8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 7, 2006

THE PMI GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	1-13664	94-3199675
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

PMI Plaza, 3003 Oak Road

Walnut Creek, California 94597

(Address of principal executive offices, including zip code)

(925) 658-7878

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On February 7, 2006, The PMI Group, Inc. filed an 8-K to furnish information under Items 2.02 and 9.01. This Amendment is being filed to correct three typographical errors contained in the press release filed as Exhibit 99.1 thereto. The changes are as follows:

On page 7 of the supplemental financial and statistical information attached to the press release, loss severity – primary for the quarter ended December 31, 2005 should have read as follows:

Loss severity – primary (quarterly)	12/31/05
Flow	85.9	%
Structured Transactions	94.3	%
Total	87.7	%

A copy of the Company’s press release (as corrected above) is attached hereto as Exhibit 99.1. This Form 8-K and the attached exhibit are furnished to, but not filed with, the Securities and Exchange Commission.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits:

The following material is furnished as an exhibit to this Current Report on Form 8-K:

Exhibit No.	Description
99.1	The PMI Group, Inc. Press Release dated February 7, 2006 (as corrected)

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S I G N A T U R E

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	THE PMI GROUP, INC.
Dated: February 7, 2006	By:	/s/ Donald P. Lofe, Jr.
		Donald P. Lofe, Jr. Executive Vice President, Chief Financial Officer

Dated: February 7, 2006	By:	/s/ Thomas H. Jeter
		Thomas H. Jeter Vice President, Corporate Controller

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EX-99.1

Exhibit 99.1

NEWS RELEASE

Investors and Media Contacts:

Bill Horning / Beth Haiken

925.658.6193 / 925.658.6192

THE PMI GROUP, INC. REPORTS FOURTH QUARTER

2005 NET INCOME OF $107.7 MILLION, OR $1.11 PER DILUTED SHARE

Walnut Creek, CA, February 7, 2006 - The PMI Group, Inc. (NYSE: PMI) (the “Company”) today reported a 33.8% increase in net income of $107.7 million for the fourth quarter of 2005 compared to net income of $80.5 million for the fourth quarter of 2004. Earnings per diluted share were $1.11 for the fourth quarter of 2005 compared to $0.79 for the fourth quarter of 2004, representing a 40.5% increase.

For the full year, the Company reported record income from continuing operations after income taxes of $409.2 million in 2005 compared to $366.5 million in 2004, an increase of 11.7%. Diluted earnings per share from continuing operations after income taxes were $4.10 per share in 2005 compared to $3.55 per share in 2004, an increase of 15.5%.

Highlights for the fourth quarter of 2005 and the full year 2005 included strong growth in U.S. Mortgage Insurance Operations¹ net premiums written and full year incurred losses at the low end of the Company’s guidance, growth in the International Operations² net income driven by results from PMI Australia and positive results from the Financial Guaranty³ segment led by equity in earnings from FGIC.

The Company’s book value per share as of December 31, 2005 was $36.42 compared to $33.37 at December 31, 2004, representing an increase of 9.1%.

The PMI Group, Inc. Fourth Quarter Results by Segment

	Fourth Quarter Total Revenues							Fourth Quarter Net Income
(Dollars in millions, except per share data)	2005		2004			% Change		2005			2004			% Change
U.S. Mortgage Insurance Operations	$	197.9	$	198.4		(0.3	%)	$	69.9		$	69.8		0.1	%
International Operations		54.8		49.5		10.7	%		27.0			24.2		11.6	%
Financial Guaranty		21.5		16.2		32.7	%		19.2			14.5		32.4	%
Other4		9.0		(11.3	)	n.m.			(8.4	)		(28.0	)	n.m.
Total	$	283.2	$	252.8		12.0	%	$	107.7		$	80.5		33.8	%
Diluted Net Income Per Share								$	1.11		$	0.79		40.5	%
Book Value Per Share								$	36.42		$	33.37		9.1	%

May not total due to rounding.

n.m. – Not meaningful

¹ “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 Mortgage Insurance Company (CMG).

² “International Operations” includes the results of PMI Australia, PMI Europe and the results of operations from the Hong Kong branch operations.

³ “Financial Guaranty” includes the results of the Financial Guaranty Insurance Company, Inc. (FGIC) with which The PMI Group, Inc. has an equity ownership interest of 42.0% and results from the RAM Reinsurance Group of Companies (RAM Re), a financial guaranty reinsurer based in Bermuda.

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The PMI Group, Inc. Full Year Results by Segment

	Full Year Total Revenues						Full Year Net Income
(Dollars in millions, except per share data)	2005		2004		% Change		2005			2004			% Change
U.S. Mortgage Insurance Operations	$	792.9	$	754.1	5.1	%	$	275.4		$	254.5		8.2	%
International Operations		212.4		191.3	11.0	%		105.5			99.9		5.6	%
Financial Guaranty		79.8		67.8	17.7	%		72.2			60.7		18.9	%
Other		32.7		24.9	31.3	%		(43.9	)		(15.8	)	n.m.
Total	$	1,117.8	$	1,038.2	7.7	%	$	409.2		$	399.3		2.5	%
Diluted Net Income Per Share							$	4.10		$	3.87		5.9	%
Diluted Net Income from Continuing Operations Per Share							$	4.10		$	3.55		15.5	%

May not total due to rounding.

n.m. – Not meaningful

⁴ The “Other” segment primarily consists of the holding company, contract underwriting operations and Select Portfolio Servicing, Inc. (SPS) prior to its disposition on October 4, 2005. In the fourth quarter of 2004 the Company incurred a $13.3 million (after tax) realized capital loss related to SPS.

Consolidated Operating Results

Consolidated net premiums written for the fourth quarter and full year 2005 totaled $246.1 million and $845.7 million, respectively, compared to $200.1 million and $771.4 million for the same periods a year ago. The increases were due primarily to an increase in premiums written in U.S. Mortgage Insurance Operations.

Consolidated premiums earned for the fourth quarter and full year 2005 were $206.6 million and $817.6 million, respectively, compared to $202.3 million and $770.4 million for the same periods a year ago. The increases were due primarily to increases in premiums earned in the U.S. Mortgage Insurance Operations and International Operations.

