PMI Loses $157 Million in the First Quarter

""The PMI Group"":http://www.pmi-us.com/ is still in the red. The California-based residential mortgage insurer released its first quarter 2010 earnings report Sunday, posting a net loss of $157 million, or $1.90 per share.

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The company's net loss widened from a deficit of $115.3 million, or $1.41 per share, during the same period one year ago. PMI said this year-over-year change was primarily due to the increase in fair value of the company's corporate debt.

First quarter results included a $40.8 million loss in total revenues as a result of the increase in the fair value of certain corporate debt obligations attributed to improving credit spreads. This was a significant change from the first quarter of 2009 when the company posted an $18.5 million gain in total revenues due to the decrease in fair value of debt obligations.

PMI's U.S. mortgage insurance operations recorded a net loss of $121.8 million in the first quarter of this year, narrowing from a net loss of $127.6 million during the same quarter in 2009. The company said the first quarter 2010 shortfall was the result of losses and loss adjustment expenses (LAE) of $350.1 million.

The company's mortgage insurance operations loss reserves for primary and pool insurance, gross of reinsurance recoverables, totaled $3.3 billion at March 31, 2010, up slightly from $3.2 billion at December 31, 2009.

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Reserves for losses and LAE for primary insurance decreased sequentially by $6.7 million to $2.9 billion, primarily due to lower primary default inventories and reserve releases related to the payment of claims. However, loss reserves for pool insurance increased sequentially by $48.6 million to $310.4 million, mostly the result of higher claim rates related to modified pool contracts representing a further acceleration of expected losses.

According to PMI's earnings report, primary new notices of default declined by 21 percent compared to the first quarter of 2009--the first yearly decline since the fourth quarter of 2007. While primary loans in default increased on a year-over-year basis, they decreased from the previous quarter, marking the first quarterly decline since the second quarter of 2006.

As a percentage of primary policies in force, the default rate was 21.53 percent as of March 31, 2010, up from 21.40 percent as of December 31, 2009 and 15.29 percent as of March 31, 2009.

Pool loans also saw a quarter-to-quarter and year-over-year decrease in defaults, primarily due to the modified pool restructuring completed during the first quarter of this year.

Due in part to the decline of loans in default, PMI's primary reserves for losses and loss adjustment expenses decreased by $6.7 million during the quarter.

PMI also noted that its loan modification activity increased in the first quarter. Its homeownership preservation initiatives enabled 12,383 borrowers, representing $559.8 million risk in force, to retain their homes through loan modifications and payment plans during the first three months of 2010.

As of March 31, 2010, approximately 27,303 loans were in a Home Affordable Modification Program trial modification, up from 23,181 loans as of December 31, 20090. In addition, the company's efforts enabled 2,780 homeowners to avoid foreclosure through alternatives such as short sales.