Exhibit 99.1
The PMI Group, Inc.
NEWS RELEASE | ||
Investor and media contacts: | ||
Glen Corso / Matt Nichols | ||
925.658.6429 / 925.658.6618 |
THE PMI GROUP, INC. REPORTS RECORD 2004 EARNINGS
34% GROWTHIN EARNINGSFROM CONTINUING OPERATIONS
Walnut Creek, CA, February 4, 2005, —The PMI Group, Inc. (NYSE: PMI) (the “Company”) today announced thatconsolidated net income from continuing operations totaled $81.7 million for the quarter ended December 31, 2004 and $366.5 million for the year ended December 31, 2004, compared to $65.9 million and $274.3 million for the same periods a year ago.Consolidated net income totaled $80.5 million for the quarter ended December 31, 2004 and $399.3 million for the year ended December 31, 2004, compared to $80.2 million and $299.4 million for the same periods a year ago.
Net income per share for the quarter and year totaled $0.79 and $3.87 respectively, compared to $0.80 and $3.09 for the same periods a year ago.
Results for the quarter include a realized capital loss from the Company’s investment in Select Portfolio Servicing, Inc. (“SPS”) of $13.3 million (after tax) ($0.14 per share), a reduction of the realized capital gain from the sale of American Pioneer Title Insurance Company (“APTIC”) of $1.1 million (after tax) ($0.01 per share), and the dilutive effect of a change in accounting principle related to contingent convertible debentures of $0.05 per share.Results for the year include a realized capital gain from the sale of APTIC of $29.0 million (after tax) ($0.30 per share), a realized capital loss on the Company’s investment in SPS of $13.3 million (after tax) ($0.14 per share) and the dilutive effect of a change in accounting principle related to contingent convertible debentures of $0.24 per share.
In 2004, the FASB’s Emerging Issues Task Force reached a final consensus that the dilutive effect of contingent convertible debt must be included in earnings per share regardless of whether the triggering contingency has been satisfied. For the Company, this change in accounting principle resulted in the addition of 8.15 million common shares to shares outstanding and was applied on a retroactive basis requiring a restatement of prior periods’ earnings per share. The dilutive effect of this change in accounting principal on diluted earnings per share for the quarter and year was $0.05 per share and $0.24 per share respectively, compared to $0.05 per share and $0.20 per share for the same periods a year ago.
RECONCILIATIONOF DILUTED EARNINGS PER SHARE
(Dollars and shares, except per share amounts in millions) | Q4 2004 | 2004 | Q4 2003 | 2003 | ||||||||
Net Income | $ | 80.5 | $ | 399.3 | $ | 80.2 | $ | 299.4 | ||||
Plus: interest expense on contingent convertible debentures, net of taxes | 2.0 | 7.7 | 1.9 | 7.4 | ||||||||
Net income after assumed conversion | $ | 82.5 | $ | 407.0 | $ | 82.1 | $ | 306.8 | ||||
Diluted weighted average shares: | ||||||||||||
Before conversion of contingent convertible debentures | 96.3 | 97.1 | 94.5 | 91.0 | ||||||||
Effect of conversion of contingent convertible debentures | 8.2 | 8.2 | 8.2 | 8.2 | ||||||||
Diluted weighted average shares after assumed conversion | 104.4 | 105.2 | 102.6 | 99.2 | ||||||||
Diluted earnings per share | $ | 0.79 | $ | 3.87 | $ | 0.80 | $ | 3.09 | ||||
Note: Amounts may not total due to rounding
2004 Highlights
• | Combined1 insurance in force grew to a record $267.3 billion at December 31, 2004 from $237.3 billion at December 31, 2003; |
• | Consolidated revenues grew 16 percent over 2003 to $1,038 million compared to $891.7 million; |
• | Consolidated premiums earned grew 11 percent to $770.4 million compared to $696.9 million; |
• | Premiums earned from International Operations2 increased $32.3 million or 31 percent over 2003 to $136.3 million; |
• | The first full year of the Company’s investment in Financial Guaranty Insurance Company (“FGIC”) yielded equity in earnings of $56.6 million (after tax); |
• | Completed the Company’s $100 million common share repurchase program. |
Results for the Company include:
• | Favorable net income impacts of $1.3 million and $10.2 million for the quarter and year respectively, due to a change in the average foreign currency exchange rates compared to the same periods a year ago. Mark-to-market losses related to the foreign currency put options purchased to mitigate the effects of a strengthening in the U.S. dollar were $0.2 million for the quarter and $1.1 million for the year. |
1 | “Combined” includes results from U.S. Mortgage Insurance Operations, CMG Mortgage Insurance Company (“CMG”), PMI Australia and PMI Europe. |
2 | “International Operations” includes the results of PMI Australia, PMI Europe and the results of operations in Hong Kong. |
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The diluted weighted average common shares outstanding for the quarter and year totaled 104.4 million and 105.2 million respectively, compared to 102.6 million and 99.2 million for the same periods a year ago. The increases reflect the issuance of 5.75 million shares in November 2003 as a result of the Company’s common stock offering, partially offset by the Company’s repurchase of 2.5 million common shares in the second half of 2004. For the quarter and year, 1.5 million common shares and 2.5 million common shares respectively were repurchased at a cost of $60.3 million and $100 million respectively.
Combined new insurance written (including new credit default swaps written) for the quarter and year was $19.1 billion and $83.4 billion respectively, compared to $39.3 billion and $113.2 billion for the same periods a year ago. The decreases were due primarily to declines in new insurance written by U.S. Mortgage Insurance Operations3, partially offset by increases in new insurance written by PMI Australia.Combined insurance in force (including new credit default swaps written) at December 31, 2004 was $267.3 billion, compared to $237.3 billion at December 31, 2003. The increase was due primarily to an increase in insurance in force for PMI Australia.
Consolidated net premiums written for the quarter and year totaled $200.1 million and $771.4 million respectively, compared to $350.9 million and $876.0 million for the same periods a year ago. The decreases were due primarily to a single premium non-refundable policy executed in the fourth quarter of 2003 totaling $114 million of net premiums written for U.S. Mortgage Insurance Operations.
Consolidated premiums earned for the quarter and year totaled $202.3 million and $770.4 million respectively, compared to $182.4 million and $696.9 million for the same periods a year ago. The increase for the quarter was due primarily to the increase in premiums earned for U.S. Mortgage Insurance Operations. The increase for the year was due primarily to increases in premiums earned for U.S. Mortgage Insurance Operations and International Operations.
Consolidated net investment income for the quarter and year totaled $43.0 million and $168.6 million respectively, compared to $47.2 million and $149.8 million for the same periods a year ago. The decrease for the quarter was due primarily to a reduction in the amount of cash available for investment due to the repurchase of $100 million of common stock during the third and fourth quarters of 2004. The increase for the year was due primarily to an increase in the investment portfolio average balance.
Consolidated losses and loss adjustment expenses for the quarter and year totaled $60.1 million and $237.3 million respectively, compared to $59.4 million and $209.1 million
3 | “U.S. Mortgage Insurance Operations” includes the results of PMI Mortgage Insurance Co. and affiliated U.S. reinsurance companies and equity in earnings from CMG. |
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for the same periods a year ago. The increase for the year was due primarily to the higher losses and loss adjustment expenses incurred by U.S. Mortgage Insurance Operations and to the change between the losses and loss adjustment expenses/(reversals) for PMI Australia for 2004 of $0.6 million compared to ($8.2) million for 2003.
Consolidated reserve for losses and loss adjustment expenses totaled $364.8 million at December 31, 2004, compared to $346.9 million at December 31, 2003. The increase was led principally by an increase in loss reserves for U.S. Mortgage Insurance Operations and PMI Europe.
Consolidated other underwriting and operating expensesfor the quarter and year totaled $57.8 million and $201.8 million respectively, compared to $46.3 million and $175.7 million for the same periods a year ago. The increases for the quarter and year were due primarily to the higher expenses for U.S. Mortgage Insurance Operations and PMI Australia, partially offset by lower U.S. contract underwriting expenses.
Consolidated income tax expense from continuing operations for the year totaled $112.5 million and includes the third quarter 2004 reversal of a $4.7 million tax reserve established in connection with notices of assessment received from the California Franchise Tax Board for dividends received by the Company from its wholly-owned insurance company subsidiaries. Legislation enacted by the State of California on September 29, 2004 permits an irrevocable election to take a deduction of 80% of qualifying dividends received by holding companies. The Company has made this election.
2004 SEGMENT HIGHLIGHTS
(Dollars in millions) | U.S. Mortgage Insurance Operations | International Operations | Financial Guaranty4 | Other5 | Total | ||||||||||||
Net premiums written | $ | 598.1 | $ | 173.2 | $ | — | $ | 0.0 | $ | 771.4 | * | ||||||
Premiums earned | 634.0 | 136.3 | — | 0.0 | 770.4 | * | |||||||||||
Equity in earnings | 15.3 | — | 67.8 | 0.4 | 83.6 | * | |||||||||||
Total revenues | 754.1 | 191.3 | 67.8 | 24.9 | 1,038.2 | * | |||||||||||
Losses, expenses and interest expense | 404.2 | 48.7 | — | 106.4 | 559.2 | * | |||||||||||
Net income | $ | 254.5 | $ | 99.9 | $ | 60.7 | $ | (15.8 | ) | $ | 399.3 |
* | Does not total due to rounding |
4 | “Financial Guaranty” includes the equity in earnings from FGIC and RAM Re. |
5 | “Other” includes the results from the holding company, equity in earnings/losses from SPS, limited partnerships, PMI Mortgage Services Co., dormant insurance companies and the discontinued operations of APTIC. |
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U.S. Mortgage Insurance Operations
Net income for U.S. Mortgage Insurance Operations for the quarter and year totaled $69.8 million and $254.5 million respectively, compared to $59.4 million and $245.5 million for the same periods a year ago. The increases were due primarily to increases in premiums earned, partially offset by increases in other underwriting and operating expenses, including a field operations restructuring charge of $2.9 million.
