PMI Group Remains in Bad Shape

Sep 13, 2008 (Zacks Investment Research via COMTEX) -- PMI | Quote | Chart | News | PowerRating -- PMI Group, Inc.'s (PMI) second quarter net operating loss of $3.03 per diluted share was substantially worse than the estimates. The results suffered from increased losses in the U.S. Mortgage Insurance Operations, partially offset by strong results from International Operations. The company also wrote off the carrying value of its investment in FGIC. The company recently sold its Australia and Asia operations, in order to support its capital and liquidity position but we do not rule out additional capital raises in the near-to-medium term. We have further increased our FY08 and FY09 loss estimates to $10.80 per share and $2.30 per share respectively, based on the company's 2Q08 results and further deterioration in the housing environment. Our adjusted EPS targets reflect higher losses, slightly offset by increased revenues. At current levels, shares of PMI trade at 0.13x PMI s 2Q08 book value of $24.72 per share, which is significantly below its historical 2.2x high. The rise in delinquencies and defaults on loan payments may continue for a longer time than expected earlier, leading to increased losses for the mortgage insurers. We do not expect any correction to the multiple in the near future. Our six-month target price of $2.50 per share incorporates a multiple of 0.11 on our projected book value of $22.00 per share for December 31, 2008. We are maintaining our Sell recommendation on the shares. Read the full analyst report on PMI

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