Consolidated losses and loss adjustment expenses for the fourth quarter and full year 2005 totaled $64.8 million and $257.8 million, respectively, compared to $60.1 million and $237.3 million for the same periods a year ago. The increases were due primarily to higher paid claims in the fourth quarter and full year 2005 in the U.S. Mortgage Insurance Operations.

Consolidated other underwriting and operating expenses for the fourth quarter and full year 2005 totaled $59.1 million and $213.6 million, respectively, compared to $57.8 million and $204.7 million for the same periods a year ago. The increases were due primarily from International Operations, principally from higher profit sharing commissions in PMI Europe related to the continued favorable credit performance of the Royal & Sun Alliance (R&SA) portfolio and an increase in expenses related to implementing new regulatory requirements in PMI Australia.

Consolidated reserve for losses and loss adjustment expenses totaled $368.8 million as of December 31, 2005 compared to $366.3 million as of September 30, 2005 and $364.8 million as of December 31, 2004. The increase for the fourth quarter of 2005

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was attributable to an increase in U.S. Mortgage Insurance Operations claim rates due to the portfolio composition and seasoning of the insurance portfolio and to loss reserve increases due to an increase in notices of defaults from the hurricane impacted areas.

Common shares repurchased in the fourth quarter of 2005 totaled 1.1 million shares at a total cost of $44.5 million, completing the Company’s $150 million common share repurchase program authorized in July 2005. For the full year 2005, the Company invested $250 million to repurchase a total of 6.3 million common shares at an average cost of $39.74 per share. For the full year 2005, the Company repurchased approximately 7% of its common shares outstanding as of December 31, 2004.

Hurricane Related Items

• As of December 31, 2005, U.S. Mortgage Insurance Operations provided loss reserves of $2.5 million (pre-tax) for approximately 3,500 pending notices of default (NODs) from the hurricane impacted areas estimated to have a reduced likelihood of generating a claim. Loss reserves were established for all other NODs from the hurricane impacted areas in the normal course of operations.

• For the full year 2005, the Company recorded a total of $9.4 million (after tax) in loss reserve increases in the U.S. Mortgage Insurance Operations, reduced equity earnings from Select Portfolio Servicing, Inc. and Financial Guaranty Insurance Company and expenses related to disaster relief donations.

Segment Highlights

U.S. Mortgage Insurance Operations

• U.S. Mortgage Insurance Operations realized a 30.7% increase in net premiums written for the fourth quarter of 2005 to $201.2 million as compared to $153.9 million for the fourth quarter of 2004. The increase was primarily due to two large single premium structured transactions completed in the fourth quarter of 2005 and an increase in average overall premium rates.

• U.S. Mortgage Insurance Operations total incurred losses for the fourth quarter 2005 were $63.2 million, bringing the full year 2005 total incurred losses to $253.4 million, which was at the low end of the Company’s range of guidance.

Page 3

• Equity in earnings from CMG for the full year 2005 increased 22.9% to $18.8 million compared to $15.3 million for the full year 2004.

International Operations

• PMI Australia reported net income of $23.7 million for the fourth quarter of 2005, an increase of 22.8% over net income for the fourth quarter 2004 of $19.3 million. For the full year 2005, PMI Australia reported net income of $88.5 million compared to $76.3 million for the full year 2004 representing an increase of 16.0% year-over-year. The increases were due primarily to increases in premiums earned, higher investment income and the appreciation of the Australian dollar relative to the U.S. dollar.

• PMI Europe reported net income for the quarter and full year of 2005 of $1.6 million and $9.8 million, respectively, compared to $3.5 million and $17.3 million for the same periods a year ago. The decreases in the fourth quarter and full year 2005 were due principally from higher profit sharing commissions related to the continued favorable credit performance of the R&SA portfolio.

• PMI’s Hong Kong gross reinsurance premiums written for the full year 2005 totaled $18.4 million compared to $12.8 million for the same period a year ago, an increase of 43.8%. The increase was due primarily to increased policy writings as a result of higher mortgage market volume and increased market penetration.

Financial Guaranty

• Equity in earnings from FGIC grew for the fourth quarter and full year 2005 to $18.0 million (after-tax) and $69.1 million (after-tax), respectively, compared to $13.5 million (after-tax) and $56.6 million (after-tax) for the same periods a year ago. The increases were due to higher premiums earned and higher investment income partially offset by an increase in reserves related to Hurricane Katrina for the third quarter of 2005.

• Equity in earnings from RAM Re for the fourth quarter and full year 2005 were $1.3 million (after-tax) and $3.1 million (after-tax), respectively, compared to $1.0 million (after-tax) and $4.1 million (after-tax) for the same periods a year ago.

Page 4

Other

• As previously reported by the Company, on October 4, 2005 the Company completed the sale of all outstanding stock of SPS to Credit Suisse First Boston (USA). In the fourth quarter of 2004, the Company signed a letter of intent granting Credit Suisse First Boston (USA) an option to buy 100% of the outstanding stock of SPS from the Company. As a result of this agreement, the Company incurred a $13.3 million (after tax) realized capital loss on its investment in SPS for the fourth quarter of 2004.

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 promote homeownership and facilitate 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. 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 our Form 10-Q for the quarter ended September 30, 2005 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.

# # #

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THE PMI GROUP, INC. AND SUBSIDIARIES (the “Company”)

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

Contents

Consolidated Statements of Operations and Balance Sheets	Page 2
Business Segments Results of Operations - Three Months Ended December 31, 2005 and 2004	Page 3
Business Segments Results of Operations - Year Ended December 31, 2005 and 2004	Page 4
Business Segments Balance Sheets	Page 5
U.S. Mortgage Insurance Operations Analysis of Reserve for Losses and LAE and Financial and Statistical Information	Page 6
U.S. Mortgage Insurance Operations Financial and Statistical Information	Page 7
CMG Mortgage Insurance Company, PMI Australia and PMI Europe Financial and Statistical Information	Page 8
Appendix A - PMI Australia Quarterly Financial Information	Page 9
Appendix B - PMI Europe Quarterly Financial Information	Page 10
Appendix C - Business Segments Results of Operations by Quarter	Page 11
Appendix C - Business Segments Results of Operations by Quarter (Continued)	Page 12

Please refer to the following when noted:

⁽¹⁾ For year ended December 31, 2005, the Company’s equity in earnings from 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 an equity investment held for sale. Effective January 1, 2005, SPS’s equity earnings are reported in other income.

