Exhibit 99.1
NEWS RELEASE
Investors and Media Contacts:
Bill Horning / Beth Haiken
925.658.6193 / 925.658.6192
THE PMI GROUP, INC. REPORTS RECORD 2006 NET INCOME OF
$419.7 MILLION, OR $4.57 PER DILUTED SHARE; FOURTH QUARTER
2006 NET INCOME OF $100.5 MILLION, OR $1.19 PER DILUTED
SHARE
Walnut Creek, CA, February 5, 2007 - The PMI Group, Inc. (NYSE: PMI) (the “Company”) today reported record net income for the full year 2006 of $419.7 million compared to $409.2 million in 2005. Net income per diluted share for the full year of 2006 rose 11.5% to $4.57 compared to $4.10 per share one year ago. Net income for the fourth quarter of 2006 was $100.5 million, or $1.19 per diluted share, compared to net income in the fourth quarter of 2005 of $107.7 million, or $1.11 per diluted share.
The Company ended 2006 with a book value of $41.14 per share compared to $36.42 at the end of 2005, representing an increase of approximately 13%.
Highlights include:
| | ¡ | | U.S. Mortgage Insurance Operations1— primary insurance in force grew to $102.6 billion and the persistency rate increased to 69.6%. Incurred losses for the year were approximately $263 million, consistent with the Company’s guidance; |
| | ¡ | | International Operations2 — PMI Australia had substantial growth in net premiums written driven by insurance in force growth. Fourth quarter results include an increase in incurred losses due to a normalization of credit performance in Australia. PMI Europe reported record net income along with solid growth in new insurance written. PMI’s European presence continued to expand; |
| | ¡ | | Financial Guaranty3— equity earnings from FGIC grew as a result of strong premium earnings, increased net investment income; |
| 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, PMI Asia and PMI Canada. |
| 3 | “Financial Guaranty” includes PMI Guaranty and 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 equity in earnings from Select Portfolio Servicing, Inc. (SPS) prior to its disposition on October 4, 2005, and intercompany eliminations. |
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| | ¡ | | Capital Events — the Company repurchased approximately 907,000 common shares in the fourth quarter for $40 million. For the full year, the Company has retired approximately 11.4 million common shares at a cost of approximately $535 million. Inclusive within the $535 million cost, the Company expects to receive additional common shares under its accelerated stock buyback program by no later than the second quarter of 2007. The Company had 84.5 million diluted weighted average common shares outstanding in the fourth quarter of 2006, a 14.7 million decrease from the fourth quarter 2005. |
| | ¡ | | In the fourth quarter of 2006, the Company recognized a one-time pension settlement charge of $4.0 million after tax, a $1.2 million benefit from an after tax reversal related to the Baynham settlement and costs of $0.8 million after tax to exchange and extinguish debt. |
| | ¡ | | Book value per share as of December 31, 2006 was $41.14, an increase of approximately 13% from the prior year. |
Consolidated Operating Results
Consolidated net premiums written for the fourth quarter and full year totaled $235.5 million and $861.6 million, respectively, compared to $246.1 million and $845.7 million for the same periods one year ago. The year over year increase was 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 the International segment from PMI Australia and PMI Europe.
Consolidated premiums earned for the fourth quarter and full year were $225.7 million and $860.5 million, respectively, compared to $206.6 million and $817.6 million for the same periods one year ago. The increases in 2006 were due to insurance in force growth, higher average premium rates and loan sizes in U.S. Mortgage Insurance Operations and insurance in force growth in PMI Australia.
Consolidated losses and loss adjustment expenses for the fourth quarter and full year were $90.5 million and $302.9 million, respectively, compared to $64.8 million and $257.8 million in the same periods last year. The increases in 2006 were primarily a result of loss reserve additions in U.S. Mortgage Insurance Operations and an increase in total incurred losses in PMI Australia. The incurred losses increase for PMI Australia was driven principally by increases in claim rates and severity.
Consolidated other underwriting and operating expenses for the fourth quarter and full year were $68.7 million and $235.8 million, respectively, compared to $59.1 million and $213.6 million for the same periods one year ago. The increases in 2006 were due primarily to our adoption of SFAS 123R and the resulting expenses for stock options and stock based compensation and a pension settlement charge related to a lump-sum distribution from the Supplemental Employee Retirement Plan.
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Consolidated reserve for losses and loss adjustment expenses totaled $414.7 million as of December 31, 2006 compared to $394.2 million as of September 30, 2006 and $368.8 million as of December 31, 2005. Loss reserves in U.S. Mortgage Insurance Operations increased $7.4 million in the fourth quarter of 2006 primarily due to higher expected claim rates and claim sizes. PMI Australia’s reserve for losses and LAE increased $12.4 million in the fourth quarter primarily due to higher expected claim rates and severity and, to a lesser extent, an increase in the number of delinquent loans.
| | | | | | | | | | | | | | | | | | | | |
The PMI Group, Inc. Fourth Quarter Results by Segment | |
| | | Fourth Quarter Total Revenues | | | Fourth Quarter Net Income | |
(Dollars in millions, except per share data) | | 2006 | | 2005 | | % Change | | | 2006 | | | 2005 | | | % Change | |
U.S. Mortgage Insurance Operations | | $ | 217.2 | | $ | 197.9 | | 9.8 | % | | $ | 77.2 | | | $ | 69.9 | | | 10.4 | % |
International Operations | | | 61.5 | | | 54.8 | | 12.2 | % | | | 20.0 | | | | 27.0 | | | (25.9 | )% |
Financial Guaranty | | | 33.0 | | | 21.5 | | 53.5 | % | | | 28.4 | | | | 19.2 | | | 47.9 | % |
Other4 | | | 6.1 | | | 9.0 | | n.m. | | | | (25.1 | ) | | | (8.4 | ) | | n.m. | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 317.8 | | $ | 283.2 | | 12.2 | % | | $ | 100.5 | | | $ | 107.7 | | | (6.7 | )% |
| | | | | | | | | | | | | | | | | | | | |
Diluted Net Income Per Share | | | | | | | | | | | $ | 1.19 | | | $ | 1.11 | | | 7.2 | % |
Book Value Per Share | | | | | | | | | | | $ | 41.14 | | | $ | 36.42 | | | 13.0 | % |
May not total due to rounding
n.m. – Not meaningful
| | | | | | | | | | | | | | | | | | | | |
The PMI Group, Inc. Full Year Results by Segment | |
| | | Twelve Months Ended December 31
Total Revenues | | | Twelve Months Ended December 31
Net Income | |
(Dollars in millions, except per share data) | | 2006 | | 2005 | | % Change | | | 2006 | | | 2005 | | | % Change | |
U.S. Mortgage Insurance Operations | | $ | 817.9 | | $ | 792.9 | | 3.2 | % | | $ | 290.3 | | | $ | 275.4 | | | 5.4 | % |
International Operations | | | 248.6 | | | 212.4 | | 17.0 | % | | | 103.5 | | | | 105.5 | | | (1.9 | )% |
Financial Guaranty | | | 109.2 | | | 79.8 | | 37.0 | % | | | 97.3 | | | | 72.2 | | | 34.8 | % |
Other4 | | | 30.3 | | | 32.7 | | n.m. | | | | (71.4 | ) | | | (43.9 | ) | | n.m. | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,206.0 | | $ | 1,117.8 | | 7.9 | % | | $ | 419.7 | | | $ | 409.2 | | | 2.5 | % |
| | | | | | | | | | | | | | | | | | | | |
Diluted Net Income Per Share | | | | | | | | | | | $ | 4.57 | | | $ | 4.10 | | | 11.5 | % |
May not total due to rounding
n.m. – Not meaningful
Segment Highlights
U.S. Mortgage Insurance Operations
| • | | Net premiums earned in the fourth quarter 2006 increased to $184.5 million from $166.8 million in the fourth quarter of 2005. The increase was due primarily to increases in average premium rates and average insured loan balances in 2006. |
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| • | | Total incurred losses in the fourth quarter of 2006 were $72.0 million compared to $63.2 million in the fourth quarter of 2005 driven by higher claim rates and higher claims sizes. |
| • | | Primary claims paid increased to $58.4 million for the fourth quarter of 2006 compared to $51.5 million in the fourth quarter of 2005 driven by an increase in the average claim size. |
| • | | After-tax equity in earnings from CMG for the fourth quarter 2006 was $3.3 million, compared to $3.0 million for the same period in 2005. CMG’s insurance in force grew to $16.3 billion, persistency increased to 77.2% and the primary default rate was just over one percent. |
International Operations
| • | | PMI Australia reported quarterly net income of $13.8 million for the fourth quarter of 2006 compared to $23.7 million for the fourth quarter of 2005. The decrease in net income was due primarily to higher incurred losses partially offset by increases in net investment income and premiums earned. The fourth quarter of 2006 loss reserve addition was $12.4 million while paid claims for the quarter totaled $6.6 million. |
| • | | PMI Europe reported net income of $3.5 million in the fourth quarter of 2006 compared to $1.6 million for the same period a year ago. Net income in the fourth quarter of 2006 was favorably impacted by income from new risk written in the form of credit default swaps during the year and decreased losses and expenses offset by a decline in premiums earned. |
| • | | PMI Asia’s net income in the fourth quarter of 2006 totaled $2.7 million compared to $1.7 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. |
Financial Guaranty
| • | | After-tax equity in earnings from FGIC for the fourth quarter and year to date totaled $25.9 million and $91.0 million, respectively, compared to $18.0 million and $69.1 million for the same periods a year ago. These increases in 2006 were attributable to premiums earned growth, higher net investment income and decreases in losses and loss adjustment expenses. In the fourth quarter of 2006, FGIC reversed loss reserves related to Hurricane Katrina due primarily to an improved rating outlook which increased the Company’s equity in earnings by $2.2 million. |
| • | | After-tax equity in earnings from RAM Re for the fourth quarter and year to date were $1.9 million and $5.7 million, respectively, compared to $1.3 million and $3.1 million for the same periods one year ago. |
Other
| • | | The Other segment reported net losses for the fourth quarter and year to date totaling $25.1 million and $71.4 million, respectively, compared to $8.5 million and $43.9 million for the same periods a year ago. The increase in the net loss for the fourth quarter of 2006 compared to 2005 was due primarily to |
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higher interest expense, expenses for stock options and stock based compensation, and costs to extinguish debt, partly offset by increased net investment income. For the full year of 2006 compared to 2005, other operating expenses increased due to $9.4 million after-tax in expenses for stock options and stock based compensation and a $4.0 million after tax settlement accounting charge related to a lump-sum distribution from our Supplemental Employee Retirement Plan and higher interest expense.
