| | | | |
| | | | Exhibit 99.1 NEWS RELEASE Investors and Media Contacts: Bill Horning / Beth Haiken 925.658.6193 / 925.658.6192 |
THE PMI GROUP, INC. REPORTS THIRD QUARTER 2006 NET
INCOME OF $104.2 MILLION, OR $1.16 PER DILUTED SHARE
Walnut Creek, CA, November 2, 2006 - The PMI Group, Inc. (NYSE: PMI) (the “Company”) today reported net income of $104.2 million for the third quarter of 2006 compared to net income of $95.7 million for the third quarter of 2005. Net income per diluted share grew by approximately 20 percent to $1.16 for the third quarter of 2006 compared to $0.97 for the third quarter of 2005. The increase was due to improved performance in all business segments of the Company’s operations, a reduced number of common shares outstanding and a favorable comparison with the third quarter of 2005 when the Company’s equity earnings from FGIC were adversely impacted by Hurricane Katrina.
Highlights in the third quarter of 2006 include:
| | • | | U.S. Mortgage Insurance Operations1 — solid growth in premiums written, premiums earned, average premium rate and net investment income as well as increased persistency and continued expense reductions from field office restructurings; |
| | • | | International Operations2 — PMI Australia reported record net income along with solid growth in premiums earned and net investment income while also strengthening loss reserves. PMI Europe grew net premiums written, new insurance written and insurance in force as well as continued expansion of PMI’s European presence; |
| | • | | Financial Guaranty3 — FGIC reported strong premium earnings, increased net investment income and favorable credit performance; |
| | • | | Common Share Repurchases — the Company entered into an accelerated stock buyback program pursuant to which it will purchase common stock for an aggregate purchase price of $345 million. The maximum number of shares to be repurchased under the program has been set at 8.2 million common shares and the minimum number has been set at 7.2 million |
| 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). |
| 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. |
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| | representing a purchase price range per common share from $41.88 to $47.99, respectively. The actual number of shares received and the average per share cost will depend on the weighted average share price of common stock over the period of the program which will terminate no later than April 2007. In the third quarter of 2006, the Company received the minimum allotment of approximately 7.2 million common shares. The Company will receive additional common shares at the program’s expiration to the extent the Company’s weighted average common share net price does not exceed $47.99 during the program. During the third quarter of 2006, the Company also entered into a Rule 10b5-1 Plan for the purchase of up to $40 million of additional common shares. |
| | • | | New Revolving Credit Facility – the Company entered into a new five-year $400 million revolving credit facility with a consortium of lenders. The facility may be expanded up to $500 million with the approval of the lenders. |
| | • | | Book value per share ended the third quarter at $39.14, an increase of approximately 10% from third quarter of 2005. |
Consolidated Operating Results
Consolidated net premiums written for the third quarter and year to date totaled $212.4 million and $626.1 million, respectively, compared to $206.1 million and $599.6 million for the same periods one year ago. The increases, on a year over year comparison, were due primarily to an increase in average premium rates and average insured loan balances in U.S. Mortgage Insurance Operations and higher new insurance written in PMI Australia.
Consolidated premiums earned for the third quarter and year to date were $214.9 million and $634.8 million, respectively, compared to $205.1 million and $611.0 million for the same periods one year ago. The increases, on a year over year comparison, were due to higher average premium rates, higher new insurance written, insurance in force growth and a release of unearned premiums on terminated policies in PMI Australia, and higher average premium rates and loan sizes in U.S. Mortgage Insurance Operations.
Consolidated other underwriting and operating expensesfor the third quarter and year to date were $56.2 million and $169.6 million, respectively, compared to $54.5 million and $154.6 million for the same periods one year ago. The increases in the third quarter and first nine months of 2006, compared to the same periods in 2005, were due primarily to stock option and employee stock purchase plan related expenses, partially offset by savings from field office restructurings in U.S. Mortgage Insurance Operations.
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Consolidated losses and loss adjustment expenses for the third quarter and year to date were $79.6 million and $212.4 million, respectively, compared to $61.3 million and $193.0 million in the same periods last year. The increase in the third quarter of 2006, compared to the same period in 2005, was primarily a result of loss reserve additions and an increase in claims paid in U.S. Mortgage Insurance Operations, PMI Australia and, to a lesser extent, PMI Europe. The increase in the first nine months of 2006 compared to the same period in 2005 was due primarily to reserve additions and an increase in paid claims in PMI Australia and PMI Europe.
Consolidated reserve for losses and loss adjustment expenses totaled $394.2 million as of September 30, 2006 compared to $384.6 million as of June 30, 2006 and $366.3 million as of September 30, 2005. Loss reserves in U.S. Mortgage Insurance Operations increased $3.0 million in the third quarter of 2006, compared to second quarter of 2006, primarily due to higher expected claim rates and claim sizes. PMI Australia’s reserve for losses increased $6.1 million in the third quarter, compared to the second quarter of 2006, primarily due to an increase in delinquent loans, and higher expected average claim sizes and claim rates.
| | | | | | | | | | | | | | | | | | | | |
| The PMI Group, Inc. Third Quarter Results by Segment | |
| | |
| | | Third Quarter Total Revenues | | | Third Quarter Net Income | |
(Dollars in millions, except per share data) | | 2006 | | 2005 | | % Change | | | 2006 | | | 2005 | | | % Change | |
U.S. Mortgage Insurance Operations | | $ | 201.8 | | $ | 198.9 | | 1.5 | % | | $ | 70.8 | | | $ | 69.5 | | | 1.9 | % |
International Operations | | | 68.6 | | | 55.1 | | 24.5 | % | | | 29.4 | | | | 28.0 | | | 5.0 | % |
Financial Guaranty | | | 26.5 | | | 13.7 | | 93.4 | % | | | 23.7 | | | | 12.6 | | | 88.1 | % |
Other4 | | | 4.0 | | | 3.9 | | 2.6 | % | | | (19.8 | ) | | | (14.4 | ) | | n.m. | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 300.9 | | $ | 271.6 | | 10.8 | % | | $ | 104.2 | | | $ | 95.7 | | | 8.9 | % |
| | | | | | | | | | | | | | | | | | | | |
Diluted Net Income Per Share | | | | | | | | | | | $ | 1.16 | | | $ | 0.97 | | | 19.6 | % |
Book Value Per Share | | | | | | | | | | | $ | 39.14 | | | $ | 35.69 | | | 9.6 | % |
May not total due to rounding.
n.m. – Not meaningful
| | | | | | | | | | | | | | | | | | | | |
| The PMI Group, Inc. Year to Date Results by Segment | |
| | |
| | | Nine Months Ended September 30 Total Revenues | | | Nine Months Ended September 30 Net Income | |
(Dollars in millions, except per share data) | | 2006 | | 2005 | | % Change | | | 2006 | | | 2005 | | | % Change | |
U.S. Mortgage Insurance Operations | | $ | 600.7 | | $ | 595.0 | | 1.0 | % | | $ | 213.1 | | | $ | 205.6 | | | 3.6 | % |
International Operations | | | 187.1 | | | 157.6 | | 18.7 | % | | | 83.5 | | | | 78.4 | | | 6.5 | % |
Financial Guaranty | | | 76.3 | | | 58.3 | | 30.9 | % | | | 68.8 | | | | 53.0 | | | 29.8 | % |
Other4 | | | 24.2 | | | 23.8 | | n.m. | | | | (46.3 | ) | | | (35.5 | ) | | n.m. | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 888.2 | | $ | 834.6 | | 6.4 | % | | $ | 319.2 | | | $ | 301.5 | | | 5.9 | % |
| | | | | | | | | | | | | | | | | | | | |
Diluted Net Income Per Share | | | | | | | | | | | $ | 3.38 | | | $ | 3.00 | | | 12.7 | % |
May not total due to rounding.
