,944     $ 5,369  

New credit default swap written (year-to-date in millions)

    $ —       $ 2,603     $ 2,068  

Insurance in force (in millions)

    $ 31,365     $ 34,332     $ 33,699  

Risk in force (in millions)

    $ 2,405     $ 2,747     $ 3,283  

Claims paid (year-to-date in thousands)

    $ 825     $ 979     $ 489  

Number of claims paid (year-to-date)

      20       77       31  

THE PMI GROUP, INC. AND SUBSIDIARIES

 

APPENDIX A - U.S. MORTGAGE INSURANCE OPERATIONS (4) SUPPLEMENTAL STATISTICAL INFORMATION

 

     3/31/2005
     12/31/2004
     9/30/2004
     6/30/2004
     3/31/2004
  

Primary insurance in force (in millions)

                                         

Flow

    $ 91,399     $ 93,263     $ 93,601     $ 92,968     $ 93,161  

Bulk

      12,598       12,058       11,181       11,238       11,143  
    
 
 
 
 

Total

    $ 103,997     $ 105,321     $ 104,782     $ 104,206     $ 104,304  
    
 
 
 
 

Primary risk in force (in millions)

                                         

Flow

    $ 22,541     $ 22,885     $ 22,741     $ 22,342     $ 22,143  

Bulk

      2,966       2,773       2,518       2,460       2,402  
    
 
 
 
 

Total

    $ 25,507     $ 25,658     $ 25,259     $ 24,802     $ 24,545  
    
 
 
 
 

Primary policies in force

      788,847       803,236       805,859       807,822       816,624  

Primary risk in force - credit score distribution

                                         

Flow                     619-575

      6.1 %     6.2 %     6.4 %     6.6 %     6.8 %

                             574 or below

      1.7 %     1.8 %     1.9 %     2.0 %     2.1 %

Bulk                     619-575

      20.2 %     21.1 %     21.6 %     21.0 %     21.3 %

                             574 or below

      12.9 %     13.0 %     12.7 %     12.2 %     12.7 %

Total                     619-575

      7.7 %     7.8 %     7.9 %     8.0 %     8.3 %

                             574 or below

      3.0 %     3.0 %     3.0 %     3.0 %     3.1 %

Primary average loan size (in thousands)

                                         

Flow

    $ 131.5     $ 131.3     $ 130.5     $ 129.3     $ 128.1  

Bulk

    $ 134.1     $ 129.8     $ 127.1     $ 126.9     $ 124.9  

Total

    $ 131.8     $ 131.1     $ 130.1     $ 129.0     $ 127.7  

Loss severity - primary (quarterly)

                                         

Flow

      85.6 %     84.9 %     77.4 %     83.0 %     82.1 %

Bulk

      90.9 %     84.6 %     78.8 %     83.5 %     82.1 %

Total

      86.8 %     84.8 %     77.8 %     83.1 %     82.1 %

Alt-A primary insurance in force (in millions)

                                         

With FICO scores of 660 and above

    $ 10,892     $ 10,250     $ 9,421     $ 8,590     $ 7,623  

With FICO scores below 660 and above 619

      2,136       2,029       1,836       1,648       1,330  
    
 
 
 
 

Total Alt-A primary insurance in force

    $ 13,028     $ 12,279     $ 11,257     $ 10,238     $ 8,953  
    
 
 
 
 

 

NEW INSURANCE WRITTEN AND INSURANCE IN FORCE ANALYSIS

 

     3/31/2005
     12/31/2004
     9/30/2004
     6/30/2004
     3/31/2004
  

FICO > 700 and LTV > 80 (in millions)

                                         

Primary new insurance written (year-to-date)

    $ 3,049     $ 16,643     $ 12,788     $ 8,633     $ 3,826  

Primary insurance in force

    $ 42,974     $ 43,801     $ 43,862     $ 43,640     $ 43,660  

Total portfolio (in millions)

                                         

Primary new insurance written (year-to-date)

    $ 8,168     $ 41,213     $ 30,695     $ 20,205     $ 8,799  

Primary insurance in force

    $ 103,997     $ 105,321     $ 104,782     $ 104,206     $ 104,304  

FICO > 700 and LTV > 80 as a percentage of total portfolio

                                         

Primary new insurance written (year-to-date)

      37.3 %     40.4 %     41.7 %     42.7 %     43.5 %

Primary insurance in force

      41.3 %     41.6 %     41.9 %     41.9 %     41.9 %

THE PMI GROUP, INC. AND SUBSIDIARIES

 

APPENDIX B - PMI AUSTRALIA AND PMI EUROPE QUARTERLY FINANCIAL INFORMATION

 

PMI AUSTRALIA

 

     3/31/05
     12/31/04
     9/30/04
     6/30/04
     3/31/04
    12/31/03
    9/30/03
     6/30/03
     (Australian $ in thousands, unless otherwise noted)

Income Statement Components - Quarter Ended

                                                             

