UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
| x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-13664
| A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
PMI Alternate 401(k) Plan
| B. | Name of issuer of the securities held pursuant to the Plan and the address of its principal executive office: |
The PMI Group, Inc.
3003 Oak Road
Walnut Creek, California 94597
PMI Alternate 401(k) Plan
Financial Statements
and Supplemental Schedule
(Modified Cash Basis)
As of December 31, 2004 and 2003 and for the year ended December 31, 2004
Contents
Report of Independent Registered Public Accounting Firm
The Participants of the PMI Alternate 401(k) Plan
and Board of Directors of The PMI Group, Inc.
We have audited the accompanying statements of net assets available for benefits (modified cash basis) of the PMI Alternate 401(k) Plan (the Plan) as of December 31, 2004 and 2003, and the related statement of changes in net assets available for benefits (modified cash basis) for the year ended December 31, 2004. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosure in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As described in Note 2, the financial statements and supplemental schedule were prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than U.S. generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in all material respects, information regarding the Plan’s net assets available for benefits (modified cash basis) as of December 31, 2004 and 2003, and the changes therein (modified cash basis) for the year ended December 31, 2004, on the basis of accounting as described in Note 2.
Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule (modified cash basis) of assets (held at end of year) as of December 31, 2004, is presented for the purpose of additional analysis and is not a required part of the financial statements, but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
Los Angeles, California
June 8, 2005
1
PMI Alternate 401(k) Plan
Statements of Net Assets Available for Benefits
(Modified Cash Basis)
| | | | | | |
| | | As of December 31,
|
| | | 2004
| | 2003
|
Assets | | | | | | |
Cash | | $ | 322 | | $ | 325 |
Investments, at fair value | | | 4,154,405 | | | 4,016,415 |
| | |
|
| |
|
|
Net assets available for benefits | | $ | 4,154,727 | | $ | 4,016,740 |
| | |
|
| |
|
|
See accompanying notes.
2
PMI Alternate 401(k) Plan
Statement of Changes in Net Assets Available for Benefits
(Modified Cash Basis)
Year ended December 31, 2004
| | | |
Additions | | | |
Appreciation and investment income: | | | |
Net appreciation in fair value of investments | | $ | 331,595 |
Interest and dividends | | | 50,582 |
| | |
|
|
Total appreciation and investment income | | | 382,177 |
| |
Contributions: | | | |
Participants | | | 688,171 |
Rollover | | | 21,430 |
| | |
|
|
Total contributions | | | 709,601 |
| | |
|
|
Total additions | | | 1,091,778 |
| | |
|
|
Deductions | | | |
Benefits paid directly to participants | | | 939,155 |
Transfer to The PMI Group, Inc. Savings and Profit-Sharing Plan | | | 14,636 |
| | |
|
|
Total deductions | | | 953,791 |
| | |
|
|
Net increase | | | 137,987 |
| |
Net assets available for benefits: | | | |
Beginning of year | | | 4,016,740 |
| | |
|
|
End of year | | $ | 4,154,727 |
| | |
|
|
See accompanying notes.
3
PMI Alternate 401(k) Plan
Notes to Financial Statements
(Modified Cash Basis)
December 31, 2004
1. Description of the Plan
The following description of the PMI Alternate 401(k) Plan (the Plan) provides only general information. Participants should refer to the plan document for a more complete description of the Plan’s provisions. The most recent restated Adoption Agreement was adopted effective January 1, 2003.
General
The Plan is a defined contribution plan covering substantially all temporary full-time and part-time employees of The PMI Group, Inc. (the Company), other than those classes of employees specifically excluded by the plan document. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Plan trustee is Merrill Lynch Trust Company.
Employees are eligible on the first day of the next payroll period after their date of employment and must be at least 18 years of age to participate in the Plan.
Contributions
Each year, participants may contribute up to 17% of their annual pre-tax compensation, as defined in the Plan, subject to annual limitations defined by the Internal Revenue Code (the Code). The Company does not match employee contributions.
Upon enrollment, participants may direct all contributions to any of the Plan’s investment options. Participants may change their investment elections at any time during the year.