n.m. – Not meaningful
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Segment Highlights
U.S. Mortgage Insurance Operations
| • | | Net premiums earned increased to $168.1 million from $166.1 million in the third quarter of 2005. The increase was due primarily to increases in average premium rates and average insured loan balances in 2006. |
| • | | Total incurred losses in the third quarter of 2006 were $67.7 million compared to $61.7 million in the third quarter of 2005 driven by increases in primary claims paid, average claim size, average claim rate and loss reserves. |
| • | | Primary claims paid increased to $57.3 million for the third quarter of 2006 compared to $50.2 million in the third quarter of 2005 driven by an increase in the number of claims paid and an increase in average claim size. |
| • | | Equity in earnings from CMG for the third quarter 2006 was $5.0 million, compared to $5.2 million for the same period in 2005. The decline was due to increases in both losses and underwriting and operations expense. CMG’s portfolio remains strong as insurance in force grew to $16.1 billion, persistency increased to 75.6% and the primary default rate was less than one percent. |
International Operations
| • | | PMI Australia reported quarterly net income of $24.7 million for the third quarter of 2006 compared to $23.6 million for the third 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 loss adjusted expenses. In functional currency, PMI Australia’s net income increased by 5.1% to AUD $32.7 million in the third quarter of 2006 from AUD $31.1 million in the third quarter of 2005. |
| • | | PMI Europe reported that net income was $2.0 million in the third quarter of 2006 compared to $2.8 million for the same period a year ago. Net income in the third quarter of 2006 was impacted by increased expenses associated with additions to the loss reserve and operations expansion. In functional currency, net income from PMI Europe for the third quarter of 2006 was €1.6 million compared to €2.3 million for the same period a year ago. |
| • | | PMI Asia’s net income in the third quarter of 2006 totaled $2.7 million compared to $1.6 million for the same period a year ago. The increase in net income was due primarily to an increase in reinsurance premiums earned and net investment income. As a result of the previous period ending restructuring, the tax rate for PMI Asia decreased to 17.5% beginning in July 2006. |
Financial Guaranty
| • | | After-tax equity in earnings from FGIC for the third quarter and year to date totaled $21.9 million and $65.1 million, respectively, compared to $12.5 million and $51.1 million for the same periods a year ago. FGIC’s third quarter and year to date 2005 financial results were adversely impacted by $5.3 |
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| | million in after-tax charges and reserves related to Hurricane Katrina. The increases in 2006 results were attributable to premiums earned growth, notwithstanding the lower levels of refundings, higher net investment income and decreases in losses and loss adjustment expenses. |
| • | | After-tax equity in earnings from RAM Re for quarter and year to date were $1.9 million and $3.8 million, respectively, compared to $50 thousand and $1.9 million for the same periods one 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 June 30, 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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THE PMI GROUP, INC. AND SUBSIDIARIES (the “Company”)
FINANCIAL RESULTS AND STATISTICAL INFORMATION FOR THE PERIOD ENDED SEPTEMBER 30, 2006
Contents
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Consolidated Statements of Operations and Balance Sheets | | Page 2 |
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Business Segments Results of Operations - Three Months Ended September 30, 2006 and 2005 | | Page 3 |
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Business Segments Results of Operations - Nine Months Ended September 30, 2006 and 2005 | | Page 4 |
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Business Segments Balance Sheets | | Page 5 |
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U.S. Mortgage Insurance Operations Analysis of Reserve for Losses and LAE and Financial and Statistical Information | | Page 6 |
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U.S. Mortgage Insurance Operations Financial and Statistical Information | | Page 7 |
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CMG Mortgage Insurance Company, PMI Australia and PMI Europe Financial and Statistical Information | | Page 8 |
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Appendix A - PMI Australia and PMI Europe Quarterly Financial Information | | Page 9 |
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Appendix B - Business Segments Results of Operations by Quarter | | Page 10 |
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Appendix C - PMI Australia Financial and Statistical Information | | Page 11 |
Please refer to the following when noted:
| (1) | For the quarter and nine months ended September 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) | Other underwriting and operating expenses from the “Other” segment includes charges of $1.9 million (after tax) and $7.6 million (after tax) for stock option expenses and related stock based compensation expenses in the third quarter and in the nine months ended September 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) | 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. |
| (12) | The $1.0 million reversal relates to the settlement in 2001 of theBaynham class action litigation. |
| (13) | In the third quarter of 2006, we remarketed $345 million of our 3.0% senior notes related to the Hybrid Income Term Security Units (HITS). Subsequent to the remarketing, we purchased $300 million of the 3.0% senior notes for approximately $299 million. As a result of remarketing, the interest rate of the remaining $45 million in senior notes was reset from 3.0% to 5.568%. Also during the third quarter of 2006, we issued $250 million 6.0% senior notes, which will mature on September 15, 2016 and $150 million 6.625% senior notes, which will mature on September 15, 2036. Lastly, during the third quarter of 2006, we exchanged our $360 million senior convertible debentures (CoCos) to include a net share settlement feature. |
| (14) | In the third quarter of 2006, we entered into an accelerated stock buyback program pursuant to which we will purchase common stock for an aggregate purchase price of $345 million. The maximum number of shares to be repurchased under the program has been set at 8.2 million common shares and the minimum number has been set at 7.2 million representing a purchase price range per common share from $41.88 to $47.99, respectively. The actual number of shares received and the average per share cost will depend on the weighted average share price of common stock over the period of the program which will terminate no later than April 2007. In the third quarter of 2006, we received the minimum allotment of approximately 7.2 million common shares. We will receive additional common shares at the program’s expiration to the extent our weighted average common share net price does not exceed $47.99 during the program. We entered into a $345 million bridge loan in connection with the accelerated share repurchase program. |
| (15) | Following the completion of the exchange offer in August 2006, approximately $341 million, or 95% of the CoCos were exchanged. The addition of the net share settlement feature to the exchanged debentures decreased the dilutive effect of the CoCos for the purpose of calculating diluted EPS for the three months and nine months ended September 30, 2006. |
| 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. |
THE PMI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 |
| | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | | | (Unaudited) |
| | | (Dollars and shares, except per share data, in thousands) |
Net premiums written | | $ | 212,426 | | | $ | 206,082 | | | $ | 626,145 | | | $ | 599,589 |
| | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | |
Premiums earned | | $ | 214,903 | | | $ | 205,050 | | | $ | 634,787 | | | $ | 611,025 |
Net investment income | | | 49,680 | | | | 44,427 | | | | 145,561 | | | | 133,964 |
Equity in earnings from unconsolidated subsidiaries(1) | | | 31,491 | | | | 18,520 | | | | 91,404 | | | | 72,014 |
Net realized investment gains (losses) | | | 726 | | | | (327 | ) | | | 1,621 | | | | 1,897 |
Other income | | | 4,120 | | | | 3,939 | | | | 14,843 | | | | 15,725 |
| | | | | | | | | | | | | | | |
Total revenues | | | 300,920 | | | | 271,609 | | | | 888,216 | | | | 834,625 |
| | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 79,603 | | | | 61,302 | | | | 212,403 | | | | 193,019 |
Amortization of deferred policy acquisition costs | | | 16,701 | | | | 17,747 | | | | 51,482 | | | | 57,000 |
Other underwriting and operating expenses(7) | | | 56,307 | | | | 54,515 | | | | 167,744 | | | | 154,575 |
Field office restructuring(6) | | | — | | | | — | | | | 1,955 | | | | — |
Net costs to exchange and extinguish long-term debt(13) | | | 875 | | | | — | | | | 875 | | | | — |
Litigation settlement charge reversal(12) | | | (999 | ) | | | — | | | | (999 | ) | | | — |
Interest expense | | | 9,486 | | | | 8,458 | | | | 25,732 | | | | 26,483 |
| | | | | | | | | | | | | | | |
Total losses and expenses | | | 161,973 | | | | 142,022 | | | | 459,192 | | | | 431,077 |
| | | | | | | | | | | | | | | |
Income before income taxes | | | 138,947 | | | | 129,587 | | | | 429,024 | | | | 403,548 |
Income taxes | | | 34,709 | | | | 33,876 | | | | 109,823 | | | | 102,094 |
| | | | | | | | | | | | | | | |
Net income | | $ | 104,238 | | | $ | 95,711 | | | $ | 319,201 | | | $ | 301,454 |
| | | | | | | | | | | | | | | |
| | | | |
Diluted net income per share | | $ | 1.16 | | | $ | 0.97 | | | $ | 3.38 | | | $ | 3.00 |
| | | | | | | | | | | | | | | |
| | | | |
Reconciliation of earnings per share | | | | | | | | | | | | | | | |
Net income | | $ | 104,238 | | | $ | 95,711 | | | $ | 319,201 | | | $ | 301,454 |
Plus: Interest expense on contingently convertible debt, net of income taxes (15) | | | 799 | | | | 1,912 | | | | 3,513 | | | | 5,736 |
| | | | | | | | | | | | | | | |
Net income adjusted for diluted earnings per share calculation | | $ | 105,037 | | | $ | 97,623 | | | $ | 322,714 | | | $ | 307,190 |
| | | | | | | | | | | | | | | |
Share data: | | | | | | | | | | | | | | | |
Basic weighted average common shares outstanding | | | 85,319 | | | | 91,019 | | | | 87,557 | | | | 92,577 |
Stock options and other dilutive components | | | 1,029 | | | | 1,835 | | | | 1,125 | | | | 1,777 |
Common stock equivalent shares related to contingently convertible debt | | | 4,453 | | | | 8,153 | | | | 6,906 | | | | 8,153 |
| | | | | | | | | | | | | | | |
Diluted weighted average common shares outstanding | | | 90,801 | | | | 101,007 | | | | 95,588 | | | | 102,507 |
| | | | | | | | | | | | | | | |
Share repurchase data: | | | | | | | | | | | | | | | |
Common shares repurchased(14) | | | 7,189 | | | | 2,583 | | | | 10,491 | | | | 5,192 |
| | | | | | | | | | | | | | | |
Average price paid per common share repurchased (including commissions) | | | * | | | $ | 40.83 | | | | * | | | $ | 39.58 |
| | | | | | | | | | | | | | | |
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | |
| | | September 30,
2006 | | December 31,
2005 | | September 30,
2005 |
| | | (Unaudited) | | | | (Unaudited) |
| | | (Dollars and shares, except per share data, in thousands) |
Assets | | | | | | | | | |
Cash and investments, at fair value | | $ | 4,049,505 | | $ | 3,789,432 | | $ | 3,638,112 |
Investments in unconsolidated subsidiaries(1) | | | 1,062,897 | | | 984,925 | | | 967,735 |
Equity investment held for sale(1) | | | — | | | — | | | 108,469 |
Related party receivables | | | 614 | | | 2,864 | | | 7,060 |
Reinsurance receivables, reinsurance recoverables and prepaid premiums | | | 21,371 | | | 30,338 | | | 28,493 |
Deferred policy acquisition costs | | | 82,630 | | | 86,170 | | | 87,049 |
Other assets | | | 367,567 | | | 360,407 | | | 343,241 |
| | | | | | | | | |
Total assets | | $ | 5,584,584 | | $ | 5,254,136 | | $ | 5,180,159 |
| | | | | | | | | |
Liabilities | | | | | | | | | |
Reserve for losses and loss adjustment expenses | | $ | 394,210 | | $ | 368,841 | | $ | 366,335 |
Unearned premiums | | | 489,838 | | | 490,899 | | | 462,424 |
Bridge loan(14) | | | 345,000 | | | — | | | — |
Long-term debt(13) | | | 919,435 | | | 819,529 | | | 819,529 |
Other liabilities | | | 327,949 | | | 344,077 | | | 335,520 |
| | | | | | | | | |
Total liabilities | | | 2,476,432 | | | 2,023,346 | | | 1,983,808 |
Shareholders’ equity | | | 3,108,152 | | | 3,230,790 | | | 3,196,351 |
| | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 5,584,584 | | $ | 5,254,136 | | $ | 5,180,159 |
| | | | | | | | | |
Basic shares issued and outstanding | | | 79,421 | | | 88,713 | | | 89,550 |
| | | | | | | | | |
Book value per share | | $ | 39.14 | | $ | 36.42 | | $ | 35.69 |
| | | | | | | | | |
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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 September 30, 2006 (Unaudited) | |
| | | (Dollars in thousands) | |
| | | | | |
Net premiums written | | $ | 160,468 | | | $ | 51,942 | | | $ | — | | | $ | 16 | | | $ | 212,426 | |
| | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 168,118 | | | $ | 46,766 | | | $ | — | | | $ | 19 | | | $ | 214,903 | |
Net investment income | | | 27,082 | | | | 17,442 | | | | (1 | ) | | | 5,157 | | | | 49,680 | |
Equity in earnings from unconsolidated subsidiaries(1) | | | 5,010 | | | | — | | | | 26,549 | | | | (68 | ) | | | 31,491 | |
Net realized investment gains (losses) | | | 1,620 | | | | 3,452 | | | | — | | | | (4,346 | ) | | | 726 | |
Other income (loss) | | | (22 | ) | | | 938 | | | | — | | | | 3,204 | | | | 4,120 | |
| | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 201,808 | | | | 68,598 | | | | 26,548 | | | | 3,966 | | | | 300,920 | |
| | | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 67,699 | | | | 11,907 | | | | — | | | | (3 | ) | | | 79,603 | |
Amortization of deferred policy acquisition costs | | | 12,830 | | | | 3,871 | | | | — | | | | — | | | | 16,701 | |
Other underwriting and operating expenses (7) | | | 23,618 | | | | 11,205 | | | | — | | | | 21,484 | | | | 56,307 | |
Net costs to exchange and extinguish long-term debt(13) | | | — | | | | — | | | | — | | | | 875 | | | | 875 | |
Litigation settlement charge reversal(12) | | | (999 | ) | | | — | | | | | | | | — | | | | (999 | ) |
Interest expense | | | 1 | | | | 124 | | | | — | | | | 9,361 | | | | 9,486 | |
| | | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 103,149 | | | | 27,107 | | | | — | | | | 31,717 | | | | 161,973 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 98,659 | | | | 41,491 | | | | 26,548 | | | | (27,751 | ) | | | 138,947 | |
Income tax (benefit) | | | 27,819 | | | | 12,048 | | | | 2,820 | | | | (7,978 | ) | | | 34,709 | |
| | | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 70,840 | | | $ | 29,443 | | | $ | 23,728 | | | $ | (19,773 | ) | | $ | 104,238 | |
| | | | | | | | | | | | | | | | | | | | |
Expense ratio(8) | | | 22.1 | % | | | 29.0 | % | | | | | | | | | | | | |
Loss ratio(8) | | | 40.3 | % | | | 25.5 | % | | | | | | | | | | | | |
Combined ratio | | | 62.4 | % | | | 54.5 | % | | | | | | | | | | | | |
| |
| | | Three Months Ended September 30, 2005 (Unaudited) | |
| | | (Dollars in thousands) | |
| | | | | |
Net premiums written | | $ | 158,866 | | | $ | 47,197 | | | $ | — | | | $ | 19 | | | $ | 206,082 | |
| | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 166,052 | | | $ | 38,979 | | | $ | — | | | $ | 19 | | | $ | 205,050 | |
Net investment income | | | 25,046 | | | | 14,844 | | | | — | | | | 4,537 | | | | 44,427 | |
Equity in earnings from unconsolidated subsidiaries(1) | | | 5,217 | | | | — | | | | 13,691 | | | | (388 | ) | | | 18,520 | |
Net realized investment gains (losses) | | | 2,597 | | | | (27 | ) | | | — | | | | (2,897 | ) | | | (327 | ) |
Other income (loss) | | | 3 | | | | 1,287 | | | | — | | | | 2,649 | | | | 3,939 | |
| | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 198,915 | | | | 55,083 | | | | 13,691 | | | | 3,920 | | | | 271,609 | |
| | | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 61,667 | | | | (365 | ) | | | — | | | | — | | | | 61,302 | |
Amortization of deferred policy acquisition costs | | | 14,478 | | | | 3,269 | | | | — | | | | — | | | | 17,747 | |
Other underwriting and operating expenses | | | 25,260 | | | | 11,648 | | | | — | | | | 17,607 | | | | 54,515 | |
Interest expense | | | 3 | | | | — | | | | — | | | | 8,455 | | | | 8,458 | |
| | | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 101,408 | | | | 14,552 | | | | — | | | | 26,062 | | | | 142,022 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 97,507 | | | | 40,531 | | | | 13,691 | | | | (22,142 | ) | | | 129,587 | |
Income tax (benefit) | | | 27,977 | | | | 12,514 | | | | 1,135 | | | | (7,750 | ) | | | 33,876 | |
| | | | | | | | | | | | | | | | | | | | |
Net Income (loss) | | $ | 69,530 | | | $ | 28,017 | | | $ | 12,556 | | | $ | (14,392 | ) | | $ | 95,711 | |
| | | | | | | | | | | | | | | | | | | | |
Expense ratio(8) | | | 25.0 | % | | | 31.6 | % | | | | | | | | | | | | |
Loss ratio (8) | | | 37.1 | % | | | (0.9 | )% | | | | | | | | | | | | |
Combined ratio | | | 62.1 | % | | | 30.7 | % | | | | | | | | | | | | |
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 | |
| | | Nine Months Ended September 30, 2006 (Unaudited) | |
| | | (Dollars in thousands) | |
Net premiums written | | $ | 482,846 | | | $ | 143,263 | | | $ | — | | $ | 36 | | | $ | 626,145 | |
| | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 503,482 | | | $ | 131,252 | | | $ | — | | $ | 53 | | | $ | 634,787 | |
Net investment income | | | 79,823 | | | | 47,852 | | | | 1 | | | 17,885 | | | | 145,561 | |
Equity in earnings (loss) from unconsolidated subsidiaries(1) | | | 15,231 | | | | — | | | | 76,260 | | | (87 | ) | | | 91,404 | |
Net realized investment gains (losses) | | | 2,162 | | | | 3,846 | | | | — | | | (4,387 | ) | | | 1,621 | |
Other (loss) income | | | (38 | ) | | | 4,185 | | | | — | | | 10,696 | | | | 14,843 | |
| | | | | | | | | | | | | | | | | | | |
Total revenues | | | 600,660 | | | | 187,135 | | | | 76,261 | | | 24,160 | | | | 888,216 | |
| | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 190,999 | | | | 21,407 | | | | — | | | (3 | ) | | | 212,403 | |
Amortization of deferred policy acquisition costs | | | 39,434 | | | | 12,048 | | | | — | | | — | | | | 51,482 | |
Other underwriting and operating expenses(7) | | | 72,499 | | | | 31,454 | | | | — | | | 63,791 | | | | 167,744 | |
Field office restructuring(6) | | | 1,955 | | | | — | | | | — | | | — | | | | 1,955 | |
Net costs to exchange and extinguish long-term debt(13) | | | — | | | | — | | | | — | | | 875 | | | | 875 | |
Litigation settlement charge reversal(12) | | | (999 | ) | | | — | | | | — | | | — | | | | (999 | ) |
Interest expense | | | 2 | | | | 124 | | | | — | | | 25,606 | | | | 25,732 | |
| | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 303,890 | | | | 65,033 | | | | — | | | 90,269 | | | | 459,192 | |
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 296,770 | | | | 122,102 | | | | 76,261 | | | (66,109 | ) | | | 429,024 | |
Income tax (benefit) | | | 83,660 | | | | 38,554 | | | | 7,426 | | | (19,817 | ) | | | 109,823 | |
| | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 213,110 | | | $ | 83,548 | | | $ | 68,835 | | $ | (46,292 | ) | | $ | 319,201 | |
| | | | | | | | | | | | | | | | | | | |
Expense ratio(8) | | | 23.4 | % | | | 30.4 | % | | | | | | | | | | | |
Loss ratio(8) | | | 37.9 | % | | | 16.3 | % | | | | | | | | | | | |
Combined ratio | | | 61.3 | % | | | 46.7 | % | | | | | | | | | | | |
| |
| | | Nine Months Ended September 30, 2005 (Unaudited) | |
| | | (Dollars in thousands) | |
Net premiums written | | $ | 465,968 | | | $ | 133,567 | | | $ | — | | $ | 54 | | | $ | 599,589 | |
| | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 498,412 | | | $ | 112,555 | | | $ | — | | $ | 58 | | | $ | 611,025 | |
Net investment income | | | 78,171 | | | | 42,657 | | | | — | | | 13,136 | | | | 133,964 | |
Equity in earnings (losses) from unconsolidated subsidiaries(1) | | | 14,228 | | | | — | | | | 58,299 | | | (513 | ) | | | 72,014 | |
Net realized investment gains (losses) | | | 4,184 | | | | 296 | | | | — | | | (2,583 | ) | | | 1,897 | |
Other income | �� | | 2 | | | | 2,047 | | | | — | | | 13,676 | | | | 15,725 | |
| | | | | | | | | | | | | | | | | | | |
Total revenues | | | 594,997 | | | | 157,555 | | | | 58,299 | | | 23,774 | | | | 834,625 | |
| | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 190,281 | | | | 2,738 | | | | — | | | — | | | | 193,019 | |
Amortization of deferred policy acquisition costs | | | 45,534 | | | | 11,466 | | | | — | | | — | | | | 57,000 | |
Other underwriting and operating expenses | | | 74,092 | | | | 29,191 | | | | — | | | 51,292 | | | | 154,575 | |
Interest expense | | | 4 | | | | — | | | | — | | | 26,479 | | | | 26,483 | |
| | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 309,911 | | | | 43,395 | | | | — | | | 77,771 | | | | 431,077 | |
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 285,086 | | | | 114,160 | | | | 58,299 | | | (53,997 | ) | | | 403,548 | |
Income tax (benefit) | | | 79,525 | | | | 35,746 | | | | 5,346 | | | (18,523 | ) | | | 102,094 | |
| | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 205,561 | | | $ | 78,414 | | | $ | 52,953 | | $ | (35,474 | ) | | $ | 301,454 | |
| | | | | | | | | | | | | | | | | | | |
Expense ratio(8) | | | 25.7 | % | | | 30.4 | % | | | | | | | | | | | |
Loss ratio(8) | | | 38.2 | % | | | 2.4 | % | | | | | | | | | | | |
Combined ratio | | | 63.9 | % | | | 32.8 | % | | | | | | | | | | | |
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 |
| | | September 30, 2006 |
| | | (Dollars in thousands) |
Assets | | | | | | | | | | | | | | | | |
Cash and investments, at fair value | | $ | 2,064,571 | | $ | 1,247,144 | | $ | 2,003 | | $ | 735,787 | | | $ | 4,049,505 |
Investments in unconsolidated subsidiaries(1) | | | 127,424 | | | — | | | 916,659 | | | 18,814 | | | | 1,062,897 |
Related party receivables | | | 699 | | | — | | | — | | | (85 | ) | | | 614 |
Reinsurance receivables, recoverables and prepaid premiums | | | 15,895 | | | 5,476 | | | — | | | — | | | | 21,371 |
Deferred policy acquisition costs | | | 43,159 | | | 39,471 | | | — | | | — | | | | 82,630 |
Other assets | | | 214,834 | | | 43,974 | | | 1 | | | 108,758 | | | | 367,567 |
| | | | | | | | | | | | | | | | |
Total assets | | $ | 2,466,582 | | $ | 1,336,065 | | $ | 918,663 | | $ | 863,274 | | | $ | 5,584,584 |
| | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | |
Reserve for losses and loss adjustment expenses | | $ | 358,784 | | $ | 35,426 | | $ | — | | $ | — | | | $ | 394,210 |
Unearned premiums | | | 114,720 | | | 375,091 | | | — | | | 27 | | | | 489,838 |
Bridge loan(14) | | | — | | | — | | | — | | | 345,000 | | | | 345,000 |
Long-term debt (13) | | | — | | | — | | | — | | | 919,435 | | | | 919,435 |
Other liabilities (assets) | | | 257,035 | | | 71,050 | | | 26,051 | | | (26,187 | ) | | | 327,949 |
| | | | | | | | | | | | | | | | |
Total liabilities | | | 730,539 | | | 481,567 | | | 26,051 | | | 1,238,275 | | | | 2,476,432 |
Shareholders’ equity (deficit) | | | 1,736,043 | | | 854,498 | | | 892,612 | | | (375,001 | ) | | | 3,108,152 |
| | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 2,466,582 | | $ | 1,336,065 | | $ | 918,663 | | $ | 863,274 | | | $ | 5,584,584 |
| | | | | | | | | | | | | | | | |
| |
| | | 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 (assets) | | | 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 (deficit) | | | 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 |
| | | | | | | | | | | | | | | | |
| |
| | | September 30, 2005 |
| | | (Dollars in thousands) |
Assets | | | | | | | | | | | | | | | | |
Cash and investments, at fair value | | $ | 2,170,214 | | $ | 1,094,028 | | $ | — | | $ | 373,870 | | | $ | 3,638,112 |