⁽²⁾ In the fourth quarter of 2004, the Company recorded a write-down of its equity investment in SPS for $20.4 million (pre-tax). The write-down was recorded as a realized capital loss on its equity investment due to the Company’s decision to sell SPS.

⁽³⁾ The $2.6 million refund relates to the settlement in 2001 of the Baynham class action litigation.

⁽⁴⁾ 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. In December 2004, the Company reduced its gain on sale of APTIC by $1.1 million after tax related to the true-up of the Company’s pension liability due to settlement accounting triggered by the sale of APTIC.

⁽⁵⁾ U.S. Mortgage Insurance Operations include the operating results of PMI Mortgage Insurance Co. and affiliated U.S. mortgage insurance and reinsurance companies (“PMI”). CMG and its affiliates are included under the equity method of accounting in equity in earnings from unconsolidated subsidiaries.

⁽⁶⁾ International Operations include PMI Australia, PMI Europe and the Company’s Hong Kong branch’s results of operations.

⁽⁷⁾ Financial Guaranty represents our equity investments in FGIC Corporation and RAM Re.

⁽⁸⁾ The “Other” segment includes other income and related operating expenses of PMI Mortgage Services Co.; investment income, interest expense and corporate expenses 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 the discontinued operations of APTIC.

⁽⁹⁾ The expense ratio is the ratio, expressed as a percentage, of the sum of amortization of deferred policy acquisition costs and other underwriting and operating 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.

⁽¹⁰⁾ Pool insurance includes modified pool, GSE pool, old pool and all other pool insurance products for U.S. Mortgage Insurance Operations.

⁽¹¹⁾ Statutory risk-to-capital ratio is for PMI Mortgage Insurance Co. only.

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

THE PMI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended December 31,					Year Ended December 31,
	2005		2004			2005		2004
	(Dollars and shares, except per share data, in thousands)
Net premiums written	$	246,100	$	200,103		$	845,689	$	771,362
Revenues
Premiums earned	$	206,577	$	202,312		$	817,602	$	770,399
Net investment income		45,499		42,991			179,463		168,609
Equity in earnings from unconsolidated subsidiaries (1)		25,871		19,750			97,885		83,554
Net realized investment gains (losses)		153		(275	)		2,050		2,621
Realized capital loss on equity investment held for sale (2)		—		(20,420	)		—		(20,420	)
Other income		5,058		8,404			20,783		33,473
Total revenues		283,158		252,762			1,117,783		1,038,236
Losses and expenses
Losses and loss adjustment expenses		64,760		60,092			257,779		237,282
Amortization of deferred policy acquisition costs		17,387		19,650			74,387		85,216
Other underwriting and operating expenses		59,074		57,765			213,649		204,695
Legal settlement refund (3)		—		—			—		(2,574	)
Interest expense		4,654		8,652			31,137		34,626
Total losses and expenses		145,875		146,159			576,952		559,245
Income from continuing operations before income taxes		137,283		106,603			540,831		478,991
Income taxes from continuing operations		29,568		24,952			131,662		112,459
Income from continuing operations after income taxes		107,715		81,651			409,169		366,532
Income from discontinued operations before income taxes (4)		—		—			—		5,756
Income taxes from discontinued operations (4)		—		—			—		1,958
Income from discontinued operations after income taxes (4)		—		—			—		3,798
Gain on sale of discontinued operations, net of income taxes of $16,536 (4)		—		(1,105	)		—		29,003
Net income	$	107,715	$	80,546		$	409,169	$	399,333
Reconciliation of earnings per share
Net income	$	107,715	$	80,546		$	409,169	$	399,333
Plus: Interest expense on contingently convertible debt, net of income taxes		1,912		1,920			7,648		7,685
Net income adjusted for diluted earnings per share calculation	$	109,627	$	82,466		$	416,817	$	407,018
Share data:
Basic weighted average common shares outstanding		89,247		94,837			91,738		95,452
Stock options and other dilutive components		1,789		1,446			1,729		1,626
Common stock equivalent shares related to contingently convertible debt		8,153		8,153			8,153		8,153
Diluted weighted average common shares outstanding		99,189		104,436			101,620		105,231
Per share data:
Diluted net income from continuing operations per share	$	1.11	$	0.80		$	4.10	$	3.55
Income from discontinued operations after income taxes		—		—			—		0.04
Gain on sale of discontinued operations, net of income taxes		—		(0.01	)		—		0.28
Diluted net income per share	$	1.11	$	0.79		$	4.10	$	3.87
Common share repurchase data:
Common shares repurchased		1,100		1,484			6,292		2,470
Average price paid per common share repurchased (including commissions)	$	40.47	$	40.61		$	39.74	$	40.63

CONSOLIDATED BALANCE SHEETS

	December 31, 2005		December 31, 2004
	(Dollars in thousands, except per share data)
Assets
Cash and investments, at fair value	$	3,789,432	$	3,621,550
Investments in unconsolidated subsidiaries (1)		984,925		911,604
Equity investment held for sale (2)		—		109,519
Related party receivables		2,864		18,439
Reinsurance receivables, reinsurance recoverables and prepaid premiums		30,338		49,657
Deferred policy acquisition costs		86,170		92,438
Other assets		360,407		342,760
Total assets	$	5,254,136	$	5,145,967
Liabilities
Reserve for losses and loss adjustment expenses	$	368,841	$	364,847
Unearned premiums		490,899		484,815
Long-term debt		819,529		819,529
Other liabilities		344,077		339,021
Total liabilities		2,023,346		2,008,212
Shareholders’ equity		3,230,790		3,137,755
Total liabilities and shareholders’ equity	$	5,254,136	$	5,145,967
Basic shares issued and outstanding (shares in thousands)		88,713		94,025
Book value per share	$	36.42	$	33.37