Participant Accounts
Each participant’s account is credited with the participant’s contributions and allocations of Plan appreciation and investment income (“earnings”) and may be charged with an allocation of administrative expenses, if any. Allocations are based on participant earnings or account balances, as defined in the Plan. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.
Vesting
Participants are immediately vested in their contributions plus actual earnings thereon.
4
PMI Alternate 401(k) Plan
Notes to Financial Statements
(Modified Cash Basis) (continued)
December 31, 2004
1. Description of the Plan (continued)
Participant Withdrawals
Upon termination of employment, death, disability, or retirement, participants or their beneficiaries may elect to receive a lump-sum benefit equal to their account balance. In-service withdrawals may be available upon hardship or upon attainment of age 59½ in accordance with the Plan’s provisions.
In 2004, participant withdrawals were $939,155 compared to $588,816 in 2003. This increase is primarily due to higher value lump-sum distributions paid to participants terminated from the Plan.
Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their account balance. Loan terms shall not exceed five years. The loans are secured by the balance in the participant’s account and bear interest at a rate equal to the prime rate published in the Wall Street Journal plus 1%. Principal and interest are paid ratably through payroll deductions.
Administrative Expenses
The Company pays substantially all administrative expenses of the Plan.
Plan Termination
Although it has not expressed any intention to do so, the Company has the right under the Plan to terminate the Plan subject to the provisions of ERISA. In the event of the Plan’s termination, participants will remain fully vested in their accounts.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements and supplemental schedule of the Plan are prepared on the modified cash basis, which is a comprehensive basis of accounting other than U.S. generally accepted accounting principles. Under this basis, investment assets are reported at fair value, net realized and unrealized appreciation in fair value of investments is recognized in the period incurred on the Statement of Changes in Net Assets Available for Benefits (Modified Cash Basis), contributions are recognized when received rather than as earned, and benefits and expenses are recognized when paid rather than as incurred.
5
PMI Alternate 401(k) Plan
Notes to Financial Statements
(Modified Cash Basis) (continued)
December 31, 2004
2. Summary of Significant Accounting Policies (continued)
Investments Valuation and Income Recognition
The Plan’s investments are stated at fair value. The shares of registered investment companies are valued at quoted market prices which represent the net asset values of shares held by the Plan at year-end. Common collective trust funds are valued based on the quoted redemption values on the last business day of the plan year. Money market funds are valued at historical cost plus accrued interest, which approximates fair value. Participant loans are valued at their outstanding balances, which approximate fair value.
Purchases and sales of securities are recorded on a settlement-date basis. Interest income and dividends are recorded when received in accordance with the modified cash basis of accounting.
Use of Estimates
The preparation of financial statements in conformity with the modified cash basis of accounting requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
3. Income Tax Status
The Plan received a determination letter from the Internal Revenue Service dated January 25, 2005, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax-exempt.
6
PMI Alternate 401(k) Plan
Notes to Financial Statements
(Modified Cash Basis) (continued)
December 31, 2004
4. Investments
At December 31, 2004, there were 19 investment fund options available in the Plan, including The PMI Group, Inc. common stock. During 2004 and 2003, the Plan’s investments (including investments purchased, sold as well as held during the year) appreciated in fair value as determined by quoted market prices as follows:
| | | | | | |
| | | 2004
| | 2003
|
Registered investment companies | | $ | 243,370 | | $ | 366,979 |
Common collective trust funds | | | 59,598 | | | 178,833 |
Common stock | | | 28,627 | | | 50,008 |
| | |
|
| |
|
|
Total | | $ | 331,595 | | $ | 595,820 |
| | |
|
| |
|
|
Investments that represent 5% or more of the fair value of the Plan’s net assets are as follows:
| | | | | | |
| | | As of December 31,
|
| | | 2004
| | 2003
|
Davis New York Venture Fund | | $ | 564,473 | | $ | 524,837 |
Merrill Lynch Retirement Reserves Fund | | | 586,440 | | | 674,931 |
Merrill Lynch Fundamental Growth Fund | | | 259,754 | �� | | 288,529 |
BGI Lifepath 2020 Fund | | | 248,496 | | | 251,385 |
PIMCO Total Return Fund | | | 388,744 | | | 383,352 |
Merrill Lynch Equity Index Trust Fund | | | 510,844 | | | 516,686 |
Merrill Lynch Mid Cap Index Trust Fund | | | 348,945 | | | 330,667 |
The PMI Group, Inc. Stock Fund | | | 260,270 | | | 248,920 |
5. Transactions with Parties-in-Interest
Transactions in shares of the Company’s common stock qualify as party-in-interest transactions under the provisions of ERISA. During 2004, the Plan made purchases of $74,396 and sales of $92,419 of the Company’s common stock.
