Exhibit 99.1
The PMI Group, Inc.
[LOGO OF PMI GROUP, INC.] | NEWS RELEASE | |
Investor and media contacts: | ||
Glen Corso / Matt Nichols | ||
925.658.6429 / 925.658.6618 |
FOR IMMEDIATE RELEASE:
THE PMI GROUP, INC. REPORTS FIRST QUARTER 2003
NET INCOME PER SHARE of $1.00
Walnut Creek, CA, April 23, 2003 —The PMI Group, Inc. (NYSE:PMI) today announced net income per share for the quarter ended March 31, 2003 of $1.00, unchanged from the same period in 2002. Net operating income1 per share for the quarter was $0.99 compared to $0.94 for the same period a year ago. Net income was $89.6 million for the quarter compared to $91.5 million for the same period a year ago. Net income in the first quarter of 2002 included $7.2 million in income attributable to the cumulative effect of a change in accounting for negative goodwill. Net operating income was $88.8 million for the quarter compared to $85.9 million for the same period a year ago. Combined2 new primary insurance written in the quarter was $17.9 billion compared to $16.4 billion for the same period a year ago. Combined primary insurance in force at March 31, 2003 was $176.8 billion compared to $162.5 billion a year ago, an increase of 8.8%.
1 “Net operating income” excludes capital gains, capital losses, and the cumulative effect of an accounting change. In the first quarter of 2003, these items totaled $0.01 per share, or $851,000. In the first quarter of 2002, these items totaled $0.06 per share or $5.6 million.
2 “Combined” includes results from U.S. Mortgage Insurance Operations (“USMIO”), CMG and PMI Australia.
CONSOLIDATED RESULTS SUMMARY | |||||||
(Dollars in millions) | Q1 2003 |
| Q1 2002 |
| |||
Net premiums written | $235.3 |
| $223.4 |
| |||
Net premiums earned | $236.6 |
| $213.0 |
| |||
Investment income and equity in earnings of unconsolidated subsidiaries | 43.9 |
| 41.2 |
| |||
Other | 13.7 |
| 9.2 |
| |||
Total Revenues | $294.2 |
| $263.4 |
| |||
Losses and loss adjustment expenses | $51.7 |
| $39.0 |
| |||
Underwriting, interest and other expenses | 118.0 |
| 102.7 |
| |||
Total Expenses | $169.7 |
| $141.7 |
| |||
Income taxes | 34.9 |
| 37.4 |
| |||
Cumulative effect of accounting change | — |
| 7.2 |
| |||
Net Income in accordance with GAAP | $89.6 |
| $91.5 |
| |||
Net realized (gains) losses, net of tax | (0.9 | ) | 1.6 |
| |||
Cumulative effect of accounting change | — |
| (7.2 | ) | |||
Net Operating Income | $88.8 |
| $85.9 |
| |||
Diluted net income per share in accordance with GAAP | $1.00 |
| $1.00 |
| |||
Net realized (gains) losses, net of tax | (0.01 | ) | 0.02 |
| |||
Cumulative effect of accounting change | — |
| (0.08 | ) | |||
Diluted operating earnings per share | $0.99 |
| $0.94 |
| |||
During the quarter, PMI repurchased 341,200 shares of its outstanding common stock for a total of approximately $9.8 million, completing a $100 million repurchase authorization first announced in 1998. In February 2003, PMI’s Board of Directors authorized an additional $100 million repurchase authorization.
2
CONSOLIDATED LOSSES AND LOSS ADJUSTMENT EXPENSES | ||||||
(Dollars in millions) | Q1 2003 | Q4 2002 | Q1 2002 | |||
Claims paid and loss adjustment expenses | $45.3 | $37.4 | $28.8 | |||
Change in net loss reserves | 6.4 | 6.9 | 10.2 | |||
Losses and loss adjustment expenses | $51.7 | $44.3 | $39.0 | |||
Consolidated loss and loss adjustment expenses totaled $51.7 million for the quarter compared to $39.0 million for the same period a year ago and $44.3 million for the fourth quarter of 2002. Claims paid and loss adjustment expenses increased over the previous periods due to higher claims payments in U.S. Mortgage Insurance Operations.
Consolidated gross loss reserves grew to $358.7 million at March 31, 2003, a 10 percent increase over the first quarter 2002, led by gross loss reserve increases of $22.7 million in U.S. Mortgage Insurance Operations since March 31, 2002.
Consolidated underwriting and other operating expenses (including amortization of policy acquisition costs and interest expense) were $118.0 million in the quarter compared to $102.7 million for the same period a year ago. The increases were primarily due to higher volume in PMI’s title insurance business.
3
Business Segments
FIRST QUARTER 2003 SEGMENT HIGHLIGHTS | |||||||||||||||
(Dollars in millions) | U.S. MIO | International3 | Title | Other4 | Total | ||||||||||
Net Premiums written | $151.7 | $23.0 |
| $60.6 |
| $— |
| $235.3 |
| ||||||
Premiums earned | 156.6 | 19.4 |
| 60.6 |
| — |
| 236.6 |
| ||||||
Equity in earnings of unconsolidated subsidiaries | 2.9 | — |
| — |
| 6.0 |
| 8.8 |
| ||||||
Total revenues | 182.5 | 25.6 |
| 64.3 |
| 21.8 |
| 294.2 |
| ||||||
Losses, expenses and interest | 81.9 | 5.7 |
| 59.8 |
| 22.4 |
| 169.7 |
| ||||||
Net Income in accordance with GAAP | $71.9 | $14.2 |
| $3.0 |
| $0.5 |
| $89.6 |
| ||||||
Net realized (gains) losses, net of tax | 0.3 | (0.2 | ) | (0.0 | ) | (0.9 | ) | (0.9 | ) | ||||||
Net Operating Income | $72.2 | $14.0 |
| $3.0 |
| $(0.4 | ) | $88.8 |
| ||||||
FIRST QUARTER 2002 SEGMENT HIGHLIGHTS | |||||||||||||
(Dollars in millions) | U.S. MIO | International |
| Title | Other | Total |
| ||||||
Net Premiums written | $156.4 | $18.9 |
| $48.1 | $— | $223.4 |
| ||||||
Premiums earned | 152.6 | 12.2 |
| 48.1 | — | 213.0 |
| ||||||
Equity in earnings of unconsolidated subsidiaries | 3.1 | — |
| — | 7.6 | 10.7 |
| ||||||
Total revenues | 174.9 | 18.4 |
| 50.7 | 19.4 | 263.4 |
| ||||||
Losses, expenses and interest | 70.4 | 4.2 |
| 46.8 | 20.4 | 141.7 |
| ||||||
Net Income in accordance with GAAP | $71.3 | $17.2 |
| $2.5 | $0.4 | $91.5 |
| ||||||
Net realized (gains) losses, net of tax | 1.6 | (0.2 | ) | — | 0.2 | 1.6 |
| ||||||
Cumulative effect of change in accounting | — | (7.2 | ) | — | — | (7.2 | ) | ||||||
Net Operating Income | $72.9 | $9.8 |
| $2.5 | $0.6 | $85.9 |
| ||||||
3 “International” includes the results of PMI Australia and PMI Europe and results of operations in Hong Kong.
