Exhibit 99.1
| | |
 | | NEWS RELEASE |
Investors and Media Contacts:
Bill Horning / Beth Haiken
925.658.6193 / 925.658.6192
THE PMI GROUP, INC. REPORTS SECOND QUARTER 2007
NET INCOME OF $83.8 MILLION, OR $0.95 PER DILUTED SHARE
Walnut Creek, CA, July 31, 2007 - The PMI Group, Inc. (NYSE: PMI) (the “Company”) today reported net income for the second quarter of 2007 of $83.8 million, or $0.95 per diluted share. Net income for the second quarter of 2006 was $109.6 million, or $1.14 per diluted share. The decline in net income for the second quarter of 2007 was primarily due to a $58.7 million increase in loss reserves and higher claims paid in U.S. Mortgage Insurance Operations, partially offset by increases in net income from International Operations and Financial Guaranty.
The Company ended the second quarter of 2007 with a book value of $43.46 per share compared to $38.11 at the end of the second quarter of 2006, representing an increase of approximately 14%.
Highlights include:
| | • | | U.S. Mortgage Insurance Operations1 — Net income was $41.5 million in the second quarter of 2007. Losses and loss adjustment expenses increased to $134.4 million as a result of increases in notices of default, claim rates and claim sizes. Total revenues in the second quarter of 2007 increased by approximately 13% driven by strong growth in net premiums written and earned. Net premiums written and net premiums earned in the second quarter of 2007 increased by approximately 19% and 16%, respectively, compared with the same period one year ago. Insurance in force at the end of the second quarter of 2007 was $111.7 billion, representing an 11% increase from one year ago. |
| | • | | International Operations2 — PMI Australia had solid growth in net premiums written and grew their insurance in force to $172.9 billion. Total losses and loss adjustment expenses decreased in the second quarter of 2007 from the first quarter resulting in a loss ratio of 25.2% for the period and 34.4% for the first six months of 2007. PMI Europe reported |
1 | “U.S. Mortgage Insurance Operations” includes the results of PMI Mortgage Insurance Co. (PMI), affiliated U.S. reinsurance companies and equity in earnings from CMG Mortgage Insurance Company (CMG MI). |
2 | “International Operations” includes the results of PMI Australia, PMI Europe, PMI Asia and PMI Canada. |
Page 1
| | strong growth in net premiums written of approximately 66% compared with the second quarter of 2006 driven particularly by flow business in Italy. |
| | • | | Financial Guaranty3 — equity in earnings from FGIC were $27.4 million (pre-tax), an increase of 10% compared with the second quarter of 2006, as a result of strong premium earnings, a significant recovery related to a Hurricane Katrina impacted credit, a release of certain tax contingencies and increased net investment income, partially offset by mark to market adjustments in certain mortgage related CDO’s due principally to widening credit spreads. |
| | • | | Capital Events — The Company repurchased 468,500 common shares for approximately $23 million in the second quarter of 2007. The Company also completed its accelerated stock buyback program in the second quarter of 2007 with the final delivery of 436,152 common shares. In July 2007, the Company announced an additional $150 million authorization to its existing common share repurchase program which brings total current authorizations to $300 million. |
Consolidated Operating Results
Consolidated net premiums written for the second quarter and first half of 2007 totaled $256.0 million and $500.0 million, respectively, compared with $211.8 million and $413.7 million for the same periods one year ago. The year over year increases were primarily due to an increase in new insurance written, improved persistency, higher average primary premium rates and higher average insured loan balances in U.S. Mortgage Insurance Operations and an increase in net premiums written combined with favorable foreign exchange rates in PMI Australia.
Consolidated premiums earned for the second quarter and first half of 2007 were $242.3 million and $478.7 million, respectively, compared with $213.6 million and $419.9 million for the same periods one year ago. The increases were due to insurance in force growth, higher average premium rates and larger loan sizes in U.S. Mortgage Insurance Operations.
Consolidated losses and loss adjustment expenses for the second quarter and first half of 2007 were $146.2 million and $255.5 million, respectively, compared with $71.9 million and $132.8 million for the same periods last year. The increases were primarily a result of higher incurred losses in U.S. Mortgage Insurance Operations as a result of an increase in notices of default, claim size and claim rates.
3 | “Financial Guaranty” includes PMI Guaranty Co. (PMI Guaranty) and our equity investments in Financial Guaranty Insurance Company, Inc. (FGIC) and Ram Reinsurance Company Ltd. (RAM Re). |
Page 2
Consolidated other underwriting and operating expensesfor the second quarter and first half of 2007 were $59.8 million and $122.5 million, respectively, compared with $52.9 million and $113.4 million for the same periods one year ago. The increases were primarily due to growth of the International Operations combined with changes in foreign exchange rates.
Consolidated reserve for losses and loss adjustment expenses totaled $507.0 million as of June 30, 2007 compared with $443.0 million as of March 31, 2007 and $384.6 million as of June 30, 2006. Reserves for losses and loss adjustment expenses (LAE) in U.S. Mortgage Insurance Operations increased $58.7 million in the second quarter of 2007 primarily due to an increase in notices of default, increased claim rates and larger claim sizes. PMI Australia’s reserve for losses and LAE increased $2.8 million in the second quarter of 2007 due to a higher default inventory.
The PMI Group, Inc. Second Quarter Results by Segment
| | | | | | | | | | | | | | | | | | | | |
| | | Second Quarter Total Revenues | | | Second Quarter Net Income | |
(Dollars in millions, except per share data) | | 2007 | | 2006 | | % Change | | | 2007 | | | 2006 | | | % Change | |
U.S. Mortgage Insurance Operations | | $ | 227.0 | | $ | 200.9 | | 13.0 | % | | $ | 41.5 | | | $ | 72.2 | | | (42.5 | )% |
International Operations | | | 68.0 | | | 61.9 | | 9.9 | % | | | 28.1 | | | | 25.5 | | | 10.2 | % |
Financial Guaranty | | | 33.7 | | | 26.5 | | 27.2 | % | | | 29.0 | | | | 24.0 | | | 20.8 | % |
Corporate and Other4 | | | 6.7 | | | 10.1 | | n.m. | | | | (14.8 | ) | | | (12.1 | ) | | n.m. | |
| | | | | | | | | | | | | | | | | | | | |
Consolidated Total | | $ | 335.4 | | $ | 299.4 | | 12.0 | % | | $ | 83.8 | | | $ | 109.6 | | | (23.5 | )% |
| | | | | | | | | | | | | | | | | | | | |
Diluted Net Income Per Share | | | | | | | | | | | $ | 0.95 | | | $ | 1.14 | | | (16.7 | )% |
Book Value Per Share | | | | | | | | | | | $ | 43.46 | | | $ | 38.11 | | | 14.0 | % |
May not total due to rounding
n.m. – Not meaningful
The PMI Group, Inc. Year to Date Results by Segment
| | | | | | | | | | | | | | | | | | | | |
| | | Six Months Ended June 30
Total Revenues | | | Six Months Ended June 30 Net
Income | |
(Dollars in millions, except per share data) | | 2007 | | 2006 | | % Change | | | 2007 | | | 2006 | | | % Change | |
U.S. Mortgage Insurance Operations | | $ | 456.2 | | $ | 398.9 | | 14.4 | % | | $ | 110.4 | | | $ | 142.3 | | | (22.4 | )% |
International Operations | | | 131.8 | | | 118.5 | | 11.2 | % | | | 51.2 | | | | 54.1 | | | (5.4 | )% |
Financial Guaranty | | | 67.9 | | | 49.7 | | 36.6 | % | | | 58.9 | | | | 45.1 | | | 30.6 | % |
Corporate and Other4 | | | 10.5 | | | 20.2 | | n.m. | | | | (34.7 | ) | | | (26.5 | ) | | n.m. | |
| | | | | | | | | | | | | | | | | | | | |
Consolidated Total | | $ | 666.4 | | $ | 587.3 | | 13.5 | % | | $ | 185.9 | | | $ | 215.0 | | | (13.5 | )% |
| | | | | | | | | | | | | | | | | | | | |
Diluted Net Income Per Share | | | | | | | | | | | $ | 2.11 | | | $ | 2.23 | | | (5.4 | )% |
May not total due to rounding
n.m. – Not meaningful
Segment Highlights
U.S. Mortgage Insurance Operations
| • | | Net income totaled $41.5 million for the second quarter of 2007. |
4 | The “Corporate and Other” segment primarily consists of the holding company, contract underwriting operations and intercompany eliminations. |
Page 3
| • | | Net premiums written in the second quarter of 2007 increased by 19% to $189.2 million from $158.9 million in the second quarter of 2006. The increase was due primarily to increases in new insurance written, higher average premium rates and higher average insured loan balances. |
| • | | The primary persistency rate improved to 71.7% in the second quarter of 2007 compared with 64.9% in the second quarter of 2006. |
| • | | Total incurred losses in the second quarter of 2007 were $134.4 million compared with $64.2 million in the second quarter of 2006 driven by an increase in the number of notices of default, larger claim sizes and increased claim rates. |
| • | | Total claims paid increased to $72.3 million for the second quarter of 2007 compared with $52.1 million in the second quarter of 2006 driven by an increase in the claim rate and larger average claim sizes. |
| • | | After-tax equity in earnings from CMG MI for the second quarter of 2007 was $3.0 million, compared with $3.7 million for the same period of 2006. The decline in equity in earnings was primarily driven by higher claims paid partially offset by higher premiums earned. CMG MI’s insurance in force grew to $17.4 billion, persistency increased to 79.2% and the primary default rate was just above 1%. |
International Operations
| • | | PMI Australia reported net income of $24.4 million for the second quarter of 2007 compared with $21.9 million for the second quarter of 2006. The increase in net income was due primarily to higher net investment income and premiums earned, partially offset by increased incurred losses. The second quarter of 2007 addition to reserves for losses and LAE was $2.8 million while claims paid for the quarter totaled $7.3 million. |
| • | | PMI Europe reported net income of $1.7 million in the second quarter of 2007 compared with $3.5 million for the same period a year ago. The decrease was due primarily to a decrease in premiums earned with Royal & Sun Alliance lenders’ mortgage insurance portfolio acquired in 2003 and an increase in losses and underwriting expenses. |
| • | | PMI Asia’s net income in the second quarter of 2007 totaled $2.3 million compared with $0.1 million for the same period a year ago. |
Financial Guaranty
| • | | After-tax equity in earnings from FGIC for the second quarter of 2007 totaled $25.4 million compared with $22.9 million for the same period a year ago. |
| • | | After-tax equity in earnings from RAM Re for the second quarter of 2007 was $2.2 million compared with $1.1 million for the same period one year ago. |
Page 4
| • | | PMI Guaranty, which began operations in the fourth quarter of 2006, reported net income of $1.4 million in the second quarter of 2007. |
Corporate and Other
| | • | | The Corporate and Other segment reported a net loss for the second quarter of 2007 totaling $14.8 million compared with a net loss of $12.1 million for the same period a year ago. The increase in the net loss for the second quarter of 2007 compared with 2006 was due primarily to decreased net investment income from a reduction in the size of the investment portfolio, and an increase in stock option 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 and New Zealand, Canada and the European Union, as well as one of the largest providers of mortgage guaranty reinsurance in Hong Kong. For more information:www.pmigroup.com.