Net premiums writtenfor U.S. Mortgage Insurance Operations for the quarter and year totaled $153.9 million and $598.1 million respectively, compared to $252.9 million and $685.1 million for the same periods a year ago. The decreases were due to the execution of a single premium non-refundable policy executed in the fourth quarter of 2003 totaling $114 million, partially offset by increases in monthly premium plan premiums received.
Premiums earned for the quarter and year totaled $168.3 million and $634.0 million respectively, compared to $145.2 million and $592.8 million for the same periods a year ago. The increases were due primarily to an increase in the average premium rate as a result of a higher percentage of policies with deeper coverage, a higher percentage of policies on adjustable rate mortgages and a higher proportion of mortgages with higher loan to value ratios, all compared to the same periods a year ago. The increase for the year was also attributable to $14.5 million of premiums earned from the cancellation of coverage on certain loans insured under a non-refundable single-premium policy.
Net investment income for the quarter and year totaled $25.5 million and $102.2 million respectively, compared to $35.6 million and $103.1 million for the same periods a year ago. The decreases were due primarily to adjustments made in the fourth quarter of 2003 related to the amortization of discounts and call premiums on bonds called for early redemption, partially offset by increases in the investment portfolio and municipal bond refundings.
Equity in earnings from CMG Mortgage Insurance Company for the quarter and year totaled $3.0 million (after tax) and $9.9 million (after tax) respectively, compared to $2.5 million (after tax) and $8.8 million (after tax) for the same periods a year ago. The increases were due primarily to the growth of insurance in force and premiums earned.
Losses and loss adjustment expenses for the quarter and year totaled $58.4 million and $233.2 million respectively, compared to $58.2 million and $214.7 million for the same periods a year ago. The increase for the year was due primarily to increases in primary claims paid and additions to loss reserves.
Amortization of policy acquisition costs for the quarter and year totaled $16.6 million and $72.1 million respectively, compared to $20.3 million and $78.9 million for the same periods a year ago. The deferred policy acquisition cost asset declined $15.7 million from December 31, 2003 as the amortization of deferred costs outpaced additions.
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Other underwriting and operating expenses for the quarter and year totaled $27.3 million and $98.5 million respectively, compared to $19.5 million and $72.2 million for the same periods a year ago. The increase for the year was due primarily to: the recognition of expenses previously deferred as acquisition costs; increases in 2004 compensation and related expenses and 2003 compensation and related expenses paid in the first quarter of 2004; higher depreciation expense attributable to increased technology investments; and the reallocation of expenses previously recorded as loss adjustment expenses. The increase for the quarter was due primarily to compensation related expenses, the recognition of expenses previously deferred as acquisition costs and higher depreciation expense attributable to increased technology investments.
Reported separately from other underwriting and operating expenses, in 2004 the Company incurred expenses of $2.9 million (pre-tax) related to the consolidation of certain field underwriting and sales offices and the reduction in the number of personnel. The consolidation and reduction is expected to result in annual pre-tax savings of $5 million to $6 million beginning in 2005.
In addition to the other underwriting and operating expenses above, during the third quarter 2004, the Company received a $2.6 million (pre-tax) refund relating to the settlement in 2001 of theBaynham class action litigation.
NEW INSURANCE WRITTEN
(Dollars in billions) | Q4 2004 | 2004 | Q4 2003 | 2003 | ||||||||
Domestic6 new primary mortgage insurance written | $ | 11.8 | $ | 46.6 | $ | 13.3 | $ | 64.3 | ||||
Excluding CMG | 10.5 | 41.2 | 11.9 | 57.3 | ||||||||
Bulk transactions | 2.3 | 5.0 | 1.4 | 7.1 | ||||||||
Domestic mortgage pool insurance written | 3.0 | 10.5 | 8.4 | 16.0 |
Domestic new insurance written for the quarter and year totaled $11.8 billion and $46.6 billion respectively, compared to $13.3 billion and $64.3 billion for the same periods a year ago. The decreases were due primarily to lower mortgage origination volume and lower mortgage insurance volume, together with an increase in the fourth quarter in bulk insurance writings compared to fourth quarter 2003.
6 | “Domestic” includes results from U.S. Mortgage Insurance Operations and CMG. |
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PRIMARY MORTGAGE INSURANCE IN FORCE
(Dollars in billions) | as of 12/31/04 | as of 12/31/03 | ||||||
Domestic primary insurance in force | $ | 119.4 | $ | 117.8 | ||||
Excluding CMG | 105.3 | 105.2 | ||||||
Domestic primary risk in force | 28.9 | 27.4 | ||||||
Excluding CMG | 25.7 | 24.7 | ||||||
Domestic annual primary persistency rate | 61.8 | % | 45.1 | % | ||||
Excluding CMG | 60.9 | % | 44.6 | % |
Domestic primary insurance in force totaled $119.4 billion, compared to $117.8 billion a year ago. The increase was a result of a slowing in policy cancellations over the previous year. The domestic annual persistency rate increased to 61.8 percent as of December 31, 2004 from 45.1 percent as of December 31, 2003.
Pool risk in force as of December 31, 2004 was $2.4 billion, compared to $2.9 billion at December 31, 2003.
DEFAULT RATE
as of 12/31/04 | as of 12/31/03 | |||||
Domestic primary mortgage insurance | 4.37 | % | 4.10 | % | ||
Excluding CMG | 4.86 | % | 4.53 | % | ||
Excluding CMG and bulk transactions | 4.30 | % | 3.89 | % | ||
Bulk transactions only | 9.19 | % | 9.45 | % | ||
Pool insurance | 5.50 | % | 4.36 | % |
At December 31, 2004, the Company’sU.S. primary insurance default rate, excluding CMG, was 4.86 percent compared to 4.53 percent at December 31, 2003. The increase was due to a combination of a 3 percent decrease in the number of policies in force and a 4 percent increase in delinquent loan inventory.
At December 31, 2004, the Company’sU.S. pool insurance default rate was 5.50 percent compared to 4.36 percent at December 31, 2003. The increase was due primarily to the 19 percent decrease in pool insurance policies in force. The Company believes that its modified pool insurance products’ risk reduction features, including a stated stop loss limit, exposure limits on each individual loan in the pool, and deductibles, in some instances reduce the Company’s potential for loss exposure on loans insured by those products.
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CLAIMS PAID – EXCLUDING CMG
(Dollars in millions) | Q4 2004 | 2004 | Q4 2003 | 2003 | ||||||||
Claims paid | ||||||||||||
Primary – traditional flow | $ | 36.9 | $ | 141.3 | $ | 32.6 | $ | 114.7 | ||||
Primary – bulk | 10.8 | 51.9 | 16.8 | 62.2 | ||||||||
Total primary | 47.7 | 193.2 | 49.4 | 176.9 | ||||||||
Total pool and other | 4.4 | 17.7 | 4.4 | 15.7 | ||||||||
Total claims paid | $ | 52.1 | $ | 210.9 | $ | 53.8 | $ | 192.6 |
Primary claims paid for the quarter and year totaled $47.7 million and $193.2 million respectively, compared to $49.4 million and $176.9 million for the same periods a year ago. We believe the increase in claims paid in 2004 was influenced by the seasoning of our insurance portfolio and general economic conditions, partially offset by our loss mitigation efforts.
International Operations
Net incomefrom International Operations for the quarter and year totaled $24.2 million and $99.9 million respectively, compared to $24.2 million and $78.6 million for the same periods a year ago. The flat quarterly results were attributable to strong premiums earned and net investment income recorded in the fourth quarter 2003. The strong fourth quarter 2003 results were due primarily to a reinsurance arrangement that was part of the then pending acquisition of the UK lenders’ mortgage insurance portfolio from R&SA which closed in the fourth quarter 2003 and retroactive to July 2003. The increase for the year was the result of increases in premiums earned for PMI Australia and PMI Europe and the strengthening of the Australian dollar and the Euro compared to the U.S. dollar, partially offset by the change between the losses and loss adjustment expenses/(reversals) for PMI Australia for 2004 of $0.6 million compared to ($8.2) million for 2003. The results of our International Operations are subject to fluctuations in the foreign currency exchange rate of the U.S. dollar with the Australian dollar and the Euro.
In the second quarter of 2004, the Company initiated a foreign currency put option program designed to mitigate a portion of the negative effects to net income due to a potential strengthening of the U.S. dollar relative to the Australian dollar and the Euro during the remainder of 2004. For the quarter and year, the Company recognized in other income a net expense of $0.2 million and $1.1 million respectively, due primarily to the changes in fair value of the foreign currency put options. The Company has put a similar program in place for 2005.
Net investment incomefor International Operations for the quarter and year totaled $12.8 million and $47.1 million respectively, compared to $9.0 million and $31.3 million for the same periods a year ago. The increases were due primarily to increases in the investment portfolios of PMI Australia and PMI Europe and an increase in the yield on investments in the PMI Australia investment portfolio.
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Net incomefrom PMI Australia for the quarter and year totaled $19.3 million and $76.3 million respectively, compared to $15.5 million and $62.4 million for the same periods a year ago. The increase for the year was due primarily to increases in premiums earned and net investment income and the strengthening of the Australian dollar compared to the U.S. dollar, partially offset by the change between the losses and loss adjustment expenses/(reversals) for PMI Australia for 2004 of $0.6 million compared to ($8.2) million for 2003.
In local currency, net income from PMI Australia for the quarter and year totaled AU$25.4 million and AU$103.5 million respectively, compared to AU$21.4 million and AU$95.2 million for the same periods a year ago.
Losses and loss adjustment expenses/(reversals)for PMI Australia for the quarter and year totaled ($0.1) million and $0.6 million respectively, compared to $0.4 million and ($8.2) million for the same periods a year ago. The change for year is primarily due to the release of $11.1 million of loss reserves in 2003. The low level of losses and loss adjustment expenses for the quarter and year is the result of the continued low claims paid and delinquent loan inventory. Claims paid totaled $0.5 million and $1.1 million for the quarter and year respectively, compared to $0.4 million and $2.7 million for the same periods a year ago.
Premiums earnedfor PMI Australia for the quarter and year totaled $27.1 million and $109.1 million respectively, compared to $26.3 million and $85.1 million for the same periods a year ago. The increase for the year was a result of an increase in insurance in force during 2004 and the strengthening of the Australian dollar versus the U.S. dollar.