7
Supplemental Schedule
PMI Alternate 401(k) Plan
EIN: 94-3199675 Plan Number: 004
Schedule H, Line 4(i)—Schedule of Assets (Held at End of Year) (Modified Cash Basis)
December 31, 2004
| | | | | | | |
(a)
| | (b) Identity of Issuer, Borrower,
Lessor or Similar Party
| | (c) Description of Investment
Including Maturity Date, Rate of
Interest, Collateral, Par or
Maturity Value
| | (e) Current
Value
|
| | | Registered investment companies: | | | | | |
| | | BGI Lifepath 2010 Fund | | 2,492.4881 shares | | $ | 31,754 |
| | | BGI Lifepath 2020 Fund | | 16,359.1813 shares | | | 248,496 |
| | | BGI Lifepath 2030 Fund | | 1,955.1562 shares | | | 29,073 |
| | | BGI Lifepath 2040 Fund | | 564.7653 shares | | | 9,618 |
| | | BGI Lifepath Retirement Portfolio Income Fund | | 1,130.2694 shares | | | 12,636 |
| | | Davis New York Venture Fund | | 18,392.7410 shares | | | 564,473 |
* | | Merrill Lynch Fundamental Growth Fund | | 14,691.9880 shares | | | 259,754 |
* | | Merrill Lynch Mid Cap Index Trust Fund | | 26,060.0829 shares | | | 348,945 |
* | | Merrill Lynch Mid Cap Value Opp Port Fund | | 3,523.1157 shares | | | 71,026 |
* | | Merrill Lynch Small Cap Index Fund | | 7,062.2693 shares | | | 99,578 |
| | | Oppenheimer Dev Markets Fund | | 6,630.7125 shares | | | 178,234 |
| | | PIMCO Total Return Fund | | 36,433.3321 shares | | | 388,744 |
| | | Templeton Foreign Fund | | 16,640.3516 shares | | | 204,676 |
| | | Van Kampen Aggressive Growth Fund | | 11,481.7461 shares | | | 162,926 |
| | | |
| | | Common collective trust funds: | | | | | |
| | | BGI MSCI EAFE Equity Index Fund | | 678.4356 units | | | 14,983 |
* | | Merrill Lynch Equity Index Trust Fund | | 5,746.2740 units | | | 510,844 |
* | | Merrill Lynch Retirement Preservation Trust Fund | | 127,966.9400 units | | | 127,967 |
| | | Money market fund: | | | | | |
* | | Merrill Lynch Retirement Reserves Fund | | 586,439.8000 units | | | 586,440 |
| | | |
| | | Common stock: | | | | | |
* | | The PMI Group, Inc. Stock Fund | | 6,234.0000 shares | | | 260,270 |
| | | |
| | | Participant loans: | | | | | |
* | | Participant loans | | Interest rates of 5.00%-5.75% maturing through 2008 | | | 43,964 |
| | | Cash | | | | | 4 |
| | | | | | |
|
|
| | | Total investments | | | | $ | 4,154,405 |
| | | | | | |
|
|
| * | Indicates a party-in-interest to the Plan. |
Note: Column (d), cost, is not required as all investments are participant-directed.
8
SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
| | |
| PMI Alternate 401(k) Plan |
| |
| By | | /s/ CHARLES F. BROOM |
| | | Charles F. Broom Plan Administrator |
Date: June 27, 2005
PMI ALTERNATE 401(K) PLAN
EXHIBIT INDEX
| | |
Exhibit Number:
| | Description
|
| 23 | | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm |