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, 2006 and Form 10-Q for the quarter ended March 31, 2007 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.
# # #
Page 5
THE PMI GROUP, INC. AND SUBSIDIARIES (the “Company”)
FINANCIAL RESULTS AND STATISTICAL INFORMATION FOR THE PERIOD ENDED JUNE 30, 2007
Contents
| | |
| |
Consolidated Statements of Operations and Balance Sheets | | Page 2 |
| |
Business Segments Results of Operations - Three Months Ended June 30, 2007 and 2006 | | Page 3 |
| |
Business Segments Results of Operations - Six Months Ended June 30, 2007 and 2006 | | Page 4 |
| |
Business Segments Balance Sheets | | Page 5 |
| |
U.S. Mortgage Insurance Operations Analysis of Reserve for Losses and LAE and Financial and Statistical Information | | Page 6 |
| |
U.S. Mortgage Insurance Operations Financial and Statistical Information | | Page 7 |
| |
CMG Mortgage Insurance Company, PMI Australia and PMI Europe Financial and Statistical Information | | Page 8 |
| |
Appendix A - PMI Australia and PMI Europe Quarterly Financial Information | | Page 9 |
| |
Appendix B - Business Segments Results of Operations by Quarter | | Page 10 |
| |
Appendix C - PMI Australia Financial and Statistical Information | | Page 11 |
Please refer to the following when noted:
(1) | For the quarter and six months ended June 30, 2007, the Company’s equity in earnings from unconsolidated subsidiaries include FGIC Corporation, CMG Mortgage Insurance Company (“CMG MI”), RAM Reinsurance Company, Ltd. (“RAM Re”), and certain limited partnership interests. |
(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 MI 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, PMI Asia and PMI Canada. PMI Canada began offering residential mortgage insurance products to Canadian lenders and mortgage originators in the second quarter of 2007. |
(4) | Financial Guaranty represents PMI Guaranty Co. (“PMI Guaranty”) and our equity investments in FGIC Corporation and RAM Re. |
(5) | The “Corporate and 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) | Other underwriting and operating expenses from the “Corporate and Other” segment includes charges of $3.5 million and $10.6 million (pre-tax) or $2.6 million and $7.6 million (after tax) for stock option expenses and related stock based compensation expenses in the second quarter and first half of 2007 compared to pre-tax $2.6 million and $7.6 million ($1.9 million and $5.7 million after tax) for the corresponding periods in 2006. |
(7) | 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. |
(8) | Pool insurance includes modified pool, GSE pool, old pool and all other pool insurance products for U.S. Mortgage Insurance Operations. |
(9) | Statutory risk-to-capital ratio is for PMI only. |
(10) | In May 2007, upon completion of the $345 million accelerated share repurchase program, The PMI Group received the final delivery of 436,152 common shares bringing the total received under the program to 7,624,700 shares. The average price paid per common share upon completion of this program was $45.25 per common share. In February 2007, our Board of Directors authorized another common share repurchase program in an amount not to exceed $150 million. In June 2007, 468,500 common shares were repurchased for $22.7 million, or $48.48 per common share under the February 2007 program. In July 2007, our Board of Directors authorized an additional $150 million to its existing common share repurchase program which brings total current authorizations to $300 million. |
(11) | Interest expense in our Financial Guaranty segment relates to a $50 million surplus note provided to PMI Guaranty by the Company. The surplus note bears interest at an annual rate of 5.85% and is due October 20, 2026. The surplus note and the interest expense are eliminated in the Corporate and Other segment. |
(12) | In 2007, we purchased Australian dollar and Euro foreign currency put options designed to partially mitigate the negative financial impact of a potential strengthening of the U.S. dollar relative to the Australian dollar and the Euro. International Operations’ net income for the second quarter and first half of 2007 was reduced by $0.3 million and $1.3 million pre-tax, respectively, related to the cost of our foreign currency put options. |
Note: | The interim financial and statistical information contained in this material is unaudited. Certain prior periods’ information has been reclassified to conform to the current periods’ presentation. |
THE PMI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| | | (Dollars and shares, except per share data, in
thousands) | |
Net premiums written | | $ | 255,977 | | | $ | 211,815 | | | $ | 500,028 | | | $ | 413,719 | |
| | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 242,337 | | | $ | 213,643 | | | $ | 478,698 | | | $ | 419,883 | |
Income from credit default swaps | | | 1,579 | | | | 2,128 | | | | 3,407 | | | | 3,766 | |
Net investment income | | | 51,119 | | | | 49,015 | | | | 103,758 | | | | 95,882 | |
Equity in earnings from unconsolidated subsidiaries(1) | | | 35,748 | | | | 32,287 | | | | 72,257 | | | | 59,913 | |
Net realized investment gains | | | 414 | | | | 556 | | | | 1,992 | | | | 896 | |
Change in fair value of foreign currency put options(12) | | | (306 | ) | | | (1,993 | ) | | | (1,319 | ) | | | (697 | ) |
Other income | | | 4,478 | | | | 3,802 | | | | 7,573 | | | | 7,653 | |
| | | | | | | | | | | | | | | | |
Total revenues | | | 335,369 | | | | 299,438 | | | | 666,366 | | | | 587,296 | |
| | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 146,160 | | | | 71,861 | | | | 255,480 | | | | 132,800 | |
Amortization of deferred policy acquisition costs | | | 17,010 | | | | 17,794 | | | | 33,455 | | | | 34,781 | |
Other underwriting and operating expenses(6) | | | 59,773 | | | | 52,873 | | | | 122,474 | | | | 113,392 | |
Interest expense | | | 8,398 | | | | 8,067 | | | | 16,657 | | | | 16,246 | |
| | | | | | | | | | | | | | | | |
Total losses and expenses | | | 231,341 | | | | 150,595 | | | | 428,066 | | | | 297,219 | |
| | | | | | | | | | | | | | | | |
Income before income taxes | | | 104,028 | | | | 148,843 | | | | 238,300 | | | | 290,077 | |
Income taxes | | | 20,195 | | | | 39,228 | | | | 52,434 | | | | 75,114 | |
| | | | | | | | | | | | | | | | |
Net income | | $ | 83,833 | | | $ | 109,615 | | | $ | 185,866 | | | $ | 214,963 | |
| | | | | | | | | | | | | | | | |
Diluted net income per share | | $ | 0.95 | | | $ | 1.14 | | | $ | 2.11 | | | $ | 2.23 | |
| | | | | | | | | | | | | | | | |
Reconciliation of earnings per share | | | | | | | | | | | | | | | | |
Net income | | $ | 83,833 | | | $ | 109,615 | | | $ | 185,866 | | | $ | 214,963 | |
Plus: Interest expense on contingently convertible debt, net of income taxes | | | — | | | | 1,912 | | | | — | | | | 3,824 | |
| | | | | | | | | | | | | | | | |
Net income adjusted for diluted earnings per share calculation | | $ | 83,833 | | | $ | 111,527 | | | $ | 185,866 | | | $ | 218,787 | |
| | | | | | | | | | | | | | | | |
Share data: | | | | | | | | | | | | | | | | |
Basic weighted average common shares outstanding | | | 86,819 | | | | 88,357 | | | | 86,893 | | | | 88,695 | |
Stock options and other dilutive components | | | 1,171 | | | | 1,383 | | | | 1,178 | | | | 1,362 | |
Common stock equivalent shares related to contingently convertible debt | | | — | | | | 8,153 | | | | — | | | | 8,153 | |
| | | | | | | | | | | | | | | | |
Diluted weighted average common shares outstanding | | | 87,990 | | | | 97,893 | | | | 88,071 | | | | 98,210 | |
| | | | | | | | | | | | | | | | |