Investments in unconsolidated subsidiaries(1) | | | 125,376 | | | — | | | 823,287 | | | 19,072 | | | | 967,735 |
Equity investment held for sale (1) | | | — | | | — | | | — | | | 108,469 | | | | 108,469 |
Related party receivables | | | 1,877 | | | — | | | — | | | 5,183 | | | | 7,060 |
Reinsurance receivables, recoverables and prepaid premiums | | | 24,307 | | | 4,186 | | | — | | | — | | | | 28,493 |
Deferred policy acquisition costs | | | 47,480 | | | 39,569 | | | — | | | — | | | | 87,049 |
Other assets | | | 206,092 | | | 27,806 | | | — | | | 109,343 | | | | 343,241 |
| | | | | | | | | | | | | | | | |
Total assets | | $ | 2,575,346 | | $ | 1,165,589 | | $ | 823,287 | | $ | 615,937 | | | $ | 5,180,159 |
| | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | |
Reserve for losses and loss adjustment expenses | | $ | 342,174 | | $ | 24,158 | | $ | — | | $ | 3 | | | $ | 366,335 |
Unearned premiums | | | 127,481 | | | 334,908 | | | — | | | 35 | | | | 462,424 |
Long-term and debt | | | — | | | — | | | — | | | 819,529 | | | | 819,529 |
Other liabilities | | | 234,778 | | | 76,994 | | | 17,189 | | | 6,559 | | | | 335,520 |
| | | | | | | | | | | | | | | | |
Total liabilities | | | 704,433 | | | 436,060 | | | 17,189 | | | 826,126 | | | | 1,983,808 |
Shareholders’ equity (deficit) | | | 1,870,913 | | | 729,529 | | | 806,098 | | | (210,189 | ) | | | 3,196,351 |
| | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 2,575,346 | | $ | 1,165,589 | | $ | 823,287 | | $ | 615,937 | | | $ | 5,180,159 |
| | | | | | | | | | | | | | | | |
Page 5
THE PMI GROUP, INC. AND SUBSIDIARIES
U.S. MORTGAGE INSURANCE OPERATIONS(2) ANALYSIS OF RESERVE FOR LOSSES AND LAE
| | | | | | | | | | | | | | | |
| | | September 30, 2006 | | June 30, 2006 | | September 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 | | 38,573 | | $ | 325,502 | | 37,102 | | $ | 318,878 | | 38,146 | | $ | 302,925 |
Pool insurance(9) | | 15,253 | | | 33,282 | | 17,458 | | | 36,954 | | 19,037 | | | 39,249 |
| | | | | | | | | | | | | | | |
Total | | 53,826 | | $ | 358,784 | | 54,560 | | $ | 355,832 | | 57,183 | | $ | 342,174 |
| | | | | | | | | | | | | | | |
Reconciliation of Reserve for Losses and LAE
| | | | | | | | | | | | |
| | | September 30, 2006 | | | June 30, 2006 | | | Reserve Change | |
| | | (Dollars in thousands) | |
Gross reserve for losses and LAE: | | | | | | | | | | | | |
Primary insurance | | $ | 325,502 | | | $ | 318,878 | | | $ | 6,624 | |
Pool insurance(9) | | | 33,282 | | | | 36,954 | | | | (3,672 | ) |
| | | | | | | | | | | | |
Total gross reserve for losses and LAE | | | 358,784 | | | | 355,832 | | | | 2,952 | |
Ceded reserve for losses: | | | | | | | | | | | | |
Primary insurance | | | (2,719 | ) | | | (2,417 | ) | | | (302 | ) |
Pool insurance (9) | | | (79 | ) | | | (87 | ) | | | 8 | |
| | | | | | | | | | | | |
Total ceded reserve for losses | | | (2,798 | ) | | | (2,504 | ) | | | (294 | ) |
| | | | | | | | | | | | |
Net reserve for losses and LAE | | $ | 355,986 | | | $ | 353,328 | | | $ | 2,658 | |
| | | | | | | | | | | | |
U.S. MORTGAGE INSURANCE OPERATIONS(2) FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | | | | | | | | |
| | | Three Months
Ended September 30, | | | Nine Months Ended
September 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Flow insurance written(in millions) | | $ | 6,015 | | | $ | 7,824 | | | $ | 16,773 | | | $ | 21,568 | |
Structured insurance written(in millions) | | | 1,641 | | | | 908 | | | | 6,031 | | | | 4,989 | |
| | | | | | | | | | | | | | | | |
Primary new insurance written(in millions) | | $ | 7,656 | | | $ | 8,732 | | | $ | 22,804 | | | $ | 26,557 | |
| | | | | | | | | | | | | | | | |
Primary new risk written(in millions) | | $ | 1,980 | | | $ | 2,224 | | | $ | 5,917 | | | $ | 6,844 | |
Pool new insurance written(in millions)(9) | | $ | 3,924 | | | $ | 5,159 | | | $ | 12,225 | | | $ | 9,693 | |
Pool new risk written(in millions)(9) | | $ | 84 | | | $ | 124 | | | $ | 297 | | | $ | 225 | |
Product mix as a % of new insurance written: | | | | | | | | | | | | | | | | |
Above 97% LTV’s | | | 19 | % | | | 13 | % | | | 16 | % | | | 13 | % |
90.01% to 95% LTV’s | | | 22 | % | | | 24 | % | | | 22 | % | | | 24 | % |
85.01% to 90% LTV’s | | | 44 | % | | | 48 | % | | | 45 | % | | | 43 | % |
90.01% to 95% LTV’s with >= 30% coverage | | | 18 | % | | | 19 | % | | | 18 | % | | | 20 | % |
85.01% to 90% LTV’s with >= 25% coverage | | | 39 | % | | | 41 | % | | | 40 | % | | | 37 | % |
ARMs | | | 19 | % | | | 27 | % | | | 26 | % | | | 32 | % |
Monthlies | | | 96 | % | | | 97 | % | | | 96 | % | | | 97 | % |
Refinances | | | 34 | % | | | 34 | % | | | 35 | % | | | 35 | % |
Structured transactions | | | 21 | % | | | 10 | % | | | 26 | % | | | 19 | % |
Premiums written(in thousands): | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 205,848 | | | $ | 203,797 | | | $ | 617,410 | | | $ | 602,776 | |
Ceded premiums, net of assumed premiums | | | (42,108 | ) | | | (41,585 | ) | | | (125,165 | ) | | | (126,327 | ) |
Refunded premiums | | | (3,272 | ) | | | (3,346 | ) | | | (9,399 | ) | | | (10,481 | ) |
| | | | | | | | | | | | | | | | |
Net premiums written | | | 160,468 | | | | 158,866 | | | | 482,846 | | | | 465,968 | |
Change in unearned premiums | | | 7,650 | | | | 7,186 | | | | 20,636 | | | | 32,444 | |
| | | | | | | | | | | | | | | | |
Net premiums earned | | $ | 168,118 | | | $ | 166,052 | | | $ | 503,482 | | | $ | 498,412 | |
| | | | | | | | | | | | | | | | |
Page 6
THE PMI GROUP, INC. AND SUBSIDIARIES
U.S. MORTGAGE INSURANCE OPERATIONS(2) FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 9/30/2006 | | | 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 | | | | $ | 84,405 | | | $ | 84,644 | | | $ | 85,685 | | | $ | 86,991 | | | $ | 88,433 | | | $ | 89,965 | | | $ | 91,399 | |
Structured transactions | | | | | 15,877 | | | | 15,741 | | | | 15,826 | | | | 14,099 | | | | 12,788 | | | | 13,469 | | | | 12,598 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | | $ | 100,282 | | | $ | 100,385 | | | $ | 101,511 | | | $ | 101,090 | | | $ | 101,221 | | | $ | 103,434 | | | $ | 103,997 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Primary risk in force(in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow | | | | $ | 20,855 | | | $ | 20,883 | | | $ | 21,102 | | | $ | 21,388 | | | $ | 21,745 | | | $ | 22,067 | | | $ | 22,346 | |
Structured transactions | | | | | 4,193 | | | | 4,127 | | | | 4,147 | | | | 3,583 | | | | 3,167 | | | | 3,296 | | | | 2,966 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | | $ | 25,048 | | | $ | 25,010 | | | $ | 25,249 | | | $ | 24,971 | | | $ | 24,912 | | | $ | 25,363 | | | $ | 25,312 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pool risk in force (in millions) (9) | | $ | 2,773 | | | $ | 2,737 | | | $ | 2,666 | | | $ | 2,589 | | | $ | 2,530 | | | $ | 2,445 | | | $ | 2,417 | |
Primary risk in force—credit score distribution | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow | | 620 or above | | | 93.5 | % | | | 93.3 | % | | | 93.2 | % | | | 93.0 | % | | | 92.7 | % | | | 92.4 | % | | | 92.1 | % |
| | 619-575 | | | 5.2 | % | | | 5.3 | % | | | 5.4 | % | | | 5.5 | % | | | 5.7 | % | | | 5.9 | % | | | 6.1 | % |
| | 574 or below | | | 1.3 | % | | | 1.4 | % | | | 1.4 | % | | | 1.5 | % | | | 1.6 | % | | | 1.7 | % | | | 1.8 | % |
| | | | | | | | |
Structured transactions | | 620 or above | | | 82.8 | % | | | 80.7 | % | | | 79.2 | % | | | 76.9 | % | | | 73.9 | % | | | 71.7 | % | | | 66.9 | % |
| | 619-575 | | | 10.8 | % | | | 12.3 | % | | | 13.2 | % | | | 14.5 | % | | | 16.0 | % | | | 17.4 | % | | | 20.2 | % |
| | 574 or below | | | 6.4 | % | | | 7.1 | % | | | 7.6 | % | | | 8.6 | % | | | 10.1 | % | | | 10.9 | % | | | 12.9 | % |
| | | | | | | | |
Total | | 620 or above | | | 91.7 | % | | | 91.3 | % | | | 90.9 | % | | | 90.7 | % | | | 90.3 | % | | | 89.7 | % | | | 89.2 | % |
| | 619-575 | | | 6.1 | % | | | 6.4 | % | | | 6.6 | % | | | 6.8 | % | | | 7.0 | % | | | 7.4 | % | | | 7.7 | % |
| | 574 or below | | | 2.2 | % | | | 2.3 | % | | | 2.5 | % | | | 2.5 | % | | | 2.7 | % | | | 2.9 | % | | | 3.1 | % |