Primary insurance in forcefor PMI Australia was $113.6 billion at December 31, 2004, compared to $87.9 billion at December 31, 2003.Primary risk in forcefor PMI Australia was $103.1 billion at December 31, 2004, compared to $79.3 billion at December 31, 2003.
New insurance writtenfor PMI Australia for the quarter and year totaled $7.3 billion and $34.2 billion respectively, compared to $5.8 billion and $25.4 billion for the same periods a year ago. PMI Australia’s primary new insurance written includes flow channel insurance as well as insurance written on residential mortgage-backed securities, or RMBS. RMBS transactions include insurance on seasoned portfolios comprised of prime credit quality loans with loan-to-values principally below 80 percent. RMBS new insurance written for the quarter and year totaled $2.8 billion and $14.7 billion respectively, compared to $0.9 billion and $6.0 billion for the same periods a year ago.
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Net income for PMI Europe for the quarter and year totaled $3.5 million and $17.3 million respectively, compared to $7.1 million and $11.0 million for the same periods a year ago. The decrease for the quarter was due primarily to reinsurance premiums earned in the fourth quarter of 2003 related to the then pending acquisition of the UK lenders’ mortgage insurance portfolio from R&SA. The increase for the year was due primarily to increases in premiums earned and net investment income. In local currency, net income from PMI Europe for the quarter and year totaled €2.7 million and €14.0 million respectively, compared to €6.0 million and €9.4 million for the same periods a year ago.
Net premiums written for PMI Europe for the quarter and year totaled $2.1 million and $9.6 million respectively, compared to $51.1 million and $55.4 million for the same periods a year ago. The decreases in net premiums written were due to the reinsurance premiums written in the fourth quarter 2003 related to the then pending acquisition of the UK lenders’ mortgage insurance portfolio from R&SA.
Premiums earnedfor PMI Europe for the quarter and year totaled $5.4 million and $20.9 million respectively, compared to $9.2 million and $13.7 million for the same periods a year ago. The decrease for the quarter was due to the reinsurance premiums earned in the fourth quarter 2003 related to the then pending acquisition of the UK lenders’ mortgage insurance portfolio from R&SA. The increase for the year was due primarily to the increase in the average insurance in force for the year.
Net investment incomefor PMI Europe for the quarter and year totaled $2.1 million and $8.9 million respectively, compared to $1.6 million and $5.0 million for the same periods a year ago.Insurance in force (including credit default swaps) for PMI Europe was $34.3 billion at December 31, 2004, compared $31.6 billion at December 31, 2003.Risk in force (including credit default swaps) for PMI Europe was $2.8 billion at December 31, 2004, compared to $3.1 billion at December 31, 2003.
PMI Europe has entered into credit default swaps which are classified as derivative instruments.Other incomefor PMI Europe for the quarter and year totaled $2.9 million and $6.8 million respectively, primarily relating to the change in the fair value of those instruments.
PMI’sHong Kong reinsurance premiums earned for the quarter and year totaled $1.5 million and $6.3 million respectively, compared to $1.6 million and $5.3 million for the same periods a year ago. The increase for the year was due primarily to an increase in mortgage origination activity in Hong Kong. PMI’s Hong Kong branch reinsures mortgage risk for the Hong Kong Mortgage Corporation.
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Financial Guaranty
Financial Guaranty, which includes equity in earnings from the Company’s investments in FGIC and RAM Re, reportednet income for the quarter and year of $14.5 million and $60.7 million respectively, compared to $8.6 million and $10.4 million for the same periods a year ago. The increases were the result of our 42.1 percent investment in FGIC, which occurred in December 2003. For the quarter and year, equity in earnings fromFGIC totaled $13.5 million (after tax) and $56.6 million (after tax) respectively. In 2004 FGIC made progress in establishing itself as a full service global financial guarantor strengthening their participation in the structured finance and international areas, while broadening their penetration in the municipal sector.
Equity in earnings fromRAM Re for the quarter and year totaled $0.9 million (after tax) and $4.1 million (after tax) respectively, compared to $1.0 million (after tax) and $2.7 million (after tax) for the same periods a year ago. The decrease for the quarter was due primarily to an increase in interest expense. The increase for the year was due primarily to the $1.9 million charge in the first quarter of 2003 for other-than-temporary impairment to its investment portfolio. PMI reports equity in earnings from RAM Re on a one-quarter lag.
Other
The Other segment consists of revenues and expenses of the holding company, PMI Mortgage Services Co., SPS, and for 2003 and the first quarter of 2004 the discontinued operations of APTIC.
The Company has signed a letter of intent granting Credit Suisse First Boston (USA), Inc. with an option to buy 100 percent of the outstanding stock of SPS from PMI and the other SPS corporate shareholder. As a result of the agreement, PMI incurred a $13.3 million (after tax) realized capital loss on its investment in SPS for the quarter. The carrying value of the Company’s remaining investment in SPS, following the realized capital loss, is $109.5 million, and $16.7 million of receivables, which are current to date.
Net loss for the quarter totaled $28.0 million compared to a net loss of $11.9 million for the same period a year ago. The increase in the net loss for the quarter was due primarily to a $13.3 million (after tax) realized loss related to the letter of intent involving SPS, partially offset by a change in equity earnings from SPS and the release of $4.7 million of tax reserves.Net lossfor the year totaled $15.8 million compared to $35.1 million for the same period a year ago. The decrease in net loss for the year was due to the $29.0 million (after tax) realized capital gain on sale of APTIC and a change in equity in earnings from SPS, partially offset by a $13.3 million (after tax) realized capital loss related to the agreement to sell SPS and the absence of net income from discontinued operations of APTIC.
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Equity in earnings/(losses) from SPS for the quarter and year totaled ($0.2) million (after tax) and $0.4 million (after tax) respectively, compared to ($3.3) million (after tax) and ($16.4) million (after tax) for the same periods a year ago. The increase for the year was due to the absence of SPS-related settlement and legal expenses incurred in 2003. SPS recognized a charge in 2003 in connection with its settlement of a joint Federal Trade Commission and U.S. Department of Housing and Urban Development investigation and the estimated related costs of the settlement. In addition to equity in the earnings/(loss) of SPS, the Company realized a $13.3 million (after tax) realized capital loss related to the letter of intent involving SPS set forth above.
Other income totaled $5.3 million and $26.1 million for the quarter and year, compared to $3.9 million and $40.1 million for the same periods a year ago. The decline for the year was the result of a decline in contract underwriting volume.
Other underwriting and operating expenses for the quarter and year totaled $20.3 million and $71.9 million respectively, compared to $20.1 million and $83.2 million for the same periods a year ago. The level of expenses for the year reflect lower contract underwriting expenses due to decreased volume, partially offset by higher holding company expenses including compensation and interest expense.
ABOUT THE PMI GROUP, INC.
The PMI Group, Inc. (NYSE:PMI) headquartered in Walnut Creek, California is an international provider of credit enhancement products that promotes homeownership and facilitates mortgage transactions in the capital markets. Through its wholly owned subsidiaries and unconsolidated strategic investments, the Company offers residential mortgage insurance and credit enhancement products domestically and internationally as well as financial guaranty insurance and reinsurance.
The Company is an advocate of affordable housing and supports a number of organizations that foster greater access to affordable housing. The Company’s approach to affordable housing lending is to develop products and services that assist responsible borrowers who may not qualify for mortgage loans under traditional underwriting practices.
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. These forward-looking statements relate to the Company’s field office consolidation. Readers are cautioned that these forward-looking statements by their nature involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Many factors could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including, among others, refinements of our estimates of savings and charges as we implement the office consolidation, conditions affecting the Company’s mortgage insurance operations, and general economic conditions. Risks and uncertainties that could affect the Company are discussed in our Form 10-Q for the quarter ended June 30, 2004.
