Pmi (PMI) 8-K Consolidated Statements of Operations and Balance Sheets

THE PMI GROUP, INC. AND SUBSIDIARIES (the “Company”)

FINANCIAL RESULTS AND STATISTICAL INFORMATION FOR THE PERIOD ENDED JUNE 30, 2006

Contents

Consolidated Statements of Operations and Balance Sheets	Page 2
Business Segments Results of Operations - Three Months Ended June 30, 2006 and 2005	Page 3
Business Segments Results of Operations - Six Months Ended June 30, 2006 and 2005	Page 4
Business Segments Balance Sheets	Page 5
U.S. Mortgage Insurance Operations Analysis of Reserve for Losses and LAE and Financial and Statistical Information	Page 6
U.S. Mortgage Insurance Operations Financial and Statistical Information	Page 7
CMG Mortgage Insurance Company, PMI Australia and PMI Europe Financial and Statistical Information	Page 8
Appendix A - PMI Australia and PMI Europe Quarterly Financial Information	Page 9
Appendix B - Business Segments Results of Operations by Quarter	Page 10

Please refer to the following when noted:

(1) For the quarter and six months ended June 30, 2006, the Company’s equity in earnings from unconsolidated subsidiaries include FGIC Corporation, CMG Mortgage Insurance Company (“CMG”), RAM Reinsurance Company, Ltd. (“RAM Re”), other limited partnership interests and the trust subsidiary that issued the Company's preferred securities. As of December 31, 2004, the equity investment in SPS Holding Corp. (“SPS”) was reclassified from investments in unconsolidated subsidiaries to an equity investment held for sale. Effective January 1, 2005, SPS’s equity earnings are reported in other income. On October 4, 2005, PMI sold its equity ownership interest in SPS.

(2) U.S. Mortgage Insurance Operations include the operating results of PMI Mortgage Insurance Co. (“PMI”) 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.

(3) International Operations include PMI Australia, PMI Europe and PMI Asia. In June 2006, PMI Asia received its insurance authorization from the Hong Kong Insurance Authority. Subsequent to its receipt of authorization, the Company transferred the Hong Kong branch’s entire mortgage reinsurance portfolio to PMI Asia. In connection with this restructuring, our International Operations incurred a $1.1 million federal tax charge during the second quarter of 2006.

(4) Financial Guaranty represents our equity investments in FGIC Corporation and RAM Re.

(5) The “Other” segment includes other income and related operating expenses of PMI Mortgage Services Co.; investment income, interest expense and corporate expenses of The PMI Group, Inc.; the results of Commercial Loan Insurance Corporation and WMAC Credit Insurance Corporation and equity in earnings from SPS and certain limited partnerships.

(6) U.S. Mortgage Insurance Operations include a $1.3 million charge (after tax), or $0.01 per diluted share in the first quarter of 2006 relating to the reduction and restructuring of field offices.

(7) The “Other” segment includes charges of $1.9 million (after tax) and $5.7 million (after tax) for stock option expenses and related stock based compensation expenses in the second quarter and in the six months ended June 30, 2006, respectively.

(8) The expense ratio is the ratio, expressed as a percentage, of the sum of amortization of deferred policy acquisition costs and other underwriting and operating 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.

(9) Pool insurance includes modified pool, GSE pool, old pool and all other pool insurance products for U.S. Mortgage Insurance Operations.

(10) Statutory risk-to-capital ratio is for PMI Mortgage Insurance Co. only.

(11) Effective January 1, 2006, we refined our method of operating cost allocation between our U.S. Mortgage Insurance Operations segment and our Other segment. As a result of this refinement, we allocated approximately $1.5 million of expenses in the second quarter to our Other segment which previously would have been allocated to our U.S. Mortgage Insurance Operations segment. Year to date we have allocated $3.0 million of expenses to our Other segment which previously would have been allocated to our U.S. Mortgage Insurance Operations segment.

(12) During the second quarter of 2006, we refined our methodology for classification of Alt-A and full documentation loans. As a result, we reclassified for all periods presented herein certain loans previously designated as Alt-A loans as full documentation loans.

Note: The interim financial and statistical information contained in this material is unaudited. Certain prior year information has been reclassified to conform to the current periods’ presentation.

Page 1

THE PMI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended June 30,				Six Months Ended June 30,
	2006		2005		2006		2005
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
	(Dollars and shares, except per share data, in thousands)
Net premiums written	$	211,815	$	199,762	$	413,719	$	393,507
Revenues
Premiums earned	$	213,643	$	206,408	$	419,883	$	405,975
Net investment income		49,015		45,747		95,882		89,537
Equity in earnings from unconsolidated subsidiaries(1)		32,287		28,282		59,913		53,494
Net realized investment gains		556		1,503		896		2,224
Other income		3,937		6,251		10,722		11,787
Total revenues		299,438		288,191		587,296		563,017
Losses and expenses
Losses and loss adjustment expenses		71,861		67,235		132,800		131,717
Amortization of deferred policy acquisition costs		17,794		18,809		34,781		39,252
Other underwriting and operating expenses(7)		52,873		54,417		111,437		100,062
Field office restructuring(6)		—		—		1,955		—
Interest expense		8,067		8,472		16,246		18,025
Total losses and expenses		150,595		148,933		297,219		289,056
Income before income taxes		148,843		139,258		290,077		273,961
Income taxes		39,228		34,673		75,114		68,218
Net income	$	109,615	$	104,585	$	214,963	$	205,743
Diluted net income per share	$	1.14	$	1.04	$	2.23	$	2.03
Reconciliation of earnings per share
Net income	$	109,615	$	104,585	$	214,963	$	205,743
Plus: Interest expense on contingently convertible debt, net of income taxes		1,912		1,912		3,824		3,824
Net income adjusted for diluted earnings per share calculation	$	111,527	$	106,497	$	218,787	$	209,567
Share data:
Basic weighted average common shares outstanding		88,357		92,838		88,695		93,370
Stock options and other dilutive components		1,383		1,601		1,362		1,723
Common stock equivalent shares related to contingently convertible debt		8,153		8,153		8,153		8,153
Diluted weighted average common shares outstanding		97,893		102,592		98,210		103,246
Share repurchase data:
Common shares repurchased		3,221		1,776		3,302		2,609
Average price paid per common share repurchased (including commissions)	$	45.49	$	37.54	$	45.43	$	38.34