4 “Other” includes the results from the holding company and PMI Mortgage Services Co. and equity in earnings from Fairbanks Capital, RAM Re and Truman Fund.
4
U.S. Mortgage Insurance Operations
PMI’s U.S. Mortgage Insurance Operations reported premiums written of $151.7 million and premiums earned of $156.6 million for the quarter compared to $156.4 million and $152.6 million, respectively, for the same period a year ago. The decrease in premiums written reflects the combined impact of lower persistency and higher premium cessions under captive reinsurance agreements. The increase in premiums earned was attributable to the better than expected performance of PMI’s pool insurance in force. An evaluation of the earnings pattern of pool insurance, based upon its performance, drove a reduction in the unearned premium reserve of $7.1 million.
Gross expenses for the quarter remained flat at $35.3 million compared to $34.8 million for the same period in 2002. Net income for the quarter was $71.9 million, compared to $71.3 million for the same period a year ago.
NEW MORTGAGE INSURANCE WRITTEN | ||||
(Dollars in billions) | Q1 2003 | Q1 2002 | ||
Domestic5 new primary mortgage insurance written | $13.7 | $12.7 | ||
Excluding CMG | 12.2 | 11.5 | ||
Bulk transactions | 0.8 | 1.1 | ||
Domestic modified mortgage pool insurance written | 2.7 | 5.2 | ||
Domestic primary new insurance written6 totaled $13.7 billion for the quarter compared to $12.7 billion for the same period a year ago. The amount of bulk transactions totaled $0.8 billion for the quarter compared to $1.1 billion for the same period a year ago.
5 “Domestic” includes results from U.S. mortgage insurance operations and CMG.
6 Starting with fourth quarter 2002 PMI, in its public reporting, reverted to its historical definitions of primary and pool insurance from those used by Mortgage Insurance Companies of America.
5
MORTGAGE INSURANCE IN FORCE | ||||||||||
(Dollars in billions) | as of 03/31/03 |
| as of 12/31/02 |
| as of 3/31/02 |
| ||||
Domestic primary mortgage insurance in force | $116.6 |
| $118.5 |
| $117.3 |
| ||||
Excluding CMG | 105.5 |
| 107.6 |
| 108.1 |
| ||||
Domestic primary mortgage risk in force | 27.0 |
| 27.7 |
| 27.3 |
| ||||
Excluding CMG | 24.5 |
| 25.2 |
| 25.1 |
| ||||
Domestic primary persistency rate | 53.2 | % | 56.6 | % | 59.4 | % | ||||
Excluding CMG | 52.7 | % | 56.2 | % | 59.1 | % | ||||
Domestic primary insurance in force totaled $116.6 billion, a decrease of two percent from a year ago. The decline in primary insurance in force was a result of record levels of policy cancellations offset by strong levels of new primary insurance written.
PRIMARY MORTGAGE INSURANCE DELINQUENCY RATIO | ||||||||||
as of 3/31/03 |
| as of 12/31/02 |
| as of 3/31/02 |
| |||||
Domestic primary mortgage insurance in force default rate | 3.84 | % | 3.84 | % | 2.81 | % | ||||
Excluding CMG | 4.19 | % | 4.18 | % | 3.02 | % | ||||
Excluding CMG and bulk transactions | 3.52 | % | 3.52 | % | 2.51 | % | ||||
Bulk transactions only | 10.59 | % | 10.40 | % | 7.17 | % | ||||
CLAIMS PAID AND LOSS RESERVES | ||||||
(Dollars in millions) | Q1 2003 | Q4 2002 | Q1 2002 | |||
Primary claims paid – excluding CMG | $36.7 | $29.5 | $22.1 | |||
Primary loss reserves – excluding CMG | 282.4 | 277.6 | 261.2 | |||
Pool claims paid – excluding CMG | 3.2 | 2.6 | 1.9 | |||
Pool loss reserves – excluding CMG | 38.0 | 38.1 | 36.5 | |||
Primary claims paid totaled $36.7 million for the quarter, compared to $22.1 million for the same period a year ago. The increase in claims paid was influenced by the seasoning
6
of our insurance portfolio, higher levels of unemployment in the economy and the somewhat higher claim rate we experience in the portion of the portfolio that is less than “A” credit quality.
In the first quarter 2003, our U.S. primary delinquent loan inventory declined to 35,803 from 36,537 at December 31, 2002. Delinquent loan inventory at March 31, 2002 totaled 26,909. During the first quarter of 2003 the Company reinstated its practice of reporting claims as “paid” at the time of disbursement, consistent with industry practice. This was implemented to more appropriately reflect the effects of PMI’s loss mitigation efforts that take place after the perfection of the claim and prior to disbursement of the claim. Also in the quarter, PMI increased loss reserves in U.S. Mortgage Insurance Operations by $4.9 million.
PMI’s equity in earnings of CMG Mortgage Insurance Company decreased to $2.9 million for the quarter, compared to $3.1 million for the same period a year ago. The decrease was largely a result of additions in CMG’s loss reserves.