Share repurchase data: | | | | | | | | | | | | | | | | |
Common shares repurchased (10) | | | 905 | | | | 3,221 | | | | 1,230 | | | | 3,302 | |
| | | | | | | | | | | | | | | | |
Average price paid per common share repurchased (including commissions) | | $ | 46.92 | | | $ | 45.49 | | | $ | 46.10 | | | $ | 45.43 | |
| | | | | | | | | | | | | | | | |
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | |
| | | June 30, 2007 | | December 31,
2006 | | June 30, 2006 |
| | | (Unaudited) | | | | (Unaudited) |
| | | (Dollars and shares, except per share data, in
thousands) |
Assets | | | | | | | | | |
Cash and investments, at fair value | | $ | 4,074,057 | | $ | 3,750,140 | | $ | 3,844,411 |
Investments in unconsolidated subsidiaries(1) | | | 1,133,727 | | | 1,100,387 | | | 1,007,780 |
Related party receivables | | | 1,361 | | | 714 | | | 1,398 |
Reinsurance receivables, reinsurance recoverables and prepaid premiums | | | 11,347 | | | 25,315 | | | 20,815 |
Deferred policy acquisition costs | | | 93,178 | | | 87,008 | | | 83,666 |
Other assets | | | 395,369 | | | 363,626 | | | 355,396 |
| | | | | | | | | |
Total assets | | $ | 5,709,039 | | $ | 5,327,190 | | $ | 5,313,466 |
| | | | | | | | | |
Liabilities | | | | | | | | | |
Reserve for losses and loss adjustment expenses | | $ | 506,951 | | $ | 414,736 | | $ | 384,605 |
Unearned premiums | | | 571,804 | | | 520,264 | | | 490,906 |
Long-term debt | | | 496,593 | | | 496,593 | | | 819,529 |
Other liabilities | | | 373,486 | | | 327,007 | | | 324,459 |
| | | | | | | | | |
Total liabilities | | | 1,948,834 | | | 1,758,600 | | | 2,019,499 |
Shareholders’ equity | | | 3,760,205 | | | 3,568,590 | | | 3,293,967 |
| | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 5,709,039 | | $ | 5,327,190 | | $ | 5,313,466 |
| | | | | | | | | |
Basic shares issued and outstanding | | | 86,513 | | | 86,747 | | | 86,442 |
| | | | | | | | | |
Book value per share | | $ | 43.46 | | $ | 41.14 | | $ | 38.11 |
| | | | | | | | | |
Page 2
THE PMI GROUP, INC. AND SUBSIDIARIES
BUSINESS SEGMENTS RESULTS OF OPERATIONS
| | | | | | | | | | | | | | | | | | | |
| | | U.S. Mortgage
Insurance
Operations(2) | | | International
Operations (3) | | | Financial
Guaranty (4) | | Corporate
and Other (5) | | | Consolidated
Total | |
| | | Three Months Ended June 30, 2007 (Unaudited) | |
| | | (Dollars in thousands) | |
Net premiums written | | $ | 189,180 | | | $ | 65,376 | | | $ | 1,414 | | $ | 7 | | | $ | 255,977 | |
| | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 195,385 | | | $ | 46,384 | | | $ | 552 | | $ | 16 | | | $ | 242,337 | |
Income from credit default swaps | | | — | | | | 1,579 | | | | — | | | — | | | | 1,579 | |
Net investment income | | | 25,966 | | | | 20,581 | | | | 2,314 | | | 2,258 | | | | 51,119 | |
Equity in earnings from unconsolidated subsidiaries(1) | | | 4,617 | | | | — | | | | 30,842 | | | 289 | | | | 35,748 | |
Net realized investment gains (losses) | | | 981 | | | | 53 | | | | — | | | (620 | ) | | | 414 | |
Change in fair value of foreign currency put options(12) | | | — | | | | (306 | ) | | | — | | | — | | | | (306 | ) |
Other income (loss) | | | 17 | | | | (308 | ) | | | — | | | 4,769 | | | | 4,478 | |
| | | | | | | | | | | | | | | | | | | |
Total revenues | | | 226,966 | | | | 67,983 | | | | 33,708 | | | 6,712 | | | | 335,369 | |
| | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 134,384 | | | | 11,776 | | | | — | | | — | | | | 146,160 | |
Amortization of deferred policy acquisition costs | | | 12,610 | | | | 4,131 | | | | 269 | | | — | | | | 17,010 | |
Other underwriting and operating expenses(6) | | | 26,759 | | | | 12,657 | | | | 432 | | | 19,925 | | | | 59,773 | |
Interest expense(11) | | | 39 | | | | — | | | | 732 | | | 7,627 | | | | 8,398 | |
| | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 173,792 | | | | 28,564 | | | | 1,433 | | | 27,552 | | | | 231,341 | |
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 53,174 | | | | 39,419 | | | | 32,275 | | | (20,840 | ) | | | 104,028 | |
Income taxes (benefit) | | | 11,627 | | | | 11,322 | | | | 3,261 | | | (6,015 | ) | | | 20,195 | |
| | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 41,547 | | | $ | 28,097 | | | $ | 29,014 | | $ | (14,825 | ) | | $ | 83,833 | |
| | | | | | | | | | | | | | | | | | | |
Expense ratio(7) | | | 20.8 | % | | | 25.7 | % | | | | | | | | | | | |
Loss ratio(7) | | | 68.8 | % | | | 25.4 | % | | | | | | | | | | | |
Combined ratio | | | 89.6 | % | | | 51.1 | % | | | | | | | | | | | |
| |
| | | Three Months Ended June 30, 2006 (Unaudited) | |
| | | (Dollars in thousands) | |
Net premiums written | | $ | 158,904 | | | $ | 52,900 | | | $ | — | | $ | 11 | | | $ | 211,815 | |
| | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 167,826 | | | $ | 45,801 | | | $ | — | | $ | 16 | | | $ | 213,643 | |
Income from credit default swaps | | | — | | | | 2,128 | | | | — | | | — | | | | 2,128 | |
Net investment income | | | 27,064 | | | | 15,625 | | | | 2 | | | 6,324 | | | | 49,015 | |
Equity in earnings from unconsolidated subsidiaries(1) | | | 5,729 | | | | — | | | | 26,476 | | | 82 | | | | 32,287 | |
Net realized investment gains (losses) | | | 305 | | | | 252 | | | | — | | | (1 | ) | | | 556 | |
Change in fair value of foreign currency put options(12) | | | — | | | | (1,993 | ) | | | — | | | — | | | | (1,993 | ) |
Other income | | | 7 | | | | 83 | | | | — | | | 3,712 | | | | 3,802 | |
| | | | | | | | | | | | | | | | | | | |
Total revenues | | | 200,931 | | | | 61,896 | | | | 26,478 | | | 10,133 | | | | 299,438 | |
| | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 64,153 | | | | 7,708 | | | | — | | | — | | | | 71,861 | |
Amortization of deferred policy acquisition costs | | | 13,162 | | | | 4,632 | | | | — | | | — | | | | 17,794 | |
Other underwriting and operating expenses(6) | | | 22,970 | | | | 10,461 | | | | — | | | 19,442 | | | | 52,873 | |
Interest expense | | | 1 | | | | — | | | | — | | | 8,066 | | | | 8,067 | |
| | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 100,286 | | | | 22,801 | | | | — | | | 27,508 | | | | 150,595 | |
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 100,645 | | | | 39,095 | | | | 26,478 | | | (17,375 | ) | | | 148,843 | |
Income tax (benefit) | | | 28,480 | | | | 13,598 | | | | 2,469 | | | (5,319 | ) | | | 39,228 | |
| | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 72,165 | | | $ | 25,497 | | | $ | 24,009 | | $ | (12,056 | ) | | $ | 109,615 | |
| | | | | | | | | | | | | | | | | | | |
Expense ratio(7) | | | 22.7 | % | | | 28.5 | % | | | | | | | | | | | |
Loss ratio(7) | | | 38.2 | % | | | 16.8 | % | | | | | | | | | | | |
Combined ratio | | | 60.9 | % | | | 45.3 | % | | | | | | | | | | | |
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) | | Corporate
and Other (5) | | | Consolidated
Total | |
| | | Six Months Ended June 30, 2007 (Unaudited) | |
| | | (Dollars in thousands) | |
Net premiums written | | $ | 385,096 | | | $ | 108,758 | | | $ | 6,155 | | $ | 19 | | | $ | 500,028 | |
| | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 389,144 | | | $ | 88,766 | | | $ | 759 | | $ | 29 | | | $ | 478,698 | |
Income from credit default swaps | | | — | | | | 3,407 | | | | — | | | — | | | | 3,407 | |
Net investment income | | | 54,288 | | | | 39,745 | | | | 4,635 | | | 5,090 | | | | 103,758 | |
Equity in earnings from unconsolidated subsidiaries(1) | | | 9,478 | | | | — | | | | 62,545 | | | 234 | | | | 72,257 | |
Net realized investment gains (losses) | | | 3,248 | | | | 90 | | | | — | | | (1,346 | ) | | | 1,992 | |
Change in fair value of foreign currency put options(12) | | | — | | | | (1,319 | ) | | | — | | | — | | | | (1,319 | ) |
Other income | | | 4 | | | | 1,094 | | | | — | | | 6,475 | | | | 7,573 | |
| | | | | | | | | | | | | | | | | | | |
Total revenues | | | 456,162 | | | | 131,783 | | | | 67,939 | | | 10,482 | | | | 666,366 | |
| | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 227,168 | | | | 28,312 | | | | — | | | — | | | | 255,480 | |
Amortization of deferred policy acquisition costs | | | 25,192 | | | | 7,892 | | | | 371 | | | — | | | | 33,455 | |
Other underwriting and operating expenses(6) | | | 54,420 | | | | 23,230 | | | | 886 | | | 43,938 | | | | 122,474 | |
Interest expense(11) | | | 39 | | | | 6 | | | | 1,463 | | | 15,149 | | | | 16,657 | |
| | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 306,819 | | | | 59,440 | | | | 2,720 | | | 59,087 | | | | 428,066 | |
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 149,343 | | | | 72,343 | | | | 65,219 | | | (48,605 | ) | | | 238,300 | |
Income taxes (benefit) | | | 38,920 | | | | 21,120 | | | | 6,341 | | | (13,947 | ) | | | 52,434 | |
| | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 110,423 | | | $ | 51,223 | | | $ | 58,878 | | $ | (34,658 | ) | | $ | 185,866 | |
| | | | | | | | | | | | | | | | | | | |
Expense ratio(7) | | | 20.7 | % | | | 28.6 | % | | | | | | | | | | | |
Loss ratio(7) | | | 58.4 | % | | | 31.9 | % | | | | | | | | | | | |
Combined ratio | | | 79.1 | % | | | 60.5 | % | | | | | | | | | | | |
| |
| | | Six Months Ended June 30, 2006 (Unaudited) | |
| | | (Dollars in thousands) | |
Net premiums written | | $ | 322,377 | | | $ | 91,321 | | | $ | — | | $ | 21 | | | $ | 413,719 | |
| | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 335,364 | | | $ | 84,486 | | | $ | — | | $ | 33 | | | $ | 419,883 | |
Income from credit default swaps | | | — | | | | 3,766 | | | | — | | | — | | | | 3,766 | |
Net investment income | | | 52,740 | | | | 30,410 | | | | 2 | | | 12,730 | | | | 95,882 | |
Equity in earnings (losses) from unconsolidated subsidiaries(1) | | | 10,221 | | | | — | | | | 49,712 | | | (20 | ) | | | 59,913 | |
Net realized investment gains (losses) | | | 542 | | | | 394 | | | | — | | | (40 | ) | | | 896 | |
Change in fair value of foreign currency put options(12) | | | — | | | | (697 | ) | | | — | | | — | | | | (697 | ) |
Other (loss) income | | | (17 | ) | | | 182 | | | | — | | | 7,488 | | | | 7,653 | |
| | | | | | | | | | | | | | | | | | | |
Total revenues | | | 398,850 | | | | 118,541 | | | | 49,714 | | | 20,191 | | | | 587,296 | |
| | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 123,300 | | | | 9,500 | | | | — | | | — | | | | 132,800 | |
Amortization of deferred policy acquisition costs | | | 26,604 | | | | 8,177 | | | | — | | | — | | | | 34,781 | |
Other underwriting and operating expenses(6) | | | 50,835 | | | | 20,250 | | | | — | | | 42,307 | | | | 113,392 | |
Interest expense | | | 1 | | | | — | | | | — | | | 16,245 | | | | 16,246 | |
| | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 200,740 | | | | 37,927 | | | | — | | | 58,552 | | | | 297,219 | |
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 198,110 | | | | 80,614 | | | | 49,714 | | | (38,361 | ) | | | 290,077 | |
Income tax (benefit) | | | 55,840 | | | | 26,507 | | | | 4,606 | | | (11,839 | ) | | | 75,114 | |
| | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 142,270 | | | $ | 54,107 | | | $ | 45,108 | | $ | (26,522 | ) | | $ | 214,963 | |
| | | | | | | | | | | | | | | | | | | |
Expense ratio(7) | | | 24.0 | % | | | 31.1 | % | | | | | | | | | | | |
Loss ratio(7) | | | 36.8 | % | | | 11.2 | % | | | | | | | | | | | |
Combined ratio | | | 60.8 | % | | | 42.3 | % | | | | | | | | | | | |
Page 4
THE PMI GROUP, INC. AND SUBSIDIARIES
BUSINESS SEGMENTS BALANCE SHEETS
| | | | | | | | | | | | | | | | | | |
| | | U.S. Mortgage
Insurance
Operations(2) | | International
Operations (3) | | | Financial
Guaranty(4) | | | Corporate
and Other (5) | | | Consolidated
Total |
| | | June 30, 2007 (Unaudited) |
| | | (Dollars in thousands) |
Assets | | | | | | | | | | | | | | | | | | |
Cash and investments, at fair value | | $ | 2,067,004 | | $ | 1,579,489 | | | $ | 205,967 | | | $ | 221,597 | | | $ | 4,074,057 |
Investments in unconsolidated subsidiaries(1) | | | 122,072 | | | — | | | | 996,431 | | | | 15,224 | | | | 1,133,727 |
Related party receivables (payables) | | | 1,217 | | | (767 | ) | | | 158 | | | | 753 | | | | 1,361 |
Reinsurance receivables, recoverables and prepaid premiums | | | 9,800 | | | 1,547 | | | | — | | | | — | | | | 11,347 |
Deferred policy acquisition costs | | | 43,906 | | | 45,960 | | | | 3,312 | | | | — | | | | 93,178 |
Other assets | | | 214,575 | | | 54,319 | | | | 4,256 | | | | 122,219 | | | | 395,369 |
| | | | | | | | | | | | | | | | | | |
Total assets | | $ | 2,458,574 | | $ | 1,680,548 | | | $ | 1,210,124 | | | $ | 359,793 | | | $ | 5,709,039 |
| | | | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | | |
Reserve for losses and loss adjustment expenses | | $ | 444,594 | | $ | 62,357 | | | $ | — | | | $ | — | | | $ | 506,951 |
Unearned premiums | | | 103,331 | | | 461,464 | | | | 6,984 | | | | 25 | | | | 571,804 |
Long-term debt | | | — | | | — | | | | 50,000 | (11) | | | 446,593 | | | | 496,593 |
Other liabilities (assets) | | | 265,268 | | | 69,824 | | | | 40,817 | | | | (2,423 | ) | | | 373,486 |
| | | | | | | | | | | | | | | | | | |
Total liabilities | | | 813,193 | | | 593,645 | | | | 97,801 | | | | 444,195 | | | | 1,948,834 |
Shareholders’ equity (deficit) | | | 1,645,381 | | | 1,086,903 | | | | 1,112,323 | | | | (84,402 | ) | | | 3,760,205 |
| | | | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 2,458,574 | | $ | 1,680,548 | | | $ | 1,210,124 | | | $ | 359,793 | | | $ | 5,709,039 |
| | | | | | | | | | | | | | | | | | |
| |
| | | 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 (payables) | | | 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 | | | 212,197 | | | 41,215 | | | | 3,345 | | | | 106,869 | | | | 363,626 |
| | | | | | | | | | | | | | | | | | |
Total assets | | $ | 2,395,688 | | $ | 1,441,633 | | | $ | 1,164,818 | | | $ | 325,051 | | | $ | 5,327,190 |
| | | | | | | | | | | | | | | | | | |
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 | | | — | | | — | | | | 50,000 | (11) | | | 446,593 | | | | 496,593 |
Other liabilities (assets) | | | 283,544 | | | 67,645 | | | | 41,440 | | | | (65,622 | ) | | | 327,007 |
| | | | | | | | | | | | | | | | | | |
Total liabilities | | | 756,171 | | | 528,395 | | | | 93,029 | | | | 381,005 | | | | 1,758,600 |
Shareholders’ equity (deficit) | | | 1,639,517 | | | 913,238 | | | | 1,071,789 | | | | (55,954 | ) | | | 3,568,590 |
| | | | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 2,395,688 | | $ | 1,441,633 | | | $ | 1,164,818 | | | $ | 325,051 | | | $ | 5,327,190 |
| | | | | | | | | | | | | | | | | | |
| |
| | | June 30, 2006 (Unaudited) |
| | | (Dollars in thousands) |
Assets | | | | | | | | | | | | | | | | | | |
Cash and investments, at fair value | | $ | 2,259,393 | | $ | 1,156,454 | | | $ | 1,995 | | | $ | 426,569 | | | $ | 3,844,411 |
Investments in unconsolidated subsidiaries(1) | | | 120,574 | | | — | | | | 867,923 | | | | 19,283 | | | | 1,007,780 |
Related party receivables | | | 1,291 | | | — | | | | — | | | | 107 | | | | 1,398 |
Reinsurance receivables, recoverables and prepaid premiums | | | 14,977 | | | 5,838 | | | | — | | | | — | | | | 20,815 |
Deferred policy acquisition costs | | | 45,769 | | | 37,897 | | | | — | | | | — | | | | 83,666 |
Other assets | | | 204,724 | | | 33,293 | | | | 3 | | | | 117,376 | | | | 355,396 |