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 from the quarter ended September 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 DECEMBER 31, 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 December 31, 2006 and 2005 | | Page 3 |
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Business Segments Results of Operations - Year Ended December 31, 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 year ended December 31, 2006, the Company’s equity in earnings from unconsolidated subsidiaries include FGIC Corporation, CMG Mortgage Insurance Company (“CMG”), RAM Reinsurance Company, Ltd. (“RAM Re”), certain limited partnership interests and the trust subsidiary that issued the Company’s preferred securities. |
| (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. |
| (4) | Financial Guaranty represents our equity investments in FGIC Corporation and RAM Re, and also represents PMI Guaranty Co. (“PMI Guaranty”). PMI Guaranty, a wholly owned subsidiary of The PMI Group, Inc., was formed in 2006 and began operations in the fourth quarter of 2006. PMI Guaranty provides financial guaranty insurance, financial guaranty reinsurance and related credit enhancement products and services. |
| (5) | The “Other” segment includes other income and related operating expenses of PMI Mortgage Services Co.; investment income, interest expense, intercompany eliminations 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 certain limited partnerships. |
| (6) | U.S. Mortgage Insurance Operations include a $1.3 million charge (after tax) 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 $2.2 million (pre-tax) or $1.8 million (after tax) and $12.2 million (pre-tax) or $9.4 million (after tax) for stock option expenses and related stock based compensation expenses in the fourth quarter and year ended December 31, 2006, respectively. |
| (8) | The expense ratio is 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 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 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 litigation settlement relates to 2001Baynham class action litigation. In the fourth quarter of 2006, PMI received a settlement refund of $1.8 million, net of expenses, related to the 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. During the third quarter of 2006, we exchanged our senior convertible debentures (CoCos) to include a net share settlement feature. Following the completion of the exchange offer in August 2006, approximately $341 million, or 95% of the CoCos were exchanged. In October 2006, we redeemed the $360 million aggregate principal amount of the debentures. On November 15, 2006, we issued approximately 8 million shares related to the HITS discussed above. Also in the fourth quarter of 2006, we redeemed our $63 million 6.75% senior notes at maturity. |
| (14) | In the third quarter of 2006, we entered into an accelerated stock buyback program pursuant to which we purchased 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 per share will depend on the weighted average share price of common stock over the period of the program which will extend through approximately April or May 2007. In September 2006, we received 7.2 million minimum shares under the accelerated stock buyback program. In the fourth quarter of 2006, we repurchased an additional 907 thousand shares for $40 million under a Rule 10b 5-1 program for an average price per common share of $44.11. |
| (15) | Following the completion of the exchange offer in August 2006, the addition of the net share settlement feature to the exchanged debentures and the subsequent redemption of the CoCos that were not exchanged decreased the dilutive effect of the CoCos for the purpose of calculating EPS for the three months and year ending December 31, 2006. |
| (16) | Interest expense in our Financial Guaranty segment relates to a $50 million surplus note provided to PMI Guaranty Co. by the Company. The surplus note bears interest at an annual rate of 5.85% and is due October 20, 2026. |
| 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 December 31, | | Year Ended December 31, |
| | | 2006 | | | 2005 | | 2006 | | | 2005 |
| | | (Dollars and shares, except per share data, in thousands) |
Net premiums written | | $ | 235,468 | | | $ | 246,100 | | $ | 861,614 | | | $ | 845,689 |
| | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | |
Premiums earned | | $ | 225,743 | | | $ | 206,577 | | $ | 860,530 | | | $ | 817,602 |
Income from credit default swaps | | | 2,687 | | | | 484 | | | 7,431 | | | | 2,399 |
Net investment income | | | 49,740 | | | | 45,499 | | | 195,301 | | | | 179,463 |
Equity in earnings from unconsolidated subsidiaries(1) | | | 35,906 | | | | 25,871 | | | 127,309 | | | | 97,885 |
Net realized investment gains | | | 1,135 | | | | 153 | | | 2,756 | | | | 2,050 |
Other income | | | 2,610 | | | | 4,574 | | | 12,710 | | | | 18,384 |
| | | | | | | | | | | | | | |
Total revenues | | | 317,821 | | | | 283,158 | | | 1,206,037 | | | | 1,117,783 |
| | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 90,532 | | | | 64,760 | | | 302,936 | | | | 257,779 |
Amortization of deferred policy acquisition costs | | | 16,293 | | | | 17,387 | | | 68,358 | | | | 74,387 |
Other underwriting and operating expenses(7) | | | 68,652 | | | | 59,074 | | | 235,813 | | | | 213,649 |
Field office restructuring(6) | | | — | | | | — | | | 1,955 | | | | — |
Net costs to exchange and extinguish long-term debt(13) | | | 1,169 | | | | — | | | 2,044 | | | | — |
Litigation (recovery) settlement(12) | | | (1,840 | ) | | | — | | | (2,839 | ) | | | — |
Interest expense | | | 12,323 | | | | 4,654 | | | 38,055 | | | | 31,137 |
| | | | | | | | | | | | | | |
Total losses and expenses | | | 187,129 | | | | 145,875 | | | 646,322 | | | | 576,952 |
| | | | | | | | | | | | | | |
Income before income taxes | | | 130,692 | | | | 137,283 | | | 559,715 | | | | 540,831 |
Income taxes | | | 30,242 | | | | 29,568 | | | 140,064 | | | | 131,662 |
| | | | | | | | | | | | | | |
Net income | | $ | 100,450 | | | $ | 107,715 | | $ | 419,651 | | | $ | 409,169 |
| | | | | | | | | | | | | | |
Diluted net income per share | | $ | 1.19 | | | $ | 1.11 | | $ | 4.57 | | | $ | 4.10 |
| | | | | | | | | | | | | | |
Reconciliation of earnings per share | | | | | | | | | | | | | | |
Net income | | $ | 100,450 | | | $ | 107,715 | | $ | 419,651 | | | $ | 409,169 |
Plus: Interest expense on contingently convertible debt, net of income taxes(15) | | | 24 | | | | 1,912 | | | 4,752 | | | | 7,648 |
| | | | | | | | | | | | | | |
Net income adjusted for diluted earnings per share calculation | | $ | 100,474 | | | $ | 109,627 | | $ | 424,403 | | | $ | 416,817 |
| | | | | | �� | | | | | | | | |
Share data: | | | | | | | | | | | | | | |
Basic weighted average common shares outstanding | | | 83,275 | | | | 89,247 | | | 86,478 | | | | 91,738 |
Stock options and other dilutive components | | | 1,140 | | | | 1,789 | | | 1,192 | | | | 1,729 |
Common stock equivalent shares related to contingently convertible debt | | | 122 | | | | 8,153 | | | 5,196 | | | | 8,153 |
| | | | | | | | | | | | | | |
Diluted weighted average common shares outstanding | | | 84,537 | | | | 99,189 | | | 92,866 | | | | 101,620 |
| | | | | | | | | | | | | | |
Share repurchase data: | | | | | | | | | | | | | | |
Common shares repurchased (14) | | | 907 | | | | 1,100 | | | 11,397 | | | | 6,292 |
| | | | | | | | | | | | | | |
Average price paid per common share repurchased (including commissions) | | $ | 44.11 | | | $ | 40.47 | | | * | | | $ | 39.74 |