PMI Capital Corporation
The results for PMI Capital Corporation include International Mortgage Insurance, Title Insurance and equity in the earnings from Fairbanks Capital, Ram Re and Truman Fund.
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PMI CAPITAL CORPORATION | |||||||
(Dollars in millions) | Q1 2003 |
| Q1 2002 |
| |||
Premiums and other income | $89.9 |
| $69.0 |
| |||
Equity in earnings of unconsolidated subsidiaries | 8.4 |
| 7.3 |
| |||
Losses | 4.2 |
| 3.0 |
| |||
Expenses | 61.2 |
| 47.8 |
| |||
Pre-tax income | 32.9 |
| 25.5 |
| |||
Income taxes | 8.2 |
| 8.2 |
| |||
Net Income in accordance with GAAP | $24.7 |
| $17.3 |
| |||
Percentage of consolidated net income from PMI Capital Corporation | 28 | % | 19 | % | |||
Realized gains and losses | (0.2 | ) | (0.3 | ) | |||
Cumulative effect of a change in accounting | — |
| (7.2 | ) | |||
Net operating income | $24.5 |
| $9.8 |
| |||
Percentage of consolidated net operating income from PMI Capital Corporation | 28 | % | 12 | % | |||
International Mortgage Insurance
International Mortgage Insurance Operations reported net income of $14.2 million compared to $17.2 million for the same period a year ago and operating income of $14 million for first quarter 2003 compared to $9.8 million for the same period a year ago. Net income for the first quarter 2002 included a $7.2 million gain resulting from the cumulative effect of an accounting change for negative goodwill.
Loss and loss adjustment expense (benefit) for the first quarter 2003 totaled ($0.7) million compared to $0.6 million for the same period a year ago. The benefit resulted from a $1.9 million decline in loss reserves for PMI Australia due to a decline in delinquent loan inventory and claims paid.
Primary insurance in force for PMI Australia was $60.2 billion at March 31, 2003 compared to $45.2 billion at March 31, 2002. The increase was primarily attributable to the
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$14.9 billion of new insurance written over the previous 12 months driven by market share expansion. Mortgage credit default swap guarantees in force for PMI Europe was $6.7 billion at March 31, 2003 compared to $4.1 billion at March 31, 2002. Risk in force at PMI Europe was $537 million at March 31, 2003 and $391 million at March 31, 2002.
Title Insurance
American Pioneer Title Insurance Company (APTIC), the Company’s wholly-owned title insurance subsidiary, reported net income of $3.0 million for the quarter, compared to $2.5 million for the same period a year ago. Premiums earned increased to $60.6 million for the quarter compared from $48.1 million for the same period a year ago. Losses and expenses totaled $59.8 million for the quarter compared to $46.8 million for the same period a year ago. Loss reserves increased over the fourth quarter 2002 by $3.2 million to $20.5 million from $17.3. The increases in net income, premiums earned and losses and expenses were a result of the high level of title policy underwriting in the first quarter of 2003.
Equity in Earnings from Unconsolidated Strategic Investments
PMI’s equity in earnings from Fairbanks Capital, Ram Re and Truman Fund was approximately $8.4 million for the quarter compared to $7.3 million for the same period a year ago.
PMI CAPITAL CORPORATION EQUITY IN EARNINGS OF UNCONSOLIDATED STRATEGIC INVESTMENTS | ||||
(Dollars in millions) | Q1 2003 | Q1 2002 | ||
Fairbanks Capital | $7.0 | $3.7 | ||
Ram Re | 0.3 | 0.9 | ||
Truman Fund | 1.1 | 2.7 | ||
Total | $8.4 | $7.3 | ||
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The increase in equity in earnings for PMI Capital Corporation was primarily a result of the increase in PMI’s ownership of Fairbanks Capital to 57 percent and the overall growth of Fairbanks Capital’s special servicing operations.
Fairbanks continues to be in discussions with the rating agencies regarding its residential subprime and residential special servicer rankings. PMI does not know whether the rankings will be maintained. A reduction in the rankings of Fairbanks could have a negative impact on the Company’s financial condition and results of operations.
PMI’s equity in earnings from Ram Re for the first quarter declined compared to the same period a year ago primarily as a result of a $4.1 million increase in provisions for losses following similar action taken by the primary guarantors reinsured by RAM Re in connection with securities they have guaranteed. PMI’s share of the increase to provisions for losses was $0.9 million.
PMI’s equity in earnings from Truman Fund declined to $1.1 million compared to $2.7 million for the same period a year ago reflecting the lack of structured securities sales by Truman in the quarter. Truman had two securities sales in the first quarter and fourth quarter of 2002.
Other
PMI’s Other business segment, which consists of revenue and expenses of the holding company, equity in the earnings from unconsolidated subsidiaries other than CMG, and contract underwriting operations, had total revenues of $21.8 million for the quarter compared to $19.4 million for the same period a year ago.
The increase in revenues was driven primarily by increases in our equity in earnings from unconsolidated subsidiaries and contract underwriting fees.
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EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARIES | |||||
(Dollars in millions) | Q1 2003 |
| Q1 2002 | ||
Unconsolidated strategic investments | $8.4 |
| $7.3 | ||
Limited partnerships | (2.4 | ) | 0.3 | ||
Equity in earnings of unconsolidated subsidiaries | 6.0 |
| 7.6 | ||
The change in equity in earnings was due to the increase in equity in earnings from unconsolidated strategic investments and offset by $2.4 million of losses recognized in private equity limited partnerships.
Contract underwriting fees rose due to higher volumes of loan underwriting. Interest and dividend income for the quarter declined to $3.9 million from $5.0 million due to lower interest rates earned on fixed income investments.
Other underwriting and operating expenses were $17.9 million for the quarter compared to $15.6 million for the same period a year ago. The increase was primarily due to greater contract underwriting expenses related to higher loan volume.
About The PMI Group, Inc.
PMI is headquartered in Walnut Creek, California and is one of the largest private mortgage insurers in the world. PMI, through its subsidiaries, provides private mortgage insurance in the United States, Australia, New Zealand and Europe, and mortgage guaranty reinsurance in Hong Kong. PMI, a leader in mortgage credit risk management, develops structured credit enhancement solutions and provides various products and services for the home mortgage finance industry.