2

THE PMI GROUP, INC. AND SUBSIDIARIES

BUSINESS SEGMENTS RESULTS OF OPERATIONS

	U.S. Mortgage Insurance Operations (5)			International Operations (6)			Financial Guaranty (7)		Other (8)			Consolidated Total
	Three Months Ended December 31, 2005
	(Dollars in thousands)
Net premiums written	$	201,160		$	44,913		$	—	$	27		$	246,100
Revenues
Premiums earned	$	166,778		$	39,781		$	—	$	18		$	206,577
Net investment income		26,168			14,499			—		4,832			45,499
Equity in earnings (losses) from unconsolidated subsidiaries (1)		4,583			—			21,453		(165	)		25,871
Net realized investment gains (losses)		378			(221	)		—		(4	)		153
Other income (loss)		(3	)		778			—		4,283			5,058
Total revenues		197,904			54,837			21,453		8,964			283,158
Losses and expenses
Losses and loss adjustment expenses		63,159			1,601			—		—			64,760
Amortization of deferred policy acquisition costs		14,113			3,274			—		—			17,387
Other underwriting and operating expenses		29,057			12,663			—		17,354			59,074
Interest expense		1			9			—		4,644			4,654
Total losses and expenses		106,330			17,547			—		21,998			145,875
Income (loss) before income taxes		91,574			37,290			21,453		(13,034	)		137,283
Income taxes (benefits)		21,696			10,251			2,208		(4,587	)		29,568
Net income (loss)	$	69,878		$	27,039		$	19,245	$	(8,447	)	$	107,715
Expense ratio (9)		21.5	%		35.5	%
Loss ratio (9)		37.9	%		4.0	%
Combined ratio		59.4	%		39.5	%
	Three Months Ended December 31, 2004
	(Dollars in thousands)
Net premiums written	$	153,916		$	46,156		$	—	$	31		$	200,103
Revenues
Premiums earned	$	168,313		$	33,979		$	—	$	20		$	202,312
Net investment income		25,496			12,789			—		4,706			42,991
Equity in earnings from unconsolidated subsidiaries (1)		4,569			—			16,156		(975	)		19,750
Net realized investment losses		(12	)		(263	)		—		—			(275	)
Realized capital loss on equity investment held for sale (2)		—			—			—		(20,420	)		(20,420	)
Other income		15			3,044			—		5,345			8,404
Total revenues		198,381			49,549			16,156		(11,324	)		252,762
Losses and expenses
Losses and loss adjustment expenses		58,355			1,737			—		—			60,092
Amortization of deferred policy acquisition costs		16,585			3,065			—		—			19,650
Other underwriting and operating expenses		27,258			10,235			—		20,272			57,765
Legal settlement refund (3)		—			—			—		—			—
Interest expense		12			—			—		8,640			8,652
Total losses and expenses		102,210			15,037			—		28,912			146,159
Income (loss) from continuing operations before income taxes		96,171			34,512			16,156		(40,236	)		106,603
Income taxes (benefits) from continuing operations		26,328			10,274			1,689		(13,339	)		24,952
Income (loss) from continuing operations after income taxes		69,843			24,238			14,467		(26,897	)		81,651
Loss on sale of discontinued operations, net of tax benefit (4)		—			—			—		(1,105	)		(1,105	)
Net income (loss)	$	69,843		$	24,238		$	14,467	$	(28,002	)	$	80,546
Expense ratio (9)		28.5	%		28.8	%
Loss ratio (9)		34.7	%		5.1	%
Combined ratio		63.2	%		33.9	%

3

THE PMI GROUP, INC. AND SUBSIDIARIES

BUSINESS SEGMENTS RESULTS OF OPERATIONS

	U.S. Mortgage Insurance Operations (5)			International Operations (6)			Financial Guaranty (7)		Other (8)			Consolidated Total
	Year Ended December 31, 2005
	(Dollars in thousands)
Net premiums written	$	667,128		$	178,481		$	—	$	80		$	845,689
Revenues
Premiums earned	$	665,190		$	152,336		$	—	$	76		$	817,602
Net investment income		104,339			57,155			—		17,969			179,463
Equity in earnings (loss) from unconsolidated subsidiaries (1)		18,811			—			79,752		(678	)		97,885
Net realized investment gains (losses)		4,563			75			—		(2,588	)		2,050
Other income (loss)		(1	)		2,825			—		17,959			20,783
Total revenues		792,902			212,391			79,752		32,738			1,117,783
Losses and expenses
Losses and loss adjustment expenses		253,440			4,339			—		—			257,779
Amortization of deferred policy acquisition costs		59,647			14,740			—		—			74,387
Other underwriting and operating expenses		103,149			41,855			—		68,645			213,649
Interest expense		6			8			—		31,123			31,137
Total losses and expenses		416,242			60,942			—		99,768			576,952
Income (loss) before income taxes		376,660			151,449			79,752		(67,030	)		540,831
Income tax (benefit)		101,221			45,996			7,553		(23,108	)		131,662
Net income (loss)	$	275,439		$	105,453		$	72,199	$	(43,922	)	$	409,169
Expense ratio (9)		24.4	%		31.7	%
Loss ratio (9)		38.1	%		2.8	%
Combined ratio		62.5	%		34.5	%
	Year Ended December 31, 2004
	(Dollars in thousands)
Net premiums written	$	598,119		$	173,178		$	—	$	65		$	771,362
Revenues
Premiums earned	$	634,004		$	136,321		$	—	$	74		$	770,399
Net investment income		102,230			47,091			—		19,288			168,609
Equity in earnings from unconsolidated subsidiaries (1)		15,280			—			67,844		430			83,554
Net realized investment gains (losses)		2,582			595			—		(556	)		2,621
Realized capital loss on equity investment held for sale (2)		—			—			—		(20,420	)		(20,420	)
Other income		47			7,342			—		26,084			33,473
Total revenues		754,143			191,349			67,844		24,900			1,038,236
Losses and expenses
Losses and loss adjustment expenses		233,157			4,125			—		—			237,282
Amortization of deferred policy acquisition costs		72,129			13,087			—		—			85,216
Other underwriting and operating expenses		101,387			31,388			—		71,920			204,695
Legal settlement refund (3)		(2,574	)		—			—		—			(2,574	)
Interest expense		62			73			—		34,491			34,626
Total losses and expenses		404,161			48,673			—		106,411			559,245
Income (loss) from continuing operations before income taxes		349,982			142,676			67,844		(81,511	)		478,991
Income taxes (benefits) from continuing operations		95,467			42,761			7,142		(32,911	)		112,459
Income (loss) from continuing operations after income taxes		254,515			99,915			60,702		(48,600	)		366,532
Income from discontinued operations before taxes (4)		—			—			—		5,756			5,756
Income taxes from discontinued operations (4)		—			—			—		1,958			1,958
Income from discontinued operations after income taxes (4)		—			—			—		3,798			3,798
Gain on sale of discontinued operations, net of income taxes (4)		—			—			—		29,003			29,003
Net income (loss)	$	254,515		$	99,915		$	60,702	$	(15,799	)	$	399,333
Expense ratio (9)		28.5	%		25.7	%
Loss ratio (9)		36.8	%		3.0	%
Combined ratio		65.3	%		28.7	%