CONSOLIDATED BALANCE SHEETS

	June 30, 2006		December 31, 2005		June 30, 2005
	(Unaudited)				(Unaudited)
	(Dollars and shares, except per share data, in thousands)
Assets
Cash and investments, at fair value	$	3,844,411	$	3,789,432	$	3,675,496
Investments in unconsolidated subsidiaries(1)		1,007,780		984,925		965,600
Equity investment held for sale (1)		—		—		110,383
Related party receivables		1,398		2,864		10,562
Reinsurance receivables, reinsurance recoverables and prepaid premiums		20,815		30,338		45,875
Deferred policy acquisition costs		83,666		86,170		87,892
Other assets		355,396		360,407		345,499
Total assets	$	5,313,466	$	5,254,136	$	5,241,307
Liabilities
Reserve for losses and loss adjustment expenses	$	384,605	$	368,841	$	364,412
Unearned premiums		490,906		490,899		461,461
Long-term debt		819,529		819,529		819,529
Other liabilities		324,459		344,077		357,951
Total liabilities		2,019,499		2,023,346		2,003,353
Shareholders’ equity		3,293,967		3,230,790		3,237,954
Total liabilities and shareholders’ equity	$	5,313,466	$	5,254,136	$	5,241,307
Basic shares issued and outstanding		86,442		88,713		91,761
Book value per share	$	38.11	$	36.42	$	35.29

Page 2

THE PMI GROUP, INC. AND SUBSIDIARIES

BUSINESS SEGMENTS RESULTS OF OPERATIONS

	U.S. Mortgage Insurance Operations (2)			International Operations (3)			Financial Guaranty (4)		Other(5)			Consolidated Total
	Three Months Ended June 30, 2006 (Unaudited)
	(Dollars in thousands)
Net premiums written	$	158,904		$	52,900		$	—	$	11		$	211,815
Revenues
Premiums earned	$	167,826		$	45,801		$	—	$	16		$	213,643
Net investment income		27,064			15,625			2		6,324			49,015
Equity in earnings from unconsolidated subsidiaries(1)		5,729			—			26,476		82			32,287
Net realized investment gains (losses)		305			252			—		(1	)		556
Other income		7			218			—		3,712			3,937
Total revenues		200,931			61,896			26,478		10,133			299,438
Losses and expenses
Losses and loss adjustment expenses		64,153			7,708			—		—			71,861
Amortization of deferred policy acquisition costs		13,162			4,632			—		—			17,794
Other underwriting and operating expenses(7), (11)		22,970			10,461			—		19,442			52,873
Interest expense		1			—			—		8,066			8,067
Total losses and expenses		100,286			22,801			—		27,508			150,595
Income (loss) before income taxes		100,645			39,095			26,478		(17,375	)		148,843
Income tax (benefit)		28,480			13,598			2,469		(5,319	)		39,228
Net income (loss)	$	72,165		$	25,497		$	24,009	$	(12,056	)	$	109,615
Expense ratio (8)		22.7	%		28.5	%
Loss ratio(8)		38.2	%		16.8	%
Combined ratio		60.9	%		45.3	%
	Three Months Ended June 30, 2005 (Unaudited)
	(Dollars in thousands)
Net premiums written	$	152,564		$	47,185		$	—	$	13		$	199,762
Revenues
Premiums earned	$	168,248		$	38,141		$	—	$	19		$	206,408
Net investment income		27,546			14,058			—		4,143			45,747
Equity in earnings (losses) from unconsolidated subsidiaries(1)		4,937			—			23,761		(416	)		28,282
Net realized investment gains (losses)		1,167			(18	)		—		354			1,503
Other (loss) income		(5	)		873			—		5,383			6,251
Total revenues		201,893			53,054			23,761		9,483			288,191
Losses and expenses
Losses and loss adjustment expenses		65,496			1,739			—		—			67,235
Amortization of deferred policy acquisition costs		15,030			3,779			—		—			18,809
Other underwriting and operating expenses		25,278			10,539			—		18,600			54,417
Interest expense		—			—			—		8,472			8,472
Total losses and expenses		105,804			16,057			—		27,072			148,933
Income (loss) before income taxes		96,089			36,997			23,761		(17,589	)		139,258
Income tax (benefit)		26,400			11,747			2,254		(5,728	)		34,673
Net income (loss)	$	69,689		$	25,250		$	21,507	$	(11,861	)	$	104,585
Expense ratio (8)		26.4	%		30.3	%
Loss ratio (8)		38.9	%		4.6	%
Combined ratio		65.3	%		34.9	%