Primary average loan size(in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow | | | | $ | 138.3 | | | $ | 136.9 | | | $ | 135.6 | | | $ | 134.5 | | | $ | 133.3 | | | $ | 132.2 | | | $ | 131.5 | |
Structured transactions | | | | $ | 151.8 | | | $ | 150.7 | | | $ | 150.7 | | | $ | 145.4 | | | $ | 139.5 | | | $ | 139.8 | | | $ | 134.1 | |
Total | | | | $ | 140.3 | | | $ | 138.9 | | | $ | 137.8 | | | $ | 136.0 | | | $ | 134.1 | | | $ | 133.2 | | | $ | 131.8 | |
Loss severity—primary(quarterly) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow | | | | | 83.1 | % | | | 83.2 | % | | | 84.9 | % | | | 85.9 | % | | | 84.0 | % | | | 83.8 | % | | | 85.6 | % |
Structured transactions | | | | | 86.7 | % | | | 86.8 | % | | | 91.2 | % | | | 94.3 | % | | | 89.6 | % | | | 87.7 | % | | | 90.9 | % |
Total | | | | | 84.0 | % | | | 84.1 | % | | | 86.5 | % | | | 87.7 | % | | | 85.2 | % | | | 84.6 | % | | | 86.8 | % |
Persistency | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Primary persistency rate | | | | | 67.3 | % | | | 64.9 | % | | | 63.1 | % | | | 61.9 | % | | | 61.2 | % | | | 62.0 | % | | | 60.8 | % |
Primary loans, defaults and default rates | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Primary policies in force | | | | | 714,742 | | | | 722,756 | | | | 736,908 | | | | 743,533 | | | | 754,934 | | | | 776,721 | | | | 788,847 | |
Primary loans in default | | | | | 38,573 | | | | 37,102 | | | | 37,784 | | | | 42,702 | | | | 38,146 | | | | 35,030 | | | | 35,716 | |
Primary default rate | | | | | 5.40 | % | | | 5.13 | % | | | 5.13 | % | | | 5.74 | % | | | 5.05 | % | | | 4.51 | % | | | 4.53 | % |
Structured transactions only default rate | | | | | 9.96 | % | | | 9.26 | % | | | 8.59 | % | | | 9.85 | % | | | 10.09 | % | | | 8.54 | % | | | 8.17 | % |
Pool default rate | | | | | 4.81 | % | | | 5.60 | % | | | 6.17 | % | | | 6.84 | % | | | 6.34 | % | | | 5.65 | % | | | 5.65 | % |
Claims paid(quarter-to-date in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Primary claims paid—flow | | | | $ | 42.6 | | | $ | 36.2 | | | $ | 37.3 | | | $ | 39.2 | | | $ | 38.8 | | | $ | 46.1 | | | $ | 41.7 | |
Primary claims paid—structured transactions | | | 14.7 | | | | 11.3 | | | | 13.5 | | | | 12.3 | | | | 11.4 | | | | 11.6 | | | | 13.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total primary claims paid | | | | | 57.3 | | | | 47.5 | | | | 50.8 | | | | 51.5 | | | | 50.2 | | | | 57.7 | | | | 55.5 | |
Total pool and other | | | | | 4.7 | | | | 4.6 | | | | 4.3 | | | | 5.1 | | | | 5.4 | | | | 4.9 | | | | 4.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total claims paid | | | | $ | 62.0 | | | $ | 52.1 | | | $ | 55.1 | | | $ | 56.6 | | | $ | 55.6 | | | $ | 62.6 | | | $ | 60.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Number of primary claims paid(quarter-to-date) | | | 2,346 | | | | 2,038 | | | | 2,058 | | | | 2,138 | | | | 2,190 | | | | 2,521 | | | | 2,413 | |
Average primary claim size(quarter-to-date in thousands) | | $ | 24.4 | | | $ | 23.3 | | | $ | 24.7 | | | $ | 24.1 | | | $ | 22.9 | | | $ | 22.9 | | | $ | 23.0 | |
Captive reinsurance arrangements(year-to-date) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Percentage of flow NIW subject to captive reinsurance arrangements | | | 71.6 | % | | | 71.3 | % | | | 69.6 | % | | | 69.0 | % | | | 68.0 | % | | | 65.0 | % | | | 60.4 | % |
Percentage of primary NIW subject to captive reinsurance arrangements | | | 53.5 | % | | | 51.5 | % | | | 44.8 | % | | | 54.7 | % | | | 55.7 | % | | | 50.7 | % | | | 47.1 | % |
Percentage of primary IIF subject to captive reinsurance arrangements | | | 53.9 | % | | | 53.3 | % | | | 53.2 | % | | | 53.4 | % | | | 53.2 | % | | | 52.1 | % | | | 52.4 | % |
Percentage of primary RIF subject to captive reinsurance arrangements | | | 54.4 | % | | | 53.9 | % | | | 53.9 | % | | | 54.4 | % | | | 54.4 | % | | | 53.4 | % | | | 53.9 | % |
Alt-A primary insurance in force(in millions)(11) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
With FICO scores of 660 and above | | | | $ | 14,203 | | | $ | 13,216 | | | $ | 12,575 | | | $ | 11,455 | | | $ | 10,346 | | | $ | 9,731 | | | $ | 8,892 | |
With FICO scores below 660 and above 619 | | | 3,178 | | | | 2,934 | | | | 2,783 | | | | 2,564 | | | | 2,327 | | | | 2,325 | | | | 2,135 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Alt-A primary insurance in force | | | | $ | 17,381 | | | $ | 16,150 | | | $ | 15,358 | | | $ | 14,019 | | | $ | 12,673 | | | $ | 12,056 | | | $ | 11,027 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk-to-capital ratio(10) | | | | | 8.2 to 1 | | | | 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
| | | | | | | | | | | | |
| | | September 30,
2006 | | | June 30,
2006 | | | September 30,
2005 | |
Primary new insurance written(quarter-to-date in millions) | | $ | 1,238 | | | $ | 1,167 | | | $ | 1,740 | |
Primary insurance in force(in millions) | | $ | 16,063 | | | $ | 15,774 | | | $ | 15,358 | |
Primary risk in force(in millions) | | $ | 3,897 | | | $ | 3,791 | | | $ | 3,607 | |
Insured primary loans | | | 113,004 | | | | 111,889 | | | | 111,217 | |
Persistency | | | 75.6 | % | | | 73.6 | % | | | 70.2 | % |
Primary loans in default | | | 974 | | | | 965 | | | | 632 | |
Primary default rate | | | 0.86 | % | | | 0.86 | % | | | 0.57 | % |
Primary claims paid(quarter-to-date in thousands) | | $ | 2,268 | | | $ | 1,512 | | | $ | 1,172 | |
Number of primary claims paid(quarter-to-date) | | | 98 | | | | 68 | | | | 49 | |
Average primary claim size (quarter-to-date in thousands) | | $ | 23.1 | | | $ | 22.2 | | | $ | 23.9 | |
| | | | | | |
| PMI AUSTRALIA FINANCIAL AND STATISTICAL INFORMATION | | | | | | |
| | | | | | | | | | | | |
| | | September 30,
2006 | | | June 30,
2006 | | | September 30,
2005 | |
Net premiums written(quarter-to-date in thousands) | | $ | 47,472 | | | $ | 48,603 | | | $ | 40,544 | |
Premiums earned(quarter-to-date in thousands) | | $ | 39,849 | | | $ | 39,110 | | | $ | 31,777 | |
Flow insurance written(quarter-to-date in millions) | | $ | 5,376 | | | $ | 5,062 | | | $ | 4,963 | |
RMBS insurance written(quarter-to-date in millions) | | | 3,899 | | | | 7,744 | | | | 3,006 | |
| | | | | | | | | | | | |
New insurance written(quarter-to-date in millions) | | $ | 9,275 | | | $ | 12,806 | | | $ | 7,969 | |
| | | | | | | | | | | | |
| | | |
Insurance in force(in millions) | | $ | 135,001 | | | $ | 135,529 | | | $ | 124,014 | |
Risk in force(in millions) | | $ | 123,159 | | | $ | 124,139 | | | $ | 113,028 | |
Policies in force | | | 1,026,990 | | | | 1,074,618 | | | | 994,330 | |
Loans in default | | | 2,099 | | | | 1,731 | | | | 1,007 | |
Default rate | | | 0.20 | % | | | 0.16 | % | | | 0.10 | % |
Claims paid(quarter-to-date in thousands) | | $ | 4,534 | | | $ | 3,181 | | | $ | 717 | |
Number of claims paid(quarter-to-date) | | | 80 | | | | 73 | | | | 14 | |
Average claim size(quarter-to-date in thousands) | | $ | 56.7 | | | $ | 43.6 | | | $ | 51.2 | |
| | | | | | |
| PMI EUROPE FINANCIAL AND STATISTICAL INFORMATION | | | | | | |
| | | | | | | | | |
| | | September 30,
2006 | | June 30,
2006 | | September 30,
2005 |
Net premiums written(quarter-to-date in thousands) | | $ | 2,948 | | $ | 2,109 | | $ | 2,417 |
Premiums earned(quarter-to-date in thousands) | | $ | 4,153 | | $ | 3,905 | | $ | 4,576 |
New insurance written(quarter-to-date in millions) | | $ | 62 | | $ | 24 | | $ | — |
New credit default swaps written(quarter-to-date in millions) | | $ | 7,910 | | $ | — | | $ | 514 |
New reinsurance written(quarter-to-date in millions) | | $ | 2,248 | | $ | 379 | | $ | 2,992 |
Insurance in force(in millions) | | $ | 49,976 | | $ | 39,996 | | $ | 34,501 |
Risk in force(in millions) | | $ | 4,441 | | $ | 2,836 | | $ | 2,894 |
Claims paid including credit default swaps(quarter-to-date in thousands) | | $ | 1,228 | | $ | 919 | | $ | 306 |
Page 8
THE PMI GROUP, INC. AND SUBSIDIARIES
APPENDIX A—QUARTERLY FINANCIAL INFORMATION
PMI AUSTRALIA QUARTERLY FINANCIAL INFORMATION
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | 2005 | |