| | | | | | | | | | | | | | |
CONSOLIDATED BALANCE SHEETS
| | | | | | |
| | | December 31,
2006 | | December 31,
2005 |
| | | (Dollars and shares, except per share data, in thousands) |
Assets | | | | | | |
Cash and investments, at fair value | | $ | 3,750,140 | | $ | 3,789,432 |
Investments in unconsolidated subsidiaries(1) | | | 1,100,387 | | | 984,925 |
Related party receivables | | | 714 | | | 2,864 |
Reinsurance receivables, reinsurance recoverables and prepaid premiums | | | 25,315 | | | 30,338 |
Deferred policy acquisition costs | | | 87,008 | | | 86,170 |
Other assets | | | 356,582 | | | 360,407 |
| | | | | | |
Total assets | | $ | 5,320,146 | | $ | 5,254,136 |
| | | | | | |
Liabilities | | | | | | |
Reserve for losses and loss adjustment expenses | | $ | 414,736 | | $ | 368,841 |
Unearned premiums | | | 520,264 | | | 490,899 |
Long-term debt (13) | | | 496,593 | | | 819,529 |
Other liabilities | | | 319,963 | | | 344,077 |
| | | | | | |
Total liabilities | | | 1,751,556 | | | 2,023,346 |
| | |
Shareholders’ equity | | | 3,568,590 | | | 3,230,790 |
| | | | | | |
Total liabilities and shareholders’ equity | | $ | 5,320,146 | | $ | 5,254,136 |
| | | | | | |
Basic shares issued and outstanding | | | 86,747 | | | 88,713 |
| | | | | | |
Book value per share | | $ | 41.14 | | $ | 36.42 |
| | | | | | |
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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 December 31, 2006 | |
| | | (Dollars in thousands) | |
Net premiums written | | $ | 175,730 | | | $ | 58,129 | | | $ | 1,590 | | $ | 19 | | | $ | 235,468 | |
| | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 184,511 | | | $ | 41,219 | | | $ | 1 | | $ | 12 | | | $ | 225,743 | |
Income from credit default swaps | | | — | | | | 2,687 | | | | — | | | — | | | | 2,687 | |
Net investment income | | | 26,071 | | | | 17,990 | | | | 2,036 | | | 3,643 | | | | 49,740 | |
Equity in earnings (losses) from unconsolidated subsidiaries(1) | | | 5,077 | | | | — | | | | 30,953 | | | (124 | ) | | | 35,906 | |
Net realized investment gains (losses) | | | 1,627 | | | | (244 | ) | | | — | | | (248 | ) | | | 1,135 | |
Other (loss) income | | | (30 | ) | | | (189 | ) | | | — | | | 2,829 | | | | 2,610 | |
| | | | | | | | | | | | | | | | | | | |
Total revenues | | | 217,256 | | | | 61,463 | | | | 32,990 | | | 6,112 | | | | 317,821 | |
| | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 72,039 | | | | 18,492 | | | | — | | | 1 | | | | 90,532 | |
Amortization of deferred policy acquisition costs | | | 12,544 | | | | 3,748 | | | | 1 | | | — | | | | 16,293 | |
Other underwriting and operating expenses(7) | | | 28,956 | | | | 11,064 | | | | 716 | | | 27,916 | | | | 68,652 | |
Net costs to exchange and extinguish long-term debt(13) | | | — | | | | — | | | | — | | | 1,169 | | | | 1,169 | |
Litigation (recovery) settlement(12) | | | (1,840 | ) | | | — | | | | — | | | — | | | | (1,840 | ) |
Interest expense(16) | | | — | | | | 1 | | | | 569 | | | 11,753 | | | | 12,323 | |
| | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 111,699 | | | | 33,305 | | | | 1,286 | | | 40,839 | | | | 187,129 | |
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 105,557 | | | | 28,158 | | | | 31,704 | | | (34,727 | ) | | | 130,692 | |
Income taxes (benefit) | | | 28,349 | | | | 8,193 | | | | 3,281 | | | (9,581 | ) | | | 30,242 | |
| | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 77,208 | | | $ | 19,965 | | | $ | 28,423 | | $ | (25,146 | ) | | $ | 100,450 | |
| | | | | | | | | | | | | | | | | | | |
Expense ratio(8) | | | 22.6 | % | | | 25.5 | % | | | | | | | | | | | |
Loss ratio(8) | | | 39.0 | % | | | 44.9 | % | | | | | | | | | | | |
Combined ratio | | | 61.6 | % | | | 70.4 | % | | | | | | | | | | | |
| |
| | | Three Months Ended December 31, 2005 | |
| | | (Dollars in thousands) | |
Net premiums written | | $ | 201,160 | | | $ | 44,913 | | | $ | — | | $ | 27 | | | $ | 246,100 | |
| | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 166,778 | | | $ | 39,781 | | | $ | — | | $ | 18 | | | $ | 206,577 | |
Income from credit default swaps | | | — | | | | 484 | | | | — | | | — | | | | 484 | |
Net investment income | | | 26,168 | | | | 14,499 | | | | — | | | 4,832 | | | | 45,499 | |
Equity in earnings (losses) from unconsolidated subsidiaries(1) | | | 4,583 | | | | — | | | | 21,453 | | | (165 | ) | | | 25,871 | |
Net realized investment gains (losses) | | | 378 | | | | (221 | ) | | | — | | | (4 | ) | | | 153 | |
Other (loss) income | | | (3 | ) | | | 294 | | | | — | | | 4,283 | | | | 4,574 | |
| | | | | | | | | | | | | | | | | | | |
Total revenues | | | 197,904 | | | | 54,837 | | | | 21,453 | | | 8,964 | | | | 283,158 | |
| | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 63,159 | | | | 1,601 | | | | — | | | — | | | | 64,760 | |
Amortization of deferred policy acquisition costs | | | 14,113 | | | | 3,274 | | | | — | | | — | | | | 17,387 | |
Other underwriting and operating expenses | | | 29,057 | | | | 12,663 | | | | — | | | 17,354 | | | | 59,074 | |
Interest expense | | | 1 | | | | 9 | | | | — | | | 4,644 | | | | 4,654 | |
| | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 106,330 | | | | 17,547 | | | | — | | | 21,998 | | | | 145,875 | |
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 91,574 | | | | 37,290 | | | | 21,453 | | | (13,034 | ) | | | 137,283 | |
Income taxes (benefit) | | | 21,696 | | | | 10,251 | | | | 2,208 | | | (4,587 | ) | | | 29,568 | |
| | | | | | | | | | | | | | | | | | | |
Net Income (loss) | | $ | 69,878 | | | $ | 27,039 | | | $ | 19,245 | | $ | (8,447 | ) | | $ | 107,715 | |
| | | | | | | | | | | | | | | | | | | |
Expense ratio(8) | | | 21.5 | % | | | 35.5 | % | | | | | | | | | | | |
Loss ratio (8) | | | 37.9 | % | | | 4.0 | % | | | | | | | | | | | |
Combined ratio | | | 59.4 | % | | | 39.5 | % | | | | | | | | | | | |
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 | |
| | | Year Ended December 31, 2006 | |
| | | (Dollars in thousands) | |
Net premiums written | | $ | 658,576 | | | $ | 201,392 | | | $ | 1,590 | | $ | 56 | | | $ | 861,614 | |
| | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 687,993 | | | $ | 172,471 | | | $ | 1 | | $ | 65 | | | $ | 860,530 | |
Income from credit default swaps | | | — | | | | 7,431 | | | | — | | | — | | | | 7,431 | |
Net investment income | | | 105,893 | | | | 65,842 | | | | 2,037 | | | 21,529 | | | | 195,301 | |
Equity in earnings (losses) from unconsolidated subsidiaries(1) | | | 20,308 | | | | — | | | | 107,213 | | | (212 | ) | | | 127,309 | |
Net realized investment gains (losses) | | | 3,789 | | | | 3,602 | | | | — | | | (4,635 | ) | | | 2,756 | |
Other (loss) income | | | (69 | ) | | | (747 | ) | | | — | | | 13,526 | | | | 12,710 | |
| | | | | | | | | | | | | | | | | | | |
Total revenues | | | 817,914 | | | | 248,599 | | | | 109,251 | | | 30,273 | | | | 1,206,037 | |
| | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 263,037 | | | | 39,901 | | | | — | | | (2 | ) | | | 302,936 | |
Amortization of deferred policy acquisition costs | | | 51,979 | | | | 16,378 | | | | 1 | | | — | | | | 68,358 | |
Other underwriting and operating expenses(7) | | | 101,453 | | | | 41,935 | | | | 716 | | | 91,709 | | | | 235,813 | |
Field office restructuring(6) | | | 1,955 | | | | — | | | | — | | | — | | | | 1,955 | |
Net costs to exchange and extinguish long-term debt(13) | | | — | | | | — | | | | — | | | 2,044 | | | | 2,044 | |
Litigation (recovery) settlement(12) | | | (2,839 | ) | | | — | | | | — | | | — | | | | (2,839 | ) |
Interest expense(16) | | | 2 | | | | 125 | | | | 569 | | | 37,359 | | | | 38,055 | |
| | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 415,587 | | | | 98,339 | | | | 1,286 | | | 131,110 | | | | 646,322 | |
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 402,327 | | | | 150,260 | | | | 107,965 | | | (100,837 | ) | | | 559,715 | |
Income taxes (benefit) | | | 112,010 | | | | 46,747 | | | | 10,706 | | | (29,399 | ) | | | 140,064 | |
| | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 290,317 | | | $ | 103,513 | | | $ | 97,259 | | $ | (71,438 | ) | | $ | 419,651 | |
| | | | | | | | | | | | | | | | | | | |
Expense ratio(8) | | | 23.2 | % | | | 29.0 | % | | | | | | | | | | | |
Loss ratio(8) | | | 38.2 | % | | | 23.1 | % | | | | | | | | | | | |
Combined ratio | | | 61.4 | % | | | 52.1 | % | | | | | | | | | | | |
| |
| | | Year Ended December 31, 2005 | |
| | | (Dollars in thousands) | |
Net premiums written | | $ | 667,128 | | | $ | 178,481 | | | $ | — | | $ | 80 | | | $ | 845,689 | |
| | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 665,190 | | | $ | 152,336 | | | $ | — | | $ | 76 | | | $ | 817,602 | |
Income from credit default swaps | | | — | | | | 2,399 | | | | — | | | — | | | | 2,399 | |
Net investment income | | | 104,339 | | | | 57,155 | | | | — | | | 17,969 | | | | 179,463 | |
Equity in earnings (losses) from unconsolidated subsidiaries(1) | | | 18,811 | | | | — | | | | 79,752 | | | (678 | ) | | | 97,885 | |
Net realized investment gains (losses) | | | 4,563 | | | | 75 | | | | — | | | (2,588 | ) | | | 2,050 | |
Other income | | | (1 | ) | | | 426 | | | | — | | | 17,959 | | | | 18,384 | |
| | | | | | | | | | | | | | | | | | | |
Total revenues | | | 792,902 | | | | 212,391 | | | | 79,752 | | | 32,738 | | | | 1,117,783 | |
| | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 253,440 | | | | 4,339 | | | | — | | | — | | | | 257,779 | |
Amortization of deferred policy acquisition costs | | | 59,647 | | | | 14,740 | | | | — | | | — | | | | 74,387 | |
Other underwriting and operating expenses | | | 103,149 | | | | 41,855 | | | | — | | | 68,645 | | | | 213,649 | |
Interest expense | | | 6 | | | | 8 | | | | — | | | 31,123 | | | | 31,137 | |
| | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 416,242 | | | | 60,942 | | | | — | | | 99,768 | | | | 576,952 | |
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 376,660 | | | | 151,449 | | | | 79,752 | | | (67,030 | ) | | | 540,831 | |
Income taxes (benefit) | | | 101,221 | | | | 45,996 | | | | 7,553 | | | (23,108 | ) | | | 131,662 | |
| | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 275,439 | | | $ | 105,453 | | | $ | 72,199 | | $ | (43,922 | ) | | $ | 409,169 | |
| | | | | | | | | | | | | | | | | | | |
Expense ratio(8) | | | 24.4 | % | | | 31.7 | % | | | | | | | | | | | |
Loss ratio(8) | | | 38.1 | % | | | 2.8 | % | | | | | | | | | | | |
Combined ratio | | | 62.5 | % | | | 34.5 | % | | | | | | | | | | | |
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 |
| | | December 31, 2006 |
| | | (Dollars in thousands) |
Assets | | | | | | | | | | | | | | | | | |
Cash and investments, at fair value | | $ | 1,990,326 | | $ | 1,349,069 | | $ | 210,277 | | | $ | 200,468 | | | $ | 3,750,140 |
Investments in unconsolidated subsidiaries(1) | | | 132,403 | | | — | | | 950,249 | | | | 17,735 | | | | 1,100,387 |
Related party receivables | | | 735 | | | — | | | — | | | | (21 | ) | | | 714 |
Reinsurance receivables, recoverables and prepaid premiums | | | 16,504 | | | 8,811 | | | — | | | | — | | | | 25,315 |
Deferred policy acquisition costs | | | 43,523 | | | 42,538 | | | 947 | | | | — | | | | 87,008 |
Other assets | | | 209,331 | | | 46,669 | | | 3,161 | | | | 97,421 | | | | 356,582 |
| | | | | | | | | | | | | | | | | |
Total assets | | $ | 2,392,822 | | $ | 1,447,087 | | $ | 1,164,634 | | | $ | 315,603 | | | $ | 5,320,146 |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | — |
Liabilities | | | | | | | | | | | | | | | | | — |
Reserve for losses and loss adjustment expenses | | $ | 366,182 | | $ | 48,554 | | $ | — | | | $ | — | | | $ | 414,736 |
Unearned premiums | | | 106,445 | | | 412,196 | | | 1,589 | | | | 34 | | | | 520,264 |
Long-term debt (13) | | | — | | | — | | | 50,000 | (16) | | | 446,593 | | | | 496,593 |
Other liabilities (assets) | | | 280,678 | | | 73,099 | | | 41,256 | | | | (75,070 | ) | | | 319,963 |
| | | | | | | | | | | | | | | | | |
Total liabilities | | | 753,305 | | | 533,849 | | | 92,845 | | | | 371,557 | | | | 1,751,556 |
| | | | | |
Shareholders’ equity (deficit) | | | 1,639,517 | | | 913,238 | | | 1,071,789 | | | | (55,954 | ) | | | 3,568,590 |
| | | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 2,392,822 | | $ | 1,447,087 | | $ | 1,164,634 | | | $ | 315,603 | | | $ | 5,320,146 |
| | | | | | | | | | | | | | | | | |
| |
| | | 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 and 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 |
| | | | | | | | | | | | | | | | | |
Page 5
THE PMI GROUP, INC. AND SUBSIDIARIES
U.S. MORTGAGE INSURANCE OPERATIONS(2) ANALYSIS OF RESERVE FOR LOSSES AND LAE
| | | | | | | | | | | | | | | |
| | | December 31, 2006 | | September 30, 2006 | | December 31, 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 | | 39,997 | | $ | 332,900 | | 38,573 | | $ | 325,502 | | 42,702 | | $ | 307,066 |
Pool insurance(9) | | 15,898 | | | 33,282 | | 15,253 | | | 33,282 | | 20,379 | | | 38,470 |
| | | | | | | | | | | | | | | |
Total | | 55,895 | | $ | 366,182 | | 53,826 | | $ | 358,784 | | 63,081 | | $ | 345,536 |
| | | | | | | | | | | | | | | |
Reconciliation of Reserve for Losses and LAE
| | | | | | | | | | | | |
| | | December 31,
2006 | | | September 30,
2006 | | | Reserve
Change | |
| | | (Dollars in thousands) | |
Gross reserve for losses and LAE: | | | | | | | | | | | | |
Primary insurance | | $ | 332,900 | | | $ | 325,502 | | | $ | 7,398 | |
Pool insurance(9) | | | 33,282 | | | | 33,282 | | | | — | |
| | | | | | | | | | | | |
Total gross reserve for losses and LAE | | | 366,182 | | | | 358,784 | | | | 7,398 | |
| | | |
Ceded reserve for losses: | | | | | | | | | | | | |
Primary insurance | | | (2,769 | ) | | | (2,719 | ) | | | (50 | ) |
Pool insurance (9) | | | (79 | ) | | | (79 | ) | | | — | |
| | | | | | | | | | | | |
Total ceded reserve for losses | | | (2,848 | ) | | | (2,798 | ) | | | (50 | ) |
| | | | | | | | | | | | |
Net reserve for losses and LAE | | $ | 363,334 | | | $ | 355,986 | | | $ | 7,348 | |
| | | | | | | | | | | | |
U.S. MORTGAGE INSURANCE OPERATIONS(2) FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | | | Year Ended December 31, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Flow insurance written(in millions) | | $ | 6,498 | | | $ | 6,625 | | | $ | 23,270 | | | $ | 28,194 | |
Structured insurance written(in millions) | | | 2,932 | | | | 2,751 | | | | 8,964 | | | | 7,740 | |
| | | | | | | | | | | | | | | | |
Primary new insurance written(in millions) | | $ | 9,430 | | | $ | 9,376 | | | $ | 32,234 | | | $ | 35,934 | |
| | | | | | | | | | | | | | | | |
Primary new risk written(in millions) | | $ | 2,427 | | | $ | 2,392 | | | $ | 8,345 | | | $ | 9,237 | |
| | | | |
Pool new insurance written(in millions)(9) | | $ | 12,338 | | | $ | 4,369 | | | $ | 24,563 | | | $ | 14,062 | |
| | | | |
Pool new risk written(in millions)(9) | | $ | 450 | | | $ | 102 | | | $ | 746 | | | $ | 327 | |
| | | | |
Product mix as a % of new insurance written: | | | | | | | | | | | | | | | | |
Above 97% LTV’s | | | 27 | % | | | 13 | % | | | 19 | % | | | 13 | % |
90.01% to 95% LTV’s | | | 19 | % | | | 21 | % | | | 21 | % | | | 24 | % |
85.01% to 90% LTV’s | | | 34 | % | | | 44 | % | | | 42 | % | | | 43 | % |
90.01% to 95% LTV’s with >= 30% coverage | | | 14 | % | | | 17 | % | | | 17 | % | | | 20 | % |
85.01% to 90% LTV’s with >= 25% coverage | | | 29 | % | | | 38 | % | | | 37 | % | | | 37 | % |
ARMs | | | 20 | % | | | 36 | % | | | 24 | % | | | 33 | % |
Monthlies | | | 96 | % | | | 85 | % | | | 96 | % | | | 94 | % |
Refinances | | | 38 | % | | | 37 | % | | | 36 | % | | | 36 | % |
Structured transactions | | | 31 | % | | | 29 | % | | | 28 | % | | | 22 | % |
| | | | |
Premiums written(in thousands): | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 221,747 | | | $ | 246,432 | | | $ | 839,157 | | | $ | 849,209 | |
Ceded premiums, net of assumed premiums | | | (42,608 | ) | | | (41,450 | ) | | | (167,773 | ) | | | (167,778 | ) |
Refunded premiums | | | (3,409 | ) | | | (3,822 | ) | | | (12,808 | ) | | | (14,303 | ) |
| | | | | | | | | | | | | | | | |
Net premiums written | | | 175,730 | | | | 201,160 | | | | 658,576 | | | | 667,128 | |
Change in unearned premiums | | | 8,781 | | | | (34,382 | ) | | | 29,417 | | | | (1,938 | ) |
| | | | | | | | | | | | | | | | |
Net premiums earned | | $ | 184,511 | | | $ | 166,778 | | | $ | 687,993 | | | $ | 665,190 | |
| | | | | | | | | | | | | | | | |
Page 6
THE PMI GROUP, INC. AND SUBSIDIARIES
U.S. MORTGAGE INSURANCE OPERATIONS(2) FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | 12/31/2006 | | | 9/30/2006 | | | 6/30/2006 | | | 3/31/2006 | | | 12/31/2005 | |
Primary insurance in force(in millions) | | | | | | | | | | | | | | | | | | | | | | |
Flow | | | | $ | 85,086 | | | $ | 84,405 | | | $ | 84,644 | | | $ | 85,685 | | | $ | 86,991 | |
Structured transactions | | | | | 17,549 | | | | 15,877 | | | | 15,741 | | | | 15,826 | | | | 14,099 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total | | | | $ | 102,635 | | | $ | 100,282 | | | $ | 100,385 | | | $ | 101,511 | | | $ | 101,090 | |
| | | | | | | | | | | | | | | | | | | | | | |
Primary risk in force(in millions) | | | | | | | | | | | | | | | | | | | | | | |
Flow | | | | $ | 21,095 | | | $ | 20,855 | | | $ | 20,883 | | | $ | 21,102 | | | $ | 21,388 | |
Structured transactions | | | | | 4,616 | | | | 4,193 | | | | 4,127 | | | | 4,147 | | | | 3,583 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total | | | | $ | 25,711 | | | $ | 25,048 | | | $ | 25,010 | | | $ | 25,249 | | | $ | 24,971 | |
| | | | | | | | | | | | | | | | | | | | | | |
Pool risk in force (in millions)(9) | | | | $ | 3,216 | | | $ | 2,773 | | | $ | 2,737 | | | $ | 2,666 | | | $ | 2,589 | |
| | | | | | |
Primary risk in force - credit score distribution | | | | | | | | | | | | | | | | | | | | | | |
Flow | | 620 or above | | | 93.7 | % | | | 93.5 | % | | | 93.3 | % | | | 93.2 | % | | | 93.0 | % |
| | 619-575 | | | 5.0 | % | | | 5.2 | % | | | 5.3 | % | | | 5.4 | % | | | 5.5 | % |
| | 574 or below | | | 1.3 | % | | | 1.3 | % | | | 1.4 | % | | | 1.4 | % | | | 1.5 | % |
| | | | | | |
Structured transactions | | 620 or above | | | 84.7 | % | | | 82.8 | % | | | 80.7 | % | | | 79.2 | % | | | 76.9 | % |
| | 619-575 | | | 9.8 | % | | | 10.8 | % | | | 12.3 | % | | | 13.2 | % | | | 14.5 | % |
| | 574 or below | | | 5.5 | % | | | 6.4 | % | | | 7.1 | % | | | 7.6 | % | | | 8.6 | % |
| | | | | | |
Total | | 620 or above | | | 92.0 | % | | | 91.7 | % | | | 91.3 | % | | | 90.9 | % | | | 90.7 | % |
| | 619-575 | | | 5.9 | % | | | 6.1 | % | | | 6.4 | % | | | 6.6 | % | | | 6.8 | % |
| | 574 or below | | | 2.1 | % | | | 2.2 | % | | | 2.3 | % | | | 2.5 | % | | | 2.5 | % |
| | | | | | |
Primary average loan size(in thousands) | | | | | | | | | | | | | | | | | | | | | | |
Flow | | | | $ | 140.0 | | | $ | 138.3 | | | $ | 136.9 | | | $ | 135.6 | | | $ | 134.5 | |
Structured transactions | | | | $ | 155.6 | | | $ | 151.8 | | | $ | 150.7 | | | $ | 150.7 | | | $ | 145.4 | |
Total | | | | $ | 142.5 | | | $ | 140.3 | | | $ | 138.9 | | | $ | 137.8 | | | $ | 136.0 | |
| | | | | | |
Loss severity - primary(quarterly) | | | | | | | | | | | | | | | | | | | | | | |
Flow | | | | | 88.6 | % | | | 83.1 | % | | | 83.2 | % | | | 84.9 | % | | | 85.9 | % |
Structured transactions | | | | | 92.4 | % | | | 86.7 | % | | | 86.8 | % | | | 91.2 | % | | | 94.3 | % |
Total | | | | | 89.6 | % | | | 84.0 | % | | | 84.1 | % | | | 86.5 | % | | | 87.7 | % |
| | | | | | |
Persistency | | | | | | | | | | | | | | | | | | | | | | |
Primary persistency rate | | | | | 69.6 | % | | | 67.3 | % | | | 64.9 | % | | | 63.1 | % | | | 61.9 | % |
| | | | | | |
Primary loans, defaults and default rates | | | | | | | | | | | | | | | | | | | | | | |
Primary policies in force | | | | | 720,347 | | | | 714,742 | | | | 722,756 | | | | 736,908 | | | | 743,533 | |
| | | | | | |
Primary loans in default | | | | | 39,997 | | | | 38,573 | | | | 37,102 | | | | 37,784 | | | | 42,702 | |
| | | | | | |
Primary default rate | | | | | 5.55 | % | | | 5.40 | % | | | 5.13 | % | | | 5.13 | % | | | 5.74 | % |
Structured transactions only default rate | | | | | 9.86 | % | | | 9.96 | % | | | 9.26 | % | | | 8.59 | % | | | 9.85 | % |
Pool default rate | | | | | 4.24 | % | | | 4.81 | % | | | 5.60 | % | | | 6.17 | % | | | 6.84 | % |
| | | | | | |
Claims paid(quarter-to-date in millions) | | | | | | | | | | | | | | | | | | | | | | |
Primary claims paid - flow | | | | $ | 43.0 | | | $ | 42.6 | | | $ | 36.2 | | | $ | 37.3 | | | $ | 39.2 | |
Primary claims paid - structured transactions | | | | | 15.4 | | | | 14.7 | | | | 11.3 | | | | 13.5 | | | | 12.3 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total primary claims paid | | | | | 58.4 | | | | 57.3 | | | | 47.5 | | | | 50.8 | | | | 51.5 | |
Total pool and other | | | | | 3.0 | | | | 4.7 | | | | 4.6 | | | | 4.3 | | | | 5.1 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total claims paid | | | | $ | 61.4 | | | $ | 62.0 | | | $ | 52.1 | | | $ | 55.1 | | | $ | 56.6 | |
| | | | | | | | | | | | | | | | | | | | | | |
Number of primary claims paid(quarter-to-date) | | | | | 2,195 | | | | 2,346 | | | | 2,038 | | | | 2,058 | | | | 2,138 | |
| | | | | | |
Average primary claim size(quarter-to-date in thousands) | | | | $ | 26.6 | | | $ | 24.4 | | | $ | 23.3 | | | $ | 24.7 | | | $ | 24.1 | |
| | | | | | |
Captive reinsurance arrangements(year-to-date) | | | | | | | | | | | | | | | | | | | | | | |
Percentage of flow NIW subject to captive reinsurance arrangements | | | | | 68.8 | % | | | 71.6 | % | | | 71.3 | % | | | 69.6 | % | | | 69.0 | % |
Percentage of primary NIW subject to captive reinsurance arrangements | | | | | 50.4 | % | | | 53.5 | % | | | 51.5 | % | | | 44.8 | % | | | 54.7 | % |
Percentage of primary IIF subject to captive reinsurance arrangements | | | | | 52.9 | % | | | 53.9 | % | | | 53.3 | % | | | 53.2 | % | | | 53.4 | % |
Percentage of primary RIF subject to captive reinsurance arrangements | | | | | 53.2 | % | | | 54.4 | % | | | 53.9 | % | | | 53.9 | % | | | 54.4 | % |
| | | | | | |
Alt-A primary insurance in force(in millions)(11) | | | | | | | | | | | | | | | | | | | | | | |
With FICO scores of 660 and above | | | | $ | 15,738 | | | $ | 14,203 | | | $ | 13,216 | | | $ | 12,575 | | | $ | 11,455 | |
With FICO scores below 660 and above 619 | | | | | 3,353 | | | | 3,178 | | | | 2,934 | | | | 2,783 | | | | 2,564 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total Alt-A primary insurance in force | | | | $ | 19,091 | | | $ | 17,381 | | | $ | 16,150 | | | $ | 15,358 | | | $ | 14,019 | |
| | | | | | | | | | | | | | | | | | | | | | |
Risk-to-capital ratio(10) | | | | | 8.1 to 1 | | | | 8.2 to 1 | | | | 7.7 to 1 | | | | 8.1 to 1 | | | | 8.2 to 1 | |
Page 7
THE PMI GROUP, INC. AND SUBSIDIARIES
CMG MORTGAGE INSURANCE COMPANY FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | | | | |
| | | December 31,
2006 | | | September 30,
2006 | | | December 31,
2005 | |
Primary new insurance written(quarter-to-date in millions) | | $ | 1,064 | | | $ | 1,238 | | | $ | 1,154 | |
| | | |
Primary insurance in force(in millions) | | $ | 16,320 | | | $ | 16,063 | | | $ | 15,495 | |
| | | |
Primary risk in force(in millions) | | $ | 3,984 | | | $ | 3,897 | | | $ | 3,666 | |
| | | |
Insured primary loans | | | 113,832 | | | | 113,004 | | | | 111,472 | |
| | | |
Persistency | | | 77.2 | % | | | 75.6 | % | | | 72.0 | % |
| | | |
Primary loans in default | | | 1,192 | | | | 974 | | | | 907 | |
| | | |
Primary default rate | | | 1.05 | % | | | 0.86 | % | | | 0.81 | % |
| | | |
Primary claims paid(quarter-to-date in thousands) | | $ | 1,372 | | | $ | 2,268 | | | $ | 1,667 | |
| | | |
Number of primary claims paid(quarter-to-date) | | | 54 | | | | 98 | | | | 73 | |
| | | |
Average primary claim size (quarter-to-date in thousands) | | $ | 25.4 | | | $ | 23.1 | | | $ | 22.8 | |
PMI AUSTRALIA FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | | | | |
| | | December 31,
2006 | | | September 30,
2006 | | | December 31,
2005 | |
Net premiums written(quarter-to-date in thousands) | | $ | 53,238 | | | $ | 47,472 | | | $ | 39,562 | |
| | | |
Premiums earned(quarter-to-date in thousands) | | $ | 34,167 | | | $ | 39,849 | | | $ | 32,685 | |
| | | |
Flow insurance written(quarter-to-date in millions) | | $ | 5,836 | | | $ | 5,376 | | | $ | 4,673 | |
RMBS insurance written(quarter-to-date in millions) | | | 3,078 | | | | 3,899 | | | | 1,187 | |
| | | | | | | | | | | | |
New insurance written(quarter-to-date in millions) | | $ | 8,914 | | | $ | 9,275 | | | $ | 5,860 | |
| | | | | | | | | | | | |
| | | |
Insurance in force(in millions) | | $ | 148,765 | | | $ | 135,001 | | | $ | 119,915 | |
| | | |
Risk in force(in millions) | | $ | 135,541 | | | $ | 123,159 | | | $ | 108,751 | |
| | | |
Policies in force | | | 1,055,057 | | | | 1,026,990 | | | | 981,732 | |
| | | |
Loans in default | | | 2,281 | | | | 2,099 | | | | 1,264 | |
| | | |
Default rate | | | 0.22 | % | | | 0.20 | % | | | 0.13 | % |
| | | |
Claims paid(quarter-to-date in thousands) | | $ | 6,584 | | | $ | 4,534 | | | $ | 1,454 | |
| | | |
Number of claims paid(quarter-to-date) | | | 118 | | | | 80 | | | | 37 | |
| | | |
Average claim size(quarter-to-date in thousands) | | $ | 55.8 | | | $ | 56.7 | | | $ | 39.3 | |
PMI EUROPE FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | |
| | | December 31,
2006 | | September 30,
2006 | | December 31,
2005 |
Net premiums written(quarter-to-date in thousands) | | $ | 3,213 | | $ | 2,948 | | $ | 3,477 |
| | | |
Premiums earned(quarter-to-date in thousands) | | $ | 4,212 | | $ | 4,153 | | $ | 4,424 |
| | | |
New insurance written(quarter-to-date in millions) | | $ | 160 | | $ | 62 | | $ | 33 |
| | | |
New credit default swaps written(quarter-to-date in millions) | | $ | 5,994 | | $ | 7,910 | | $ | — |
| | | |
New reinsurance written(quarter-to-date in millions) | | $ | 1,028 | | $ | 2,248 | | $ | 3,223 |
| | | |
Insurance in force(in millions) | | $ | 48,467 | | $ | 49,976 | | $ | 38,443 |
| | | |
Risk in force(in millions) | | $ | 3,850 | | $ | 4,441 | | $ | 2,776 |
| | | |
Claims paid including credit default swaps(quarter-to-date in thousands) | | $ | 1,095 | | $ | 1,228 | | $ | 1,076 |
Page 8
THE PMI GROUP, INC. AND SUBSIDIARIES
APPENDIX A - QUARTERLY FINANCIAL INFORMATION
PMI AUSTRALIA QUARTERLY FINANCIAL INFORMATION
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | 2005 | |
| | | 4th Quarter | | | 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 | | $ | 44,341 | | | $ | 52,634 | | | $ | 52,399 | | | $ | 43,644 | | $ | 43,959 | | | $ | 41,815 | | | $ | 38,929 | | | $ | 37,840 | |
Net investment income | | $ | 19,453 | | | $ | 18,886 | | | $ | 17,529 | | | $ | 16,712 | | $ | 16,346 | | | $ | 15,777 | | | $ | 14,967 | | | $ | 14,444 | |
Net realized investment (losses) gains | | $ | (387 | ) | | $ | 3,708 | | | $ | (262 | ) | | $ | 164 | | $ | (89 | ) | | $ | 77 | | | $ | (1 | ) | | $ | 261 | |
Change in fair value of foreign currency put options | | $ | (109 | ) | | $ | (638 | ) | | $ | (2,640 | ) | | $ | 1,855 | | $ | (24 | ) | | $ | (232 | ) | | $ | (422 | ) | | $ | (1,338 | ) |
Total losses and expenses | | $ | 37,656 | | | $ | 28,610 | | | $ | 24,843 | | | $ | 15,789 | | $ | 17,226 | | | $ | 13,632 | | | $ | 15,104 | | | $ | 13,788 | |
Net income | | $ | 18,073 | | | $ | 32,688 | | | $ | 29,332 | | | $ | 32,546 | | $ | 31,906 | | | $ | 31,079 | | | $ | 26,725 | | | $ | 26,487 | |
| | | | | | | | |
Net income(U.S. $ in thousands) | | $ | 13,830 | | | $ | 24,732 | | | $ | 21,923 | | | $ | 24,054 | | $ | 23,728 | | | $ | 23,623 | | | $ | 20,541 | | | $ | 20,584 | |
| | | | | | | | |
Balance Sheet Components | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Cash and investments, at fair value | | $ | 1,358,525 | | | $ | 1,314,487 | | | $ | 1,257,618 | | | $ | 1,219,179 | | $ | 1,197,016 | | | $ | 1,147,390 | | | $ | 1,090,399 | | | $ | 1,037,704 | |
Total assets | | $ | 1,442,781 | | | $ | 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 | | $ | 38,581 | | | $ | 24,185 | | | $ | 16,150 | | | $ | 11,489 | | $ | 11,573 | | | $ | 11,156 | | | $ | 12,541 | | | $ | 12,549 | |
Unearned premiums | | $ | 466,644 | | | $ | 441,936 | | | $ | 431,864 | | | $ | 419,207 | | $ | 415,885 | | | $ | 406,661 | | | $ | 395,113 | | | $ | 382,781 | |
Shareholder’s equity | | $ | 885,595 | | | $ | 874,975 | | | $ | 841,116 | | | $ | 822,918 | | $ | 793,045 | | | $ | 757,372 | | | $ | 730,113 | | | $ | 689,927 | |
PMI EUROPE QUARTERLY FINANCIAL INFORMATION
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | | 2005 | |
| | | 4th Quarter | | 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 | | € | 3,264 | | € | 3,258 | | | € | 3,108 | | | € | 3,232 | | | € | 3,721 | | | € | 3,749 | | | € | 3,298 | | | € | 3,321 | |
Income from credit default swaps | | € | 2,067 | | € | 769 | | | € | 1,691 | | | € | 1,356 | | | € | 409 | | | € | 811 | | | € | 390 | | | € | 320 | |
Net investment income | | € | 1,803 | | € | 1,891 | | | € | 1,797 | | | € | 1,898 | | | € | 1,861 | | | € | 2,258 | | | € | 1,964 | | | € | 1,891 | |
Net realized investment gains (losses) | | € | 35 | | € | 511 | | | € | 361 | | | € | 17 | | | € | (131 | ) | | € | (70 | ) | | € | (13 | ) | | € | 111 | |
Change in fair value of foreign currency put options | | € | — | | € | (2 | ) | | € | (42 | ) | | € | (43 | ) | | € | 55 | | | € | (3 | ) | | € | 342 | | | € | (33 | ) |
Total losses and expenses | | € | 3,001 | | € | 4,026 | | | € | 2,635 | | | € | 2,692 | | | € | 3,824 | | | € | 3,244 | | | € | 3,168 | | | € | 2,031 | |
Net income | | € | 2,718 | | € | 1,559 | | | € | 2,780 | | | € | 2,451 | | | € | 1,362 | | | € | 2,276 | | | € | 1,828 | | | € | 2,326 | |
| | | | | | | | |
Net income(U.S. $ in thousands) | | $ | 3,506 | | $ | 1,987 | | | $ | 3,498 | | | $ | 2,949 | | | $ | 1,615 | | | $ | 2,774 | | | $ | 2,330 | | | $ | 3,049 | |
| | | | | | | | |
Balance Sheet Components | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Cash and investments, at fair value | | € | 163,148 | | € | 162,858 | | | € | 160,424 | | | € | 182,304 | | | € | 182,559 | | | € | 182,682 | | | € | 179,698 | | | € | 172,707 | |
Total assets | | € | 184,404 | | € | 182,503 | | | € | 174,624 | | | € | 192,990 | | | € | 192,107 | | | € | 192,431 | | | € | 188,840 | | | € | 182,857 | |