Page 3

THE PMI GROUP, INC. AND SUBSIDIARIES

BUSINESS SEGMENTS RESULTS OF OPERATIONS

	U.S. Mortgage Insurance Operations (2)			International Operations (3)			Financial Guaranty (4)		Other(5)			Consolidated Total
	Six Months Ended June 30, 2006 (Unaudited)
	(Dollars in thousands)
Net premiums written	$	322,377		$	91,321		$	—	$	21		$	413,719
Revenues
Premiums earned	$	335,364		$	84,486		$	—	$	33		$	419,883
Net investment income		52,740			30,410			2		12,730			95,882
Equity in earnings (losses) from unconsolidated subsidiaries(1)		10,221			—			49,712		(20	)		59,913
Net realized investment gains (losses)		542			394			—		(40	)		896
Other (loss) income		(17	)		3,251			—		7,488			10,722
Total revenues		398,850			118,541			49,714		20,191			587,296
Losses and expenses
Losses and loss adjustment expenses		123,300			9,500			—		—			132,800
Amortization of deferred policy acquisition costs		26,604			8,177			—		—			34,781
Other underwriting and operating expenses (7), (11)		48,880			20,250			—		42,307			111,437
Field office restructuring(6)		1,955			—			—		—			1,955
Interest expense		1			—			—		16,245			16,246
Total losses and expenses		200,740			37,927			—		58,552			297,219
Income (loss) before income taxes		198,110			80,614			49,714		(38,361	)		290,077
Income tax (benefit)		55,840			26,507			4,606		(11,839	)		75,114
Net income (loss)	$	142,270		$	54,107		$	45,108	$	(26,522	)	$	214,963
Expense ratio(8)		24.0	%		31.1	%
Loss ratio(8)		36.8	%		11.2	%
Combined ratio		60.8	%		42.3	%
	Six Months Ended June 30, 2005 (Unaudited)
	(Dollars in thousands)
Net premiums written	$	307,103		$	86,370		$	—	$	34		$	393,507
Revenues
Premiums earned	$	332,360		$	73,576		$	—	$	39		$	405,975
Net investment income		53,125			27,813			—		8,599			89,537
Equity in earnings (losses) from unconsolidated subsidiaries(1)		9,011			—			44,608		(125	)		53,494
Net realized investment gains		1,587			322			—		315			2,224
Other (loss) income		(1	)		760			—		11,028			11,787
Total revenues		396,082			102,471			44,608		19,856			563,017
Losses and expenses
Losses and loss adjustment expenses		128,614			3,103			—		—			131,717
Amortization of deferred policy acquisition costs		31,056			8,196			—		—			39,252
Other underwriting and operating expenses		48,832			17,543			—		33,687			100,062
Interest expense		1			—			—		18,024			18,025
Total losses and expenses		208,503			28,842			—		51,711			289,056
Income (loss) before income taxes		187,579			73,629			44,608		(31,855	)		273,961
Income tax (benefit)		51,548			23,232			4,211		(10,773	)		68,218
Net income (loss)	$	136,031		$	50,397		$	40,397	$	(21,082	)	$	205,743
Expense ratio(8)		26.0	%		29.8	%
Loss ratio(8)		38.7	%		4.2	%
Combined ratio		64.7	%		34.0	%

Page 4

THE PMI GROUP, INC. AND SUBSIDIARIES

BUSINESS SEGMENTS BALANCE SHEETS

	U.S. Mortgage Insurance Operations (2)		International Operations (3)		Financial Guaranty (4)		Other(5)			Consolidated Total
	June 30, 2006 (Unaudited)
	(Dollars in thousands)
Assets
Cash and investments, at fair value	$	2,259,393	$	1,156,454	$	1,995	$	426,569		$	3,844,411
Investments in unconsolidated subsidiaries(1)		120,574		—		867,923		19,283			1,007,780
Related party receivables		1,291		—		—		107			1,398
Reinsurance receivables, recoverables and prepaid premiums		14,977		5,838		—		—			20,815
Deferred policy acquisition costs		45,769		37,897		—		—			83,666
Other assets		204,724		33,293		3		117,376			355,396
Total assets	$	2,646,728	$	1,233,482	$	869,921	$	563,335		$	5,313,466
Liabilities
Reserve for losses and loss adjustment expenses	$	355,832	$	28,773	$	—	$	—		$	384,605
Unearned premiums		147,739		343,136		—		31			490,906
Long-term debt		—		—		—		819,529			819,529
Other liabilities		284,851		59,597		23,421		(43,410	)		324,459
Total liabilities		788,422		431,506		23,421		776,150			2,019,499
Shareholders’ equity		1,858,306		801,976		846,500		(212,815	)		3,293,967
Total liabilities and shareholders’ equity	$	2,646,728	$	1,233,482	$	869,921	$	563,335		$	5,313,466
	December 31, 2005
	(Dollars in thousands)
Assets
Cash and investments, at fair value	$	2,108,853	$	1,093,505	$	—	$	587,074		$	3,789,432
Investments in unconsolidated subsidiaries(1)		129,600		—		836,752		18,573			984,925
Related party receivables		2,700		—		—		164			2,864
Reinsurance receivables, recoverables and prepaid premiums		24,576		5,762		—		—			30,338
Deferred policy acquisition costs		48,310		37,860		—		—			86,170
Other assets		207,436		25,260		—		127,711			360,407
Total assets	$	2,521,475	$	1,162,387	$	836,752	$	733,522		$	5,254,136
Liabilities
Reserve for losses and loss adjustment expenses	$	345,536	$	23,302	$	—	$	3		$	368,841
Unearned premiums		162,368		328,489		—		42			490,899
Long-term debt		—		—		—		819,529			819,529
Other liabilities		248,343		79,610		19,204		(3,080	)		344,077
Total liabilities		756,247		431,401		19,204		816,494			2,023,346
Shareholders’ equity		1,765,228		730,986		817,548		(82,972	)		3,230,790
Total liabilities and shareholders’ equity	$	2,521,475	$	1,162,387	$	836,752	$	733,522		$	5,254,136
	June 30, 2005 (Unaudited)
	(Dollars in thousands)
Assets
Cash and investments, at fair value	$	2,140,727	$	1,048,992	$	—	$	485,777		$	3,675,496
Investments in unconsolidated subsidiaries(1)		121,558		—		821,308		22,734			965,600
Equity investment held for sale (1)		—		—		—		110,383			110,383
Related party receivables		1,507		—		—		9,055			10,562
Reinsurance receivables, recoverables and prepaid premiums		23,903		21,972		—		—			45,875
Deferred policy acquisition costs		48,738		39,154		—		—			87,892
Other assets		208,219		24,800		—		112,480			345,499
Total assets	$	2,544,652	$	1,134,918	$	821,308	$	740,429		$	5,241,307
Liabilities
Reserve for losses and loss adjustment expenses	$	338,628	$	25,781	$	—	$	3		$	364,412
Unearned premiums		132,809		328,618		—		34			461,461
Long-term debt		—		—		—		819,529			819,529
Other liabilities		245,481		71,727		16,248		24,495			357,951
Total liabilities		716,918		426,126		16,248		844,061			2,003,353
Shareholders’ equity		1,827,734		708,792		805,060		(103,632	)		3,237,954
Total liabilities and shareholders’ equity	$	2,544,652	$	1,134,918	$	821,308	$	740,429		$	5,241,307

