PMI Group Unit Seized by Arizona Agency, to Pay 50% on Claims
Oct. 23 (Bloomberg) -- PMI Group Inc., the mortgage insurer that was ordered in August to stop writing policies, said a unit that sells such coverage was seized by Arizona authorities and will pay out claims at 50 percent starting tomorrow.
The Arizona insurance regulator has full possession, management and control of the unit, PMI Group said in a statement on its website. Bill Horning, a spokesman for PMI, didn’t respond to a message seeking comment.
In August, the Arizona Department of Insurance told PMI that the unit, PMI Mortgage Insurance Co., was to halt sales of new policies and stop making interest payments on $285 million in surplus notes. PMI, which is based in Walnut Creek, California, said it needed to provide the regulator with a plan to improve its ability to meet policyholder obligations.
“The department may take appropriate action, including commencing conservatorship proceedings” if PMI fails to satisfy regulators’ demands, the company said on Aug. 19.
That same month, PMI Group posted its 16th straight quarterly loss.
The worst U.S. housing crash in seven decades has pressured mortgage insurers, which pay lenders when homeowners default and foreclosures fail to recoup costs. Home prices fell 3.3 percent in the 12 months through July as a U.S. unemployment rate of more than 9 percent sapped the confidence of potential home buyers.
Until 2007, private mortgage policies had been among the most profitable types of coverage sold by insurers. From 2000 to 2006, members of the Mortgage Insurance Companies of America reported a profit margin of at least 35 cents for every dollar they collected in premiums.
MGIC Investment Corp., the largest U.S. guarantor of home loans, reported a wider third-quarter loss on Oct. 21 as the cost of claims from mortgage delinquencies rose.
PMI shares have fallen 91 percent year to date, and traded at 31 cents on Oct. 21 in New York before the stock was halted.
--Editors: Sylvia Wier, Joe Sabo
To contact the reporters on this story: Mike Millard in Seattle at Mmillard2@bloomberg.net; Noah Buhayar in New York at firstname.lastname@example.org
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