| | | 3rd Quarter | | | 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 | | $ | 52,634 | | | $ | 52,399 | | | $ | 43,644 | | $ | 43,959 | | | $ | 41,815 | | | $ | 38,929 | | | $ | 37,840 | |
Net investment income | | $ | 22,594 | | | $ | 17,267 | | | $ | 16,876 | | $ | 16,257 | | | $ | 15,854 | | | $ | 14,966 | | | $ | 14,705 | |
Change in fair value of foreign currency put options | | $ | (638 | ) | | $ | (2,640 | ) | | $ | 1,855 | | $ | (24 | ) | | $ | (232 | ) | | $ | (422 | ) | | $ | (1,338 | ) |
Total losses and expenses | | $ | 28,610 | | | $ | 24,843 | | | $ | 15,789 | | $ | 17,226 | | | $ | 13,632 | | | $ | 15,104 | | | $ | 13,788 | |
Net income | | $ | 32,688 | | | $ | 29,332 | | | $ | 32,546 | | $ | 31,906 | | | $ | 31,079 | | | $ | 26,725 | | | $ | 26,487 | |
| | | | | | | |
Net income(U.S. $ in thousands) | | $ | 24,732 | | | $ | 21,923 | | | $ | 24,054 | | $ | 23,728 | | | $ | 23,623 | | | $ | 20,541 | | | $ | 20,584 | |
| | | | | | | |
Balance Sheet Components | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Cash and investments, at fair value | | $ | 1,314,487 | | | $ | 1,257,618 | | | $ | 1,219,179 | | $ | 1,197,016 | | | $ | 1,147,390 | | | $ | 1,090,399 | | | $ | 1,037,704 | |
Total assets | | $ | 1,396,072 | | | $ | 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 | | $ | 24,185 | | | $ | 16,150 | | | $ | 11,489 | | $ | 11,573 | | | $ | 11,156 | | | $ | 12,541 | | | $ | 12,549 | |
Unearned premiums | | $ | 441,936 | | | $ | 431,864 | | | $ | 419,207 | | $ | 415,885 | | | $ | 406,661 | | | $ | 395,113 | | | $ | 382,781 | |
Shareholder’s equity | | $ | 874,975 | | | $ | 841,116 | | | $ | 822,918 | | $ | 793,045 | | | $ | 757,372 | | | $ | 730,113 | | | $ | 689,927 | |
PMI EUROPE QUARTERLY FINANCIAL INFORMATION
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | | 2006 | | | 2005 | |
| | | 3rd Quarter | | | 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 | | € | 3,258 | | | € | 3,108 | | | € | 3,232 | | | € | 3,721 | | € | 3,749 | | | € | 3,298 | | € | 3,321 | |
Net investment income | | € | 2,402 | | | € | 2,157 | | | € | 1,915 | | | € | 1,730 | | € | 2,188 | | | € | 1,951 | | € | 2,002 | |
Change in fair value of foreign currency put options | | € | (2 | ) | | € | (42 | ) | | € | (43 | ) | | € | 55 | | € | (3 | ) | | € | 342 | | € | (33 | ) |
Change in fair value of credit default swaps | | € | 769 | | | € | 1,691 | | | € | 1,356 | | | € | 409 | | € | 811 | | | € | 390 | | € | 320 | |
Total losses and expenses | | € | 4,026 | | | € | 2,635 | | | € | 2,692 | | | € | 3,824 | | € | 3,244 | | | € | 3,168 | | € | 2,031 | |
Net income | | € | 1,559 | | | € | 2,780 | | | € | 2,451 | | | € | 1,362 | | € | 2,276 | | | € | 1,828 | | € | 2,326 | |
| | | | | | | |
Net income(U.S. $ in thousands) | | $ | 1,987 | | | $ | 3,498 | | | $ | 2,949 | | | $ | 1,615 | | $ | 2,774 | | | $ | 2,330 | | $ | 3,049 | |
| | | | | | | |
Balance Sheet Components | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Assets | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Cash and investments, at fair value | | € | 162,858 | | | € | 160,424 | | | € | 182,304 | | | € | 182,559 | | € | 182,682 | | | € | 179,698 | | € | 172,707 | |
Total assets | | € | 182,503 | | | € | 174,624 | | | € | 192,990 | | | € | 192,107 | | € | 192,431 | | | € | 188,840 | | € | 182,857 | |
| | | | | | | |
Liabilities and Shareholder’s Equity | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Reserve for losses and LAE | | € | 13,340 | | | € | 12,521 | | | € | 12,581 | | | € | 12,508 | | € | 13,019 | | | € | 13,395 | | € | 12,807 | |
Unearned premiums | | € | 16,703 | | | € | 17,648 | | | € | 19,077 | | | € | 20,020 | | € | 20,808 | | | € | 22,589 | | € | 24,719 | |
Shareholder’s equity | | € | 138,766 | | | € | 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 | |
| | | 3rd
Quarter | | | 2nd
Quarter | | | 1st
Quarter | | | 4th
Quarter | | | 3rd
Quarter | | | 2nd
Quarter | |
| | | (Dollars in thousands) | |
U.S. Mortgage Insurance Operations(2) | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | | |
Net premiums written | | $ | 160,468 | | | $ | 158,904 | | | $ | 163,474 | | | $ | 201,160 | | | $ | 158,866 | | | $ | 152,564 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 168,118 | | | $ | 167,826 | | | $ | 167,538 | | | $ | 166,778 | | | $ | 166,052 | | | $ | 168,248 | |
Net investment income | | | 27,082 | | | | 27,064 | | | | 25,676 | | | | 26,168 | | | | 25,046 | | | | 27,546 | |
Equity in earnings from unconsolidated subsidiaries(1) | | | 5,010 | | | | 5,729 | | | | 4,492 | | | | 4,583 | | | | 5,217 | | | | 4,937 | |
Net realized investment gains | | | 1,620 | | | | 305 | | | | 237 | | | | 378 | | | | 2,597 | | | | 1,167 | |
Other (loss) income | | | (22 | ) | | | 7 | | | | (23 | ) | | | (3 | ) | | | 3 | | | | (5 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 201,808 | | | | 200,931 | | | | 197,920 | | | | 197,904 | | | | 198,915 | | | | 201,893 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 67,699 | | | | 64,153 | | | | 59,147 | | | | 63,159 | | | | 61,667 | | | | 65,496 | |
Amortization of deferred policy acquisition costs | | | 12,830 | | | | 13,162 | | | | 13,442 | | | | 14,113 | | | | 14,478 | | | | 15,030 | |
Other underwriting expenses and operating expenses | | | 23,618 | | | | 22,970 | | | | 27,866 | | | | 29,057 | | | | 25,260 | | | | 25,278 | |
Litigation settlement charge reversal(12) | | | (999 | ) | | | — | | | | — | | | | — | | | | — | | | | — | |
Interest expense | | | 1 | | | | 1 | | | | — | | | | 1 | | | | 3 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 103,149 | | | | 100,286 | | | | 100,455 | | | | 106,330 | | | | 101,408 | | | | 105,804 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Income before income taxes | | | 98,659 | | | | 100,645 | | | | 97,465 | | | | 91,574 | | | | 97,507 | | | | 96,089 | |
Income taxes | | | 27,819 | | | | 28,480 | | | | 27,360 | | | | 21,696 | | | | 27,977 | | | | 26,400 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Net income | | $ | 70,840 | | | $ | 72,165 | | | $ | 70,105 | | | $ | 69,878 | | | $ | 69,530 | | | $ | 69,689 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
International Operations(3) | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | | |
Net premiums written | | $ | 51,942 | | | $ | 52,900 | | | $ | 38,420 | | | $ | 44,913 | | | $ | 47,197 | | | $ | 47,185 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 46,766 | | | $ | 45,801 | | | $ | 38,686 | | | $ | 39,781 | | | $ | 38,979 | | | $ | 38,141 | |
Net investment income | | | 17,442 | | | | 15,625 | | | | 14,785 | | | | 14,499 | | | | 14,844 | | | | 14,058 | |
Net realized investment gains (losses) | | | 3,452 | | | | 252 | | | | 142 | | | | (221 | ) | | | (27 | ) | | | (18 | ) |
Other income | | | 938 | | | | 218 | | | | 3,031 | | | | 778 | | | | 1,287 | | | | 873 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 68,598 | | | | 61,896 | | | | 56,644 | | | | 54,837 | | | | 55,083 | | | | 53,054 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 11,907 | | | | 7,708 | | | | 1,792 | | | | 1,601 | | | | (365 | ) | | | 1,739 | |
Amortization of deferred policy acquisition costs | | | 3,871 | | | | 4,632 | | | | 3,545 | | | | 3,274 | | | | 3,269 | | | | 3,779 | |
Other underwriting and operating expenses | | | 11,205 | | | | 10,461 | | | | 9,789 | | | | 12,663 | | | | 11,648 | | | | 10,539 | |
Interest expense | | | 124 | | | | — | | | | — | | | | 9 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 27,107 | | | | 22,801 | | | | 15,126 | | | | 17,547 | | | | 14,552 | | | | 16,057 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Income before income taxes | | | 41,491 | | | | 39,095 | | | | 41,518 | | | | 37,290 | | | | 40,531 | | | | 36,997 | |
Income taxes | | | 12,048 | | | | 13,598 | | | | 12,909 | | | | 10,251 | | | | 12,514 | | | | 11,747 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 29,443 | | | $ | 25,497 | | | $ | 28,609 | | | $ | 27,039 | | | $ | 28,017 | | | $ | 25,250 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Financial Guaranty(4) | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | | | | |
Equity in earnings from unconsolidated subsidiaries(1) | | $ | 26,549 | | | $ | 26,476 | | | $ | 23,235 | | | $ | 21,453 | | | $ | 13,691 | | | $ | 23,761 | |
Interest and dividends | | | (1 | ) | | | 2 | | | | — | | | | — | | | | — | | | | — | |
Income taxes | | | 2,820 | | | | 2,469 | | | | 2,137 | | | | 2,208 | | | | 1,135 | | | | 2,254 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 23,728 | | | $ | 24,009 | | | $ | 21,098 | | | $ | 19,245 | | | $ | 12,556 | | | $ | 21,507 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Other(5) | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
Net premiums written | | $ | 16 | | | $ | 11 | | | $ | 10 | | | $ | 27 | | | $ | 19 | | | $ | 13 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 19 | | | $ | 16 | | | $ | 17 | | | $ | 18 | | | $ | 19 | | | $ | 19 | |
Net investment income | | | 5,157 | | | | 6,324 | | | | 6,406 | | | | 4,832 | | | | 4,537 | | | | 4,143 | |
Equity in (losses) earnings from unconsolidated subsidiaries(1) | | | (68 | ) | | | 82 | | | | (102 | ) | | | (165 | ) | | | (388 | ) | | | (416 | ) |
Net realized investment (losses) gains | | | (4,346 | ) | | | (1 | ) | | | (39 | ) | | | (4 | ) | | | (2,897 | ) | | | 354 | |
Other income | | | 3,204 | | | | 3,712 | | | | 3,777 | | | | 4,283 | | | | 2,649 | | | | 5,383 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 3,966 | | | | 10,133 | | | | 10,059 | | | | 8,964 | | | | 3,920 | | | | 9,483 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | (3 | ) | | | — | | | | — | | | | — | | | | — | | | | — | |
Other underwriting expenses and operating expenses(7) | | | 21,484 | | | | 19,442 | | | | 22,865 | | | | 17,354 | | | | 17,607 | | | | 18,600 | |
Net costs to exchange and extinguish long-term debt (13) | | | 875 | | | | — | | | | — | | | | — | | | | — | | | | — | |
Interest expense | | | 9,361 | | | | 8,066 | | | | 8,179 | | | | 4,644 | | | | 8,455 | | | | 8,472 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 31,717 | | | | 27,508 | | | | 31,044 | | | | 21,998 | | | | 26,062 | | | | 27,072 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Loss before income tax benefits | | | (27,751 | ) | | | (17,375 | ) | | | (20,985 | ) | | | (13,034 | ) | | | (22,142 | ) | | | (17,589 | ) |
Income tax benefits | | | (7,978 | ) | | | (5,319 | ) | | | (6,521 | ) | | | (4,587 | ) | | | (7,750 | ) | | | (5,728 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | | $ | (19,773 | ) | | $ | (12,056 | ) | | $ | (14,464 | ) | | $ | (8,447 | ) | | $ | (14,392 | ) | | $ | (11,861 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Page 10
THE PMI GROUP, INC. AND SUBSIDIARIES
APPENDIX C—PMI AUSTRALIA FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 9/30/2006 | | | 6/30/2006 | | | 3/31/2006 | | | 12/31/2005 | | | 9/30/2005 | | | 6/30/2005 | | | 3/31/2005 | |
Insurance in Force(U.S. $ in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow | | $ | 86,026 | | | $ | 86,215 | | | $ | 81,503 | | | $ | 82,236 | | | $ | 83,286 | | | $ | 81,025 | | | $ | 80,099 | |
RMBS | | | 48,975 | | | | 49,314 | | | | 41,547 | | | | 37,679 | | | | 40,728 | | | | 38,786 | | | | 37,340 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 135,001 | | | $ | 135,529 | | | $ | 123,050 | | | $ | 119,915 | | | $ | 124,014 | | | $ | 119,811 | | | $ | 117,439 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Risk in Force(U.S. $ in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow | | $ | 74,328 | | | $ | 74,956 | | | $ | 70,773 | | | $ | 71,160 | | | $ | 72,393 | | | $ | 70,320 | | | $ | 69,461 | |
RMBS | | | 48,831 | | | | 49,183 | | | | 41,426 | | | | 37,591 | | | | 40,635 | | | | 38,705 | | | | 37,263 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 123,159 | | | $ | 124,139 | | | $ | 112,199 | | | $ | 108,751 | | | $ | 113,028 | | | $ | 109,025 | | | $ | 106,724 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Average loan size(U.S. $ in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow | | $ | 134.8 | | | $ | 128.2 | | | $ | 122.5 | | | $ | 125.0 | | | $ | 127.6 | | | $ | 125.8 | | | $ | 125.7 | |
RMBS | | $ | 125.9 | | | $ | 122.6 | | | $ | 115.1 | | | $ | 116.3 | | | $ | 119.2 | | | $ | 117.5 | | | $ | 117.1 | |
Total | | $ | 131.5 | | | $ | 126.1 | | | $ | 119.9 | | | $ | 122.1 | | | $ | 124.7 | | | $ | 123.0 | | | $ | 122.9 | |
| | | | | | | |
Loss severity (quarterly) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow | | | 21.87 | % | | | 18.24 | % | | | 15.77 | % | | | 15.72 | % | | | 21.55 | % | | | 13.18 | % | | | 11.52 | % |
RMBS | | | 21.73 | % | | | 1.64 | % | | | 3.89 | % | | | 11.27 | % | | | 0.00 | % | | | 0.00 | % | | | 17.42 | % |
Total | | | 21.86 | % | | | 18.16 | % | | | 15.25 | % | | | 15.58 | % | | | 21.55 | % | | | 13.18 | % | | | 11.84 | % |
| | | | | | | |
Primary loans, defaults and default rates | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Policies in force—Flow | | | 638,139 | | | | 672,347 | | | | 665,336 | | | | 657,713 | | | | 652,750 | | | | 643,835 | | | | 637,040 | |
Policies in force—RMBS | | | 388,851 | | | | 402,271 | | | | 360,924 | | | | 324,019 | | | | 341,580 | | | | 329,985 | | | | 318,882 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Policies in force—Total | | | 1,026,990 | | | | 1,074,618 | | | | 1,026,260 | | | | 981,732 | | | | 994,330 | | | | 973,820 | | | | 955,922 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Loans in default—Flow | | | 1,826 | | | | 1,478 | | | | 1,314 | | | | 1,094 | | | | 909 | | | | 1,032 | | | | 784 | |
Loans in default —RMBS | | | 273 | | | | 253 | | | | 206 | | | | 170 | | | | 98 | | | | 130 | | | | 93 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans in default —Total | | | 2,099 | | | | 1,731 | | | | 1,520 | | | | 1,264 | | | | 1,007 | | | | 1,162 | | | | 877 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Default rate —Flow | | | 0.29 | % | | | 0.22 | % | | | 0.20 | % | | | 0.17 | % | | | 0.14 | % | | | 0.16 | % | | | 0.12 | % |
Default rate —RMBS | | | 0.07 | % | | | 0.06 | % | | | 0.06 | % | | | 0.05 | % | | | 0.03 | % | | | 0.04 | % | | | 0.03 | % |
Default rate —Total | | | 0.20 | % | | | 0.16 | % | | | 0.15 | % | | | 0.13 | % | | | 0.10 | % | | | 0.12 | % | | | 0.09 | % |
| | | | | | | |
Net claims paid(quarter to date in U.S. $ in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net claims paid—Flow | | $ | 4,123.2 | | | $ | 3,179.2 | | | $ | 1,210.6 | | | $ | 1,420.9 | | | $ | 716.5 | | | $ | 734.8 | | | $ | 326.8 | |
Net claims paid—RMBS | | | 411.3 | | | | 1.5 | | | | 13.6 | | | | 33.4 | | | | — | | | | — | | | | 28.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net claims paid—Total | | | 4,534.5 | | | | 3,180.7 | | | | 1,224.2 | | | | 1,454.3 | | | | 716.5 | | | | 734.8 | | | | 355.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Number of claims paid—Flow | | | 72 | | | | 72 | | | | 30 | | | | 36 | | | | 14 | | | | 24 | | | | 17 | |
Number of claims paid—RMBS | | | 8 | | | | 1 | | | | 1 | | | | 1 | | | | — | | | | — | | | | 1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Number of claims paid—Total | | | 80 | | | | 73 | | | | 31 | | | | 37 | | | | 14 | | | | 24 | | | | 18 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Average claim size- Flow | | $ | 57.3 | | | $ | 44.2 | | | $ | 40.4 | | | $ | 39.5 | | | $ | 51.2 | | | $ | 30.6 | | | $ | 19.2 | |
Average claim size- RMBS | | $ | 51.4 | | | $ | 1.5 | | | $ | 13.6 | | | $ | 33.4 | | | $ | — | | | $ | — | | | $ | 28.4 | |
Average claim size- Total | | $ | 56.7 | | | $ | 43.6 | | | $ | 39.5 | | | $ | 39.3 | | | $ | 51.2 | | | $ | 30.6 | | | $ | 19.7 | |
| | | | | | | |
Combined Ratio | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loss Ratio | | | 26.41 | % | | | 17.26 | % | | | 3.79 | % | | | 5.33 | % | | | (1.07 | )% | | | 2.47 | % | | | 1.21 | % |
Expense Ratio | | | 23.60 | % | | | 24.25 | % | | | 30.14 | % | | | 27.95 | % | | | 26.37 | % | | | 27.60 | % | | | 31.99 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Combined Ratio | | | 50.01 | % | | | 41.51 | % | | | 33.93 | % | | | 33.28 | % | | | 25.30 | % | | | 30.07 | % | | | 33.20 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Page 11