PMI is an advocate of affordable housing and supports a number of initiatives and organizations that foster greater access to affordable housing in the United States, including
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Social Compact, Habitat for Humanity, Neighborhood Housing Services of America, Native American Indian Housing Council and the Unity Council.
This release can be accessed through the World Wide Web atwww.pmigroup.com. You may listen to PMI’s conference call to discuss the first quarter earnings results at 12:00 noon Eastern, 9:00 a.m. Pacific time, on April 23, 2003 by going towww.pmigroup.com / investor relations.
Cautionary Statement: Statements in this press 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. Forward-looking statements are subject to a number of risks and uncertainties that could cause the Company’s actual results to differ materially from those expressed. Risks and uncertainties that could affect us are discussed in our various Securities and Exchange Commission filings, including our report on Form 10-K for the year ended December 31, 2002.
# # #
12
THE PMI GROUP, INC. AND SUBSIDIARIES
FINANCIAL AND OPERATING RESULTS FOR PERIOD ENDING MARCH 31, 2003
CONTENTS | ||
Consolidated Statements of Operations and Balance Sheets | Page 2 | |
Business Segments Results of Operations | Page 3 | |
Business Segments Balance Sheets | Page 4 | |
U.S. Mortgage Insurance Operations Analysis of Loss Reserves and Statistical Information | Page 5 | |
U.S. Mortgage Insurance Operations and CMG Statistical Information | Page 6 | |
International Mortgage Insurance Operations | Page 7 | |
Please refer to the following when noted:
| (1) | The Company's investments and equity earnings in unconsolidated subsidiaries include CMG, RAM Reinsurance, Fairbanks Capital, Truman Fund and other limited partnership interests. |
| (2) | Company obligated mandatory redeemable preferred capital securities of subsidiary trust holding solely junior subordinated deferrable interest debentures of the Company. |
| (3) | U.S. Mortgage Insurance Operations include the operating results of PMI Mortgage Insurance Co. and affiliated U.S. mortgage insurance and reinsurance companies. In addition, CMG, and its affiliates, are included under the equity method of accounting in equity earnings of unconsolidated subsidiaries. |
| (4) | International Mortgage Insurance Operations include PMI Australia, PMI Europe and PMI's Hong Kong reinsurance operations. Financial results of International Operations are subject to currency rate risk. |
| (5) | The “Other” segment includes the activity of the holding company, equity investments in unconsolidated subsidiaries, and the operating results of PMI Mortgage Services Co. |
| (6) | Pool insurance includes modified pool, GSE pool, old pool and all other pool insurance products. |
| (7) | Represents statutory risk to capital ratio for PMI Mortgage Insurance Co. |
| (8) | Upon the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 142 “Goodwill and Other Intangible Assets” effective January 1, 2002, the Company realized a gain of $7.2 million for the remaining balance of negative goodwill, recorded in connection with the acquisition of PMI Ltd in 1999. There is no tax provision on the change in accounting principle. The amortization of negative goodwill was reported in operating earnings prior to the adoption of SFAS No. 142. |
| (9) | Per share data has been adjusted to reflect the two-for-one stock split effective in June 2002. |
| (10) | During the first quarter of 2003 the Company began reporting claims as “paid” at the time of disbursement. This was implemented to more appropriately reflect the efforts of PMI’s loss mitigation efforts that take place after the perfection of the claim and prior to disbursement of the claim. Previously, claims were reported as “paid” in PMI’s operating statistics upon perfection of the claim filing. Approximately 257 loans were affected that remained in the delinquent loan inventory at quarter end representing approximately $5.1 million to $5.7 million. |
| (11) | The financial information contained in this material are unaudited. Certain prior year information have been reclassified to conform to the current year's presentation. |
Page 1
THE PMI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
Three Months Ended March 31, | ||||||||||||
2003 | 2002 | |||||||||||
(Dollars in thousands, except per share data) | ||||||||||||
Net premiums written | $ | 235,284 |
| $ | 223,381 |
| ||||||
Revenues | ||||||||||||
Premiums earned | $ | 236,578 |
| $ | 212,962 |
| ||||||
Interest and dividend income |