| | | | | | | | | | | | | | | | | | |
Total assets | | $ | 2,646,728 | | $ | 1,233,482 | | | $ | 869,921 | | | $ | 563,335 | | | $ | 5,313,466 |
| | | | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | | |
Reserve for losses and loss adjustment expenses | | $ | 355,832 | | $ | 28,773 | | | $ | — | | | $ | — | | | $ | 384,605 |
Unearned premiums | | | 147,739 | | | 343,136 | | | | — | | | | 31 | | | | 490,906 |
Long-term debt | | | — | | | — | | | | — | | | | 819,529 | | | | 819,529 |
Other liabilities (assets) | | | 284,851 | | | 59,597 | | | | 23,421 | | | | (43,410 | ) | | | 324,459 |
| | | | | | | | | | | | | | | | | | |
Total liabilities | | | 788,422 | | | 431,506 | | | | 23,421 | | | | 776,150 | | | | 2,019,499 |
Shareholders’ equity (deficit) | | | 1,858,306 | | | 801,976 | | | | 846,500 | | | | (212,815 | ) | | | 3,293,967 |
| | | | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 2,646,728 | | $ | 1,233,482 | | | $ | 869,921 | | | $ | 563,335 | | | $ | 5,313,466 |
| | | | | | | | | | | | | | | | | | |
Page 5
THE PMI GROUP, INC. AND SUBSIDIARIES
U.S. MORTGAGE INSURANCE OPERATIONS(2) ANALYSIS OF RESERVE FOR LOSSES AND LAE
| | | | | | | | | | | | | | | |
| | | June 30, 2007 | | March 31, 2007 | | June 30, 2006 |
| | | 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 | | 42,349 | | $ | 402,831 | | 39,206 | | $ | 348,735 | | 37,102 | | $ | 318,878 |
Pool insurance(8) | | 20,238 | | | 41,763 | | 18,500 | | | 37,301 | | 17,458 | | | 36,954 |
| | | | | | | | | | | | | | | |
Total | | 62,587 | | $ | 444,594 | | 57,706 | | $ | 386,036 | | 54,560 | | $ | 355,832 |
| | | | | | | | | | | | | | | |
Reconciliation of Reserve for Losses and LAE
| | | | | | | | | | | |
| | | June 30,
2007 | | | March 31,
2007 | | | Reserve
Change |
| | | (Dollars in thousands) |
Gross reserve for losses and LAE: | | | | | | | | | | | |
Primary insurance | | $ | 402,831 | | | $ | 348,735 | | | $ | 54,096 |
Pool insurance(8) | | | 41,763 | | | | 37,301 | | | | 4,462 |
| | | | | | | | | | | |
Total gross reserve for losses and LAE | | | 444,594 | | | | 386,036 | | | | 58,558 |
Ceded reserve for losses: | | | | | | | | | | | |
Primary insurance | | | (2,495 | ) | | | (2,590 | ) | | | 95 |
Pool insurance (8) | | | (59 | ) | | | (79 | ) | | | 20 |
| | | | | | | | | | | |
Total ceded reserve for losses | | | (2,554 | ) | | | (2,669 | ) | | | 115 |
| | | | | | | | | | | |
Net reserve for losses and LAE | | $ | 442,040 | | | $ | 383,367 | | | $ | 58,673 |
| | | | | | | | | | | |
U.S. MORTGAGE INSURANCE OPERATIONS(2) FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
Flow insurance written(in millions) | | $ | 10,268 | | | $ | 5,716 | | | $ | 17,793 | | | $ | 10,757 | |
Structured insurance written(in millions) | | | 1,337 | | | | 1,344 | | | | 4,775 | | | | 4,391 | |
| | | | | | | | | | | | | | | | |
Primary new insurance written(in millions) | | $ | 11,605 | | | $ | 7,060 | | | $ | 22,568 | | | $ | 15,148 | |
| | | | | | | | | | | | | | | | |
Primary new risk written(in millions) | | $ | 2,806 | | | $ | 1,790 | | | $ | 5,726 | | | $ | 3,938 | |
Pool new insurance written(in millions)(8) | | $ | 5,270 | | | $ | 3,575 | | | $ | 11,458 | | | $ | 8,302 | |
Pool new risk written(in millions)(8) | | $ | 122 | | | $ | 108 | | | $ | 299 | | | $ | 212 | |
Product mix as a % of new insurance written: | | | | | | | | | | | | | | | | |
Above 97% LTV’s | | | 35 | % | | | 17 | % | | | 35 | % | | | 15 | % |
90.01% to 95% LTV’s | | | 21 | % | | | 22 | % | | | 21 | % | | | 22 | % |
85.01% to 90% LTV’s | | | 31 | % | | | 46 | % | | | 29 | % | | | 46 | % |
90.01% to 95% LTV’s with >= 30% coverage | | | 16 | % | | | 18 | % | | | 16 | % | | | 18 | % |
85.01% to 90% LTV’s with >= 25% coverage | | | 27 | % | | | 40 | % | | | 26 | % | | | 40 | % |
ARMs | | | 8 | % | | | 20 | % | | | 12 | % | | | 30 | % |
Monthlies | | | 98 | % | | | 96 | % | | | 97 | % | | | 97 | % |
Refinances | | | 38 | % | | | 32 | % | | | 42 | % | | | 36 | % |
Structured transactions | | | 12 | % | | | 19 | % | | | 21 | % | | | 29 | % |
Premiums written(in thousands): | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 236,412 | | | $ | 203,426 | | | $ | 476,842 | | | $ | 411,562 | |
Ceded premiums, net of assumed premiums | | | (42,973 | ) | | | (41,402 | ) | | | (84,108 | ) | | | (83,058 | ) |
Refunded premiums | | | (4,259 | ) | | | (3,120 | ) | | | (7,638 | ) | | | (6,127 | ) |
| | | | | | | | | | | | | | | | |
Net premiums written | | | 189,180 | | | | 158,904 | | | | 385,096 | | | | 322,377 | |
Change in unearned premiums | | | 6,205 | | | | 8,922 | | | | 4,048 | | | | 12,987 | |
| | | | | | | | | | | | | | | | |
Net premiums earned | | $ | 195,385 | | | $ | 167,826 | | | $ | 389,144 | | | $ | 335,364 | |
| | | | | | | | | | | | | | | | |
Page 6
THE PMI GROUP, INC. AND SUBSIDIARIES
U.S. MORTGAGE INSURANCE OPERATIONS(2) FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | 6/30/2007 | | | 3/31/2007 | | | 12/31/2006 | | | 9/30/2006 | | | 6/30/2006 | |
Primary insurance in force(in millions) | | | | | | | | | | | | | | | | | | | | | | |
Flow | | | | $ | 91,864 | | | $ | 87,184 | | | $ | 85,086 | | | $ | 84,405 | | | $ | 84,644 | |
Structured transactions | | | | | 19,803 | | | | 19,701 | | | | 17,549 | | | | 15,877 | | | | 15,741 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total | | | | $ | 111,667 | | | $ | 106,885 | | | $ | 102,635 | | | $ | 100,282 | | | $ | 100,385 | |
| | | | | | | | | | | | | | | | | | | | | | |
Primary risk in force(in millions) | | | | | | | | | | | | | | | | | | | | | | |
Flow | | | | $ | 23,075 | | | $ | 21,837 | | | $ | 21,095 | | | $ | 20,855 | | | $ | 20,883 | |
Structured transactions | | | | | 5,016 | | | | 5,138 | | | | 4,616 | | | | 4,193 | | | | 4,127 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total | | | | $ | 28,091 | | | $ | 26,975 | | | $ | 25,711 | | | $ | 25,048 | | | $ | 25,010 | |
| | | | | | | | | | | | | | | | | | | | | | |
Pool risk in force(in millions)(8) | | | | $ | 3,461 | | | $ | 3,373 | | | $ | 3,216 | | | $ | 2,773 | | | $ | 2,737 | |
Primary risk in force - credit score distribution | | | | | | | | | | | | | | | | | | | | | | |
Flow | | 620 or above | | | 93.6 | % | | | 93.8 | % | | | 93.7 | % | | | 93.5 | % | | | 93.3 | % |
| | 619-575 | | | 5.0 | % | | | 4.9 | % | | | 5.0 | % | | | 5.2 | % | | | 5.3 | % |
| | 574 or below | | | 1.4 | % | | | 1.3 | % | | | 1.3 | % | | | 1.3 | % | | | 1.4 | % |
Structured transactions | | 620 or above | | | 85.4 | % | | | 85.3 | % | | | 84.7 | % | | | 82.8 | % | | | 80.7 | % |
| | 619-575 | | | 9.2 | % | | | 9.2 | % | | | 9.8 | % | | | 10.8 | % | | | 12.3 | % |
| | 574 or below | | | 5.4 | % | | | 5.5 | % | | | 5.5 | % | | | 6.4 | % | | | 7.1 | % |
Total | | 620 or above | | | 92.1 | % | | | 92.2 | % | | | 92.0 | % | | | 91.7 | % | | | 91.3 | % |
| | 619-575 | | | 5.8 | % | | | 5.7 | % | | | 5.9 | % | | | 6.1 | % | | | 6.4 | % |
| | 574 or below | | | 2.1 | % | | | 2.1 | % | | | 2.1 | % | | | 2.2 | % | | | 2.3 | % |
Primary average loan size(in thousands) | | | | | | | | | | | | | | | | | | | | | | |
Flow | | | | $ | 146.6 | | | $ | 142.8 | | | $ | 140.0 | | | $ | 138.3 | | | $ | 136.9 | |
Structured transactions | | | | $ | 159.6 | | | $ | 159.2 | | | $ | 155.6 | | | $ | 151.8 | | | $ | 150.7 | |
Total | | | | $ | 148.7 | | | $ | 145.5 | | | $ | 142.5 | | | $ | 140.3 | | | $ | 138.9 | |
Loss severity - primary(quarterly) | | | | | | | | | | | | | | | | | | | | | | |
Flow | | | | | 87.9 | % | | | 88.5 | % | | | 88.6 | % | | | 83.1 | % | | | 83.2 | % |
Structured transactions | | | | | 92.5 | % | | | 90.3 | % | | | 92.4 | % | | | 86.7 | % | | | 86.8 | % |