Page 5

THE PMI GROUP, INC. AND SUBSIDIARIES

U.S. MORTGAGE INSURANCE OPERATIONS⁽²⁾ ANALYSIS OF RESERVE FOR LOSSES AND LAE

	June 30, 2006			March 31, 2006			June 30, 2005
	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	37,102	$	318,878	37,784	$	308,843	35,030	$	299,379
Pool insurance	17,458		36,954	19,069		37,594	16,623		39,249
Total	54,560	$	355,832	56,853	$	346,437	51,653	$	338,628

Reconciliation of Reserve for Losses and LAE

	June 30, 2006			March 31, 2006			Reserve Change
	(Dollars in thousands)
Gross reserve for losses and LAE:
Primary insurance	$	318,878		$	308,843		$	10,035
Pool insurance		36,954			37,594			(640	)
Total gross reserve for losses and LAE		355,832			346,437			9,395
Ceded reserve for losses:
Primary insurance		(2,417	)		(2,213	)		(204	)
Pool insurance		(87	)		(71	)		(16	)
Total ceded reserve for losses		(2,504	)		(2,284	)		(220	)
Net reserve for losses and LAE	$	353,328		$	344,153		$	9,175

U.S. MORTGAGE INSURANCE OPERATIONS⁽²⁾ FINANCIAL AND STATISTICAL INFORMATION

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Flow insurance written(in millions)	$	5,716		$	7,442		$	10,757		$	13,745
Structured insurance written(in millions)		1,344			2,216			4,391			4,081
Primary new insurance written(in millions)	$	7,060		$	9,658		$	15,148		$	17,826
Primary new risk written(in millions)	$	1,790		$	2,551		$	3,938		$	4,621
Pool new insurance written(in millions)(7)	$	3,575		$	3,228		$	8,302		$	4,534
Pool new risk written(in millions)(7)	$	108		$	60		$	212		$	101
Product mix as a % of new insurance written:
Above 97% LTV’s		17	%		14	%		15	%		14	%
90.01% to 95% LTV’s		22	%		25	%		22	%		25	%
85.01% to 90% LTV’s		46	%		43	%		46	%		41	%
90.01% to 95% LTV’s with >= 30% coverage		18	%		21	%		18	%		21	%
85.01% to 90% LTV’s with >= 25% coverage		40	%		38	%		40	%		35	%
ARMs		20	%		35	%		30	%		34	%
Monthlies		96	%		97	%		97	%		98	%
Refinances		32	%		34	%		36	%		36	%
Structured transactions		19	%		23	%		29	%		23	%
Premiums written(in thousands):
Gross premiums written	$	203,426		$	197,850		$	411,562		$	398,980
Ceded premiums, net of assumed premiums		(41,402	)		(41,455	)		(83,058	)		(84,742	)
Refunded premiums		(3,120	)		(3,831	)		(6,127	)		(7,135	)
Net premiums written		158,904			152,564			322,377			307,103
Change in unearned premiums		8,922			15,684			12,987			25,257
Net premiums earned	$	167,826		$	168,248		$	335,364		$	332,360