| | | | | | | | |
Liabilities and Shareholder’s Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Reserve for losses and LAE | | € | 13,567 | | € | 13,340 | | | € | 12,521 | | | € | 12,581 | | | € | 12,508 | | | € | 13,019 | | | € | 13,395 | | | € | 12,807 | |
Unearned premiums | | € | 15,943 | | € | 16,703 | | | € | 17,648 | | | € | 19,077 | | | € | 20,020 | | | € | 20,808 | | | € | 22,589 | | | € | 24,719 | |
Shareholder’s equity | | € | 141,419 | | € | 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 | |
| | | 4th Quarter | | | 3rd Quarter | | | 2nd Quarter | | | 1st Quarter | | | 4th Quarter | | | 3rd Quarter | | | 2nd Quarter | | | 1st Quarter | |
| | | (Dollars in thousands) | |
U.S. Mortgage Insurance Operations (2) | |
Net premiums written | | $ | 175,730 | | | $ | 160,468 | | | $ | 158,904 | | | $ | 163,474 | | | $ | 201,160 | | | $ | 158,866 | | | $ | 152,564 | | | $ | 154,538 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 184,511 | | | $ | 168,118 | | | $ | 167,826 | | | $ | 167,538 | | | $ | 166,778 | | | $ | 166,052 | | | $ | 168,248 | | | $ | 164,112 | |
Net investment income | | | 26,071 | | | | 27,082 | | | | 27,064 | | | | 25,676 | | | | 26,168 | | | | 25,046 | | | | 27,546 | | | | 25,579 | |
Equity in earnings from unconsolidated subsidiaries(1) | | | 5,077 | | | | 5,010 | | | | 5,729 | | | | 4,492 | | | | 4,583 | | | | 5,217 | | | | 4,937 | | | | 4,074 | |
Net realized investment gains | | | 1,627 | | | | 1,620 | | | | 305 | | | | 237 | | | | 378 | | | | 2,597 | | | | 1,167 | | | | 420 | |
Other (loss) income | | | (30 | ) | | | (22 | ) | | | 7 | | | | (23 | ) | | | (3 | ) | | | 3 | | | | (5 | ) | | | 4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 217,256 | | | | 201,808 | | | | 200,931 | | | | 197,920 | | | | 197,904 | | | | 198,915 | | | | 201,893 | | | | 194,189 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 72,039 | | | | 67,699 | | | | 64,153 | | | | 59,147 | | | | 63,159 | | | | 61,667 | | | | 65,496 | | | | 63,118 | |
Amortization of deferred policy acquisition costs | | | 12,544 | | | | 12,830 | | | | 13,162 | | | | 13,442 | | | | 14,113 | | | | 14,478 | | | | 15,030 | | | | 16,026 | |
Other underwriting expenses and operating expenses | | | 28,956 | | | | 23,618 | | | | 22,970 | | | | 25,911 | | | | 29,057 | | | | 25,260 | | | | 25,278 | | | | 23,554 | |
Field office restructuring(6) | | | — | | | | — | | | | — | | | | 1,955 | | | | — | | | | — | | | | — | | | | — | |
Litigation (recovery) settlement(12) | | | (1,840 | ) | | | (999 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Interest expense | | | — | | | | 1 | | | | 1 | | | | — | | | | 1 | | | | 3 | | | | — | | | | 1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 111,699 | | | | 103,149 | | | | 100,286 | | | | 100,455 | | | | 106,330 | | | | 101,408 | | | | 105,804 | | | | 102,699 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 105,557 | | | | 98,659 | | | | 100,645 | | | | 97,465 | | | | 91,574 | | | | 97,507 | | | | 96,089 | | | | 91,490 | |
Income taxes | | | 28,349 | | | | 27,819 | | | | 28,480 | | | | 27,360 | | | | 21,696 | | | | 27,977 | | | | 26,400 | | | | 25,149 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 77,208 | | | $ | 70,840 | | | $ | 72,165 | | | $ | 70,105 | | | $ | 69,878 | | | $ | 69,530 | | | $ | 69,689 | | | $ | 66,341 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
International Operations(3) | |
Net premiums written | | $ | 58,129 | | | $ | 51,942 | | | $ | 52,900 | | | $ | 38,420 | | | $ | 44,913 | | | $ | 47,197 | | | $ | 47,185 | | | $ | 39,185 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 41,219 | | | $ | 46,766 | | | $ | 45,801 | | | $ | 38,686 | | | $ | 39,781 | | | $ | 38,979 | | | $ | 38,141 | | | $ | 35,435 | |
Income from credit default swaps | | | 2,687 | | | | 978 | | | | 2,128 | | | | 1,638 | | | | 484 | | | | 989 | | | | 506 | | | | 420 | |
Net investment income | | | 17,990 | | | | 17,442 | | | | 15,625 | | | | 14,785 | | | | 14,499 | | | | 14,844 | | | | 14,058 | | | | 13,756 | |
Net realized investment (losses) gains | | | (244 | ) | | | 3,452 | | | | 252 | | | | 142 | | | | (221 | ) | | | (27 | ) | | | (18 | ) | | | 340 | |
Other (loss) income | | | (189 | ) | | | (40 | ) | | | (1,910 | ) | | | 1,393 | | | | 294 | | | | 298 | | | | 367 | | | | (533 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 61,463 | | | | 68,598 | | | | 61,896 | | | | 56,644 | | | | 54,837 | | | | 55,083 | | | | 53,054 | | | | 49,418 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 18,492 | | | | 11,907 | | | | 7,708 | | | | 1,792 | | | | 1,601 | | | | (365 | ) | | | 1,739 | | | | 1,363 | |
Amortization of deferred policy acquisition costs | | | 3,748 | | | | 3,871 | | | | 4,632 | | | | 3,545 | | | | 3,274 | | | | 3,269 | | | | 3,779 | | | | 4,417 | |
Other underwriting and operating expenses | | | 11,064 | | | | 11,205 | | | | 10,461 | | | | 9,789 | | | | 12,663 | | | | 11,648 | | | | 10,539 | | | | 7,005 | |
Interest expense | | | 1 | | | | 124 | | | | — | | | | — | | | | 9 | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 33,305 | | | | 27,107 | | | | 22,801 | | | | 15,126 | | | | 17,547 | | | | 14,552 | | | | 16,057 | | | | 12,785 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 28,158 | | | | 41,491 | | | | 39,095 | | | | 41,518 | | | | 37,290 | | | | 40,531 | | | | 36,997 | | | | 36,633 | |
Income taxes | | | 8,193 | | | | 12,048 | | | | 13,598 | | | | 12,909 | | | | 10,251 | | | | 12,514 | | | | 11,747 | | | | 11,485 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 19,965 | | | $ | 29,443 | | | $ | 25,497 | | | $ | 28,609 | | | $ | 27,039 | | | $ | 28,017 | | | $ | 25,250 | | | $ | 25,148 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Guaranty(4) | |
Net premiums written | | $ | 1,590 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums Earned | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Equity in earnings from unconsolidated subsidiaries(1) | | | 30,953 | | | | 26,549 | | | | 26,476 | | | | 23,235 | | | | 21,453 | | | | 13,691 | | | | 23,761 | | | | 20,846 | |
Net investment income | | | 2,036 | | | | (1 | ) | | | 2 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 32,990 | | | | 26,548 | | | | 26,478 | | | | 23,235 | | | | 21,453 | | | | 13,691 | | | | 23,761 | | | | 20,846 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of deferred policy acquisition costs | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Other underwriting and operating expenses | | | 716 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Interest expense(16) | | | 569 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 1,286 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 31,704 | | | | 26,548 | | | | 26,478 | | | | 23,235 | | | | 21,453 | | | | 13,691 | | | | 23,761 | | | | 20,846 | |
Income taxes | | | 3,281 | | | | 2,820 | | | | 2,469 | | | | 2,137 | | | | 2,208 | | | | 1,135 | | | | 2,254 | | | | 1,956 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 28,423 | | | $ | 23,728 | | | $ | 24,009 | | | $ | 21,098 | | | $ | 19,245 | | | $ | 12,556 | | | $ | 21,507 | | | $ | 18,890 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other(5) | |
Net premiums written | | $ | 19 | | | $ | 16 | | | $ | 11 | | | $ | 10 | | | $ | 27 | | | $ | 19 | | | $ | 13 | | | $ | 23 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 12 | | | $ | 19 | | | $ | 16 | | | $ | 17 | | | $ | 18 | | | $ | 19 | | | $ | 19 | | | $ | 20 | |