| 33,792 |
|
| 32,819 |
| ||||||
Equity in earnings of unconsolidated subsidiaries(1) |
| 8,816 |
|
| 10,680 |
| ||||||
Net realized investment gains (losses) |
| 1,309 |
|
| (2,248 | ) | ||||||
Other income |
| 13,684 |
|
| 9,217 |
| ||||||
Total revenues |
| 294,179 |
|
| 263,430 |
| ||||||
Losses and expenses | ||||||||||||
Losses and loss adjustment expenses |
| 51,737 |
|
| 39,048 |
| ||||||
Amortization of policy acquisition costs |
| 22,005 |
|
| 20,351 |
| ||||||
Other underwriting and operating expenses |
| 91,527 |
|
| 77,508 |
| ||||||
Interest expense |
| 3,801 |
|
| 3,826 |
| ||||||
Distributions on mandatorily redeemable preferred securities(2) |
| 654 |
|
| 1,007 |
| ||||||
Total losses and expenses |
| 169,724 |
|
| 141,740 |
| ||||||
Income before income taxes and cumulative effect of a change in accounting principle |
| 124,455 |
|
| 121,690 |
| ||||||
Income taxes |
| 34,847 |
|
| 37,370 |
| ||||||
Income before cumulative effect of a change in accounting principle |
| 89,608 |
|
| 84,320 |
| ||||||
Cumulative effect of a change in accounting principle(8) |
| — |
|
| 7,172 |
| ||||||
Net income | $ | 89,608 |
| $ | 91,492 |
| ||||||
Diluted weighted average common shares outstanding(shares in thousands) |
| 89,828 |
|
| 91,446 |
| ||||||
Diluted net income per share(9) | $ | 1.00 |
| $ | 1.00 |
| ||||||
Net realized investment (gains) losses, net of tax |
| (0.01 | ) |
| 0.02 |
| ||||||
Cumulative effect of a change in accounting principle(8) |
| — |
|
| (0.08 | ) | ||||||
Diluted operating income per share(9) | $ | 0.99 |
| $ | 0.94 |
| ||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||||
March 31, 2003 | December 31, 2002 | March 31, 2002 | ||||||||||
(Dollars in thousands, except per share data) | ||||||||||||
Assets | ||||||||||||
Cash and investments, at fair value | $ | 2,855,146 | $ | 2,737,482 |
| $ | 2,555,255 |
| ||||
Investments in unconsolidated subsidiaries(1) |
| 303,623 |
| 289,795 |
|
| 211,860 |
| ||||
Reinsurance recoverable and prepaid premiums |
| 50,870 |
| 63,924 |
|
| 66,713 |
| ||||
Deferred policy acquisition costs |
| 87,855 |
| 85,210 |
|
| 83,128 |
| ||||
Other assets |
| 340,011 |
| 340,638 |
|
| 257,283 |
| ||||
Total assets | $ | 3,637,505 | $ | 3,517,049 |
| $ | 3,174,239 |
| ||||
Liabilities | ||||||||||||
Reserve for losses and loss adjustment expenses | $ | 358,685 | $ | 350,841 |
| $ | 324,945 |
| ||||
Unearned premiums |
| 242,467 |
| 232,877 |
|
| 220,874 |
| ||||
Long-term debt |
| 422,950 |
| 422,950 |
|
| 422,950 |
| ||||
Other liabilities |
| 274,863 |
| 268,048 |
|
| 266,755 |
| ||||
Total liabilities |
| 1,298,965 |
| 1,274,716 |
|
| 1,235,524 |
| ||||
Mandatorily redeemable preferred securities(2) |
| 48,500 |
| 48,500 |
|
| 48,500 |
| ||||
Shareholders' equity |
| 2,290,040 |
| 2,193,833 |
|
| 1,890,215 |
| ||||
Total liabilities, mandatorily redeemable preferred securities and shareholders' equity | $ | 3,637,505 | $ | 3,517,049 |
| $ | 3,174,239 |
| ||||
Book value per share(9) | $ | 25.75 | $ | 24.42 |
| $ | 21.03 |
| ||||
Page 2
THE PMI GROUP, INC. AND SUBSIDIARIES
BUSINESS SEGMENTS RESULTS OF OPERATIONS | |||||||||||||||||||
U.S. Mortgage Insurance Operations (3) | International Mortgage Insurance Operations (4) | Title Insurance | Other (5) | Consolidated Total | |||||||||||||||
Three Months Ended March 31, 2003 | |||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Net premiums written | $ | 151,700 |
| $ | 22,976 |
| $ | 60,608 | $ | — |
| $ | 235,284 |
| |||||
Revenues | |||||||||||||||||||
Premiums earned | $ | 156,604 |
| $ | 19,366 |
| $ | 60,608 | $ | — |
| $ | 236,578 |
| |||||
Interest and dividend income |
| 23,302 |
|
| 5,863 |
|
| 737 |
| 3,890 |
|
| 33,792 |
| |||||
Equity in earnings of unconsolidated subsidiaries(1) |
| 2,865 |
|
| — |
|
| — |
| 5,951 |
|
| 8,816 |
| |||||
Net realized investment gains (losses) |
| (479 | ) |
| 341 |
|
| 18 |
| 1,429 |
|
| 1,309 |
| |||||
Other income |
| 169 |
|
| — |
|
| 2,968 |
| 10,547 |
|
| 13,684 |
| |||||
Total revenues |
| 182,461 |
|
| 25,570 |
|
| 64,331 |
| 21,817 |
|
| 294,179 |
| |||||
Losses and expenses | |||||||||||||||||||
Losses and loss adjustment expenses |
| 47,536 |
|
| (661 | ) |
| 4,862 |
| — |
|
| 51,737 |
| |||||
Amortization of policy acquisition costs |
| 19,475 |
|
| 2,530 |
|
| — |
| — |
|
| 22,005 |
| |||||
Other underwriting and operating expenses |
| 14,825 |
|
| 3,844 |
|
| 54,917 |
| 17,941 |
|
| 91,527 |
| |||||
Interest expense |
| 25 |
|
| — |
|
| — |
| 3,776 |
|
| 3,801 |
| |||||
Distributions on redeemable preferred securities(2) |
| — |
|
| — |
|
| — |
| 654 |
|
| 654 |
| |||||