Page 6

THE PMI GROUP, INC. AND SUBSIDIARIES

U.S. MORTGAGE INSURANCE OPERATIONS⁽²⁾ FINANCIAL AND STATISTICAL INFORMATION

	6/30/2006			3/31/2006			12/31/2005			9/30/2005			6/30/2005			3/31/2005
Primary insurance in force(in millions)
Flow	$	84,644		$	85,685		$	86,991		$	88,433		$	89,965		$	91,399
Structured transactions		15,741			15,826			14,099			12,788			13,469			12,598
Total	$	100,385		$	101,511		$	101,090		$	101,221		$	103,434		$	103,997
Primary risk in force(in millions)
Flow	$	20,883		$	21,102		$	21,388		$	21,745		$	22,067		$	22,346
Structured transactions		4,127			4,147			3,583			3,167			3,296			2,966
Total	$	25,010		$	25,249		$	24,971		$	24,912		$	25,363		$	25,312
Pool risk in force (in millions)(9)	$	2,737		$	2,666		$	2,589		$	2,530		$	2,445		$	2,417
Primary risk in force - credit score distribution
Flow                                    620 or above		93.3	%		93.2	%		93.0	%		92.7	%		92.4	%		92.1	%
619-575		5.3	%		5.4	%		5.5	%		5.7	%		5.9	%		6.1	%
574 or below		1.4	%		1.4	%		1.5	%		1.6	%		1.7	%		1.8	%
Structured transactions      620 or above		80.7	%		79.2	%		76.9	%		73.9	%		71.7	%		66.9	%
619-575		12.3	%		13.2	%		14.5	%		16.0	%		17.4	%		20.2	%
574 or below		7.1	%		7.6	%		8.6	%		10.1	%		10.9	%		12.9	%
Total                                    620 or above		91.3	%		90.9	%		90.7	%		90.3	%		89.7	%		89.2	%
619-575		6.4	%		6.6	%		6.8	%		7.0	%		7.4	%		7.7	%
574 or below		2.3	%		2.5	%		2.5	%		2.7	%		2.9	%		3.1	%
Primary average loan size(in thousands)
Flow	$	136.9		$	135.6		$	134.5		$	133.3		$	132.2		$	131.5
Structured transactions	$	150.7		$	150.7		$	145.4		$	139.5		$	139.8		$	134.1
Total	$	138.9		$	137.8		$	136.0		$	134.1		$	133.2		$	131.8
Loss severity - primary(quarterly)
Flow		83.2	%		84.9	%		85.9	%		84.0	%		83.8	%		85.6	%
Structured transactions		86.8	%		91.2	%		94.3	%		89.6	%		87.7	%		90.9	%
Total		84.1	%		86.5	%		87.7	%		85.2	%		84.6	%		86.8	%
Persistency
Primary persistency rate		64.9	%		63.1	%		61.9	%		61.2	%		62.0	%		60.8	%
Primary loans, defaults and default rates
Primary policies in force		722,756			736,908			743,533			754,934			776,721			788,847
Primary loans in default		37,102			37,784			42,702			38,146			35,030			35,716
Primary default rate		5.13	%		5.13	%		5.74	%		5.05	%		4.51	%		4.53	%
Structured transactions only default rate		9.26	%		8.59	%		9.85	%		10.09	%		8.54	%		8.17	%
Pool default rate		5.60	%		6.17	%		6.84	%		6.34	%		5.65	%		5.65	%
Claims paid(year-to-date in millions)
Primary claims paid - flow	$	73.5		$	37.3		$	165.8		$	126.6		$	87.8		$	41.7
Primary claims paid - structured transactions		24.8			13.5			49.1			36.8			25.4			13.8
Total primary claims paid		98.3			50.8			214.9			163.4			113.2			55.5
Total pool and other		8.9			4.3			20.1			15.0			9.6			4.7
Total claims paid	$	107.2		$	55.1		$	235.0		$	178.4		$	122.8		$	60.2
Number of primary claims paid(year-to-date)		4,096			2,058			9,262			7,124			4,934			2,413
Average primary claim size(year-to-date in thousands)	$	24.0		$	24.7		$	23.2		$	22.9		$	22.9		$	23.0
Captive reinsurance arrangements(year-to-date)
Percentage of flow NIW subject to captive reinsurance arrangements		71.6	%		70.8	%		69.0	%		68.0	%		65.0	%		60.4	%
Percentage of primary NIW subject to captive reinsurance arrangements		51.5	%		44.8	%		54.7	%		55.7	%		50.7	%		47.1	%
Percentage of primary IIF subject to captive reinsurance arrangements		53.3	%		53.2	%		53.4	%		53.2	%		52.1	%		52.4	%
Percentage of primary RIF subject to captive reinsurance arrangements		53.9	%		53.9	%		54.4	%		54.4	%		53.4	%		53.9	%
Alt-A primary insurance in force(in millions)(12)
With FICO scores of 660 and above	$	13,216		$	12,575		$	11,455		$	10,346		$	9,731		$	8,892
With FICO scores below 660 and above 619		2,934			2,783			2,564			2,327			2,325			2,135
Total Alt-A primary insurance in force	$	16,150		$	15,358		$	14,019		$	12,673		$	12,056		$	11,027
Risk-to-capital ratio(10)		7.7 to 1			8.1 to 1			8.2 to 1			8.0 to 1			8.3 to 1			8.1 to 1

Page 7

THE PMI GROUP, INC. AND SUBSIDIARIES

CMG MORTGAGE INSURANCE COMPANY FINANCIAL AND STATISTICAL INFORMATION

	June 30, 2006			March 31, 2006			June 30, 2005
Primary new insurance written(year-to-date in millions)	$	2,058		$	891		$	2,495
Primary insurance in force(in millions)	$	15,774		$	15,476		$	14,694
Primary risk in force(in millions)	$	3,791		$	3,686		$	3,428
Insured primary loans		111,889			110,879			108,066
Persistency		73.6	%		72.3	%		70.3	%
Primary loans in default		965			992			622
Primary default rate(year-to-date)		0.86	%		0.89	%		0.58	%
Primary claims paid(year-to-date in thousands)	$	2,712		$	1,200		$	1,981
Number of primary claims paid(year-to-date)		123			55			100
Average primary claim size (year-to-date in thousands)	$	22.0		$	21.8		$	19.8

PMI AUSTRALIA FINANCIAL AND STATISTICAL INFORMATION

	June 30, 2006			March 31, 2006			June 30, 2005
Net premiums written(year-to-date in thousands)	$	83,243		$	34,640		$	71,775
Premiums earned(year-to-date in thousands)	$	71,377		$	32,267		$	59,319
Flow insurance written(year-to-date in millions)		9,214			4,152			8,685
RMBS insurance written(year-to-date in millions)		13,035			5,291			6,478
New insurance written(year-to-date in millions)	$	22,249		$	9,443		$	15,163
Insurance in force(in millions)	$	135,529		$	123,050		$	119,811
Risk in force(in millions)	$	124,139		$	112,199		$	109,025
Policies in force		1,074,618			1,026,260			973,820
Loans in default		1,731			1,520			1,322
Default rate		0.16	%		0.15	%		0.14	%
Claims paid(year-to-date in thousands)	$	4,405		$	1,224		$	1,090
Number of claims paid(year-to-date)		104			31			42
Average claim size(year-to-date in thousands)	$	42.4		$	39.5		$	26.0
PMI EUROPE FINANCIAL AND STATISTICAL INFORMATION
	June 30, 2006			March 31, 2006			June 30, 2005
Net premiums written(year-to-date in thousands)	$	4,863		$	2,754		$	3,027
Premiums earned (year-to-date in thousands)	$	7,793		$	3,888		$	8,507
New insurance written (year-to-date in millions)	$	56		$	32		$	—
New credit default swaps written (year-to-date in millions)	$	629		$	629		$	—
New reinsurance written (year-to-date in millions)	$	1,006		$	627		$	—
Insurance in force (in millions)	$	39,996		$	39,254		$	31,213
Risk in force (in millions)	$	2,836		$	2,760		$	2,450
Claims paid including credit default swaps(year-to-date in thousands)	$	1,275		$	644		$	1,379