4

THE PMI GROUP, INC. AND SUBSIDIARIES

BUSINESS SEGMENTS BALANCE SHEETS

	U.S. Mortgage Insurance Operations (5)		International Operations (6)		Financial Guaranty (7)		Other (8)			Consolidated Total
	December 31, 2005
	(Dollars in thousands)
Assets
Cash and investments, at fair value	$	2,108,853	$	1,093,505	$	—	$	587,074		$	3,789,432
Investments in unconsolidated subsidiaries (1)		129,600		—		836,752		18,573			984,925
Related party receivables		2,700		—		—		164			2,864
Reinsurance receivables, recoverables and prepaid premiums		24,576		5,762		—		—			30,338
Deferred policy acquisition costs		48,310		37,860		—		—			86,170
Other assets		207,436		25,260		—		127,711			360,407
Total assets	$	2,521,475	$	1,162,387	$	836,752	$	733,522		$	5,254,136
Liabilities
Reserve for losses and loss adjustment expenses	$	345,536	$	23,302	$	—	$	3		$	368,841
Unearned premiums		162,368		328,489		—		42			490,899
Long-term debt		—		—		—		819,529			819,529
Other liabilities		248,343		79,610		19,204		(3,080	)		344,077
Total liabilities		756,247		431,401		19,204		816,494			2,023,346
Shareholders’ equity		1,765,228		730,986		817,548		(82,972	)		3,230,790
Total liabilities and shareholders’ equity	$	2,521,475	$	1,162,387	$	836,752	$	733,522		$	5,254,136
	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 (2)		—		—		—		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

5

THE PMI GROUP, INC. AND SUBSIDIARIES

U.S. MORTGAGE INSURANCE OPERATIONS ⁽⁵⁾ ANALYSIS OF RESERVE FOR LOSSES AND LAE

	December 31, 2005			September 30, 2005			December 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	42,702	$	307,066	38,146	$	302,925	39,054	$	306,023
Pool insurance	20,379		38,470	19,037		39,249	17,186		32,597
Total	63,081	$	345,536	57,183	$	342,174	56,240	$	338,620

Reconciliation of Reserve for Losses and LAE

	December 31, 2005			September 30, 2005			Reserve Change
	(Dollars in thousands)
Gross reserve for losses and LAE:
Primary insurance	$	307,066		$	302,925		$	4,141
Pool insurance		38,470			39,249			(779	)
Total gross reserve for losses and LAE		345,536			342,174			3,362
Ceded reserve for losses:
Primary insurance		(2,422	)		(2,595	)		173
Pool insurance		(55	)		(89	)		34
Total ceded reserve for losses		(2,477	)		(2,684	)		207
Net reserve for losses and LAE	$	343,059		$	339,490		$	3,569

U.S. MORTGAGE INSURANCE OPERATIONS ⁽⁵⁾ FINANCIAL AND STATISTICAL INFORMATION

	Three Months Ended December 31,						Year Ended December 31,
	2005			2004			2005			2004
Flow insurance written (in millions)	$	6,625		$	8,259		$	28,194		$	36,257
Structured transactions insurance written (in millions)		2,751			2,260			7,740			4,956
Primary new insurance written (in millions)	$	9,376		$	10,519		$	35,934		$	41,213
Primary new risk written (in millions)	$	2,392		$	2,741		$	9,237		$	10,680
Pool new insurance written (in millions) (10)	$	4,369		$	3,043		$	14,062		$	10,454
Pool new risk written (in millions) (10)	$	102		$	84		$	327		$	251
Product mix as a % of new insurance written:
Above 97% LTV’s		13	%		15	%		13	%		12	%
90.01% to 95% LTV’s		21	%		26	%		24	%		30	%
85.01% to 90% LTV’s		44	%		36	%		43	%		38	%
90.01% to 95% LTV’s with >= 30% coverage		17	%		22	%		20	%		25	%
85.01% to 90% LTV’s with >= 25% coverage		38	%		31	%		37	%		32	%
ARMs		36	%		33	%		33	%		25	%
Monthlies		85	%		98	%		94	%		98	%
Refinances		37	%		33	%		36	%		32	%
Structured transactions		29	%		21	%		22	%		12	%
Premiums written (in thousands):
Gross premiums written	$	246,432		$	197,953		$	849,209		$	767,399
Ceded premiums, net of assumed premiums		(41,450	)		(40,613	)		(167,778	)		(155,274	)
Refunded premiums		(3,822	)		(3,424	)		(14,303	)		(14,006	)
Net premiums written		201,160			153,916			667,128			598,119
Change in unearned premiums		(34,382	)		14,397			(1,938	)		35,885
Net premiums earned	$	166,778		$	168,313		$	665,190		$	634,004