Total | | | | | 89.3 | % | | | 89.0 | % | | | 89.6 | % | | | 84.0 | % | | | 84.1 | % |
Persistency | | | | | | | | | | | | | | | | | | | | | | |
Primary persistency rate | | | | | 71.7 | % | | | 70.7 | % | | | 69.6 | % | | | 67.3 | % | | | 64.9 | % |
Primary loans, defaults and default rates | | | | | | | | | | | | | | | | | | | | | | |
Primary policies in force | | | | | 750,835 | | | | 734,431 | | | | 720,347 | | | | 714,742 | | | | 722,756 | |
Primary loans in default | | | | | 42,349 | | | | 39,206 | | | | 39,997 | | | | 38,573 | | | | 37,102 | |
Primary default rate | | | | | 5.64 | % | | | 5.34 | % | | | 5.55 | % | | | 5.40 | % | | | 5.13 | % |
Flow only default rate | | | | | 4.70 | % | | | 4.54 | % | | | 4.75 | % | | | 4.61 | % | | | 4.44 | % |
Structured transactions only default rate | | | | | 10.37 | % | | | 9.29 | % | | | 9.86 | % | | | 9.96 | % | | | 9.26 | % |
Pool default rate | | | | | 5.17 | % | | | 4.82 | % | | | 4.24 | % | | | 4.81 | % | | | 5.60 | % |
Claims paid(quarter-to-date in millions) | | | | | | | | | | | | | | | | | | | | | | |
Primary claims paid - flow | | | | $ | 46.3 | | | $ | 46.6 | | | $ | 43.0 | | | $ | 42.6 | | | $ | 36.2 | |
Primary claims paid - structured transactions | | | | | 21.5 | | | | 18.3 | | | | 15.4 | | | | 14.7 | | | | 11.3 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total primary claims paid | | | | | 67.8 | | | | 64.9 | | | | 58.4 | | | | 57.3 | | | | 47.5 | |
Total pool and other | | | | | 4.5 | | | | 4.4 | | | | 3.0 | | | | 4.7 | | | | 4.6 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total claims paid | | | | $ | 72.3 | | | $ | 69.3 | | | $ | 61.4 | | | $ | 62.0 | | | $ | 52.1 | |
| | | | | | | | | | | | | | | | | | | | | | |
Number of primary claims paid(quarter-to-date) | | | | | 2,336 | | | | 2,362 | | | | 2,195 | | | | 2,346 | | | | 2,038 | |
Average primary claim size(quarter-to-date in thousands) | | | | $ | 29.0 | | | $ | 27.5 | | | $ | 26.6 | | | $ | 24.4 | | | $ | 23.3 | |
Captive reinsurance arrangements(year-to-date) | | | | | | | | | | | | | | | | | | | | | | |
Percentage of flow NIW subject to captive reinsurance arrangements | | | | | 56.0 | % | | | 49.3 | % | | | 68.8 | % | | | 71.6 | % | | | 71.3 | % |
Percentage of primary NIW subject to captive reinsurance arrangements | | | | | 44.2 | % | | | 34.1 | % | | | 50.4 | % | | | 53.5 | % | | | 51.5 | % |
Percentage of primary IIF subject to captive reinsurance arrangements | | | | | 50.3 | % | | | 51.0 | % | | | 52.9 | % | | | 53.9 | % | | | 53.3 | % |
Percentage of primary RIF subject to captive reinsurance arrangements | | | | | 50.2 | % | | | 50.8 | % | | | 53.2 | % | | | 54.4 | % | | | 53.9 | % |
Alt-A primary insurance in force(in millions) | | | | | | | | | | | | | | | | | | | | | | |
With FICO scores of 660 and above | | | | $ | 20,400 | | | $ | 18,120 | | | $ | 15,738 | | | $ | 14,203 | | | $ | 13,216 | |
With FICO scores below 660 and above 619 | | | | | 3,764 | | | | 3,652 | | | | 3,353 | | | | 3,178 | | | | 2,934 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total Alt-A primary insurance in force | | | | $ | 24,164 | | | $ | 21,772 | | | $ | 19,091 | | | $ | 17,381 | | | $ | 16,150 | |
| | | | | | | | | | | | | | | | | | | | | | |
Risk-to-capital ratio(9) | | | | | 8.7 to 1 | | | | 8.3 to 1 | | | | 8.1 to 1 | | | | 8.2 to 1 | | | | 7.7 to 1 | |
Page 7
THE PMI GROUP, INC. AND SUBSIDIARIES
CMG MORTGAGE INSURANCE COMPANY FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | | | | |
| | | June 30,
2007 | | | March 31,
2007 | | | June 30,
2006 | |
Primary new insurance written(quarter-to-date in millions) | | $ | 1,566 | | | $ | 1,053 | | | $ | 1,167 | |
Primary insurance in force(in millions) | | $ | 17,415 | | | $ | 16,670 | | | $ | 15,774 | |
Primary risk in force(in millions) | | $ | 4,292 | | | $ | 4,085 | | | $ | 3,791 | |
Policies in force | | | 118,933 | | | | 115,227 | | | | 111,889 | |
Persistency | | | 79.2 | % | | | 78.5 | % | | | 73.6 | % |
Primary loans in default | | | 1,259 | | | | 1,130 | | | | 965 | |
Primary default rate | | | 1.06 | % | | | 0.98 | % | | | 0.86 | % |
Primary claims paid(quarter-to-date in thousands) | | $ | 2,392 | | | $ | 2,131 | | | $ | 1,512 | |
Number of primary claims paid(quarter-to-date) | | | 83 | | | | 75 | | | | 68 | |
Average primary claim size (quarter-to-date in thousands) | | $ | 28.8 | | | $ | 28.4 | | | $ | 22.2 | |
PMI AUSTRALIA FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | | | | |
| | | June 30,
2007 | | | March 31,
2007 | | | June 30,
2006 | |
Net premiums written(quarter-to-date in thousands) | | $ | 59,111 | | | $ | 38,234 | | | $ | 48,603 | |
Premiums earned(quarter-to-date in thousands) | | $ | 40,105 | | | $ | 36,364 | | | $ | 39,110 | |
Flow insurance written(quarter-to-date in millions) | | $ | 5,959 | | | $ | 4,300 | | | $ | 5,062 | |
RMBS insurance written(quarter-to-date in millions) | | | 6,151 | | | | 3,284 | | | | 7,744 | |
| | | | | | | | | | | | |
New insurance written(quarter-to-date in millions) | | $ | 12,110 | | | $ | 7,584 | | | $ | 12,806 | |
| | | | | | | | | | | | |
Insurance in force(in millions) | | $ | 172,861 | | | $ | 156,698 | | | $ | 135,529 | |
Risk in force(in millions) | | $ | 158,235 | | | $ | 143,207 | | | $ | 124,139 | |
Policies in force | | | 1,103,205 | | | | 1,070,974 | | | | 1,074,618 | |
Loans in default | | | 3,156 | | | | 3,063 | | | | 1,731 | |
Default rate | | | 0.29 | % | | | 0.29 | % | | | 0.16 | % |
Claims paid(quarter-to-date in thousands) | | $ | 7,317 | | | $ | 8,389 | | | $ | 3,181 | |
Number of claims paid(quarter-to-date) | | | 130 | | | | 126 | | | | 73 | |
Average claim size(quarter-to-date in thousands) | | $ | 56.3 | | | $ | 66.6 | | | $ | 43.6 | |
PMI EUROPE FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | |
| | | June 30,
2007 | | March 31,
2007 | | June 30,
2006 |
Net premiums written(quarter-to-date in thousands) | | $ | 3,497 | | $ | 3,404 | | $ | 2,109 |
Premiums earned(quarter-to-date in thousands) | | $ | 3,519 | | $ | 3,579 | | $ | 3,905 |
New insurance written(quarter-to-date in millions) | | $ | 141 | | $ | 136 | | $ | 24 |
New credit default swaps written(quarter-to-date in millions) | | $ | — | | $ | — | | $ | — |
New reinsurance written(quarter-to-date in millions) | | $ | 1,778 | | $ | 504 | | $ | 379 |
Insurance in force(in millions) | | $ | 48,120 | | $ | 48,121 | | $ | 39,996 |
Risk in force(in millions) | | $ | 3,813 | | $ | 3,824 | | $ | 2,836 |
Claims paid including credit default swaps(quarter-to-date in thousands) | | $ | 2,577 | | $ | 1,547 | | $ | 631 |
Page 8
THE PMI GROUP, INC. AND SUBSIDIARIES
APPENDIX A - QUARTERLY FINANCIAL INFORMATION
PMI AUSTRALIA QUARTERLY FINANCIAL INFORMATION
| | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2006 | |
| | | 2nd Quarter | | | 1st Quarter | | | 4th Quarter | | | 3rd Quarter | | | 2nd Quarter | |
| | | (Australian $ in thousands, unless otherwise noted) | |
Income Statement Components - Quarter Ended | | | | | | | | | | | | | | | | | | | | |
Net premiums written | | $ | 71,013 | | | $ | 48,616 | | | $ | 69,049 | | | $ | 62,706 | | | $ | 65,056 | |
Premiums earned | | $ | 48,209 | | | $ | 46,240 | | | $ | 44,341 | | | $ | 52,634 | | | $ | 52,399 | |
Net investment income | | $ | 20,745 | | | $ | 20,529 | | | $ | 19,453 | | | $ | 18,886 | | | $ | 17,529 | |
Net realized investment gains (losses) | | $ | 82 | | | $ | (97 | ) | | $ | (387 | ) | | $ | 3,708 | | | $ | (262 | ) |
Change in fair value of foreign currency put options(12) | | $ | (330 | ) | | $ | (1,168 | ) | | $ | (109 | ) | | $ | (638 | ) | | $ | (2,640 | ) |