Premiums earned

    $ 37,840     $ 35,819     $ 37,109     $ 37,308     $ 37,790    $ 36,766    $ 32,855     $ 30,811

Net investment income

    $ 14,705     $ 14,087     $ 13,098     $ 12,677     $ 12,139    $ 9,235    $ 12,309     $ 9,525

Change in fair value of put options

    $ (1,338 )   $ (228 )   $ (1,890 )   $ 1,311     $ —      $ —      $ —       $ —  

Total expenses

    $ 13,788     $ 13,624     $ 13,413     $ 12,799     $ 12,030    $ 12,160    $ (216 )   $ 9,282

Net income

    $ 26,487     $ 25,447     $ 24,725     $ 26,832     $ 26,518    $ 21,441    $ 31,993     $ 21,412

Net income (US$ in thousands)

    $ 20,584     $ 19,272     $ 17,554     $ 19,219     $ 20,265    $ 15,511    $ 21,073     $ 13,746

Balance Sheet Components

                                                             

Assets

                                                             

Cash and investments, at fair value

    $ 1,037,704     $ 1,027,236     $ 973,479     $ 924,330     $ 892,864    $ 853,920    $ 816,143     $ 777,701

Total assets

    $ 1,132,961     $ 1,116,874     $ 1,068,080     $ 1,013,102     $ 976,723    $ 935,904    $ 891,787     $ 853,196

Liabilities and Shareholders’ Equity

                                                             

Loss reserves

    $ 12,549     $ 12,547     $ 13,692     $ 13,556     $ 13,537    $ 13,536    $ 13,698     $ 25,450

Unearned premiums

    $ 382,781     $ 378,981     $ 364,120     $ 346,748     $ 330,477    $ 321,441    $ 297,042     $ 277,921

Shareholders’ equity

    $ 689,927     $ 673,124     $ 642,585     $ 607,781     $ 586,842    $ 556,329    $ 539,141     $ 515,622
PMI EUROPE
     3/31/05
     12/31/04
     9/30/04
     6/30/04
     3/31/04
    12/31/03
    9/30/03
     6/30/03
     (Euro € in thousands, unless otherwise noted)

Income Statement Components - Quarter Ended

                                                             

Premiums earned

    € 3,321     € 4,140     € 4,233     € 4,172     € 4,295    € 7,765    € 1,283     € 1,867

Net investment income

    € 2,002     € 1,435     € 2,294     € 1,642     € 2,198    € 1,199    € 1,491     € 974

Change in fair value of put options

    € (33 )   € (6 )   € (96 )   € (18 )   € —      € —      € —       € —  

Total expenses

    € 2,031     € 3,679     € 1,476     € 1,462     € 1,768    € 1,723    € 1,144     € 1,376

Net income

    € 2,326     € 2,703     € 3,942     € 3,535     € 3,781    € 5,955    € 1,299     € 1,329

Net income (US$ in thousands)

    $ 3,049     $ 3,489     $ 4,822     $ 4,260     $ 4,726    $ 7,089    $ 1,469     $ 1,533

Balance Sheet Components

                                                             

Assets

                                                             

Cash and investments, at fair value

    € 172,707     € 169,165     € 164,558     € 161,129     € 162,621    € 154,369    € 98,847     € 94,132

Total assets

    € 182,857     € 179,134     € 175,731     € 172,402     € 170,600    € 160,891    € 100,878     € 100,302

Liabilities and Shareholders’ Equity

                                                             

Loss reserves

    € 12,807     € 12,126     € 10,656     € 10,497     € 10,031    € 9,624    € 2,109     € 1,956

Unearned premiums

    € 24,719     € 26,859     € 29,363     € 31,748     € 33,903    € 36,029    € 183     € 566

Shareholders’ equity

    € 125,395     € 121,494     € 117,142     € 111,691     € 109,386    € 100,524    € 95,289     € 95,115

THE PMI GROUP, INC. AND SUBSIDIARIES

 

APPENDIX C - BUSINESS SEGMENT RESULTS OF OPERATIONS BY QUARTER

 

     2005
     2004
  
     1st Quarter
     4th Quarter
     3rd Quarter
     2nd Quarter
     1st Quarter
  
     (Dollars in thousands)  

U.S. Mortgage Insurance Operations (4)

                                         

Net premiums written

    $ 154,538     $ 153,916     $ 143,732     $ 147,407     $ 153,064  
    
 
 
 
 

Revenues

                                         

Premiums earned

    $ 164,112     $ 168,313     $ 162,276     $ 154,392     $ 149,023  

Net investment income

      25,579       25,496       24,332       27,944       24,458  

Equity in earnings from unconsolidated subsidiaries (1)

      4,074       4,569       3,707       3,676       3,328  

Net realized investment gains (losses)

      420       (12 )     1,672       (166 )     1,087  

Other income (expense)

      4       15       (24 )     (25 )     81  
    
 
 