Page 8

THE PMI GROUP, INC. AND SUBSIDIARIES

APPENDIX A - QUARTERLY FINANCIAL INFORMATION

PMI AUSTRALIA QUARTERLY FINANCIAL INFORMATION

	2006					2005
	2nd Quarter			1st Quarter		4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
	(Australian $ in thousands, unless otherwise noted)
Income Statement Components - Quarter Ended
Premiums earned	$	52,399		$	43,644	$	43,959		$	41,815		$	38,929		$	37,840
Net investment income	$	17,267		$	16,876	$	16,257		$	15,854		$	14,966		$	14,705
Change in fair value of foreign currency put options	$	(2,640	)	$	1,855	$	(24	)	$	(232	)	$	(422	)	$	(1,338	)
Total losses and expenses	$	24,843		$	15,789	$	17,226		$	13,632		$	15,104		$	13,788
Net income	$	29,332		$	32,546	$	31,906		$	31,079		$	26,725		$	26,487
Net income(U.S. $ in thousands)	$	21,923		$	24,054	$	23,728		$	23,623		$	20,541		$	20,584
Balance Sheet Components
Assets
Cash and investments, at fair value	$	1,257,618		$	1,219,179	$	1,197,016		$	1,147,390		$	1,090,399		$	1,037,704
Total assets	$	1,336,748		$	1,302,982	$	1,275,573		$	1,225,683		$	1,188,574		$	1,132,961
Liabilities and Shareholder’s Equity
Reserve for losses and LAE	$	16,150		$	11,489	$	11,573		$	11,156		$	12,541		$	12,549
Unearned premiums	$	431,864		$	419,207	$	415,885		$	406,661		$	395,113		$	382,781
Shareholder’s equity	$	841,116		$	822,918	$	793,045		$	757,372		$	730,113		$	689,927

PMI EUROPE QUARTERLY FINANCIAL INFORMATION

	2006						2005
	2nd Quarter			1st Quarter			4th Quarter		3rd Quarter			2nd Quarter		1st Quarter
	(Euro € in thousands, unless otherwise noted)
Income Statement Components - Quarter Ended
Premiums earned	€	3,108		€	3,232		€	3,721	€	3,749		€	3,298	€	3,321
Net investment income	€	2,157		€	1,915		€	1,730	€	2,188		€	1,951	€	2,002
Change in fair value of foreign currency put options	€	(42	)	€	(43	)	€	55	€	(3	)	€	342	€	(33	)
Change in fair value of credit default swaps	€	1,691		€	1,356		€	409	€	811		€	390	€	320
Total losses and expenses	€	2,635		€	2,692		€	3,824	€	3,244		€	3,168	€	2,031
Net income	€	2,780		€	2,451		€	1,362	€	2,276		€	1,828	€	2,326
Net income(U.S. $ in thousands)	$	3,498		$	2,949		$	1,615	$	2,774		$	2,330	$	3,049
Balance Sheet Components
Assets
Cash and investments, at fair value	€	160,424		€	182,304		€	182,559	€	182,682		€	179,698	€	172,707
Total assets	€	174,624		€	192,990		€	192,107	€	192,431		€	188,840	€	182,857
Liabilities and Shareholder’s Equity
Reserve for losses and LAE	€	12,521		€	12,581		€	12,508	€	13,019		€	13,395	€	12,807
Unearned premiums	€	17,648		€	19,077		€	20,020	€	20,808		€	22,589	€	24,719
Shareholder’s equity	€	134,518		€	132,900		€	133,818	€	133,352		€	131,452	€	125,395

Page 9

THE PMI GROUP, INC. AND SUBSIDIARIES

APPENDIX B- BUSINESS SEGMENTS RESULTS OF OPERATIONS BY QUARTER

	2006						2005
	2nd Quarter			1st Quarter			4th Quarter			3rd Quarter			2nd Quarter
	(Dollars in thousands)
U.S. Mortgage Insurance Operations(2)
Net premiums written	$	158,904		$	163,474		$	201,160		$	158,866		$	152,564
Revenues
Premiums earned	$	167,826		$	167,538		$	166,778		$	166,052		$	168,248
Net investment income		27,064			25,676			26,168			25,046			27,546
Equity in earnings from unconsolidated subsidiaries(1)		5,729			4,492			4,583			5,217			4,937
Net realized investment gains		305			237			378			2,597			1,167
Other income (loss)		7			(23	)		(3	)		3			(5	)
Total revenues		200,931			197,920			197,904			198,915			201,893
Losses and expenses
Losses and loss adjustment expenses		64,153			59,147			63,159			61,667			65,496
Amortization of deferred policy acquisition costs		13,162			13,442			14,113			14,478			15,030
Other underwriting expenses and operating expenses(7), (11)		22,970			25,911			29,057			25,260			25,278
Field office restructuring(6)		—			1,955			—			—			—
Interest expense		1			—			1			3			—
Total losses and expenses		100,286			100,455			106,330			101,408			105,804
Income before income taxes		100,645			97,465			91,574			97,507			96,089
Income taxes		28,480			27,360			21,696			27,977			26,400
Net income	$	72,165		$	70,105		$	69,878		$	69,530		$	69,689
International Operations(3)
Net premiums written	$	52,900		$	38,420		$	44,913		$	47,197		$	47,185
Revenues
Premiums earned	$	45,801		$	38,686		$	39,781		$	38,979		$	38,141
Net investment income		15,625			14,785			14,499			14,844			14,058
Net realized investment gains (losses)		252			142			(221	)		(27	)		(18	)
Other income		218			3,031			778			1,287			873
Total revenues		61,896			56,644			54,837			55,083			53,054
Losses and expenses
Losses and loss adjustment expenses		7,708			1,792			1,601			(365	)		1,739
Amortization of deferred policy acquisition costs		4,632			3,545			3,274			3,269			3,779
Other underwriting and operating expenses		10,461			9,789			12,663			11,648			10,539
Interest expense		—			—			9			—			—
Total losses and expenses		22,801			15,126			17,547			14,552			16,057
Income before income taxes		39,095			41,518			37,290			40,531			36,997
Income taxes		13,598			12,909			10,251			12,514			11,747
Net income	$	25,497		$	28,609		$	27,039		$	28,017		$	25,250
Financial Guaranty(4)
Equity in earnings from unconsolidated subsidiaries(1)	$	26,476		$	23,235		$	21,453		$	13,691		$	23,761
Interest and dividends		2			—			—			—			—
Income taxes		2,469			2,137			2,208			1,135			2,254
Net income	$	24,009		$	21,098		$	19,245		$	12,556		$	21,507
Other(5)
Net premiums written	$	11		$	10		$	27		$	19		$	13
Revenues
Premiums earned	$	16		$	17		$	18		$	19		$	19
Net investment income		6,324			6,406			4,832			4,537			4,143
Equity in earnings (losses) from unconsolidated subsidiaries(1)		82			(102	)		(165	)		(388	)		(416	)
Net realized investment (losses) gains		(1	)		(39	)		(4	)		(2,897	)		354
Other income		3,712			3,777			4,283			2,649			5,383
Total revenues		10,133			10,059			8,964			3,920			9,483
Losses and expenses
Other underwriting expenses and operating expenses(11)		19,442			22,865			17,354			17,607			18,600
Interest expense		8,066			8,179			4,644			8,455			8,472
Total losses and expenses		27,508			31,044			21,998			26,062			27,072
Loss before income tax benefits		(17,375	)		(20,985	)		(13,034	)		(22,142	)		(17,589	)
Income tax benefits		(5,319	)		(6,521	)		(4,587	)		(7,750	)		(5,728	)
Net loss	$	(12,056	)	$	(14,464	)	$	(8,447	)	$	(14,392	)	$	(11,861	)