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THE PMI GROUP, INC. AND SUBSIDIARIES
FINANCIAL RESULTS AND STATISTICAL INFORMATION FOR THE PERIOD ENDED DECEMBER 31, 2004
Contents | ||
Consolidated Statements of Operations and Balance Sheets | Page 2 | |
Business Segments Results of Operations - Three Months Ended December 31, 2004 and 2003 | Page 3 | |
Business Segments Results of Operations - Year Ended December 31, 2004 and 2003 | Page 4 | |
Business Segments Balance Sheets | Page 5 | |
U.S. Mortgage Insurance Operations Analysis of Loss Reserves and Statistical Information | Page 6 | |
U.S. Mortgage Insurance Operations and CMG Mortgage Insurance Company Statistical Information | Page 7 | |
PMI Australia and PMI Europe Statistical Information | Page 8 | |
Appendix A - U.S. Mortgage Insurance Operations Supplemental Statistical Information | Page 9 | |
Appendix B - PMI Australia and PMI Europe Quarterly Financial Information | Page 10 | |
Appendix C - Business Segment Results of Operations by Quarter | Page 11 |
Please refer to the following when noted:
(1) | The PMI Group, Inc.’s (“The PMI Group”) equity earnings in unconsolidated subsidiaries include FGIC Corporation (“FGIC”), SPS Holding Corp. (“SPS”), CMG Mortgage Insurance Company (“CMG”), RAM Reinsurance and other limited partnership interests. As of December 31, 2004, the equity investment in SPS was reclassified from investments in unconsolidated subsidiaries to equity investment held for sale. The PMI Group and its subsidiaries are collectively referred to as the “Company”. |
(2) | In January 2005, PMI Mortgage Insurance Co. (“PMI”) signed a letter of intent with Credit Suisse First Boston (USA), Inc. (“CSFB”) pursuant to which CSFB has an option to acquire 100% of PMI’s outstanding stock of SPS. Based on the proposed purchase price, PMI recorded a write-down of its equity investment in SPS for $20.4 million. The write-down was recorded as a realized loss of discontinued operations of equity investment due to PMI’s decision to sell SPS. According to Statement of Financial Accounting Standards No. 144,Accounting for the Impairment and Disposal of Long-Lived Assets, we are not permitted to present the disposal of equity method investments as discontinued operations. |
(3) | The $2.6 million refund relates to the settlement in 2001 of theBaynham class action litigation. |
(4) | Emerging Issues Task Force (“EITF”) Issue No. 04-8,The Effect of Contingently Convertible Instruments on Diluted Earnings per Share, states that the dilutive effect of contingently convertible debt and other instruments (“CoCo’s”) must be included in dilutive earnings per share regardless of whether the triggering contingency based on the market price of the issuer’s shares has been satisfied. This change in accounting principle was applied on a retroactive basis. This EITF issue is effective for all periods ending after December 15, 2004. The EITF resulted in additional dilution to the Company’s diluted earnings per share by affecting the Company’s $360.0 million 2.5% senior convertible debentures, which are CoCo’s. For purposes of determining dilutive earnings per share, the interest expense, net of tax, was added back to net income and an additional 8.15 million common shares was added to diluted shares outstanding for the year ended December 31, 2004. Inclusion of the CoCo’s in diluted shares outstanding resulted in a decrease to diluted earnings per share of $0.24 for the year ended December 31, 2004. |
(5) | The operating results, assets and liabilities of American Pioneer Title Insurance Company (“APTIC”) were reflected as discontinued operations in the fourth quarter of 2003 with prior period financial information reclassified accordingly. The Company completed its sale of APTIC in March 2004 and recorded a gain on sale of discontinued operations of $30.1 million, net of $17.1 million of income tax expense. In December 2004, the Company reduced its gain on sale of APTIC by $1.1 million, net of a $0.6 million income tax benefit, due to a pension settlement loss triggered by former APTIC pension plan participants receiving lump sum payments during the year. |
(6) | U.S. Mortgage Insurance Operations include the operating results of PMI Mortgage Insurance Co. and affiliated U.S. mortgage insurance and reinsurance Companies. CMG and its affiliates are included under the equity method of accounting in equity in earnings from unconsolidated subsidiaries. |
(7) | International Operations include PMI Australia, PMI Europe and PMI’s Hong Kong reinsurance operations. |
(8) | Financial Guaranty represents our equity investments of FGIC and RAM Reinsurance. |
(9) | The “Other” segment includes other income and related operating expenses of PMI Mortgage Services Co.; investment income, interest expense and corporate overhead of The PMI Group; the results of our dormant U.S. insurance companies; realized loss from discontinued operations of equity investment; equity in earnings (losses) from SPS; and the results from and realized gain on sale of discontinued operations of APTIC. |
(10) | The expense ratio is the ratio, expressed as a percentage, of the sum of amortization of policy acquisition costs and other underwriting expenses to net premiums written. The loss ratio is the ratio, expressed as a percentage, of the sum of losses and loss adjustment expenses to premiums earned, |
(11) | Pool insurance includes modified pool, GSE pool, old pool and all other pool insurance products for U.S. Mortgage Insurance Operations. |
(12) | Statutory risk-to-capital ratio for PMI. |
Note | The interim financial and statistical information contained in this material are unaudited. Certain prior year information has been reclassified to conform to the current quarters’ presentation. |
THE PMI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||
Net premiums written | $ | 200,103 | $ | 350,850 | $ | 771,362 | $ | 876,001 | |||||||
Revenues | |||||||||||||||
Premiums earned | $ | 202,312 | $ | 182,398 | $ | 770,399 | $ | 696,928 | |||||||
Net investment income | 42,991 | 47,183 | 168,609 | 149,779 | |||||||||||
Equity in earnings from unconsolidated subsidiaries(1) | 19,750 | 3,671 | 83,554 | 4,597 | |||||||||||
Net realized investment gains | (275 | ) | (4,213 | ) | 2,621 | 84 | |||||||||
Realized loss from discontinued operations of equity investment(2) | (20,420 | ) | — | (20,420 | ) | — | |||||||||
Other income | 8,404 | 3,710 | 33,473 | 40,333 | |||||||||||
Total revenues | 252,762 | 232,749 | 1,038,236 | 891,721 | |||||||||||
Losses and expenses | |||||||||||||||
Losses and loss adjustment expenses | 60,092 | 59,371 | 237,282 | 209,088 | |||||||||||
Amortization of policy acquisition costs | 19,650 | 23,236 | 85,216 | 89,327 | |||||||||||
Other underwriting and operating expenses | 57,765 | 46,273 | 201,781 | 175,693 | |||||||||||
Field operations restructuring charge | — | — | 2,914 | — | |||||||||||
Legal settlement refund(3) | — | — | (2,574 | ) | — | ||||||||||
Interest expense and distributions on mandatorily redeemable preferred securities | 8,652 | 7,846 | 34,626 | 24,491 | |||||||||||
Total losses and expenses | 146,159 | 136,726 | 559,245 | 498,599 | |||||||||||
Income from continuing operations before income taxes | 106,603 | 96,023 | 478,991 | 393,122 | |||||||||||
Income taxes from continuing operations | 24,952 | 30,086 | 112,459 | 118,814 | |||||||||||
Income from continuing operations after income taxes | 81,651 | 65,937 | 366,532 | 274,308 | |||||||||||
Income from discontinued operations before income taxes(5) | — | 10,277 | 5,756 | 26,893 | |||||||||||
Income taxes from discontinued operations(5) | — | 1,396 | 1,958 | 7,186 | |||||||||||
Income from discontinued operations after income taxes(5) | — | 8,881 | 3,798 | 19,707 | |||||||||||
Gain on sale of discontinued operations, net of income taxes(5) | (1,105 | ) | — | 29,003 | — | ||||||||||
Income before extraordinary item | 80,546 | 74,818 | 399,333 | 294,015 | |||||||||||
Extraordinary gain on write-off of negative goodwill at FGIC, net of income taxes | — | 5,418 | — | 5,418 | |||||||||||
Net income | $ | 80,546 | $ | 80,236 | $ | 399,333 | $ | 299,433 | |||||||
Diluted weighted average common shares outstanding(shares in thousands)(4) | 104,436 | 102,610 | 105,231 | 99,198 | |||||||||||
Diluted net income per share | $ | 0.79 | $ | 0.80 | $ | 3.87 | $ | 3.09 | |||||||
CONSOLIDATED BALANCE SHEETS