Total losses and expenses | | $ | 26,474 | | | $ | 34,298 | | | $ | 37,656 | | | $ | 28,610 | | | $ | 24,843 | |
Net income | | $ | 29,320 | | | $ | 22,953 | | | $ | 18,073 | | | $ | 32,688 | | | $ | 29,332 | |
Net income(U.S. $ in thousands) | | $ | 24,429 | | | $ | 18,047 | | | $ | 13,830 | | | $ | 24,732 | | | $ | 21,923 | |
Balance Sheet Components - As of Quarter Ended | | | | | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | | | | | |
Cash and investments, at fair value | | $ | 1,420,600 | | | $ | 1,375,824 | | | $ | 1,358,525 | | | $ | 1,314,487 | | | $ | 1,257,618 | |
Total assets | | $ | 1,522,304 | | | $ | 1,476,400 | | | $ | 1,442,781 | | | $ | 1,396,072 | | | $ | 1,336,748 | |
Liabilities and Shareholder’s Equity | | | | | | | | | | | | | | | | | | | | |
Reserve for losses and LAE | | $ | 51,833 | | | $ | 48,439 | | | $ | 38,581 | | | $ | 24,185 | | | $ | 16,150 | |
Unearned premiums | | $ | 491,824 | | | $ | 469,020 | | | $ | 466,644 | | | $ | 441,936 | | | $ | 431,864 | |
Shareholder’s equity | | $ | 927,897 | | | $ | 909,665 | | | $ | 885,595 | | | $ | 874,975 | | | $ | 841,116 | |
PMI EUROPE QUARTERLY FINANCIAL INFORMATION
| | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | 2006 | |
| | | 2nd Quarter | | | 1st Quarter | | | 4th Quarter | | 3rd Quarter | | | 2nd Quarter | |
| | | (Euro € in thousands, unless otherwise noted) | |
Income Statement Components - Quarter Ended | | | | | | | | | | | | | | | | | | | |
Net premiums written | | € | 2,592 | | | € | 2,600 | | | € | 2,505 | | € | 2,313 | | | € | 1,679 | |
Premiums earned | | € | 2,610 | | | € | 2,729 | | | € | 3,264 | | € | 3,258 | | | € | 3,108 | |
Income from credit default swaps | | € | 1,170 | | | € | 1,397 | | | € | 2,067 | | € | 769 | | | € | 1,691 | |
Net investment income | | € | 1,651 | | | € | 1,837 | | | € | 1,803 | | € | 1,891 | | | € | 1,797 | |
Net realized investment (losses) gains | | € | (11 | ) | | € | 87 | | | € | 35 | | € | 511 | | | € | 361 | |
Change in fair value of foreign currency put options(12) | | € | (19 | ) | | € | (76 | ) | | € | — | | € | (2 | ) | | € | (42 | ) |
Total losses and expenses | | € | 3,712 | | | € | 2,566 | | | € | 3,001 | | € | 4,026 | | | € | 2,635 | |
Net income | | € | 1,227 | | | € | 2,272 | | | € | 2,718 | | € | 1,559 | | | € | 2,780 | |
Net income(U.S. $ in thousands) | | $ | 1,655 | | | $ | 2,979 | | | $ | 3,506 | | $ | 1,987 | | | $ | 3,498 | |
Balance Sheet Components - As of Quarter Ended | | | | | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | | | | | | | | | | |
Cash and investments, at fair value | | € | 172,413 | | | € | 166,322 | | | € | 163,148 | | € | 162,858 | | | € | 160,424 | |
Total assets | | € | 189,598 | | | € | 188,090 | | | € | 184,404 | | € | 182,503 | | | € | 174,624 | |
Liabilities and Shareholder’s Equity | | | | | | | | | | | | | | | | | | | |
Reserve for losses and LAE | | € | 13,353 | | | € | 13,170 | | | € | 13,567 | | € | 13,340 | | | € | 12,521 | |
Unearned premiums | | € | 15,796 | | | € | 15,813 | | | € | 15,943 | | € | 16,703 | | | € | 17,648 | |
Shareholder’s equity | | € | 147,421 | | | € | 143,331 | | | € | 141,419 | | € | 138,766 | | | € | 134,518 | |
Page 9
THE PMI GROUP, INC. AND SUBSIDIARIES
APPENDIX B- BUSINESS SEGMENTS RESULTS OF OPERATIONS BY QUARTER
| | | | | | | | | | | | | | | | | | | | |
| | | 2007 | | | | | | 2006 | | | | |
| | | 2nd
Quarter | | | 1st
Quarter | | | 4th
Quarter | | | 3rd
Quarter | | | 2nd
Quarter | |
| | | (Dollars in thousands) | |
U.S. Mortgage Insurance Operations(2) | | | | | | | | | | | | | | | | | | | | |
Net premiums written | | $ | 189,180 | | | $ | 195,916 | | | $ | 175,730 | | | $ | 160,468 | | | $ | 158,904 | |
| | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 195,385 | | | $ | 193,759 | | | $ | 184,511 | | | $ | 168,118 | | | $ | 167,826 | |
Net investment income | | | 25,966 | | | | 28,322 | | | | 26,071 | | | | 27,082 | | | | 27,064 | |
Equity in earnings from unconsolidated subsidiaries(1) | | | 4,617 | | | | 4,861 | | | | 5,077 | | | | 5,010 | | | | 5,729 | |
Net realized investment gains | | | 981 | | | | 2,267 | | | | 1,627 | | | | 1,620 | | | | 305 | |
Other income (loss) | | | 17 | | | | (13 | ) | | | (30 | ) | | | (22 | ) | | | 7 | |
| | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 226,966 | | | | 229,196 | | | | 217,256 | | | | 201,808 | | | | 200,931 | |
| | | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 134,384 | | | | 92,784 | | | | 72,039 | | | | 67,699 | | | | 64,153 | |
Amortization of deferred policy acquisition costs | | | 12,610 | | | | 12,582 | | | | 12,544 | | | | 12,830 | | | | 13,162 | |
Other underwriting expenses and operating expenses | | | 26,759 | | | | 27,661 | | | | 28,956 | | | | 23,618 | | | | 22,970 | |
Litigation (recovery) settlement | | | — | | | | — | | | | (1,840 | ) | | | (999 | ) | | | — | |
Interest expense | | | 39 | | | | — | | | | — | | | | 1 | | | | 1 | |
| | | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 173,792 | | | | 133,027 | | | | 111,699 | | | | 103,149 | | | | 100,286 | |
| | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 53,174 | | | | 96,169 | | | | 105,557 | | | | 98,659 | | | | 100,645 | |
Income taxes | | | 11,627 | | | | 27,293 | | | | 28,349 | | | | 27,819 | | | | 28,480 | |
| | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 41,547 | | | $ | 68,876 | | | $ | 77,208 | | | $ | 70,840 | | | $ | 72,165 | |
| | | | | | | | | | | | | | | | | | | | |
International Operations(3) | | | | | | | | | | | | | | | | | | | | |
Net premiums written | | $ | 65,376 | | | $ | 43,382 | | | $ | 58,129 | | | $ | 51,942 | | | $ | 52,900 | |
| | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 46,384 | | | $ | 42,382 | | | $ | 41,219 | | | $ | 46,766 | | | $ | 45,801 | |
Income from credit default swaps | | | 1,579 | | | | 1,828 | | | | 2,687 | | | | 978 | | | | 2,128 | |
Net investment income | | | 20,581 | | | | 19,164 | | | | 17,990 | | | | 17,442 | | | | 15,625 | |
Net realized investment gains (losses) | | | 53 | | | | 37 | | | | (244 | ) | | | 3,452 | | | | 252 | |
Change in fair value of foreign currency put options(12) | | | (306 | ) | | | (1,013 | ) | | | (82 | ) | | | (482 | ) | | | (1,993 | ) |
Other (loss) income | | | (308 | ) | | | 1,402 | | | | (107 | ) | | | 442 | | | | 83 | |
| | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 67,983 | | | | 63,800 | | | | 61,463 | | | | 68,598 | | | | 61,896 | |
| | | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | 11,776 | | | | 16,536 | | | | 18,492 | | | | 11,907 | | | | 7,708 | |
Amortization of deferred policy acquisition costs | | | 4,131 | | | | 3,761 | | | | 3,748 | | | | 3,871 | | | | 4,632 | |
Other underwriting and operating expenses | | | 12,657 | | | | 10,579 | | | | 11,065 | | | | 11,329 | | | | 10,461 | |
| | | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 28,564 | | | | 30,876 | | | | 33,305 | | | | 27,107 | | | | 22,801 | |
| | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 39,419 | | | | 32,924 | | | | 28,158 | | | | 41,491 | | | | 39,095 | |
Income taxes | | | 11,322 | | | | 9,798 | | | | 8,193 | | | | 12,048 | | | | 13,598 | |
| | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 28,097 | | | $ | 23,126 | | | $ | 19,965 | | | $ | 29,443 | | | $ | 25,497 | |
| | | | | | | | | | | | | | | | | | | | |
Financial Guaranty(4) | | | | | | | | | | | | | | | | | | | | |
Net premiums written | | $ | 1,414 | | | $ | 4,741 | | | $ | 1,590 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 552 | | | $ | 207 | | | $ | 1 | | | $ | — | | | $ | — | |