Page 10

Exhibit 99.1

	NEWS RELEASE
	Investors and Media Contacts:
	Bill Horning / Beth Haiken
	925.658.6193 / 925.658.6192

THE PMI GROUP, INC. REPORTS SECOND QUARTER 2006 NET

INCOME OF $109.6 MILLION, OR $1.14 PER DILUTED SHARE

Walnut Creek, CA, August 3, 2006 - The PMI Group, Inc. (NYSE: PMI) (the “Company”) today reported net income of $109.6 million for the second quarter of 2006 compared to net income of $104.6 million for the second quarter of 2005. Net income per diluted share grew by approximately 10 percent to $1.14 for the second quarter of 2006 compared to $1.04 for the second quarter of 2005.

Highlights in the second quarter of 2006 include:

• U.S. Mortgage Insurance Operations¹— growth in premiums written, premiums earned and average premium rate as well as favorable credit performance with a sequential decline in delinquencies and claims paid;

• International Operations² — solid growth in PMI Australia’s new insurance written, insurance in force and risk in force partially offset by credit performance trending towards historic norms;

• Financial Guaranty³— continued expansion of FGIC’s operations, strong premium earnings and favorable credit performance;

• Common Share Repurchases — the Company repurchased approximately 3.2 million common shares in the second quarter of 2006 at a cost of $146.5 million.

Consolidated Operating Results

Consolidated net premiums written for the second quarter and year to date totaled $211.8 million and $413.7 million, respectively, compared to $199.8 million and $393.5 million for the same periods a year ago. The increases were due primarily to an increase in average premium rates and average insured loan balances in U.S. Mortgage Insurance Operations and an increase in new insurance written in PMI Australia.

1 “U.S. Mortgage Insurance Operations” includes the results of PMI Mortgage Insurance Co. (PMI) and affiliated U.S. reinsurance companies and equity in earnings from CMG Mortgage Insurance Company (CMG).

2 “International Operations” includes the results of PMI Australia, PMI Europe and PMI Asia.

3 “Financial Guaranty” includes our equity earnings from our investments in Financial Guaranty Insurance Company, Inc. (FGIC) and RAM Reinsurance Company Ltd. (RAM Re).

Page 1

Consolidated premiums earned for the second quarter and year to date were $213.6 million and $419.9 million, respectively, compared to $206.4 million and $406.0 million for the same periods a year ago. The increases were due to higher average premium rates and increased premiums from modified pool products in U.S. Mortgage Insurance Operations, and higher premiums earned as a result of higher new insurance written and higher insurance in force in PMI Australia.

Consolidated other underwriting and operating expensesfor the second quarter and year to date were $52.9 million and $111.4 million, respectively, compared to $54.4 million and $100.1 million for the same periods one year ago. The decrease in the second quarter of 2006 was due primarily to declines in the fair value of certain deferred compensation plans and was partially offset by stock option-related expenses. The increase in the first half of 2006 compared to the corresponding period in 2005 was primarily due to the requirement to begin expensing stock options and Employee Stock Purchase Plan related expenses in 2006 and higher operating expenses in International Operations.

Consolidated losses and loss adjustment expenses for the second quarter and six months to date were $71.9 million and $132.8 million, respectively, compared to $67.2 million and $131.7 million in the same periods last year. The increases in the second quarter and the first six months of 2006 were primarily a result of loss reserve additions during the six months ended June 30, 2006 in U.S. Mortgage Insurance Operations and PMI Australia, partially offset by decreases in primary claims paid in U.S. Mortgage Insurance Operations in the second quarter and first six months of 2006 compared to the same periods in 2005.

Consolidated reserve for losses and loss adjustment expenses totaled $384.6 million as of June 30, 2006 compared to $369.9 million as of March 31, 2006 and $364.4 million as of June 30, 2005. Loss reserves in U.S. Mortgage Insurance Operations increased by $9.2 million in the second quarter of 2006 primarily due to higher expected claim rates and claim sizes. PMI Australia’s reserve for losses increased by $3.6 million primarily due to an increase in delinquent loans, and higher expected average claim size and claim rates.