6

THE PMI GROUP, INC. AND SUBSIDIARIES

U.S. MORTGAGE INSURANCE OPERATIONS ⁽⁵⁾ FINANCIAL AND STATISTICAL INFORMATION

		12/31/2005			9/30/2005			6/30/2005			3/31/2005			12/31/2004
Primary insurance in force (in millions)
Flow		$	86,991		$	88,433		$	89,965		$	91,399		$	93,263
Structured transactions			14,099			12,788			13,469			12,598			12,058
Total		$	101,090		$	101,221		$	103,434		$	103,997		$	105,321
Primary risk in force (in millions)
Flow		$	21,644		$	21,981		$	22,296		$	22,541		$	22,885
Structured transactions			3,584			3,167			3,296			2,966			2,773
Total		$	25,228		$	25,148		$	25,592		$	25,507		$	25,658
Pool risk in force (in millions) (10)		$	2,589		$	2,530		$	2,445		$	2,417		$	2,408
Primary risk in force - credit score distribution
Flow	620 or above		93.0	%		92.7	%		92.4	%		92.2	%		92.0	%
	619-575		5.5	%		5.7	%		5.9	%		6.1	%		6.2	%
	574 or below		1.5	%		1.6	%		1.7	%		1.7	%		1.8	%
Structured transactions	620 or above		76.9	%		73.9	%		71.7	%		66.9	%		65.9	%
	619-575		14.5	%		16.0	%		17.4	%		20.2	%		21.1	%
	574 or below		8.6	%		10.1	%		10.9	%		12.9	%		13.0	%
Total	620 or above		90.7	%		90.3	%		89.7	%		89.3	%		89.2	%
	619-575		6.8	%		7.0	%		7.4	%		7.7	%		7.8	%
	574 or below		2.5	%		2.7	%		2.9	%		3.0	%		3.0	%
Primary average loan size (in thousands)
Flow		$	134.5		$	133.3		$	132.2		$	131.5		$	131.3
Structured transactions		$	145.4		$	139.5		$	139.8		$	134.1		$	129.8
Total		$	136.0		$	134.1		$	133.2		$	131.8		$	131.1
Loss severity - primary (quarterly)
Flow			85.9	%		84.0	%		83.8	%		85.6	%		84.9	%
Structured transactions			94.3	%		89.6	%		87.7	%		90.9	%		84.6	%
Total			87.7	%		85.2	%		84.6	%		86.8	%		84.8	%
Persistency			61.9	%		61.2	%		62.0	%		60.8	%		60.9	%
Primary loans, defaults and default rates
Primary policies in force			743,533			754,934			776,721			788,847			803,236
Primary loans in default			42,702			38,146			35,030			35,716			39,054
Primary default rate			5.74	%		5.05	%		4.51	%		4.53	%		4.86	%
Structured transactions only default rate			9.85	%		10.09	%		8.54	%		8.17	%		9.19	%
Pool default rate			6.84	%		6.34	%		5.65	%		5.65	%		5.51	%
Claims paid (year-to-date in thousands)
Primary claims paid - flow		$	165.8		$	126.6		$	87.8		$	41.7		$	141.3
Primary claims paid - structured transactions			49.1			36.8			25.4			13.8			51.9
Total primary claims paid			214.9			163.4			113.2			55.5			193.2
Total pool and other			20.1			15.0			9.6			4.7			17.7
Total claims paid		$	235.0		$	178.4		$	122.8		$	60.2		$	210.9
Number of primary claims paid (year-to-date)			9,262			7,124			4,934			2,413			8,335
Average primary claim size (year-to-date in thousands)		$	23.2		$	22.9		$	22.9		$	23.0		$	23.2
Captive reinsurance arrangements (year-to-date)
Percentage of flow NIW subject to captive reinsurance arrangements			69.0	%		68.0	%		65.0	%		60.4	%		62.8	%
Percentage of primary NIW subject to captive reinsurance arrangements			54.7	%		55.7	%		50.7	%		47.1	%		55.7	%
Percentage of primary IIF subject to captive reinsurance arrangements			53.4	%		53.2	%		52.1	%		52.4	%		52.0	%
Percentage of primary RIF subject to captive reinsurance arrangements			53.8	%		53.9	%		52.9	%		53.5	%		53.2	%
Risk-to-capital ratio (11)			8.3 to 1			8.1 to 1			8.4 to 1			8.1 to 1			8.2 to 1

7

THE PMI GROUP, INC. AND SUBSIDIARIES

CMG MORTGAGE INSURANCE COMPANY FINANCIAL AND STATISTICAL INFORMATION

	December 31, 2005			September 30, 2005			December 31, 2004
Primary new insurance written (year-to-date in millions)	$	5,388		$	4,234		$	5,355
Primary insurance in force (in millions)	$	15,495		$	15,358		$	14,037
Primary risk in force (in millions)	$	3,666		$	3,607		$	3,219
Insured primary loans		111,472			111,217			105,568
Persistency		72.0	%		70.2	%		69.1	%
Primary loans in default		907			632			666
Primary default rate		0.81	%		0.57	%		0.63	%
Primary claims paid (year-to-date in thousands)	$	4,827		$	3,152		$	5,111
Number of primary claims paid (year-to-date)		222			149			244
Average primary claim size (year-to-date in thousands)	$	21.7		$	21.2		$	20.9

PMI AUSTRALIA FINANCIAL AND STATISTICAL INFORMATION

	December 31, 2005			September 30, 2005			December 31, 2004
Net premiums written (year-to-date in thousands)	$	151,882		$	112,320		$	151,164
Premiums earned (year-to-date in thousands)	$	123,781		$	91,096		$	109,071
Flow insurance written (year-to-date in millions)	$	18,321		$	13,648		$	19,540
RMBS insurance written (year-to-date in millions)		10,671			9,484			14,669
New insurance written (year-to-date in millions)	$	28,992		$	23,132		$	34,209
Insurance in force (in millions)	$	119,915		$	124,014		$	113,628
Risk in force (in millions)	$	108,751		$	113,028		$	103,135
Policies in force		981,732			994,330			926,073
Loans in default		1,264			1,007			751
Default rate		0.13	%		0.10	%		0.08	%
Claims paid (year-to-date in thousands)	$	3,261		$	1,807		$	1,111
Number of claims paid (year-to-date)		93			56			65
Average claim size (year-to-date in thousands)	$	35.1		$	32.3		$	17.1

PMI EUROPE FINANCIAL AND STATISTICAL INFORMATION

	December 31, 2005		September 30, 2005		December 31, 2004
Net premiums written (year-to-date in thousands)	$	8,921	$	5,444	$	9,568
Premiums earned (year-to-date in thousands)	$	17,507	$	13,083	$	20,944
New insurance written (year-to-date in millions)	$	33	$	—	$	—
New credit default swaps written (year-to-date in millions)	$	514	$	514	$	2,603
New reinsurance written (year-to-date in millions)	$	6,215	$	2,992	$	—
Insurance in force (in millions)	$	38,443	$	34,501	$	34,332
Risk in force (in millions)	$	2,776	$	2,894	$	2,747
Claims paid including credit default swaps (year-to-date in thousands)	$	2,761	$	1,685	$	979

