UPDATE 3-Mortgage insurer PMI looks to raise capital, shrs jump
Posted on May 5, 2009
Filed Under City Mortgage
* Looks to enhance capital
* Says has sufficient liquidity to repay debt
* Posts wider-than-expected Q4 loss
* Q4 consolidated premiums earned $184.1 mln
* Shares jump 43 percent (Adds conference-call details, updates share movement)
By Anurag Kotoky
BANGALORE, March 16 (Reuters) – Mortgage insurer PMI Group Inc (PMI.N: Quote, Profile, Research) said it was exploring alternatives to enhance liquidity and capital, including potentially obtaining capital or other relief under the U.S. Treasury’s Financial Stability Plan, sending its shares up as much as 43 percent.
In a filing with the U.S. Securities and Exchange commission, the company said it was actively engaged in discussions with its lenders to amend financial covenants and events of default. [ID:nWNAB4289]
“We currently have sufficient liquidity at our holding company to repay the credit facility in the event we no longer comply with its terms or in the event of a potential cross-default under our senior notes,” PMI said in the filing.
However, the overall number of delinquent loans at the company continues to rise faster than projections and options for raising new capital remain limited at the present time, Keefe Bruyette & Woods analyst Nathaniel Otis said in a note.
Although total domestic paid claims for the fourth quarter were below estimates, it does not represent an improvement in market conditions, he said. Instead, it is more an issue of timing, given payments from servicing delays, court delays, foreclosure moratoriums and fraud investigation, Otis said.
PMI has seen a fall in the amount of excess capital available to write new mortgage insurance and expects to limit new insurance written to a range of $10 billion to $12 billion in 2009, Chief Executive Steve Smith said in a conference call with analysts.
Piper Jaffray analyst Michael Grasher removed his share-price target on the company given the “tremendous lack of transparency created by loan modifications, regulatory measures, capital concerns and share price volatility.”
LOSSES CONTINUE
Earlier in the day, PMI posted its fifth straight quarterly loss, much wider than Wall Street estimates, hurt in part by soaring investment losses.
The company posted a loss of $178.8 million, or $2.19 a share, compared with a loss of $1.01 billion, or $12.51 a share, a year earlier.
PMI incurred losses of $6 million from unconsolidated subsidiaries for the period, compared with losses of $791.2 million a year ago.
PMI posted loss of $2.22 a share from continuing operations.
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