 
 

Total revenues

      194,189       198,381       191,963       185,821       177,977  
    
 
 
 
 

Losses and expenses

                                         

Losses and loss adjustment expenses

      63,118       58,355       60,092       55,755       58,956  

Amortization of policy acquisition costs

      16,026       16,585       18,003       18,109       19,433  

Other underwriting and operating expenses

      23,554       27,258       22,785       23,445       24,981  

Field operations restructuring charge

      —         —         315       1,443       1,156  

Legal settlement refund

      —         —         (2,574 )     —         —    

Interest expense

      1       12       13       17       21  
    
 
 
 
 

Total losses and expenses

      102,699       102,210       98,634       98,769       104,547  
    
 
 
 
 

Income before income taxes

      91,490       96,171       93,329       87,052       73,430  

Income taxes

      25,149       26,328       25,528       23,790       19,822  
    
 
 
 
 

Net income

    $ 66,341     $ 69,843     $ 67,801     $ 63,262     $ 53,608  
    
 
 
 
 

International Operations (5)

                                         

Net premiums written

    $ 39,185     $ 46,156     $ 43,238     $ 43,460     $ 40,323  
    
 
 
 
 

Revenues

                                         

Premiums earned

    $ 35,435     $ 33,979     $ 32,829     $ 33,255     $ 36,259  

Net investment income

      13,756       12,789       11,848       10,646       11,807  

Net realized investment gains (losses)

      340       (263 )     256       377       225  

Other income (loss)

      (113 )     3,044       296       2,399       1,602  
    
 
 
 
 

Total revenues

      49,418       49,549       45,229       46,677       49,893  
    
 
 
 
 

Losses and expenses

                                         

Losses and loss adjustment expenses

      1,363       1,737       746       777       864  

Amortization of policy acquisition costs

      4,417       3,065       3,225       3,135       3,662  

Other underwriting and operating expenses

      7,005       10,235       7,346       6,940       6,867  

Interest expense

      —         —         12       60       1  
    
 
 
 
 

Total losses and expenses

      12,785       15,037       11,329       10,912       11,394  
    
 
 
 
 

Income before income taxes

      36,633       34,512       33,900       35,765       38,499  

Income taxes

      11,485       10,274       10,218       10,799       11,470  
    
 
 
 
 

Net income

    $ 25,148     $ 24,238     $ 23,682     $ 24,966     $ 27,029  
    
 
 
 
 

Financial Guaranty (6)

                                         

Equity in earnings from unconsolidated subsidiaries (1)

    $ 20,846     $ 16,156     $ 17,061     $ 19,699     $ 14,928  

Income taxes

      1,956       1,689       1,820       2,220       1,413  
    
 
 
 
 

Net income

    $ 18,890     $ 14,467     $ 15,241     $ 17,479     $ 13,515  
    
 
 
 
 

Other (7)

                                         

Net premiums written

    $ 23     $ 31     $ 9     $ 9     $ 17  
    
 
 
 
 

Revenues

                                         

Premiums earned

    $ 20     $ 20     $ 18     $ 16     $ 20  

Net investment income

      4,455       4,706       5,775       5,032       3,776  

Equity in earnings (losses) from unconsolidated subsidiaries (1)

      292       (975 )     353       210       842  

Net realized investment losses

      (39 )     —         (374 )     (143 )     (37 )

Realized loss from discontinued operations of equity investment (3)

      —         (20,420 )     —         —         —    

Other income

      5,644       5,345       6,146       7,424       7,168  
    
 
 
 
 

Total revenues

      10,372       (11,324 )     11,918       12,539       11,769  
    
 
 
 
 

Losses and expenses

                                         

Other underwriting and operating expenses

      15,086       20,272       16,545       17,790       17,316  

Interest expense

      9,552       8,640       8,612       8,745       8,493  
    
 
 
 
 

Total losses and expenses

      24,638       28,912       25,157       26,535       25,809  
    
 
 
 
 

Loss from continuing operations before income tax benefit

      (14,266 )     (40,236 )     (13,239 )     (13,996 )     (14,040 )

Income tax benefit from continuing operations

      (5,045 )     (13,339 )     (9,158 )     (4,964 )     (5,451 )
    
 
 
 
 

Loss from continuing operations after income tax benefit

      (9,221 )     (26,897 )     (4,081 )     (9,032 )     (8,589 )
    
 
 
 
 

Income from discontinued operations before income taxes (2)

      —         —         —         —         5,756  

Income taxes from discontinued operations (2)

      —         —         —         —         1,958  
    
 
 
 
 

Income from discontinued operations after income taxes (2)

      —         —         —         —         3,798  
    
 
 
 
 

Gain on sale of discontinued operations, net of income taxes (2)

      —         (1,105 )     —         —         30,108  
    
 
 
 
 

Net income (loss)

    $ (9,221 )   $ (28,002 )   $ (4,081 )   $ (9,032 )   $ 25,317