8

THE PMI GROUP, INC. AND SUBSIDIARIES

APPENDIX A - PMI AUSTRALIA QUARTERLY FINANCIAL INFORMATION

	2005
	4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	(Australian $ in thousands, unless otherwise noted)
Income Statement Components - Quarter Ended
Premiums earned	$	43,959		$	41,815		$	38,929		$	37,840
Net investment income	$	16,257		$	15,854		$	14,966		$	14,705
Change in fair value of foreign currency put options	$	(24	)	$	(232	)	$	(422	)	$	(1,338	)
Total expenses	$	17,226		$	13,632		$	15,104		$	13,788
Net income	$	31,906		$	31,079		$	26,725		$	26,487
Net income (U.S.$ in thousands)	$	23,728		$	23,623		$	20,541		$	20,584
Balance Sheet Components
Assets
Cash and investments, at fair value	$	1,197,016		$	1,147,390		$	1,090,399		$	1,037,704
Total assets	$	1,275,573		$	1,225,683		$	1,188,574		$	1,132,961
Liabilities and Shareholder’s Equity
Reserve for losses and LAE	$	11,573		$	11,156		$	12,541		$	12,549
Unearned premiums	$	415,885		$	406,661		$	395,113		$	382,781
Shareholder’s equity	$	793,045		$	757,372		$	730,113		$	689,927
	2004
	4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	(Australian $ in thousands, unless otherwise noted)
Income Statement Components - Quarter Ended
Premiums earned	$	35,819		$	37,109		$	37,308		$	37,790
Net investment income	$	14,087		$	13,098		$	12,677		$	12,139
Change in fair value of foreign currency put options	$	(228	)	$	(1,890	)	$	1,311		$	—
Total expenses	$	13,624		$	13,413		$	12,799		$	12,030
Net income	$	25,447		$	24,725		$	26,832		$	26,518
Net income (U.S.$ in thousands)	$	19,272		$	17,554		$	19,219		$	20,265
Balance Sheet Components
Assets
Cash and investments, at fair value	$	1,027,236		$	973,479		$	924,330		$	892,864
Total assets	$	1,116,874		$	1,068,080		$	1,013,102		$	976,723
Liabilities and Shareholder’s Equity
Reserve for losses and LAE	$	12,547		$	13,692		$	13,556		$	13,537
Unearned premiums	$	378,981		$	364,120		$	346,748		$	330,477
Shareholder’s equity	$	673,124		$	642,585		$	607,781		$	586,842

9

THE PMI GROUP, INC. AND SUBSIDIARIES

APPENDIX B - PMI EUROPE QUARTERLY FINANCIAL INFORMATION

	2005
	4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	(Euro € in thousands, unless otherwise noted)
Income Statement Components - Quarter Ended
Premiums earned	€	3,721		€	3,749		€	3,298		€	3,321
Net investment income	€	1,730		€	2,188		€	1,951		€	2,002
Change in fair value of foreign currency put options	€	55		€	(3	)	€	342		€	(33	)
Total expenses	€	3,824		€	3,244		€	3,168		€	2,031
Net income	€	1,362		€	2,276		€	1,828		€	2,326
Net income (U.S.$ in thousands)	$	1,615		$	2,774		$	2,330		$	3,049
Balance Sheet Components
Assets
Cash and investments, at fair value	€	182,559		€	182,682		€	179,698		€	172,707
Total assets	€	192,107		€	192,431		€	188,840		€	182,857
Liabilities and Shareholders Equity
Reserve for losses and LAE	€	12,508		€	13,019		€	13,395		€	12,807
Unearned premiums	€	20,020		€	20,808		€	22,589		€	24,719
Shareholders equity	€	133,818		€	133,352		€	131,452		€	125,395
	2004
	4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	(Euro € in thousands, unless otherwise noted)
Income Statement Components - Quarter Ended
Premiums earned	€	4,140		€	4,233		€	4,172		€	4,295
Net investment income	€	1,435		€	2,294		€	1,642		€	2,198
Change in fair value of foreign currency put options	€	(6	)	€	(96	)	€	(18	)	€	—
Total expenses	€	3,679		€	1,476		€	1,462		€	1,768
Net income	€	2,703		€	3,942		€	3,535		€	3,781
Net income (U.S.$ in thousands)	$	3,489		$	4,822		$	4,260		$	4,726
Balance Sheet Components
Assets
Cash and investments, at fair value	€	169,165		€	164,558		€	161,129		€	162,621
Total assets	€	179,134		€	175,731		€	172,402		€	170,600
Liabilities and Shareholders Equity
Reserve for losses and LAE	€	12,126		€	10,656		€	10,497		€	10,031
Unearned premiums	€	26,859		€	29,363		€	31,748		€	33,903
Shareholders equity	€	121,494		€	117,142		€	111,691		€	109,386