December 31, 2004 | December 31, 2003 | |||||
(Dollars in thousands, except per share data) | ||||||
Assets | ||||||
Cash and investments, at fair value | $ | 3,621,550 | $ | 3,202,881 | ||
Investments in unconsolidated subsidiaries | 911,604 | 937,846 | ||||
Equity investment held for sale(2) | 109,519 | — | ||||
Related party receivables | 18,439 | 27,840 | ||||
Reinsurance receivable, reinsurance recoverable and prepaid premiums | 49,657 | 56,799 | ||||
Deferred policy acquisition costs | 92,438 | 102,074 | ||||
Other assets | 342,760 | 348,987 | ||||
Assets - discontinued operations(5) | — | 117,862 | ||||
Total assets | $ | 5,145,967 | $ | 4,794,289 | ||
Liabilities | ||||||
Reserve for losses and loss adjustment expenses | $ | 364,847 | $ | 346,939 | ||
Unearned premiums | 484,815 | 469,001 | ||||
Long-term debt | 819,529 | 819,543 | ||||
Other liabilities | 339,021 | 330,560 | ||||
Liabilities - discontinued operations(5) | — | 44,217 | ||||
Total liabilities | 2,008,212 | 2,010,260 | ||||
Shareholders’ equity | 3,137,755 | 2,784,029 | ||||
Total liabilities and shareholders’ equity | $ | 5,145,967 | $ | 4,794,289 | ||
Basic shares issued and outstanding | 94,025 | 95,162 | ||||
Book value per share | $ | 33.37 | $ | 29.26 | ||
Page 2
THE PMI GROUP, INC. AND SUBSIDIARIES
BUSINESS SEGMENTS RESULTS OF OPERATIONS
U.S. Mortgage Insurance Operations(6) | International Operations (7) | Financial Guaranty (8) | Other(9) | Consolidated Total | |||||||||||||||
Three Months Ended December 31, 2004 | |||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Net premiums written | $ | 153,916 | $ | 46,156 | $ | — | $ | 31 | $ | 200,103 | |||||||||
Revenues | |||||||||||||||||||
Premiums earned | $ | 168,313 | $ | 33,979 | $ | — | $ | 20 | $ | 202,312 | |||||||||
Net investment income | 25,496 | 12,789 | — | 4,706 | 42,991 | ||||||||||||||
Equity in earnings (losses) from unconsolidated subsidiaries (1) | 4,569 | — | 16,156 | (975 | ) | 19,750 | |||||||||||||
Net realized investment losses | (12 | ) | (263 | ) | — | — | (275 | ) | |||||||||||
Realized loss from discontinued operations of equity investment(2) | — | — | — | (20,420 | ) | (20,420 | ) | ||||||||||||
Other income | 15 | 3,044 | — | 5,345 | 8,404 | ||||||||||||||
Total revenues | 198,381 | 49,549 | 16,156 | (11,324 | ) | 252,762 | |||||||||||||
Losses and expenses | |||||||||||||||||||
Losses and loss adjustment expenses | 58,355 | 1,737 | — | — | 60,092 | ||||||||||||||
Amortization of policy acquisition costs | 16,585 | 3,065 | — | — | 19,650 | ||||||||||||||
Other underwriting and operating expenses | 27,258 | 10,235 | — | 20,272 | 57,765 | ||||||||||||||
Field operations restructuring charge | — | — | — | — | — | ||||||||||||||
Interest expense | 12 | — | — | 8,640 | 8,652 | ||||||||||||||
Total losses and expenses | 102,210 | 15,037 | — | 28,912 | 146,159 | ||||||||||||||
Income (loss) from continuing operations before income taxes | 96,171 | 34,512 | 16,156 | (40,236 | ) | 106,603 | |||||||||||||
Income tax (benefit) from continuing operations | 26,328 | 10,274 | 1,689 | (13,339 | ) | 24,952 | |||||||||||||
Income (loss) from continuing operations after income taxes | 69,843 | 24,238 | 14,467 | (26,897 | ) | 81,651 | |||||||||||||
Loss on sale of discontinued operations, net of tax benefit(5) | — | — | — | (1,105 | ) | (1,105 | ) | ||||||||||||
Net income (loss) | $ | 69,843 | $ | 24,238 | $ | 14,467 | $ | (28,002 | ) | $ | 80,546 | ||||||||
Expense ratio (10) | 28.5 | % | 28.8 | % | |||||||||||||||
Loss ratio (10) | 34.7 | % | 5.1 | % | |||||||||||||||
Combined ratio | 63.2 | % | 33.9 | % | |||||||||||||||
Three Months Ended December 31, 2003 | |||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Net premiums written | $ | 252,857 | $ | 97,962 | $ | — | $ | 31 | $ | 350,850 | |||||||||
Revenues | |||||||||||||||||||
Premiums earned | $ | 145,209 | $ | 37,168 | $ | — | $ | 21 | $ | 182,398 | |||||||||
Net investment income | 35,611 | 9,042 | — | 2,530 | 47,183 | ||||||||||||||
Equity in earnings (losses) from unconsolidated subsidiaries(1) | 3,770 | — | 3,862 | (3,961 | ) | 3,671 | |||||||||||||
Net realized investment gains (losses) | (3,860 | ) | (675 | ) | — | 322 | (4,213 | ) | |||||||||||
Other income (loss) | 60 | (260 | ) | — | 3,910 | 3,710 | |||||||||||||
Total revenues | 180,790 | 45,275 | 3,862 | 2,822 | 232,749 | ||||||||||||||
Losses and expenses | |||||||||||||||||||
Losses and loss adjustment expenses | 58,220 | 1,151 | — | — | 59,371 | ||||||||||||||
Amortization of policy acquisition costs | 20,274 | 2,962 | — | — | 23,236 | ||||||||||||||
Other underwriting and operating expenses | 19,529 | 6,653 | — | 20,091 | 46,273 | ||||||||||||||
Interest expense and distributions on redeemable preferred securities | 29 | 5 | — | 7,812 | 7,846 | ||||||||||||||
Total losses and expenses | 98,052 | 10,771 | — | 27,903 | 136,726 | ||||||||||||||
Income (loss) from continuing operations before income taxes | 82,738 | 34,504 | 3,862 | (25,081 | ) | 96,023 | |||||||||||||
Income tax (benefit) from continuing operations | 23,351 | 10,316 | 691 | (4,272 | ) | 30,086 | |||||||||||||
Income (loss) from continuing operations after income taxes | 59,387 | 24,188 | 3,171 | (20,809 | ) | 65,937 | |||||||||||||
Income from discontinued operations before income taxes(5) | — | — | — | 10,277 | 10,277 | ||||||||||||||
Income taxes from discontinued operations(5) | — | — | — | 1,396 | 1,396 | ||||||||||||||
Income from discontinued operations after income taxes(5) | — | — | — | 8,881 | 8,881 | ||||||||||||||
Income before extraordinary item | 59,387 | 24,188 | 3,171 | (11,928 | ) | 74,818 | |||||||||||||
Extraordinary gain on write-off of negative goodwill at FGIC, net of income taxes | — | — | 5,418 | — | 5,418 | ||||||||||||||
Net income (loss) | $ | 59,387 | $ | 24,188 | $ | 8,589 | $ | (11,928 | ) | $ | 80,236 | ||||||||
Expense ratio (10) | 15.7 | % | 9.8 | % | |||||||||||||||
Loss ratio (10) | 40.1 | % | 3.1 | % | |||||||||||||||
Combined ratio | 55.8 | % | 12.9 | % |
Page 3
BUSINESS SEGMENTS RESULTS OF OPERATIONS
U.S. Mortgage Insurance Operations(6) | International Operations (7) | Financial Guaranty (8) | Other(9) | Consolidated Total | |||||||||||||||
Year Ended December 31, 2004 | |||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Net premiums written | $ | 598,119 | $ | 173,178 | $ | — | $ | 65 | $ | 771,362 | |||||||||
Revenues | |||||||||||||||||||
Premiums earned | $ | 634,004 | $ | 136,321 | $ | — | $ | 74 | $ | 770,399 | |||||||||
Net investment income | 102,230 | 47,091 | — | 19,288 | 168,609 | ||||||||||||||
Equity in earnings from unconsolidated subsidiaries (1) | 15,280 | — | 67,844 | 430 | 83,554 | ||||||||||||||
Net realized investment gains (losses) | 2,582 | 595 | — | (556 | ) | 2,621 | |||||||||||||
Realized loss from discontinued operations of equity investment(2) | — | — | — | (20,420 | ) | (20,420 | ) | ||||||||||||
Other income | 47 | 7,342 | — | 26,084 | 33,473 | ||||||||||||||
Total revenues | 754,143 | 191,349 | 67,844 | 24,900 | 1,038,236 | ||||||||||||||
Losses and expenses | |||||||||||||||||||
Losses and loss adjustment expenses | 233,157 | 4,125 | — | — | 237,282 | ||||||||||||||
Amortization of policy acquisition costs | 72,129 | 13,087 | — | — | 85,216 | ||||||||||||||
Other underwriting and operating expenses | 98,473 | 31,388 | — | 71,920 | 201,781 | ||||||||||||||
Field operations restructuring charge | 2,914 | — | — | — | 2,914 | ||||||||||||||
Legal settlement refund(3) | (2,574 | ) | — | — | — | (2,574 | ) | ||||||||||||
Interest expense | 62 | 73 | — | 34,491 | 34,626 | ||||||||||||||
Total losses and expenses | 404,161 | 48,673 | — | 106,411 | 559,245 | ||||||||||||||
Income (loss) from continuing operations before income taxes | 349,982 | 142,676 | 67,844 | (81,511 | ) | 478,991 | |||||||||||||
Income tax (benefit) from continuing operations | 95,467 | 42,761 | 7,142 | (32,911 | ) | 112,459 | |||||||||||||
Income (loss) from continuing operations after income taxes | 254,515 | 99,915 | 60,702 | (48,600 | ) | 366,532 | |||||||||||||
Income from discontinued operations before income taxes(5) | — | — | — | 5,756 | 5,756 | ||||||||||||||
Income taxes from discontinued operations(5) | — | — | — | 1,958 | 1,958 | ||||||||||||||
Income from discontinued operations after income taxes(5) | — | — | — | 3,798 | 3,798 | ||||||||||||||