The PMI Group, Inc. Second Quarter Results by Segment

	Second Quarter Total Revenues						Second Quarter Net Income
(Dollars in millions, except per share data)	2006		2005		% Change		2006			2005			% Change
U.S. Mortgage Insurance Operations	$	200.9	$	201.9	(0.5	%)	$	72.2		$	69.7		3.6	%
International Operations		61.9		53.1	16.6	%		25.4			25.3		0.4	%
Financial Guaranty		26.5		23.8	11.3	%		24.0			21.5		11.6	%
Other4		10.1		9.4	n.m.			(12.0	)		(11.9	)	n.m.
Total	$	299.4	$	288.2	3.9	%	$	109.6		$	104.6		4.8	%
Diluted Net Income Per Share							$	1.14		$	1.04		9.6	%
Book Value Per Share							$	38.11		$	35.29		8.0	%

May not total due to rounding.

n.m. – Not meaningful

4 The “Other” segment primarily consists of the holding company, contract underwriting operations and Select Portfolio Servicing, Inc. (SPS) prior to its disposition on October 4, 2005.

Page 2

The PMI Group, Inc. Year to Date Results by Segment

	Six Months Ended June 30, 2006 Total Revenues						Six Months Ended June 30, 2006 Net Income
(Dollars in millions, except per share data)	2006		2005		% Change		2006			2005			% Change
U.S. Mortgage Insurance Operations	$	398.9	$	396.1	0.7	%	$	142.3		$	136.0		4.6	%
International Operations		118.5		102.5	15.6	%		54.1			50.4		7.3	%
Financial Guaranty		49.7		44.6	11.4	%		45.1			40.4		11.6	%
Other4		20.2		19.9	n.m.			(26.5	)		(21.1	)	n.m.
Total	$	587.3	$	563.0	4.3	%	$	215.0		$	205.7		4.5	%
Diluted Net Income Per Share							$	2.23		$	2.03		9.9	%

May not total due to rounding.

n.m. – Not meaningful

Segment Highlights

U.S. Mortgage Insurance Operations

• Net premiums written increased by 4.1% in the second quarter of 2006, growing to $158.9 million from $152.6 million in the second quarter of 2005. The increase was due primarily to an increase in average premium rates and average insured loan balances in 2006.

• Total incurred losses were $64.2 million compared to $65.5 million in the second quarter of 2005 driven by a decrease in primary claims paid, partially offset by an increase in reserves for losses.

• Primary claims paid decreased to $47.5 million for the second quarter of 2006 compared to $57.7 million in the second quarter of 2005 driven by a decline in the number of claims paid partially offset by an increase in average claim size.

• Equity in earnings from CMG for the second quarter 2006 increased 16.3% year over year to $5.7 million compared to $4.9 million for the second quarter of 2005 as a result of release of loss reserves and increases in primary insurance and risk in force.

• PMI Mortgage Insurance Co., Inc. has received approval from the Arizona Department of Insurance to pay a $250 million extraordinary dividend to The PMI Group, Inc.

International Operations

• PMI Australia reported net income of $21.9 million for the second quarter of 2006 compared to $20.5 million for the second quarter of 2005. The increase in net income was due primarily to an increase in premiums earned and net investment income, partially offset by an increase in losses and LAE expenses and the weakening of the Australian dollar relative to the U.S. dollar. In functional currency, PMI Australia’s net income increased by 9.7% to AUD $29.3 million in the second quarter of 2006 from AUD $26.7 million in the second quarter of 2005.

• PMI Europe reported that net income grew by 52.2% to $3.5 million in the second quarter of 2006 compared to $2.3 million for the same period a year ago. Net income in the second quarter of 2006

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was positively impacted by changes in the fair value of credit default swap derivative contracts. In functional currency, net income from PMI Europe for the second quarter of 2006 was €2.8 million compared to €1.8 million for the same period a year ago.

• PMI Asia is a new legal entity created in the second quarter of 2006 resulting from the restructuring of PMI Hong Kong. PMI Asia’s net income in the second quarter of 2006 was negatively impacted by a one-time $1.1 million U.S. tax charge resulting from the transfer of the mortgage reinsurance portfolio from PMI Hong Kong. As a result of the restructuring, PMI Asia will realize the benefit of a lower tax rate of approximately 17.5% in future periods. PMI Asia’s net income for the second quarter 2006 totaled $0.1 million compared to $2.4 million for the same period a year ago.

Financial Guaranty

• Equity in earnings from FGIC for the second quarter and year to date totaled $22.9 million (after tax) and $43.2 million (after tax), respectively, compared to $20.5 million (after tax) and $38.6 million (after tax) for the same periods a year ago. The increases were attributable to premium growth and higher investment income, partially offset by decreases in refundings and higher underwriting expenses due to an increase in the number of employees.

• Equity in earnings from RAM Re for the first quarter and year to date were $1.1 million (after tax) and $1.9 million (after tax), respectively, compared to $1.0 million (after tax) and $1.8 million (after tax) for the same periods a year ago.

ABOUT THE PMI GROUP, INC.

The PMI Group, Inc. (NYSE: PMI), headquartered in Walnut Creek, CA, is an international provider of credit enhancement products that promote homeownership and facilitate 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, financial guaranty insurance, and financial guaranty reinsurance. Through its subsidiaries, The PMI Group, Inc. is one of the world’s largest providers of private mortgage insurance with operations in the United States, Australia, New Zealand, and the European Union, as well as one of the largest providers of mortgage guaranty reinsurance in Hong Kong.

Cautionary Statement: Statements in this earnings 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. Readers are cautioned that 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. Risks and uncertainties that could affect the Company are discussed in our Form 10-K for the year ended December 31, 2005 and Form 10-Q for the quarter ended March 31, 2006 and include changes in economic conditions such as interest rates, home values, employment rates and refinance activity. We undertake no obligation to update forward-looking statements.

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