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These actions do not affect the company's claims-paying resources or its overall holding company liquidity. PMI U.S. remains an eligible mortgage insurer for both Fannie Mae and Freddie Mac (GSEs). As of June 30, 2008, PMI's combined U.S. mortgage insurance companies had liquid assets of $2.3 billion, and holding company liquidity of approximately $252 million.
"We continue to believe our domestic mortgage insurance platform, combined with our capital enhancement activities and loss mitigation efforts, provide us with financial strength and flexibility despite the current downturn in the mortgage markets," said Steve Smith, PMI's Chairman and CEO. "We have made significant progress in executing our five-point plan while focusing on sustainable homeownership and booking high quality business."
PMI's recently announced several steps to enhance the company's overall liquidity and support opportunities for its U.S. mortgage insurance operations, including the agreement to sell PMI Australia to QBE Insurance Group Limited (QBE) for approximately $920 million*, an agreement in principle to sell PMI Asia to QBE Insurance Group Limited with net tangible assets of PMI Asia of $55 million (as of June 30, 2008), the closure of PMI Canada and the repatriation of approximately $60 million of capital to the U.S. mortgage insurance operations, and the reconfiguration of PMI Europe to conserve and enhance capital while maintaining a presence in Europe. PMI Guaranty paid approximately $144 million of its excess capital to the Company, and the Company expects to reinvest at least 80 percent of the capital at the Company into the U.S. Mortgage Insurance Operations.
PMI continues to work closely with each of the ratings agencies to communicate its financial strength, capital initiatives, and value proposition.
The following ratings were stated by S&P as of August 26, 2008: Company Rating To From Insurer Financial Strength PMI Mortgage Insurance Co. (PMI U.S.)** A- A+ PMI Mortgage Insurance Company Limited (PMI Europe)** A- A+ Senior Debt The PMI Group, Inc. ** BBB- BBB+ Junior Subordinated Debt PMI Capital I ** BB BBB- ** CreditWatch with negative implications
The ratings of CMG Mortgage Insurance Company and PMI Australia were not affected by this action and remain at AA- for both companies.
* The purchase price is approximately 100% of the net tangible asset value of PMI Australia under U.S. GAAP as of June 30, 2008. The aggregate purchase price payable upon closing is approximately $920 million, subject to adjustment under certain limited circumstances, including in the event of a material adverse change in PMI Australia's business prior to closing. The purchase price will be payable 80% in cash at closing and 20% payable in the form of an interest-bearing promissory note issued by QBE. The promissory note matures and is payable in September 2011, and the actual amount payable on the note will be reduced to the extent that the performance of PMI Australia's existing insurance portfolio as of June 30, 2008 does not achieve specified targets. Interest will be accrued from July 1, 2008 for the purchase price until the closing of the transaction and through September 2011 for the note. In connection with the transaction, PMI will also fund premiums of approximately $46.5 million to assist in procuring an excess of loss reinsurance cover for PMI Australia. The agreement provides for reinsurance profit-sharing for one-half of the reinsurance premiums at the end of the three-year policy life, subject to certain conditions.
The PMI Group, Inc.
The PMI Group, Inc. (NYSE: PMI), headquartered in Walnut Creek, CA, provides innovative credit, capital, and risk transfer solutions that expand homeownership and fund essential services for our customers and the communities they serve. Through its wholly and partially owned subsidiaries, PMI offers residential mortgage insurance and credit enhancement products. For more information: www.pmigroup.com.
Cautionary Statement: Statements in this press release that are not historical facts, or that relate to future plans, events or performance are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include our beliefs with respect to our financial strength and claims-paying ability. 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 forward- looking statements. Such factors include, among others, national or regional recessions, and further deterioration in the housing, mortgage and related credit markets. In particular, declines in housing values and/or housing demand, deterioration of borrower credit, higher unemployment rates, changes in interest rates, higher levels of consumer credit, higher mortgage default and claim rates, lower cure rates, higher claim sizes, the aging of our mortgage insurance portfolios, adverse changes in liquidity in the capital markets, the inability of loan servicers to process higher volumes of delinquent loans, and the contraction of credit markets could negatively affect our losses, loss reserves and paid claims. The ratings downgrades announced by Standard & Poor's, and/or future ratings downgrades, if any, may negatively impact us in a variety of ways and could, in isolation or taken together, negatively affect, among other things, our U.S. and international business prospects and revenues, our ability to compete in the U.S. and internationally, our GSE eligibility status in the U.S., the cost of and/or availability of financing, our consolidated financial condition, and our results of operations and cash flows. We will likely need to raise significant amounts of capital in 2008 and 2009. Given current market conditions generally and in our industry, there can be no assurance that we will be able to consummate any capital raising transactions on favorable terms, or at all. Other risks and uncertainties are discussed in our SEC filings, including our Annual Report Form 10-K for the year ended December 31, 2007 (in Item 1A) and Form's 10-Q for the quarters ended March 31, 2008 and June 30, 2008. We undertake no obligation to update forward-looking statements
SOURCE PMI Group, Inc.
http://www.pmigroup.com
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