Adjusting for the cost of its U.S. mortgage insurance losses led PMI Group (NYSE: PMI) to a $136.3 million loss in its latest quarter. And although the company has been able to taper its overall net loss, its Mortgage Insurance unit could fall out of compliance with regulatory requirements in the second quarter of the year. To put it more Foolishly, the mortgage insurer's sales might soon take a severe beating.
The numbers
PMI's net loss of $126.8 million for this quarter improved from a net loss of $157.0 million for the first quarter of 2010. Reserves for losses and loss adjustment expenses fell to $2.9 billion, from $3.2 billion as of March 31, 2010. Revenue rose 11% year over year, but this gain owed to the appreciation in fair value of debt instruments. Alas, it doesn't really imply an improvement in the company's overall revenue-generating capacity.
In fact, most of PMI's revenue items have declined from the year-ago period. Premiums earned in the quarter fell by 21%, while net investment income dropped by 37%.
The Foolish bottom line
As I had mentioned in my article on Genworth Financial (NYSE: GNW), mortgage insurers are still coping with the repercussions of the U.S. housing fiasco. Genworth, too, saw its quarterly income fall because of losses in its mortgage segment. MGIC Investment (NYSE: MTG) doesn't look in good shape, either. At the moment, I would like to stay away from PMI and all its suffering peers.
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