NU Online News Service, Aug. 5, 2:01 p.m. EDT
Standard & Poor's has lowered PMI Mortgage Insurance Co.'s (MIC) financial-strength ratings to CCC-minus from B-minus, saying statutory insolvency and/or regulatory action on the company is possible by the end of the year.
The S&P announcement comes after the company's parent, PMI Group, reported a 2011 second-quarter net loss of $134.8 million, compared to a net loss of $150.6 million in the 2010 second quarter. PMI Group says its U.S. Mortgage Insurance Operations suffered a net loss of $338.4 million in the quarter, driven by elevated losses and loss-adjustment expenses. The company says U.S. Mortgage Insurance Operations' losses were $429.6 million in the quarter, of which $187 million was related to reserves on new loan delinquencies.
PMI Group says MIC's policyholders' position is now $320.3 million below the minimum required by Arizona law, and the company expects to "further discuss with the Arizona department MIC's financial condition and various capital initiatives the company is pursuing. The company notes that the Arizona department has not yet limited MIC's ability to transact new insurance business, but that the department could, if it determines MIC's condition warrants regulatory action, issue an administrative order requiring MIC to suspend writing new business in all states.
S&P says it has a negative rating outlook on MIC based on the expectation that the company's 2011 and 2012 operating results will further erode its statutory capital position. "We will lower the rating further as the potential of regulatory takeover and/or statutory insolvency becomes more likely," the rating agency says.
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