Mortgage insurer PMI Group Inc. said Tuesday it lost $86.8 million during the third quarter as the company boosted revenue but saw paid claims, loss adjustments and reserves for losses grow to $372 million.
In U.S. mortgage insurance operations, revenues for the quarter were actually up 20 percent compared to a year ago, to $241 million, thanks to growth in net premiums written and earned.
But profits were dented by $92.6 million in claims and a $254 million increase in reserves for losses attributed to an increase in notices of default, increased claim rates and larger claims.
The default rate on 786,301 primary policies in force hit 6.45 percent during the quarter, compared with 5.64 percent in the previous quarter and 5.4 percent a year ago.
PMI Mortgage Insurance Co. and its affiliated mortgage reinsurance companies had $120 billion in insurance at force at the end of the third quarter, a 20 percent increase from a year ago.
But mortgages with loan-to-value ratios of 97 percent or greater made up 31 percent of new primary insurance policies written, compared with 19 percent a year ago.
Adjustable-rate mortgage (ARM) and pay-option ARM loans constituted 10 percent of new insurance written, down sharply from 28 percent a year ago. The percentage of alt-A loans insured also fell during the fourth quarter to 22 percent, compared with 37 percent a year ago.
PMI’s stock price has lost almost two-thirds of its value this year, and the company said it spent $178 million during the third quarter to repurchase 5.4 million common shares.
Competing mortgage insurer MGIC Investment Corp. on Oct. 17 reported a $372.5 million third-quarter loss, and the company said it did not expect to make a profit in 2008 as it pays up to $1.5 billion in claims.