Gain on sale of discontinued operations, net of income taxes(5) | — | — | — | 29,003 | 29,003 | ||||||||||||||
Net income (loss) | $ | 254,515 | $ | 99,915 | $ | 60,702 | $ | (15,799 | ) | $ | 399,333 | ||||||||
Expense ratio(10) | 28.5 | % | 25.7 | % | |||||||||||||||
Loss ratio(10) | 36.8 | % | 3.0 | % | |||||||||||||||
Combined ratio | 65.3 | % | 28.7 | % | |||||||||||||||
Year Ended December 31, 2003 | |||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Net premiums written | $ | 685,053 | $ | 190,869 | $ | — | $ | 79 | $ | 876,001 | |||||||||
Revenues | |||||||||||||||||||
Premiums earned | $ | 592,814 | $ | 104,028 | $ | — | $ | 86 | $ | 696,928 | |||||||||
Net investment income | 103,083 | 31,314 | — | 15,382 | 149,779 | ||||||||||||||
Equity in earnings (losses) from unconsolidated subsidiaries(1) | 13,574 | — | 6,587 | (15,564 | ) | 4,597 | |||||||||||||
Net realized investment gains (losses) | 1,688 | 268 | — | (1,872 | ) | 84 | |||||||||||||
Other income | 138 | 130 | — | 40,065 | 40,333 | ||||||||||||||
Total revenues | 711,297 | 135,740 | 6,587 | 38,097 | 891,721 | ||||||||||||||
Losses and expenses | |||||||||||||||||||
Losses and loss adjustment expenses (reversals) | 214,684 | (5,596 | ) | — | — | 209,088 | |||||||||||||
Amortization of policy acquisition costs | 78,877 | 10,450 | — | — | 89,327 | ||||||||||||||
Other underwriting and operating expenses | 72,173 | 20,322 | — | 83,198 | 175,693 | ||||||||||||||
Interest expense and distributions on redeemable preferred securities | 167 | 5 | — | 24,319 | 24,491 | ||||||||||||||
Total losses and expenses | 365,901 | 25,181 | — | 107,517 | 498,599 | ||||||||||||||
Income (loss) from continuing operations before income taxes | 345,396 | 110,559 | 6,587 | (69,420 | ) | 393,122 | |||||||||||||
Income tax (benefit) from continuing operations | 99,903 | 31,912 | 1,645 | (14,646 | ) | 118,814 | |||||||||||||
Income (loss) from continuing operations after income taxes | 245,493 | 78,647 | 4,942 | (54,774 | ) | 274,308 | |||||||||||||
Income from discontinued operations before income taxes(5) | — | — | — | 26,893 | 26,893 | ||||||||||||||
Income taxes from discontinued operations(5) | — | — | — | 7,186 | 7,186 | ||||||||||||||
Income from discontinued operations after income taxes(5) | — | — | — | 19,707 | 19,707 | ||||||||||||||
Income before extraordinary item | 245,493 | 78,647 | 4,942 | (35,067 | ) | 294,015 | |||||||||||||
Extraordinary gain on write-off of negative goodwill at FGIC, net of income taxes | — | — | 5,418 | — | 5,418 | ||||||||||||||
Net income (loss) | $ | 245,493 | $ | 78,647 | $ | 10,360 | $ | (35,067 | ) | $ | 299,433 | ||||||||
Expense ratio(10) | 22.0 | % | 16.1 | % | |||||||||||||||
Loss ratio(10) | 36.2 | % | -5.4 | % | |||||||||||||||
Combined ratio | 58.3 | % | 10.7 | % |
Page 4
THE PMI GROUP, INC. AND SUBSIDIARIES
BUSINESS SEGMENTS BALANCE SHEETS
U.S. Mortgage Insurance Operations(6) | International Operations (7) | Financial Guaranty (8) | Other(9) | Consolidated Total | ||||||||||||
December 31, 2004 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and investments, at fair value | $ | 2,132,300 | $ | 1,030,751 | $ | — | $ | 458,499 | $ | 3,621,550 | ||||||
Investments in unconsolidated subsidiaries | 112,456 | — | 774,880 | 24,268 | 911,604 | |||||||||||
Equity investment held for sale(2) | — | — | — | 109,519 | 109,519 | |||||||||||
Related party receivables | 1,633 | — | — | 16,806 | 18,439 | |||||||||||
Reinsurance receivable, recoverable and prepaid premiums | 31,110 | 18,547 | — | — | 49,657 | |||||||||||
Deferred policy acquisition costs | 53,998 | 38,440 | — | — | 92,438 | |||||||||||
Other assets | 208,806 | 26,460 | — | 107,494 | 342,760 | |||||||||||
Total assets | $ | 2,540,303 | $ | 1,114,198 | $ | 774,880 | $ | 716,586 | $ | 5,145,967 | ||||||
Liabilities | ||||||||||||||||
Reserve for losses and loss adjustment expenses | $ | 338,620 | $ | 26,224 | $ | — | $ | 3 | $ | 364,847 | ||||||
Unearned premiums | 152,685 | 332,091 | — | 39 | 484,815 | |||||||||||
Long-term debt | — | — | — | 819,529 | 819,529 | |||||||||||
Other liabilities | 237,431 | 71,740 | 12,424 | 17,426 | 339,021 | |||||||||||
Total liabilities | 728,736 | 430,055 | 12,424 | 836,997 | 2,008,212 | |||||||||||
Shareholders’ equity | 1,811,567 | 684,143 | 762,456 | (120,411 | ) | 3,137,755 | ||||||||||
Total liabilities and shareholders’ equity | $ | 2,540,303 | $ | 1,114,198 | $ | 774,880 | $ | 716,586 | $ | 5,145,967 | ||||||
December 31, 2003 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Assets | ||||||||||||||||
Cash and investments, at fair value | $ | 2,042,152 | $ | 836,570 | $ | — | $ | 324,159 | $ | 3,202,881 | ||||||
Investments in unconsolidated subsidiaries | 97,389 | — | 700,828 | 139,629 | 937,846 | |||||||||||
Related party receivables | 1,698 | — | — | 26,142 | 27,840 | |||||||||||
Reinsurance receivable, recoverable and prepaid premiums | 39,774 | 17,025 | — | — | 56,799 | |||||||||||
Deferred policy acquisition costs | 69,656 | 32,418 | — | — | 102,074 | |||||||||||
Other assets | 217,063 | 19,792 | — | 112,132 | 348,987 | |||||||||||
Assets - discontinued operations(5) | — | — | — | 117,862 | 117,862 | |||||||||||
Total assets | $ | 2,467,732 | $ | 905,805 | $ | 700,828 | $ | 719,924 | $ | 4,794,289 | ||||||
Liabilities | ||||||||||||||||
Reserve for losses and loss adjustment expenses | $ | 325,262 | $ | 21,674 | $ | — | $ | 3 | $ | 346,939 | ||||||
Unearned premiums | 181,854 | 287,099 | — | 48 | 469,001 | |||||||||||
Long-term debt | — | — | — | 819,543 | 819,543 | |||||||||||
Other liabilities | 160,959 | 52,067 | 6,085 | 111,449 | 330,560 | |||||||||||
Liabilities - discontinued operations(5) | — | — | — | 44,217 | 44,217 | |||||||||||
Total liabilities | 668,075 | 360,840 | 6,085 | 975,260 | 2,010,260 | |||||||||||
Shareholders’ equity | 1,799,657 | 544,965 | 694,743 | (255,336 | ) | 2,784,029 | ||||||||||
Total liabilities and shareholders’ equity | $ | 2,467,732 | $ | 905,805 | $ | 700,828 | $ | 719,924 | $ | 4,794,289 | ||||||
Page 5
THE PMI GROUP, INC. AND SUBSIDIARIES
U.S. MORTGAGE INSURANCE OPERATIONS ANALYSIS OF RESERVE FOR LOSSES AND LAE(6)
December 31, 2004 | September 30, 2004 | December 31, 2003 | |||||||||||||
Loans in Default | Reserve for Losses and LAE | Loans in Default | Reserve for Losses and LAE | Loans in Default | Reserve for Losses and LAE | ||||||||||
(Dollars in thousands) | |||||||||||||||
Primary insurance | 39,054 | $ | 306,023 | 37,111 | $ | 301,643 | 37,445 | $ | 292,531 | ||||||
Pool insurance | 17,186 | 32,597 | 16,890 | 33,106 | 16,763 | 32,731 | |||||||||
Total | 56,240 | $ | 338,620 | 54,001 | $ | 334,749 | 54,208 | $ | 325,262 | ||||||
Reconciliation of Reserve for Losses and LAE
December 31, 2004 | September 30, 2004 | Reserve Change | ||||||||||
(Dollars in thousands) | ||||||||||||
Gross reserve for losses and LAE: | ||||||||||||
Primary insurance | $ | 306,023 | $ | 301,643 | $ | 4,380 | ||||||
Pool insurance | 32,597 | 33,106 | (509 | ) | ||||||||
Total gross reserve for losses and LAE | 338,620 | 334,749 | 3,871 | |||||||||
Ceded reserve for losses: | ||||||||||||
Primary insurance | (2,289 | ) | (2,634 | ) | 345 | |||||||
Pool insurance | (117 | ) | (117 | ) | — | |||||||
Total ceded reserve for losses | (2,406 | ) | (2,751 | ) | 345 | |||||||
Net reserve for losses and LAE | $ | 336,214 | $ | 331,998 | $ | 4,216 | ||||||
U.S. MORTGAGE INSURANCE OPERATIONS STATISTICAL INFORMATION(6)
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
Flow insurance written(in millions) | $ | 8,259 | $ | 10,510 | $ | 36,257 | $ | 50,236 | ||||||||
Bulk insurance written(in millions) | 2,260 | 1,363 | 4,956 | 7,065 | ||||||||||||
Primary new insurance written(in millions) | $ | 10,519 | $ | 11,873 | $ | 41,213 | $ | 57,301 | ||||||||
Primary new risk written (in millions) | $ | 2,741 | $ | 2,890 | $ | 10,680 | $ | 13,532 | ||||||||
Pool insurance written(in millions)(11) | $ | 3,043 | $ | 8,429 | $ | 10,454 | $ | 15,962 | ||||||||
Pool risk written(in millions)(11) | $ | 84 | $ | 163 | $ | 251 | $ | 394 | ||||||||
Product mix as a % of new insurance written: | ||||||||||||||||
97% LTV’s | 15 | % | 14 | % | 12 | % | 11 | % | ||||||||
95% LTV’s | 26 | % | 30 | % | 30 | % | 28 | % | ||||||||
90% LTV’s | 36 | % | 37 | % | 38 | % | 39 | % | ||||||||
95% LTV’s with >= 30% coverage | 22 | % | 23 | % | 25 | % | 21 | % | ||||||||
90% LTV’s with >= 25% coverage | 31 | % | 29 | % | 32 | % | 29 | % | ||||||||
