The Arizona Department of Insurance has placed two subsidiaries of ""PMI Group, Inc."":http://www.pmi-us.com/ -- PMI Mortgage Insurance Co. (MIC) and PMI Insurance Co. (PIC) -- under the department's supervision and ordered them to cease issuing new mortgage insurance.
[IMAGE]PMI alerted investors of the possibility of such actions earlier this month. The Arizona Department of Insurance is the primary regulator of the subsidiaries, and according to the ""parent company's filing"":http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1odHRwOi8vaXIuaW50Lndlc3RsYXdidXNpbmVzcy5jb20vZG9jdW1lbnQvdjEvMDAwMTE5MzEyNS0xMS0yMDkxMTEvZG9jL1RoZVBNSUdyb3VwSW5jLnBkZiZ0eXBlPTImZm49VGhlUE1JR3JvdXBJbmMucGRm with the Securities and Exchange Commission, MIC's policyholders' position was $320.3 million below the minimum required by Arizona law.
Under the order, MIC and PIC may issue mortgage insurance policies under pending commitments through the close of business on September 16, 2011, but must suspend writing new business in all states. In addition, MIC is required to cease making interest payments on the $285 million in aggregate principal amount of surplus notes that it has issued.
PMI said PMI Mortgage Assurance Company (PMAC), a subsidiary of MIC, also will no longer issue mortgage
[COLUMN_BREAK]insurance policies in any states. PMAC had previously been approved by Fannie Mae and Freddie Mac to provide mortgage guaranty insurance in states where MIC was unable to continue to write new business.
The regulatory order provides that, in order to end the supervision, MIC and PIC must provide the Arizona Department of Insurance with a plan in the next 60 days to satisfactorily cure deficiencies in their financial condition.
If such a plan is not provided by the deadline, the regulator may take further action, including commencing conservatorship proceedings or initiating a court-ordered receivership for the liquidation of MIC.
PMI says a court order appointing a receiver could result in up to $735 million of the parent company's outstanding debt coming due, obligations which the PMI Group would be unable to pay.
MIC and PIC are currently working with the Arizona Department of Insurance and the GSEs to facilitate the run-off of insurance policies already in force.
""[T]he company and its subsidiaries are exploring potential capitalization and restructuring alternatives … and have engaged Willis Capital Markets & Advisory and Evercore Partners as financial advisors. There can be no assurance that any of these potential alternatives will be successful,"" PMI said in a statement.
PMI reported a $134.8 million net loss for the second quarter of this year. On Friday, the company received notice from the New York Stock Exchange (NYSE) that its share price had fallen below the NYSE's minimum listing requirement of an average closing price of $1.00 per share over 30 consecutive trading days. PMI has six months to bring its share price back into compliance with the NYSE rule or its stock will be delisted from the exchange.