10

THE PMI GROUP, INC. AND SUBSIDIARIES

APPENDIX C - BUSINESS SEGMENTS RESULTS OF OPERATIONS BY QUARTER

	2005
	4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	(Dollars in thousands)
U.S. Mortgage Insurance Operations (5)
Net premiums written	$	201,160		$	158,866		$	152,564		$	154,538
Revenues
Premiums earned	$	166,778		$	166,052		$	168,248		$	164,112
Net investment income		26,168			25,046			27,546			25,579
Equity in earnings from unconsolidated subsidiaries (1)		4,583			5,217			4,937			4,074
Net realized investment gains		378			2,597			1,167			420
Other income (loss)		(3	)		3			(5	)		4
Total revenues		197,904			198,915			201,893			194,189
Losses and expenses
Losses and loss adjustment expenses		63,159			61,667			65,496			63,118
Amortization of deferred policy acquisition costs		14,113			14,478			15,030			16,026
Other underwriting and operating expenses		29,057			25,260			25,278			23,554
Interest expense		1			3			—			1
Total losses and expenses		106,330			101,408			105,804			102,699
Income before income taxes		91,574			97,507			96,089			91,490
Income taxes		21,696			27,977			26,400			25,149
		—			—			—			—
Net income	$	69,878		$	69,530		$	69,689		$	66,341
International Operations (6)
Net premiums written	$	44,913		$	47,197		$	47,185		$	39,185
Revenues
Premiums earned	$	39,781		$	38,979		$	38,141		$	35,435
Net investment income		14,499			14,844			14,058			13,756
Net realized investment gains (losses)		(221	)		(27	)		(18	)		340
Other income (loss)		778			1,287			873			(113	)
Total revenues		54,837			55,083			53,054			49,418
Losses and expenses
Losses and loss adjustment expenses		1,601			(365	)		1,739			1,363
Amortization of deferred policy acquisition costs		3,274			3,269			3,779			4,417
Other underwriting and operating expenses		12,663			11,648			10,539			7,005
Interest expense		9			—			—			—
Total losses and expenses		17,547			14,552			16,057			12,785
Income before income taxes		37,290			40,531			36,997			36,633
Income taxes		10,251			12,514			11,747			11,485
Net income	$	27,039		$	28,017		$	25,250		$	25,148
Financial Guaranty (7)
Equity in earnings from unconsolidated subsidiaries (1)	$	21,453		$	13,691		$	23,761		$	20,846
Income taxes		2,208			1,135			2,254			1,956
Net income	$	19,245		$	12,556		$	21,507		$	18,890
Other (8)
Net premiums written	$	27		$	19		$	13		$	23
Revenues
Premiums earned	$	18		$	19		$	19		$	20
Net investment income		4,832			4,537			4,143			4,455
Equity in earnings (losses) from unconsolidated subsidiaries (1)		(165	)		(388	)		(416	)		292
Net realized investment gains (losses)		(4	)		(2,897	)		354			(39	)
Other income		4,283			2,649			5,383			5,644
Total revenues		8,964			3,920			9,483			10,372
Losses and expenses
Other underwriting and operating expenses		17,354			17,607			18,600			15,086
Interest expense		4,644			8,455			8,472			9,552
Total losses and expenses		21,998			26,062			27,072			24,638
Loss before income tax benefit		(13,034	)		(22,142	)		(17,589	)		(14,266	)
Income tax benefit		(4,587	)		(7,750	)		(5,728	)		(5,045	)
Net loss	$	(8,447	)	$	(14,392	)	$	(11,861	)	$	(9,221	)

11

THE PMI GROUP, INC. AND SUBSIDIARIES

APPENDIX C - BUSINESS SEGMENTS RESULTS OF OPERATIONS BY QUARTER (Continued)

	2004
	4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	(Dollars in thousands)
U.S. Mortgage Insurance Operations (5)
Net premiums written	$	153,916		$	143,732		$	147,407		$	153,064
Revenues
Premiums earned	$	168,313		$	162,276		$	154,392		$	149,023
Net investment income		25,496			24,332			27,944			24,458
Equity in earnings from unconsolidated subsidiaries (1)		4,569			3,707			3,676			3,328
Net realized investment gains (losses)		(12	)		1,672			(166	)		1,087
Other income (loss)		15			(24	)		(25	)		81
Total revenues		198,381			191,963			185,821			177,977
Losses and expenses
Losses and loss adjustment expenses		58,355			60,092			55,755			58,956
Amortization of deferred policy acquisition costs		16,585			18,003			18,109			19,433
Other underwriting and operating expenses		27,258			23,100			24,888			26,137
Legal settlement refund (3)		—			(2,574	)		—			—
Interest expense		12			13			17			21
Total losses and expenses		102,210			98,634			98,769			104,547
Income before income taxes		96,171			93,329			87,052			73,430
Income taxes		26,328			25,528			23,790			19,822
Net income	$	69,843		$	67,801		$	63,262		$	53,608
International Operations (6)
Net premiums written	$	46,156		$	43,238		$	43,460		$	40,323
Revenues
Premiums earned	$	33,979		$	32,829		$	33,255		$	36,259
Net investment income		12,789			11,848			10,646			11,807
Net realized investment gains (losses)		(263	)		256			377			225
Other income		3,044			296			2,399			1,602
Total revenues		49,549			45,229			46,677			49,893
Losses and expenses
Losses and loss adjustment expenses		1,737			746			777			864
Amortization of deferred policy acquisition costs		3,065			3,225			3,135			3,662
Other underwriting and operating expenses		10,235			7,346			6,940			6,867
Interest expense		—			12			60			1
Total losses and expenses		15,037			11,329			10,912			11,394
Income before income taxes		34,512			33,900			35,765			38,499
Income taxes		10,274			10,218			10,799			11,470
Net income	$	24,238		$	23,682		$	24,966		$	27,029
Financial Guaranty (7)
Equity in earnings from unconsolidated subsidiaries (1)	$	16,156		$	17,061		$	19,699		$	14,928
Income taxes		1,689			1,820			2,220			1,413
Net income	$	14,467		$	15,241		$	17,479		$	13,515
Other (8)
Net premiums written	$	31		$	9		$	9		$	17
Revenues
Premiums earned	$	20		$	18		$	16		$	20
Net investment income		4,706			5,775			5,032			3,776
Equity in earnings (losses) from unconsolidated subsidiaries (1)		(975	)		353			210			842
Net realized investment losses		—			(374	)		(143	)		(37	)
Realized loss on equity investment held for sale (2)		(20,420	)		—			—			—
Other income		5,345			6,146			7,424			7,168
Total revenues		(11,324	)		11,918			12,539			11,769
Losses and expenses
Other underwriting and operating expenses		20,272			16,545			17,790			17,316
Interest expense		8,640			8,612			8,745			8,493
Total losses and expenses		28,912			25,157			26,535			25,809
Loss from continuing operations before income tax benefit		(40,236	)		(13,239	)		(13,996	)		(14,040	)
Income tax benefit from continuing operations		(13,339	)		(9,158	)		(4,964	)		(5,451	)
Loss from continuing operations after income tax benefit		(26,897	)		(4,081	)		(9,032	)		(8,589	)
Income from discontinued operations before income taxes (4)		—			—			—			5,756
Income taxes from discontinued operations (4)		—			—			—			1,958
Income from discontinued operations after income taxes (4)		—			—			—			3,798
Gain on sale of discontinued operations, net of income taxes (4)		(1,105	)		—			—			30,108
Net income (loss)	$	(28,002	)	$	(4,081	)	$	(9,032	)	$	25,317

12