ARMs | 33 | % | 11 | % | 25 | % | 9 | % | ||||||||
Monthlies | 98 | % | 89 | % | 98 | % | 91 | % | ||||||||
Refinances | 33 | % | 34 | % | 32 | % | 45 | % | ||||||||
Bulk transactions | 21 | % | 40 | % | 12 | % | 18 | % | ||||||||
Premiums written(in thousands): | ||||||||||||||||
Gross premiums written | $ | 197,953 | $ | 303,945 | $ | 767,399 | $ | 847,195 | ||||||||
Ceded premiums, net of assumed premiums | (40,613 | ) | (41,844 | ) | (155,274 | ) | (136,442 | ) | ||||||||
Refunded premiums | (3,424 | ) | (9,244 | ) | (14,006 | ) | (25,700 | ) | ||||||||
Net premiums written | 153,916 | 252,857 | 598,119 | 685,053 | ||||||||||||
Change in unearned premiums | 14,397 | (107,648 | ) | 35,885 | (92,239 | ) | ||||||||||
Net premiums earned | $ | 168,313 | $ | 145,209 | $ | 634,004 | $ | 592,814 | ||||||||
Page 6
THE PMI GROUP, INC. AND SUBSIDIARIES
U.S. MORTGAGE INSURANCE OPERATIONS STATISTICAL INFORMATION(6)
December 31, 2004 | September 30, 2004 | December 31, 2003 | ||||||||||
Primary insurance in force (in millions) | $ | 105,321 | $ | 104,782 | $ | 105,241 | ||||||
Primary risk in force (in millions) | $ | 25,658 | $ | 25,259 | $ | 24,668 | ||||||
Pool risk in force(in millions) (11) | $ | 2,408 | $ | 2,389 | $ | 2,858 | ||||||
Risk-to-capital ratio (12) | 8.2 to 1 | 8.6 to 1 | 9.1 to 1 | |||||||||
Insured primary loans | 803,236 | 805,859 | 827,225 | |||||||||
Persistency | 60.9 | % | 59.5 | % | 44.6 | % | ||||||
Primary loans in default | 39,054 | 37,111 | 37,445 | |||||||||
Primary default rate | 4.86 | % | 4.61 | % | 4.53 | % | ||||||
Primary claims paid (year-to-date in thousands) | $ | 193,178 | $ | 145,434 | $ | 176,890 | ||||||
Number of primary claims paid(year-to-date) | 8,335 | 6,354 | 7,501 | |||||||||
Average primary claim size (year-to-date in thousands) | $ | 23.2 | $ | 22.9 | $ | 23.6 | ||||||
Percentage of NIW subject to captive reinsurance arrangements (year-to-date) | 55.7 | % | 56.1 | % | 54.1 | % | ||||||
Percentage of IIF subject to captive reinsurance arrangements(year-to-date) | 53.7 | % | 53.1 | % | 50.0 | % | ||||||
CMG MORTGAGE INSURANCE COMPANY STATISTICAL INFORMATION | ||||||||||||
December 31, 2004 | September 30, 2004 | December 31, 2003 | ||||||||||
Primary new insurance written(year-to-date in millions) | $ | 5,355 | $ | 4,074 | $ | 7,015 | ||||||
Primary insurance in force(in millions) | $ | 14,037 | $ | 14,018 | $ | 12,560 | ||||||
Primary risk in force(in millions) | $ | 3,219 | $ | 3,176 | $ | 2,772 | ||||||
Insured primary loans | 105,568 | 105,390 | 98,412 | |||||||||
Persistency | 69.1 | % | 70.3 | % | 50.8 | % | ||||||
Primary loans in default | 666 | 625 | 516 | |||||||||
Primary default rate(year-to-date) | 0.63 | % | 0.59 | % | 0.52 | % | ||||||
Primary claims paid (year-to-date in thousands) | $ | 5,111 | $ | 3,751 | $ | 3,026 | ||||||
Number of primary claims paid(year-to-date) | 244 | 174 | 148 | |||||||||
Average primary claims size(year-to-date in thousands) | $ | 20.9 | $ | 21.6 | $ | 20.4 |
Page 7
THE PMI GROUP, INC. AND SUBSIDIARIES
PMI AUSTRALIA STATISTICAL INFORMATION
December 31, 2004 | September 30, 2004 | December 31, 2003 | ||||||||||
Net premium written(year-to-date in thousands) | $ | 151,164 | $ | 112,801 | $ | 127,750 | ||||||
Premium earned(year-to-date in thousands) | $ | 109,071 | $ | 81,937 | $ | 85,050 | ||||||
Flow insurance written(year-to-date in millions) | $ | 19,540 | $ | 14,960 | $ | 19,383 | ||||||
RMBS insurance written(year-to-date in millions) | 14,669 | 11,916 | 6,044 | |||||||||
New insurance written(year-to-date in millions) | $ | 34,209 | $ | 26,876 | $ | 25,427 | ||||||
Insurance in force (in millions) | $ | 113,628 | $ | 102,527 | $ | 87,909 | ||||||
Risk in force (in millions) | $ | 103,135 | $ | 92,979 | $ | 79,294 | ||||||
Policies in force | 926,073 | 916,070 | 712,866 | |||||||||
Loans in default | 1,020 | 1,101 | 1,207 | |||||||||
Delinquency rate | 0.11 | % | 0.12 | % | 0.17 | % | ||||||
Claims paid(year-to-date in thousands) | $ | 1,111 | $ | 634 | $ | 2,663 | ||||||
Number claims paid(year-to-date) | 65 | 45 | 223 | |||||||||
Average claim size(year-to-date in thousands) | $ | 17.1 | $ | 14.1 | $ | 11.9 | ||||||
PMI EUROPE STATISTICAL INFORMATION | ||||||||||||
December 31, 2004 | September 30, 2004 | December 31, 2003 | ||||||||||
Net premium written(year-to-date in thousands) | $ | 9,568 | $ | 7,426 | $ | 55,418 | ||||||
Premium earned(year-to-date in thousands) | $ | 20,944 | $ | 15,575 | $ | 13,685 | ||||||
New credit default swap written(year-to-date in millions) | $ | 2,603 | $ | 2,603 | $ | 6,440 | ||||||
New reinsurance written(year-to-date in millions) | $ | — | $ | — | $ | 17,034 | ||||||
Insurance in force(in millions) | $ | 34,332 | $ | 32,950 | $ | 31,558 | ||||||
Risk in force(in millions) | $ | 2,747 | $ | 3,244 | $ | 3,096 | ||||||
Claims paid(year-to-date in thousands) | $ | 979 | $ | 899 | $ | 834 | ||||||
Number claims paid(year-to-date) | 77 | 66 | 67 |
Page 8
THE PMI GROUP, INC. AND SUBSIDIARIES
APPENDIX A - U.S. MORTGAGE INSURANCE OPERATIONS SUPPLEMENTAL STATISTICAL INFORMATION(6)
12/31/2004 | 9/30/2004 | 6/30/2004 | 3/31/2004 | 12/31/2003 | ||||||||||||||||
Primary insurance in force(in millions) | ||||||||||||||||||||
Flow | $ | 93,263 | $ | 93,601 | $ | 92,968 | $ | 93,161 | $ | 93,279 | ||||||||||
Bulk | 12,058 | 11,181 | 11,238 | 11,143 | 11,962 | |||||||||||||||
Total | $ | 105,321 | $ | 104,782 | $ | 104,206 | $ | 104,304 | $ | 105,241 | ||||||||||
Primary risk in force(in millions) | ||||||||||||||||||||
Flow | $ | 22,885 | $ | 22,741 | $ | 22,342 | $ | 22,143 | $ | 22,047 | ||||||||||
Bulk | 2,773 | 2,518 | 2,460 | 2,402 | 2,621 | |||||||||||||||
Total | $ | 25,658 | $ | 25,259 | $ | 24,802 | $ | 24,545 | $ | 24,668 | ||||||||||
Primary policies in force | 803,236 | 805,859 | 807,822 | 816,624 | 827,225 | |||||||||||||||
Primary risk in force - credit score distribution | ||||||||||||||||||||
Flow 619-575 | 6.2 | % | 6.4 | % | 6.6 | % | 6.8 | % | 7.1 | % | ||||||||||
574 or below | 1.8 | % | 1.9 | % | 2.0 | % | 2.1 | % | 2.2 | % | ||||||||||
Bulk 619-575 | 21.1 | % | 21.6 | % | 21.0 | % | 21.3 | % | 21.6 | % | ||||||||||
574 or below | 13.0 | % | 12.7 | % | 12.2 | % | 12.7 | % | 12.8 | % | ||||||||||
Total 619-575 | 7.8 | % | 7.9 | % | 8.0 | % | 8.3 | % | 8.6 | % | ||||||||||
574 or below | 3.0 | % | 3.0 | % | 3.0 | % | 3.1 | % | 3.3 | % | ||||||||||
Primary average loan size(in thousands) | ||||||||||||||||||||
Flow | $ | 131.3 | $ | 130.5 | $ | 129.3 | $ | 128.1 | $ | 127.4 | ||||||||||
Bulk | $ | 129.8 | $ | 127.1 | $ | 126.9 | $ | 124.9 | $ | 126.1 | ||||||||||
Total | $ | 131.1 | $ | 130.1 | $ | 129.0 | $ | 127.7 | $ | 127.2 | ||||||||||
Loss severity - primary(quarterly) | ||||||||||||||||||||
Flow | 84.9 | % | 77.4 | % | 83.0 | % | 82.1 | % | 81.6 | % | ||||||||||
Bulk | 84.6 | % | 78.8 | % | 83.5 | % | 82.1 | % | 83.4 | % | ||||||||||
Total | 84.8 | % | 77.8 | % | 83.1 | % | 82.1 | % | 82.2 | % | ||||||||||
Alt-A primary insurance in force(in millions) | ||||||||||||||||||||
With FICO scores of 660 and above | $ | 10,250 | $ | 9,421 | $ | 8,590 | $ | 7,623 | $ | 7,167 | ||||||||||
With FICO scores below 660 and above 619 | 2,029 | 1,836 | 1,648 | 1,330 | 1,233 | |||||||||||||||
Total Alt-A primary insurance in force | $ | 12,279 | $ | 11,257 | $ | 10,238 | $ | 8,953 | $ | 8,400 | ||||||||||
NEW INSURANCE WRITTEN AND INSURANCE IN FORCE ANALYSIS | ||||||||||||||||||||
12/31/2004 | 9/30/2004 | 6/30/2004 | 3/31/2004 | 12/31/2003 | ||||||||||||||||
FICO > 700 and LTV > 80(in millions) | ||||||||||||||||||||
Primary new insurance written(year-to-date) | $ | 16,643 | $ | 12,788 | $ | 8,633 | $ | 3,826 | $ | 26,172 | ||||||||||
Primary insurance in force | $ | 43,801 | $ | 43,862 | $ | 43,640 | $ | 43,660 | $ | 43,800 | ||||||||||
Total portfolio(in millions) | ||||||||||||||||||||
Primary new insurance written(year-to-date) | $ | 41,213 | $ | 30,695 | $ | 20,205 | $ | 8,799 | $ | 57,301 | ||||||||||
Primary insurance in force | $ | 105,321 | $ | 104,782 | $ | 104,206 | $ | 104,304 | $ | 105,241 | ||||||||||
FICO > 700 and LTV > 80 as a percentage of total portfolio | ||||||||||||||||||||
Primary new insurance written(year-to-date) | 40.4 | % | 41.7 | % | 42.7 | % | 43.5 | % | 45.7 | % | ||||||||||
Primary insurance in force | 41.6 | % | 41.9 | % | 41.9 | % | 41.9 | % | 41.6 | % |
Page 9
THE PMI GROUP, INC. AND SUBSIDIARIES