Total losses and expenses |
| 81,861 |
|
| 5,713 |
|
| 59,779 |
| 22,371 |
|
| 169,724 |
| |||||
Income (loss) before income taxes |
| 100,600 |
|
| 19,857 |
|
| 4,552 |
| (554 | ) |
| 124,455 |
| |||||
Income tax (benefit) |
| 28,676 |
|
| 5,672 |
|
| 1,560 |
| (1,061 | ) |
| 34,847 |
| |||||
Net income | $ | 71,924 |
| $ | 14,185 |
| $ | 2,992 | $ | 507 |
| $ | 89,608 |
| |||||
Gross expense ratio |
| 23.3% |
|
| 27.6% |
|
| 86.4% |
| n/a |
|
| n/a |
| |||||
Net expense ratio |
| 22.6% |
|
| 27.7% |
|
| 86.4% |
| n/a |
|
| n/a |
| |||||
Loss ratio |
| 30.4% |
|
| -3.4% |
|
| 7.6% |
| n/a |
|
| n/a |
| |||||
Combined ratio |
| 53.0% |
|
| 24.3% |
|
| 94.0% |
| n/a |
|
| n/a |
| |||||
Three Months Ended March 31, 2002 | |||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Net premiums written | $ | 156,360 |
| $ | 18,885 |
| $ | 48,136 | $ | — |
| $ | 223,381 |
| |||||
Revenues | |||||||||||||||||||
Premiums earned | $ | 152,630 |
| $ | 12,196 |
| $ | 48,136 | $ | — |
| $ | 212,962 |
| |||||
Interest and dividend income |
| 21,483 |
|
| 5,763 |
|
| 550 |
| 5,023 |
|
| 32,819 |
| |||||
Equity in earnings of unconsolidated subsidiaries(1) |
| 3,118 |
|
| — |
|
| — |
| 7,562 |
|
| 10,680 |
| |||||
Net realized investment gains (losses) |
| (2,478 | ) |
| 465 |
|
| — |
| (235 | ) |
| (2,248 | ) | |||||
Other income |
| 123 |
|
| — |
|
| 2,046 |
| 7,048 |
|
| 9,217 |
| |||||
Total revenues |
| 174,876 |
|
| 18,424 |
|
| 50,732 |
| 19,398 |
|
| 263,430 |
| |||||
Losses and expenses | |||||||||||||||||||
Losses and loss adjustment expenses |
| 36,061 |
|
| 593 |
|
| 2,394 |
| — |
|
| 39,048 |
| |||||
Amortization of policy acquisition costs |
| 19,152 |
|
| 1,199 |
|
| — |
| — |
|
| 20,351 |
| |||||
Other underwriting and operating expenses |
| 15,123 |
|
| 2,371 |
|
| 44,448 |
| 15,566 |
|
| 77,508 |
| |||||
Interest expense |
| 18 |
|
| — |
|
| — |
| 3,808 |
|
| 3,826 |
| |||||
Distributions on redeemable preferred securities(2) |
| — |
|
| — |
|
| — |
| 1,007 |
|
| 1,007 |
| |||||
Total losses and expenses |
| 70,354 |
|
| 4,163 |
|
| 46,842 |
| 20,381 |
|
| 141,740 |
| |||||
Income (loss) before income taxes and cumulative effect of a change in accounting principle |
| 104,522 |
|
| 14,261 |
|
| 3,890 |
| (983 | ) |
| 121,690 |
| |||||
Income tax (benefit) |
| 33,176 |
|
| 4,210 |
|
| 1,383 |
| (1,399 | ) |
| 37,370 |
| |||||
Income before cumulative effect of a change in accounting principle |
| 71,346 |
|
| 10,051 |
|
| 2,507 |
| 416 |
|
| 84,320 |
| |||||
Cumulative effect of a change in accounting principle(8) |
| — |
|
| 7,172 |
|
| — |
| — |
|
| 7,172 |
| |||||
Net income | $ | 71,346 |
| $ | 17,223 |
| $ | 2,507 | $ | 416 |
| $ | 91,492 |
| |||||
Gross expense ratio |
| 22.3% |
|
| 21.9% |
|
| 88.5% |
| n/a |
|
| n/a |
| |||||
Net expense ratio |
| 21.9% |
|
| 18.9% |
|
| 88.5% |
| n/a |
|
| n/a |
| |||||
Loss ratio |
| 23.6% |
|
| 4.9% |
|
| 4.8% |
| n/a |
|
| n/a |
| |||||
Combined ratio |
| 45.5% |
|
| 23.8% |
|
| 93.3% |
| n/a |
|
| n/a |
| |||||
Page 3
THE PMI GROUP, INC. AND SUBSIDIARIES
BUSINESS SEGMENTS BALANCE SHEETS | ||||||||||||||||
U.S. Mortgage Insurance Operations(3) | International Mortgage Insurance Operations(4) | Title Insurance | Other(5) | Consolidated Total | ||||||||||||
March 31, 2003 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and investments, at fair value | $ | 1,910,268 | $ | 545,386 | $ | 75,697 | $ | 323,795 |
| $ | 2,855,146 | |||||
Investments in unconsolidated subsidiaries(1) |
| 86,186 |
| — |
| — |
| 217,437 |
|
| 303,623 | |||||
Reinsurance recoverable and prepaid premiums |
| 39,608 |
| 11,262 |
| — |
| — |
|
| 50,870 | |||||
Deferred policy acquisition costs |
| 65,396 |
| 22,459 |
| — |
| — |
|
| 87,855 | |||||
Other assets |
| 207,161 |
| 16,738 |
| 16,091 |
| 100,021 |
|
| 340,011 | |||||
Total assets | $ | 2,308,619 | $ | 595,845 | $ | 91,788 | $ | 641,253 |
| $ | 3,637,505 | |||||
Liabilities | ||||||||||||||||
Reserve for losses and loss adjustment expenses | $ | 320,408 | $ | 17,759 | $ | 20,518 | $ | — |
| $ | 358,685 | |||||
Unearned premiums |
| 81,747 |
| 160,720 |
| — |
| — |
|
| 242,467 | |||||
Long-term debt |
| — |
| — |
| — |
| 422,950 |
|
| 422,950 | |||||
Other liabilities |
| 164,910 |
| 21,637 |
| 15,405 |
| 72,911 |
|
| 274,863 | |||||
Total liabilities |
| 567,065 |
| 200,116 |
| 35,923 |
| 495,861 |
|
| 1,298,965 | |||||
Mandatorily redeemable preferred securities(2) |
| — |
| — |
| — |
| 48,500 |
|
| 48,500 | |||||
Shareholders' equity |
| 1,741,554 |
| 395,729 |
| 55,865 |
| 96,892 |
|
| 2,290,040 | |||||
Total liabilities, mandatorily redeemable preferred securities and shareholders' equity | $ | 2,308,619 | $ | 595,845 | $ | 91,788 | $ | 641,253 |
