Exhibit 99.1
Exhibit 99.1
The PMI Group, Inc.
Cautionary Statement: Statements in this presentation 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. Forward-looking statements include statements relating to our business strategy and FGIC’s expansion opportunities. Many factors could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.
Changes in economic conditions, including economic recessions or slowdowns, adverse changes in consumer confidence, declining housing values, higher unemployment rates, deteriorating borrower credit, changes in interest rates, or combinations of these factors, could affect the mortgage origination market, the demand for mortgage insurance and/or PMI’s insurance in force. Changes in economic conditions also could cause the number and severity of claims on policies issued by PMI to increase and this could adversely affect our financial condition and results of operations. The performance of our Australian subsidiary could be adversely affected by a weakening in the demand for housing, interest rate volatility, and/or an increase in claims. Events or developments affecting FGIC may cause our investment in FGIC not to contribute the earnings estimated. Other risks and uncertainties are discussed in our SEC filings, including our Form 10-Q for the period ended June 30, 2004. PMI undertakes no obligation to update forward-looking statements.
Business Strategy
PMI intends to deliver shareholder value by
Becoming a global provider of credit enhancement
Multiple asset and risk classes
Expanding domestically and internationally
Leveraging core competencies
Diversifying domestic and international credit enhancement products
Goal of 50% of net income from non-U.S. MI businesses by 2008
Maintaining an organizational structure that allows for the efficient use of capital
Increasing efficiency/connectivity with its customers
Information management systems for risk analysis/loss mitigation
Company Highlights
Significant value in existing US insurance in force
66% of IIF originated since January 2003*
Affordable mortgage rates drive home purchase activity
Minority household formation and increasing homeownership rates
Int’l mortgage insurance*
PMI Australia net income year-to-date up 34% year-over-year
PMI Australia new insurance written up 63% year-over-year
PMI Europe opened new Milan, Italy office
FGIC growth potential
FGIC activity in high-growth, high-margin sectors has been limited
Strong opportunities in the ABS and international finance sectors
* As of September 30, 2004
Business Segments
Global Credit Enhancement
U.S. MORTGAGE INSURANCE
Traditional mortgage lenders (bankers, brokers, commercial banks)
Credit Unions
High LTV market growing faster than overall mortgage market
Nationwide home price appreciation
INTERNATIONAL MORTGAGE INSURANCE
Leading LMI provider: Australia/New Zealand
Australia RMBS market penetration
Europe: first-loss and remote-loss credit enhancement products for residential mortgages
Hong Kong: primary mortgage reinsurance
FINANCIAL GUARANTY
Primary financial guaranty
Remote-loss on investment grade risk
Financial guaranty reinsurance
Triple A rated
US Mortgage Insurance
US Mortgage Insurance Operations
Provider of primary and mortgage pool insurance
High loan-to-value credit enhancement provider
#2 market share position in U.S.
$35 billion of new insurance written since January 2004 (including CMG)*
$119 billion of domestic insurance in force (including CMG)*
$2.5 billion of assets*
High quality, low risk investment portfolio
* As of September 30, 2004
PMI Mortgage Insurance Co.
$104.8 billion Insurance in force (excluding CMG)
2004
25%
2003
41%
16%
2002
2001
8%
Insurance in force by book year
2%
2000
1999
3%
1998
2%
0.5%
1997
1996
0.5%
2%
1995
40%
30%
20%
10%
0%
50%
% of Insurance in force
As of September 30, 2004
US Mortgage Insurance Operations
PMI Insurance in force credit profile (Excluding CMG)
Sept, 2004
11.1%
15.2%
11.2%
3.3%
Bulk
Non-traditional
FICO <620
FICO <575
Homeownership Rates
80%
70%
60%
50%
40%
30%
20%
10%
0%
US
White
Black
Hispanic/Latino
2003
1994
Source: US Census Bureau
International Mortgage Insurance
International Mortgage Insurance:
Australia / New Zealand
Australia is the platform for our International Mortgage Insurance
Strong Earnings Growth in 2004
21% growth in YTD earned premium first 9 months of 2004 vs. 2003
Market dynamics
Strong housing demand has led to property price appreciation
Strong government support for first time homebuyer programs
Mortgage funding provided by private sector
International Mortgage Insurance:
Europe
The European MI market is in the early development stage. We have had good early success developing customers and demand
AA S&P and Fitch; Aa3 Moody’s
Acquired UK MI business from R&SA
Market Dynamics:
Large volume of EU mortgage debt (60% of US)
Growing secondary market (approximately 20% securitized)
Key markets with low homeownership rates (Germany)
Banking capital requirement – Basel II
Financial Guaranty
FGIC Transaction Highlights
Transaction Terms
Acquisition Price
Multiple of Book Value
Multiple of 2002 Earnings
$1.9 billion(a)
0.93x(b)
11.0x
(a) After dividend paid to GE of approximately $284 million. Includes GE’s common and preferred ownership interest.
(b) Excludes FAS 115 and GE dividend. Book value estimated as of transaction close.
Compelling valuation for an established player in growth industry
Capacity constraints in marketplace will provide growth opportunities
Low-risk portfolio
Frank Bivona, veteran financial guaranty executive, is the CEO
Transaction closed late 2003
PMI holds 42% equity ownership interest
FGIC Business Overview
9/30/04 INSURED PORTFOLIO
International 0.1%
Non-Municipal 13.3%
Municipal 86.6%
9/30/04 MUNICIPAL INSURED PORTFOLIO
Other 2.5%
Transportation & Education 16.8%
Water & Sewer 15.8%
Tax-Supported 64.9%
Leading triple-rated monoline financial guaranty company
91% of portfolio in municipal sector
85% of municipal portfolio in tax-supported, water and sewer projects and education
FGIC Opportunities
Potential for broad-based expansion into diverse MBS and selected ABS sectors
Capacity-constrained sectors offer unique opportunity for ‘newcomer’ FGIC
Expansion of FGIC’s international business operations
Western Europe’s structured finance and public finance
Followed by Australia and Japan
Strategic cooperation with The PMI Group
Joint product development and marketing
2004 Guidance
U.S. Mortgage total incurred losses: $220 million - $240 million
International net income growth: $16 million - $20 million
U.S. insurance in force growth: 0% - 1%
Earnings per share accretion from FGIC: $0.20 - $0.30
Consolidated pre-tax investment yield: 4.5% - 5.0%
Contact
GLEN CORSO
Group Senior Vice President
925-658-6429
CORPORATE CAPITAL MANAGEMENT AND CORPORATE RELATIONS
The PMI Group, Inc.
3003 Oak Road
Walnut Creek, CA 94597