Net investment income | | | 3,643 | | | | 5,157 | | | | 6,324 | | | | 6,406 | | | | 4,832 | | | | 4,537 | | | | 4,143 | | | | 4,455 | |
Equity in (losses) earnings from unconsolidated subsidiaries(1) | | | (124 | ) | | | (68 | ) | | | 82 | | | | (102 | ) | | | (165 | ) | | | (388 | ) | | | (416 | ) | | | 292 | |
Net realized investment (losses) gains | | | (248 | ) | | | (4,346 | ) | | | (1 | ) | | | (39 | ) | | | (4 | ) | | | (2,897 | ) | | | 354 | | | | (39 | ) |
Other income | | | 2,829 | | | | 3,204 | | | | 3,712 | | | | 3,777 | | | | 4,283 | | | | 2,649 | | | | 5,383 | | | | 5,644 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 6,112 | | | | 3,966 | | | | 10,133 | | | | 10,059 | | | | 8,964 | | | | 3,920 | | | | 9,483 | | | | 10,372 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 1 | | | | (3 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Other underwriting expenses and operating expenses(7) | | | 27,916 | | | | 21,484 | | | | 19,442 | | | | 22,865 | | | | 17,354 | | | | 17,607 | | | | 18,600 | | | | 15,086 | |
Net costs to exchange and extinguish long-term debt (13) | | | 1,169 | | | | 875 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Interest expense | | | 11,753 | | | | 9,361 | | | | 8,066 | | | | 8,179 | | | | 4,644 | | | | 8,455 | | | | 8,472 | | | | 9,552 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 40,839 | | | | 31,717 | | | | 27,508 | | | | 31,044 | | | | 21,998 | | | | 26,062 | | | | 27,072 | | | | 24,638 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loss before income tax benefits | | | (34,727 | ) | | | (27,751 | ) | | | (17,375 | ) | | | (20,985 | ) | | | (13,034 | ) | | | (22,142 | ) | | | (17,589 | ) | | | (14,266 | ) |
Income tax benefits | | | (9,581 | ) | | | (7,978 | ) | | | (5,319 | ) | | | (6,521 | ) | | | (4,587 | ) | | | (7,750 | ) | | | (5,728 | ) | | | (5,045 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | | $ | (25,146 | ) | | $ | (19,773 | ) | | $ | (12,056 | ) | | $ | (14,464 | ) | | $ | (8,447 | ) | | $ | (14,392 | ) | | $ | (11,861 | ) | | $ | (9,221 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Page 10
THE PMI GROUP, INC. AND SUBSIDIARIES
APPENDIX C - PMI AUSTRALIA FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 12/31/2006 | | | 9/30/2006 | | | 6/30/2006 | | | 3/31/2006 | | | 12/31/2005 | | | 9/30/2005 | | | 6/30/2005 | |
Insurance in Force (U.S. $ in millions) | | | | |
Flow | | $ | 94,529 | | | $ | 86,026 | | | $ | 86,215 | | | $ | 81,503 | | | $ | 82,236 | | | $ | 83,286 | | | $ | 81,025 | |
RMBS | | | 54,236 | | | | 48,975 | | | | 49,314 | | | | 41,547 | | | | 37,679 | | | | 40,728 | | | | 38,786 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 148,765 | | | $ | 135,001 | | | $ | 135,529 | | | $ | 123,050 | | | $ | 119,915 | | | $ | 124,014 | | | $ | 119,811 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk in Force(U.S. $ in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow | | $ | 81,490 | | | $ | 74,328 | | | $ | 74,956 | | | $ | 70,773 | | | $ | 71,160 | | | $ | 72,393 | | | $ | 70,320 | |
RMBS | | | 54,051 | | | | 48,831 | | | | 49,183 | | | | 41,426 | | | | 37,591 | | | | 40,635 | | | | 38,705 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 135,541 | | | $ | 123,159 | | | $ | 124,139 | | | $ | 112,199 | | | $ | 108,751 | | | $ | 113,028 | | | $ | 109,025 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average loan size (U.S. $ in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow | | $ | 145.6 | | | $ | 134.8 | | | $ | 128.2 | | | $ | 122.5 | | | $ | 125.0 | | | $ | 127.6 | | | $ | 125.8 | |
RMBS | | $ | 133.7 | | | $ | 125.9 | | | $ | 122.6 | | | $ | 115.1 | | | $ | 116.3 | | | $ | 119.2 | | | $ | 117.5 | |
Total | | $ | 141.0 | | | $ | 131.5 | | | $ | 126.1 | | | $ | 119.9 | | | $ | 122.1 | | | $ | 124.7 | | | $ | 123.0 | |
| | | | | | | |
Loss severity (quarterly) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow | | | 20.5 | % | | | 21.9 | % | | | 18.2 | % | | | 15.8 | % | | | 15.7 | % | | | 21.6 | % | | | 13.2 | % |
RMBS | | | 15.5 | % | | | 21.7 | % | | | 1.6 | % | | | 3.9 | % | | | 11.3 | % | | | 0.0 | % | | | 0.0 | % |
Total | | | 19.9 | % | | | 21.9 | % | | | 18.2 | % | | | 15.3 | % | | | 15.6 | % | | | 21.6 | % | | | 13.2 | % |
| | | | | | | |
Primary loans, defaults and default rates | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Policies in force - Flow | | | 649,261 | | | | 638,139 | | | | 672,347 | | | | 665,336 | | | | 657,713 | | | | 652,750 | | | | 643,835 | |
Policies in force - RMBS | | | 405,796 | | | | 388,851 | | | | 402,271 | | | | 360,924 | | | | 324,019 | | | | 341,580 | | | | 329,985 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Policies in force - Total | | | 1,055,057 | | | | 1,026,990 | | | | 1,074,618 | | | | 1,026,260 | | | | 981,732 | | | | 994,330 | | | | 973,820 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans in default - Flow | | | 2,021 | | | | 1,826 | | | | 1,478 | | | | 1,314 | | | | 1,094 | | | | 909 | | | | 1,032 | |
Loans in default - RMBS | | | 260 | | | | 273 | | | | 253 | | | | 206 | | | | 170 | | | | 98 | | | | 130 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans in default - Total | | | 2,281 | | | | 2,099 | | | | 1,731 | | | | 1,520 | | | | 1,264 | | | | 1,007 | | | | 1,162 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Default rate - Flow | | | 0.31 | % | | | 0.29 | % | | | 0.22 | % | | | 0.20 | % | | | 0.17 | % | | | 0.14 | % | | | 0.16 | % |
Default rate - RMBS | | | 0.06 | % | | | 0.07 | % | | | 0.06 | % | | | 0.06 | % | | | 0.05 | % | | | 0.03 | % | | | 0.04 | % |
Default rate - Total | | | 0.22 | % | | | 0.20 | % | | | 0.16 | % | | | 0.15 | % | | | 0.13 | % | | | 0.10 | % | | | 0.12 | % |
| | | | | | | |
Net claims paid(quarter to date in U.S. $ in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net claims paid - Flow | | $ | 5,999 | | | $ | 4,123 | | | $ | 3,179 | | | $ | 1,211 | | | $ | 1,421 | | | $ | 717 | | | $ | 735 | |
Net claims paid - RMBS | | | 585 | | | | 411 | | | | 2 | | | | 14 | | | | 33 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net claims paid - Total | | | 6,584 | | | | 4,534 | | | | 3,181 | | | | 1,225 | | | | 1,454 | | | | 717 | | | | 735 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Number of claims paid - Flow | | | 107 | | | | 72 | | | | 72 | | | | 30 | | | | 36 | | | | 14 | | | | 24 | |
Number of claims paid - RMBS | | | 11 | | | | 8 | | | | 1 | | | | 1 | | | | 1 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Number of claims paid - Total | | | 118 | | | | 80 | | | | 73 | | | | 31 | | | | 37 | | | | 14 | | | | 24 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average claim size- Flow | | $ | 56.1 | | | $ | 57.3 | | | $ | 44.2 | | | $ | 40.4 | | | $ | 39.5 | | | $ | 51.2 | | | $ | 30.6 | |
Average claim size- RMBS | | $ | 53.2 | | | $ | 51.4 | | | $ | 1.5 | | | $ | 13.6 | | | $ | 33.4 | | | $ | — | | | $ | — | |
Average claim size- Total | | $ | 55.8 | | | $ | 56.7 | | | $ | 43.6 | | | $ | 39.5 | | | $ | 39.3 | | | $ | 51.2 | | | $ | 30.6 | |
| | | | | | | |
Combined Ratio | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loss Ratio | | | 52.1 | % | | | 26.4 | % | | | 17.3 | % | | | 3.8 | % | | | 5.3 | % | | | (1.07 | )% | | | 2.5 | % |
Expense Ratio | | | 21.4 | % | | | 23.6 | % | | | 24.2 | % | | | 30.1 | % | | | 28.0 | % | | | 26.4 | % | | | 27.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Combined Ratio | | | 73.5 | % | | | 50.0 | % | | | 41.5 | % | | | 33.9 | % | | | 33.3 | % | | | 25.3 | % | | | 30.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Page 11