| $ | 3,637,505 | |||||
December 31, 2002 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and investments, at fair value | $ | 1,816,039 | $ | 495,778 | $ | 68,728 | $ | 356,937 |
| $ | 2,737,482 | |||||
Investments in unconsolidated subsidiaries(1) |
| 83,234 |
| — |
| — |
| 206,561 |
|
| 289,795 | |||||
Reinsurance recoverable and prepaid premiums |
| 53,626 |
| 10,298 |
| — |
| — |
|
| 63,924 | |||||
Deferred policy acquisition costs |
| 64,380 |
| 20,830 |
| — |
| — |
|
| 85,210 | |||||
Other assets |
| 296,578 |
| 13,479 |
| 16,328 |
| 14,253 |
|
| 340,638 | |||||
Total assets | $ | 2,313,857 | $ | 540,385 | $ | 85,056 | $ | 577,751 |
| $ | 3,517,049 | |||||
Liabilities | ||||||||||||||||
Reserve for losses and loss adjustment expenses | $ | 315,721 | $ | 17,849 | $ | 17,271 | $ | — |
| $ | 350,841 | |||||
Unearned premiums |
| 87,118 |
| 145,759 |
| — |
| — |
|
| 232,877 | |||||
Long-term debt |
| — |
| — |
| — |
| 422,950 |
|
| 422,950 | |||||
Other liabilities |
| 159,323 |
| 17,385 |
| 14,951 |
| 76,389 |
|
| 268,048 | |||||
Total liabilities |
| 562,162 |
| 180,993 |
| 32,222 |
| 499,339 |
|
| 1,274,716 | |||||
Mandatorily redeemable preferred securities(2) |
| — |
| — |
| — |
| 48,500 |
|
| 48,500 | |||||
Shareholders' equity |
| 1,751,695 |
| 359,392 |
| 52,834 |
| 29,912 |
|
| 2,193,833 | |||||
Total liabilities, mandatorily redeemable preferred securities and shareholders' equity | $ | 2,313,857 | $ | 540,385 | $ | 85,056 | $ | 577,751 |
| $ | 3,517,049 | |||||
March 31, 2002 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and investments, at fair value | $ | 1,748,111 | $ | 415,578 | $ | 53,389 | $ | 338,177 |
| $ | 2,555,255 | |||||
Investments in unconsolidated subsidiaries(1) |
| 71,197 |
| — |
| — |
| 140,663 |
|
| 211,860 | |||||
Reinsurance recoverable and prepaid premiums |
| 53,142 |
| 13,571 |
| — |
| — |
|
| 66,713 | |||||
Deferred policy acquisition costs |
| 64,891 |
| 18,237 |
| — |
| — |
|
| 83,128 | |||||
Other assets |
| 245,253 |
| 4,013 |
| 15,870 |
| (7,853 | ) |
| 257,283 | |||||
Total assets | $ | 2,182,594 | $ | 451,399 | $ | 69,259 | $ | 470,987 |
| $ | 3,174,239 | |||||
Liabilities | ||||||||||||||||
Reserve for losses and loss adjustment expenses | $ | 297,682 | $ | 14,275 | $ | 12,988 | $ | — |
| $ | 324,945 | |||||
Unearned premiums |
| 91,788 |
| 129,086 |
| — |
| — |
|
| 220,874 | |||||
Long-term debt |
| — |
| — |
| — |
| 422,950 |
|
| 422,950 | |||||
Other liabilities |
| 200,517 |
| 25,902 |
| 12,071 |
| 28,265 |
|
| 266,755 | |||||
Total liabilities |
| 589,987 |
| 169,263 |
| 25,059 |
| 451,215 |
|
| 1,235,524 | |||||
Mandatorily redeemable preferred securities(2) |
| — |
| — |
| — |
| 48,500 |
|
| 48,500 | |||||
Shareholders' equity |
| 1,592,607 |
| 282,136 |
| 44,200 |
| (28,728 | ) |
| 1,890,215 | |||||
Total liabilities, mandatorily redeemable preferred securities and shareholders' equity | $ | 2,182,594 | $ | 451,399 | $ | 69,259 | $ | 470,987 |
| $ | 3,174,239 | |||||
Page 4
THE PMI GROUP, INC. AND SUBSIDIARIES
U.S. MORTGAGE INSURANCE OPERATIONS ANALYSIS OF LOSS RESERVE (3) | |||||||||||||||
March 31, 2003 | December 31, 2002 | March 31, 2002 | |||||||||||||
Loans in Default | Reserve for Losses | Loans in Default | Reserve for Losses | Loans in Default | Reserve for Losses | ||||||||||
(Dollars in thousands) | |||||||||||||||
Primary insurance | 35,803 | $ | 282,434 | 36,537 | $ | 277,608 | 28,097 | $ | 261,226 | ||||||
Pool insurance | 18,836 |
| 37,974 | 16,374 |
| 38,113 | 10,813 |
| 36,456 | ||||||
Total | 54,639 | $ | 320,408 | 52,911 | $ | 315,721 | 38,910 | $ | 297,682 | ||||||
Reconciliation of Reserve for Losses
March 31, 2003 | December 31, 2002 | Reserve Change | ||||||||
(Dollars in thousands) | ||||||||||
Gross reserves: | ||||||||||
Primary insurance | $ | 282,434 | $ | 277,608 | $ | 4,826 |
| |||
Pool insurance |
| 37,974 |
| 38,113 |
| (139 | ) | |||
U.S. Mortgage Insurance operations gross loss reserves |
| 320,408 |
| 315,721 |
| 4,687 |
| |||
Ceded Reserves: | ||||||||||
Primary insurance |
| 3,354 |
| 3,539 |
| (185 | ) | |||
Pool insurance |
| 313 |
| 310 |
| 3 |
| |||
Total ceded loss reserves |
| 3,667 |
| 3,849 |
| (182 | ) | |||
U.S. Mortgage Insurance operations net loss reserves | $ | 316,741 | $ | 311,872 | $ | 4,869 |
| |||
U.S. MORTGAGE INSURANCE OPERATIONS STATISTICAL INFORMATION(3) | |||||||||
Three Months Ended March 31, | |||||||||
2003 | 2002 | ||||||||
Primary new insurance written(in millions) | $ | 12,241 |
| $ | 11,486 |
| |||
Primary new risk written(in millions) | $ | 2,840 |
| $ | 2,699 |
| |||
Pool insurance written(in millions)(6) | $ | 2,652 |
| $ | 5,167 |
| |||
Pool risk written(in millions)(6) | $ | 77 |
| $ | 216 |
| |||
Product mix as a % of new insurance written: | |||||||||
95% LTV |
| 28 | % |
| 32 | % | |||
90% LTV |
| 42 | % |
| 45 | % | |||
95% LTV with 30% coverage |
| 21 | % |
| 24 | % | |||
90% LTV with 25% coverage |
| 31 | % |
| 34 | % | |||
ARMs |
| 7 | % |
| 6 | % | |||
Monthlies |
| 93 | % |
| 94 | % | |||
Refinances |
| 51 | % |
| 42 | % | |||
Bulk transactions |
| 7 | % |
| 10 | % | |||
Premiums Written(in thousands): | |||||||||
Gross premiums written | $ | 187,151 |
| $ | 181,729 |
| |||
Ceded premiums, net of assumed premiums |
| (30,827 | ) |
| (21,085 | ) | |||
Refunded premiums |
| (4,623 | ) |
| (4,283 | ) | |||
Net premiums written |
| 151,701 |
|
| 156,361 |
| |||
Change in unearned premiums |
| 4,903 |
|
| (3,731 | ) | |||
Net premiums earned | $ | 156,604 |
| $ | 152,630 |
| |||
Page 5
THE PMI GROUP, INC. AND SUBSIDIARIES
U.S. MORTGAGE INSURANCE OPERATIONS STATISTICAL INFORMATION(3) | |||||||||||||
March 31, 2003 | December 31, 2002 | March 31, 2002 | |||||||||||
Primary insurance in force(in millions) | $ | 105,518 |
| $ | 107,579 |
| $ | 108,107 |
| ||||
Primary risk in force(in millions) | $ | 24,500 |
| $ | 25,188 |
| $ | 25,131 |
| ||||
Pool risk in force(in millions)(6) | $ | 3,110 |
| $ | 3,128 |
| $ | 2,698 |
| ||||
Risk-to-capital ratio(7) |
| 10.6 to 1 |
|
| 11.3 to 1 |
|
| 12.3 to 1 |
| ||||
Insured primary loans |
| 854,506 |
|
| 874,202 |
|
| 892,353 |
| ||||
Persistency |
| 52.7 | % |
| 56.2 | % |
| 59.1 | % | ||||
Primary loans in default(10) |
| 35,803 |
|
| 36,537 |
|
| 26,909 |
| ||||
Primary default rate(10) |
| 4.19 | % |
| 4.18 | % |
| 3.02 | % | ||||
Primary claims paid(year-to-date in thousands)(10) | $ | 36,662 |
| $ | 98,524 |
| $ | 22,086 |
| ||||
Number of primary claims paid(year-to-date)(10) |
| 1,624 |
|
| 4,860 |
|
| 1,053 |
| ||||
Average primary claim size(year-to-date in thousands) | $ | 22.6 |
| $ | 20.3 |
| $ | 21.0 |
| ||||
Percentage of NIW subject to captive reinsurance agreements(year-to-date) |
| 57.0 | % |
| 55.5 | % |
| 44.3 | % | ||||
Percentage of IIF subject to captive reinsurance agreements(year-to-date) |
| 44.4 | % |
| 43.1 | % |
| 34.8 | % | ||||
CMG MORTGAGE INSURANCE COMPANY STATISTICAL INFORMATION | |||||||||||||
March 31, 2003 | December 31, 2002 | March 31, 2002 | |||||||||||
Primary new insurance written(year-to-date in millions) | $ | 1,498 |
| $ | 5,403 |
| $ | 1,232 |
| ||||
Primary insurance in force(in millions) | $ | 11,104 |
| $ | 10,916 |
| $ | 9,208 |
| ||||
Primary risk in force(in millions) | $ | 2,480 |
| $ | 2,470 |
| $ | 2,155 |
| ||||
Insured primary loans |
| 90,119 |
|
| 88,977 |
|
| 78,022 |
| ||||
Persistency |
| 59 | % |
| 62 | % |
| 63 | % | ||||
Primary loans in default |
| 494 |
|
| 407 |
|
| 323 |
| ||||
Primary default rate(year-to-date) |
| 0.55 | % |
| 0.46 | % |
| 0.41 | % | ||||
Primary claims paid(year-to-date in thousands) | $ | 629 |
| $ | 1,663 |
| $ | 193 |
| ||||
Number of primary claims paid(year-to-date) |
| 25 |
|
| 92 |
|
| 10 |
| ||||
Average primary claims size(year-to-date in thousands) | $ | 25.2 |
| $ | 18.1 |
| $ | 19.3 |
| ||||
Page 6
THE PMI GROUP, INC. AND SUBSIDIARIES
INTERNATIONAL INSURANCE OPERATIONS STATISTICAL INFORMATION(4) | |||||||||
March 31, 2003 | December 2002 | March 31, 2002 | |||||||
PMI Australia | |||||||||
Net premium written(year-to-date in thousands) | $ | 21,253 | $ | 74,352 | $ | 16,649 | |||
Premium earned(year-to-date in thousands) | $ | 17,264 | $ | 59,929 | $ | 11,074 | |||
Primary new insurance written(year-to-date in millions) | $ | 4,125 | $ | 14,523 | $ | 3,712 | |||
Insurance in force(in millions) | $ | 60,227 | $ | 54,117 | $ | 45,146 | |||
Risk in force(in millions) | $ | 54,749 | $ | 48,747 | $ | 41,075 | |||
Loans in default |
| 1,786 |
| 2,176 |
| 1,826 | |||
Claims paid(year-to-date in millions) | $ | 886 | $ | 5,912 | $ | 1,642 | |||
Number of claims paid(year-to-date) |
| 73 |
| 508 |
| 147 | |||
PMI Europe | |||||||||
Net premium written(year-to-date in thousands) | $ | 843 | $ | 2,307 | $ | 352 | |||
Premium earned(year-to-date in thousands) | $ | 851 | $ | 2,127 | $ | 235 | |||
New insurance written(year-to-date in millions) | $ | — | $ | 3,692 | $ | 1,420 | |||
Insurance in force(in millions) | $ | 6,710 | $ | 6,507 | $ | 4,100 | |||
Risk in force(in millions) | $ | 537 | $ | 538 | $ | 391 | |||
Loans in default |
| — |
| — |
| — | |||
Claims paid(year-to-date in millions) | $ | — | $ | — | $ | — | |||
Number of claims paid(year-to-date ) |
| — |
| — |
| — | |||
Page 7