APPENDIX B - PMI AUSTRALIA AND PMI EUROPE QUARTERLY FINANCIAL INFORMATION
PMI AUSTRALIA
12/31/04 | 9/30/04 | 6/30/04 | 3/31/04 | 12/31/03 | 9/30/03 | 6/30/03 | 3/31/03 | ||||||||||||||||||
(Australian $ in thousands, unless otherwise noted) | |||||||||||||||||||||||||
Income Statement Components - Quarter Ended | |||||||||||||||||||||||||
Premiums earned | $ | 35,819 | $ | 37,109 | $ | 37,308 | $ | 37,790 | $ | 36,766 | $ | 32,855 | $ | 30,811 | $ | 29,103 | |||||||||
Net investment income | $ | 14,087 | $ | 13,098 | $ | 12,677 | $ | 12,139 | $ | 9,235 | $ | 12,309 | $ | 9,525 | $ | 8,396 | |||||||||
Total expenses | $ | 13,624 | $ | 13,413 | $ | 12,799 | $ | 12,030 | $ | 12,160 | $ | (216 | ) | $ | 9,282 | $ | 8,141 | ||||||||
Net income | $ | 25,447 | $ | 24,725 | $ | 26,832 | $ | 26,518 | $ | 21,441 | $ | 31,993 | $ | 21,412 | $ | 20,335 | |||||||||
Net income(US$ in thousands) | $ | 19,272 | $ | 17,554 | $ | 19,219 | $ | 20,265 | $ | 15,511 | $ | 21,073 | $ | 13,746 | $ | 12,059 | |||||||||
Balance Sheet Components | |||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||
Cash and investments, at fair value | $ | 1,027,236 | $ | 973,479 | $ | 924,330 | $ | 892,864 | $ | 853,920 | $ | 816,143 | $ | 777,701 | $ | 737,605 | |||||||||
Total assets | $ | 1,116,874 | $ | 1,068,080 | $ | 1,013,102 | $ | 976,723 | $ | 935,904 | $ | 891,787 | $ | 853,196 | $ | 813,073 | |||||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||
Loss reserves | $ | 12,547 | $ | 13,692 | $ | 13,556 | $ | 13,537 | $ | 13,536 | $ | 13,698 | $ | 25,450 | $ | 27,541 | |||||||||
Unearned premiums | $ | 378,981 | $ | 364,120 | $ | 346,748 | $ | 330,477 | $ | 321,441 | $ | 297,042 | $ | 277,921 | $ | 265,419 | |||||||||
Shareholders’ equity | $ | 673,124 | $ | 642,585 | $ | 607,781 | $ | 586,842 | $ | 556,329 | $ | 539,141 | $ | 515,622 | $ | 488,032 | |||||||||
PMI EUROPE | |||||||||||||||||||||||||
12/31/04 | 9/30/04 | 6/30/04 | 3/31/04 | 12/31/03 | 9/30/03 | 6/30/03 | 3/31/03 | ||||||||||||||||||
(Euro € in thousands, unless otherwise noted) | |||||||||||||||||||||||||
Income Statement Components - Quarter Ended | |||||||||||||||||||||||||
Premiums earned | € | 4,140 | € | 4,233 | € | 4,172 | € | 4,295 | € | 7,765 | € | 1,283 | € | 1,867 | € | 792 | |||||||||
Net investment income | € | 1,435 | € | 2,294 | € | 1,642 | € | 2,198 | € | 1,181 | € | 1,491 | € | 974 | € | 1,139 | |||||||||
Total expenses | € | 3,679 | € | 1,476 | € | 1,462 | € | 1,768 | € | 1,723 | € | 1,144 | € | 1,376 | € | 814 | |||||||||
Net income | € | 2,703 | € | 3,942 | € | 3,535 | € | 3,781 | € | 5,955 | € | 1,299 | € | 1,329 | € | 818 | |||||||||
Net income(US$ in thousands) | $ | 3,489 | $ | 4,822 | $ | 4,260 | $ | 4,726 | $ | 7,089 | $ | 1,469 | $ | 1,533 | $ | 874 | |||||||||
Balance Sheet Components | |||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||
Cash and investments, at fair value | € | 169,165 | € | 164,558 | € | 161,129 | € | 162,621 | € | 154,369 | € | 98,847 | € | 94,132 | € | 91,245 | |||||||||
Total assets | € | 179,134 | € | 175,731 | € | 172,402 | € | 170,600 | € | 160,891 | € | 100,878 | € | 100,302 | € | 95,688 | |||||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||
Loss reserves | € | 12,126 | € | 10,656 | € | 10,497 | € | 10,031 | € | 9,624 | € | 2,109 | € | 1,956 | € | 1,021 | |||||||||
Unearned premiums | € | 26,859 | € | 29,363 | € | 31,748 | € | 33,903 | € | 36,029 | € | 183 | € | 566 | € | 281 | |||||||||
Shareholders’ equity | € | 121,494 | € | 117,142 | € | 111,691 | € | 109,386 | € | 100,524 | € | 95,289 | € | 95,115 | € | 92,326 |
Page 10
THE PMI GROUP, INC. AND SUBSIDIARIES
APPENDIX C - BUSINESS SEGMENT RESULTS OF OPERATIONS BY QUARTER
2004 | ||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
U.S. Mortgage Insurance Operations (6) |
| |||||||||||||||
Net premiums written | $ | 153,064 | $ | 147,407 | $ | 143,732 | $ | 153,916 | ||||||||
Revenues | ||||||||||||||||
Premiums earned | $ | 149,023 | $ | 154,392 | $ | 162,276 | $ | 168,313 | ||||||||
Net investment income | 24,458 | 27,944 | 24,332 | 25,496 | ||||||||||||
Equity in earnings from unconsolidated subsidiaries (1) | 3,328 | 3,676 | 3,707 | 4,569 | ||||||||||||
Net realized investment gains (losses) | 1,087 | (166 | ) | 1,672 | (12 | ) | ||||||||||
Other income (expense) | 81 | (25 | ) | (24 | ) | 15 | ||||||||||
Total revenues | 177,977 | 185,821 | 191,963 | 198,381 | ||||||||||||
Losses and expenses | ||||||||||||||||
Losses and loss adjustment expenses | 58,956 | 55,755 | 60,092 | 58,355 | ||||||||||||
Amortization of policy acquisition costs | 19,433 | 18,109 | 18,003 | 16,585 | ||||||||||||
Other underwriting and operating expenses | 24,627 | 23,799 | 22,785 | 27,258 | ||||||||||||
Field operations restructuring charge | 1,510 | 1,089 | 315 | — | ||||||||||||
Legal settlement refund (3) | — | — | (2,574 | ) | — | |||||||||||
Interest expense | 21 | 17 | 13 | 12 | ||||||||||||
Total losses and expenses | 104,547 | 98,769 | 98,634 | 102,210 | ||||||||||||
Income before income taxes | 73,430 | 87,052 | 93,329 | 96,171 | ||||||||||||
Income taxes | 19,822 | 23,790 | 25,528 | 26,328 | ||||||||||||
Net income (loss) | $ | 53,608 | $ | 63,262 | $ | 67,801 | $ | 69,843 | ||||||||
International Operations (7) |
| |||||||||||||||
Net premiums written | $ | 40,323 | $ | 43,460 | $ | 43,238 | $ | 46,156 | ||||||||
Revenues | ||||||||||||||||
Premiums earned | $ | 36,259 | $ | 33,255 | $ | 32,829 | $ | 33,979 | ||||||||
Net investment income | 11,807 | 10,646 | 11,848 | 12,789 | ||||||||||||
Net realized investment gains (losses) | 225 | 377 | 256 | (263 | ) | |||||||||||
Other income | 1,602 | 2,399 | 296 | 3,044 | ||||||||||||
Total revenues | 49,893 | 46,677 | 45,229 | 49,549 | ||||||||||||
Losses and expenses | ||||||||||||||||
Losses and loss adjustment expenses | 864 | 777 | 746 | 1,737 | ||||||||||||
Amortization of policy acquisition costs | 3,662 | 3,135 | 3,225 | 3,065 | ||||||||||||
Other underwriting and operating expenses | 6,867 | 6,940 | 7,346 | 10,235 | ||||||||||||
Interest expense | 1 | 60 | 12 | — | ||||||||||||
Total losses and expenses | 11,394 | 10,912 | 11,329 | 15,037 | ||||||||||||
Income before income taxes | 38,499 | 35,765 | 33,900 | 34,512 | ||||||||||||
Income taxes | 11,470 | 10,799 | 10,218 | 10,274 | ||||||||||||
Net income (loss) | $ | 27,029 | $ | 24,966 | $ | 23,682 | $ | 24,238 | ||||||||
Financial Guaranty (8) |
| |||||||||||||||
Equity in earnings from unconsolidated subsidiaries (1) | $ | 14,928 | $ | 19,699 | $ | 17,061 | $ | 16,156 | ||||||||
Income taxes | 1,413 | 2,220 | 1,820 | 1,689 | ||||||||||||
Net income (loss) | $ | 13,515 | $ | 17,479 | $ | 15,241 | $ | 14,467 | ||||||||
Other (9) |
| |||||||||||||||
Net premiums written | $ | 17 | $ | 9 | $ | 9 | $ | 31 | ||||||||
Revenues | ||||||||||||||||
Premiums earned | $ | 20 | $ | 16 | $ | 18 | $ | 20 | ||||||||
Net investment income | 3,776 | 5,032 | 5,775 | 4,706 | ||||||||||||
Equity in earnings (losses) from unconsolidated subsidiaries (1) | 842 | 210 | 353 | (975 | ) | |||||||||||
Net realized investment losses | (37 | ) | (143 | ) | (374 | ) | — | |||||||||
Realized loss from discontinued operations of equity investment (2) | — | — | — | (20,420 | ) | |||||||||||
Other income | 7,168 | 7,424 | 6,146 | 5,345 | ||||||||||||
Total revenues | 11,769 | 12,539 | 11,918 | (11,324 | ) | |||||||||||
Losses and expenses | ||||||||||||||||
Other underwriting and operating expenses | 17,316 | 17,790 | 16,545 | 20,272 | ||||||||||||
Interest expense | 8,493 | 8,745 | 8,612 | 8,640 | ||||||||||||
Total losses and expenses | 25,809 | 26,535 | 25,157 | 28,912 | ||||||||||||
Loss from continuing operations before income tax benefit | (14,040 | ) | (13,996 | ) | (13,239 | ) | (40,236 | ) | ||||||||
Income tax benefit from continuing operations | (5,451 | ) | (4,964 | ) | (9,158 | ) | (13,339 | ) | ||||||||
Loss from continuing operations after income tax benefit | (8,589 | ) | (9,032 | ) | (4,081 | ) | (26,897 | ) | ||||||||
Income from discontinued operations before income taxes | 5,756 | — | — | — | ||||||||||||
Income taxes from discontinued operations | 1,958 | — | — | — | ||||||||||||
Income from discontinued operations after income taxes | 3,798 | — | — | — | ||||||||||||
Gain on sale of discontinued operations, net of income taxes(5) | 30,108 | — | — | (1,105 | ) | |||||||||||
Net income (loss) | $ | 25,317 | $ | (9,032 | ) | $ | (4,081 | ) | $ | (28,002 | ) | |||||
Page 11