Equity in earnings from unconsolidated subsidiaries(1) | | | 30,842 | | | | 31,703 | | | | 30,953 | | | | 26,549 | | | | 26,476 | |
Net investment income (expense) | | | 2,314 | | | | 2,321 | | | | 2,036 | | | | (1 | ) | | | 2 | |
| | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 33,708 | | | | 34,231 | | | | 32,990 | | | | 26,548 | | | | 26,478 | |
| | | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | | |
Amortization of deferred policy acquisition costs | | | 269 | | | | 102 | | | | 1 | | | | — | | | | — | |
Other underwriting and operating expenses | | | 432 | | | | 454 | | | | 716 | | | | — | | | | — | |
Interest expense(11) | | | 732 | | | | 731 | | | | 569 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 1,433 | | | | 1,287 | | | | 1,286 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 32,275 | | | | 32,944 | | | | 31,704 | | | | 26,548 | | | | 26,478 | |
Income taxes | | | 3,261 | | | | 3,080 | | | | 3,281 | | | | 2,820 | | | | 2,469 | |
| | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 29,014 | | | $ | 29,864 | | | $ | 28,423 | | | $ | 23,728 | | | $ | 24,009 | |
| | | | | | | | | | | | | | | | | | | | |
Corporate and Other(5) | | | | | | | | | | | | | | | | | | | | |
Net premiums written | | $ | 7 | | | $ | 12 | | | $ | 19 | | | $ | 16 | | | $ | 11 | |
| | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | |
Premiums earned | | $ | 16 | | | $ | 13 | | | $ | 12 | | | $ | 19 | | | $ | 16 | |
Net investment income | | | 2,258 | | | | 2,832 | | | | 3,643 | | | | 5,157 | | | | 6,324 | |
Equity in earnings (losses) from unconsolidated subsidiaries(1) | | | 289 | | | | (55 | ) | | | (124 | ) | | | (68 | ) | | | 82 | |
Net realized investment (losses) gains | | | (620 | ) | | | (726 | ) | | | (248 | ) | | | (4,346 | ) | | | (1 | ) |
Other income | | | 4,769 | | | | 1,706 | | | | 2,829 | | | | 3,204 | | | | 3,712 | |
| | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 6,712 | | | | 3,770 | | | | 6,112 | | | | 3,966 | | | | 10,133 | |
| | | | | | | | | | | | | | | | | | | | |
Losses and expenses | | | | | | | | | | | | | | | | | | | | |
Losses and loss adjustment expenses | | | — | | | | — | | | | 1 | | | | (3 | ) | | | — | |
Other underwriting expenses and operating expenses(6) | | | 19,925 | | | | 24,013 | | | | 27,916 | | | | 21,484 | | | | 19,442 | |
Net costs to exchange and extinguish long-term debt | | | — | | | | — | | | | 1,169 | | | | 875 | | | | — | |
Interest expense | | | 7,627 | | | | 7,522 | | | | 11,753 | | | | 9,361 | | | | 8,066 | |
| | | | | | | | | | | | | | | | | | | | |
Total losses and expenses | | | 27,552 | | | | 31,535 | | | | 40,839 | | | | 31,717 | | | | 27,508 | |
| | | | | | | | | | | | | | | | | | | | |
Loss before income tax benefits | | | (20,840 | ) | | | (27,765 | ) | | | (34,727 | ) | | | (27,751 | ) | | | (17,375 | ) |
Income tax benefits | | | (6,015 | ) | | | (7,932 | ) | | | (9,581 | ) | | | (7,978 | ) | | | (5,319 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net loss | | $ | (14,825 | ) | | $ | (19,833 | ) | | $ | (25,146 | ) | | $ | (19,773 | ) | | $ | (12,056 | ) |
| | | | | | | | | | | | | | | | | | | | |
Page 10
THE PMI GROUP, INC. AND SUBSIDIARIES
APPENDIX C - PMI AUSTRALIA FINANCIAL AND STATISTICAL INFORMATION
| | | | | | | | | | | | | | | | | | | | |
| | | 6/30/2007 | | | 3/31/2007 | | | 12/31/2006 | | | 9/30/2006 | | | 6/30/2006 | |
Insurance in Force(U.S. $ in millions) | | | | | | | | | | | | | | | | | | | | |
Flow | | $ | 107,229 | | | $ | 98,630 | | | $ | 94,529 | | | $ | 86,026 | | | $ | 86,215 | |
RMBS | | | 65,632 | | | | 58,068 | | | | 54,236 | | | | 48,975 | | | | 49,314 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 172,861 | | | $ | 156,698 | | | $ | 148,765 | | | $ | 135,001 | | | $ | 135,529 | |
| | | | | | | | | | | | | | | | | | | | |
Risk in Force(U.S. $ in millions) | | | | | | | | | | | | | | | | | | | | |
Flow | | $ | 92,830 | | | $ | 85,349 | | | $ | 81,490 | | | $ | 74,328 | | | $ | 74,956 | |
RMBS | | | 65,405 | | | | 57,858 | | | | 54,051 | | | | 48,831 | | | | 49,183 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 158,235 | | | $ | 143,207 | | | $ | 135,541 | | | $ | 123,159 | | | $ | 124,139 | |
| | | | | | | | | | | | | | | | | | | | |
Average loan size(U.S. $ in thousands) | | | | | | | | | | | | | | | | | | | | |
Flow | | $ | 161.5 | | | $ | 150.7 | | | $ | 145.6 | | | $ | 134.8 | | | $ | 128.2 | |
RMBS | | $ | 149.5 | | | $ | 139.4 | | | $ | 133.7 | | | $ | 125.9 | | | $ | 122.6 | |
Total | | $ | 156.7 | | | $ | 146.3 | | | $ | 141.0 | | | $ | 131.5 | | | $ | 126.1 | |
Loss severity (quarterly) | | | | | | | | | | | | | | | | | | | | |
Flow | | | 21.4 | % | | | 22.1 | % | | | 20.5 | % | | | 21.9 | % | | | 18.2 | % |
RMBS | | | 16.6 | % | | | 16.6 | % | | | 15.5 | % | | | 21.7 | % | | | 1.6 | % |
Total | | | 20.8 | % | | | 21.7 | % | | | 19.9 | % | | | 21.9 | % | | | 18.2 | % |
Primary loans, defaults and default rates | | | | | | | | | | | | | | | | | | | | |
Policies in force - Flow | | | 664,099 | | | | 654,296 | | | | 649,261 | | | | 638,139 | | | | 672,347 | |
Policies in force - RMBS | | | 439,106 | | | | 416,678 | | | | 405,796 | | | | 388,851 | | | | 402,271 | |
| | | | | | | | | | | | | | | | | | | | |
Policies in force - Total | | | 1,103,205 | | | | 1,070,974 | | | | 1,055,057 | | | | 1,026,990 | | | | 1,074,618 | |
| | | | | | | | | | | | | | | | | | | | |
Loans in default - Flow | | | 2,712 | | | | 2,642 | | | | 2,021 | | | | 1,826 | | | | 1,478 | |
Loans in default - RMBS | | | 444 | | | | 421 | | | | 260 | | | | 273 | | | | 253 | |
| | | | | | | | | | | | | | | | | | | | |
Loans in default - Total | | | 3,156 | | | | 3,063 | | | | 2,281 | | | | 2,099 | | | | 1,731 | |
| | | | | | | | | | | | | | | | | | | | |
Default rate - Flow | | | 0.41 | % | | | 0.40 | % | | | 0.31 | % | | | 0.29 | % | | | 0.22 | % |
Default rate - RMBS | | | 0.10 | % | | | 0.10 | % | | | 0.06 | % | | | 0.07 | % | | | 0.06 | % |
Default rate - Total | | | 0.29 | % | | | 0.29 | % | | | 0.22 | % | | | 0.20 | % | | | 0.16 | % |
Net claims paid(quarter to date in U.S. $ in thousands) | | | | | | | | | | | | | | | | | | | | |
Net claims paid - Flow | | $ | 6,530 | | | $ | 7,923 | | | $ | 5,999 | | | $ | 4,123 | | | $ | 3,179 | |
Net claims paid - RMBS | | | 787 | | | | 466 | | | | 585 | | | | 411 | | | | 2 | |
| | | | | | | | | | | | | | | | | | | | |
Net claims paid - Total | | | 7,317 | | | | 8,389 | | | | 6,584 | | | | 4,534 | | | | 3,181 | |
| | | | | | | | | | | | | | | | | | | | |
Number of claims paid - Flow | | | 117 | | | | 115 | | | | 107 | | | | 72 | | | | 72 | |
Number of claims paid - RMBS | | | 13 | | | | 11 | | | | 11 | | | | 8 | | | | 1 | |
| | | | | | | | | | | | | | | | | | | | |
Number of claims paid - Total | | | 130 | | | | 126 | | | | 118 | | | | 80 | | | | 73 | |
| | | | | | | | | | | | | | | | | | | | |
Average claim size- Flow | | $ | 55.8 | | | $ | 68.9 | | | $ | 56.1 | | | $ | 57.3 | | | $ | 44.2 | |
Average claim size- RMBS | | $ | 60.5 | | | $ | 42.4 | | | $ | 53.2 | | | $ | 51.4 | | | $ | 1.5 | |
Average claim size- Total | | $ | 56.3 | | | $ | 66.6 | | | $ | 55.8 | | | $ | 56.7 | | | $ | 43.6 | |
Combined Ratio | | | | | | | | | | | | | | | | | | | | |
Loss Ratio(7) | | | 25.2 | % | | | 44.4 | % | | | 52.1 | % | | | 26.4 | % | | | 17.3 | % |
Expense Ratio(7) | | | 20.1 | % | | | 28.3 | % | | | 21.4 | % | | | 23.6 | % | | | 24.2 | % |
| | | | | | | | | | | | | | | | | | | | |
Combined Ratio | | | 45.3 | % | | | 72.7 | % | | | 73.5 | % | | | 50.0 | % | | | 41.5 | % |
| | | | | | | | | | | | | | | | | | | | |
Page 11
