PMI Group Inc. (PMI), through its subsidiary PMI Mortgage Insurance Co. (MIC) and its affiliated companies (collectively PMI), provides residential mortgage insurance in the United States. Mortgage insurance provides loss protection to mortgage lenders and investors in the event of borrower default. By protecting lenders and investors from credit losses, PMI helps to ensure that mortgages are available to prospective U.S. homebuyers.  During the year ended December 31, 2010, the Company operated in three business segments: United States Mortgage Insurance Operations, International Operations and Corporate and Other.

Source: Reuters.com, SEC Filings.

Recent News

PMI shares plunged into the red last week as the Walnut Creek, California-based mortgage insurer posted its 16th consecutive quarterly loss and said it failed to meet regulators’ capital requirements.

For the second quarter of 2011, the Company posted a net loss of $134.8 million, or $(0.83) per share, narrowing the year-ago quarter loss of $151 million, or $(1.11) per share. Excluding gains it made from the sale of its Australian operations in 2008, PMI’s loss from continuing operations was $285.3 million, or $1.76 per share.  The Company said it gained $75.6 million, or $0.47 a share, from favorable changes in the market value of certain debt instruments during the second quarter.

However, PMI’s main subsidiary, PMI Mortgage Insurance Co. (MIC) realized a net loss of $338.4 million for the second quarter, nearly tripling from the year-ago quarter, as it saw lower loan defaults and a drop in claims. The Company said it will hold talks with the Arizona Department of Insurance as its MIC unit’s capital levels were well below the state’s requirements as of June 30.

With its MIC unit no longer complying with minimum state regulatory capital requirements as of June 30, the Company said it intends to hold talks with the Arizona Department of Insurance, MIC’s primary insurance regulator. PMI estimates MIC’s policyholders’ position was $320.3 million below the minimum required by Arizona law and its risk to capital ratio was 58.1 to 1 as of June 30, 2011.  The Company warned that the state’s insurance department may as a result move to stop it from selling new policies in all states and move to rehabilitate or liquidate MIC, which could significantly limit PMI’s control of the unit.

“In light of the Company’s results in the second quarter of 2011, the Company expects that the number of states in which MIC is precluded from writing new business will significantly increase,” PMI stated in the filing.

PMI shares rose on Monday after sharp losses suffered in last week, jumping as much as 32%.  More than 12.36 million shares have traded hands during the session versus the 10-day average of 12.42 million. The stock set a new 52-week low of $0.22 on Monday’s trading, versus a 52-week high of $4.68 . Market capitalization currently stands at $46.69 million and it has 161.56 million outstanding shares.

Technical Analysis

Source: http://stockcharts.com

PMI is below the lower Bollinger Band, implying that it is currently extended to the downside from its recent trend.

The MACD for PMI currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

Comparative Analysis

Source: Thomson Financial

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority.  We are neither licensed nor qualified to provide investment advice.

The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice.  The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities.  We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company.  An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report.  Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research.

Any individual who chooses to invest in any securities should do so with caution.  Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested.  Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing.

Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934.  Subscribers are cautioned not to place undue reliance upon these forward looking statements.  These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated.  Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC.  You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.

We are committed to providing factual information on the companies that are profiled.  However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions.  We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so.  Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

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Source: Reuters.com, SEC Filings.

Investment Highlights

Shares of PMI spiked almost 12% to close Thursday at $1.16, a day after the stock hit a new 52-week low of $1.01. PMI has so far reached a 52-week high of $4.68.  About 8.09 million shares have traded hands during the session, versus the 10-day average volume of 4.52 million.  The stock is currently below its 50-day and 200-day moving averages of $1.68 and $2.73, respectively.

PMI is a provider of credit enhancement solutions that expand homeownership while supporting customers and the communities they serve. Through its wholly owned subsidiaries, the Company offers residential mortgage insurance and credit enhancement products. PMI is primarily focused on its U.S. mortgage insurance operations.

PMI has posted a net loss of $126.8 million, or $(0.79) per share, for the first quarter of 2011, narrowing the year-ago quarter loss of $157.0 million, or $(1.90) per share. Loss before income taxes came in at $126.4 million in the first quarter, against the prior year’s figure of $246.0 million

The Company reported that the first-quarter results  included a gain (representing a decrease in fair market value) of $21.7 million (pre-tax), or $0.13 (pre-tax) related to the fair value measurement of certain corporate debt obligations, as compared to a loss (representing an increase in fair market value) of $40.8 million (pre-tax), or $0.49 (pre-tax) for the first quarter of 2010.

The Company’s total revenue increased to $160 million for the January-March quarter, from $143.7 million for the comparable quarter last year.

As of March 31, 2011, the mortgage insurer had consolidated cash and cash equivalents and investments of $3.0 billion and total assets in captive trust accounts of approximately $679 million, supporting $439.3 million of reinsurance recoverables.

PMI Mortgage Insurance Co. ended the first quarter of 2011 with excess minimum policyholders’ position of about $39 million and a risk to capital ratio of 24.4 to 1.

PMI is expected to announce its next earnings on July 25, 2011.

Visit PMI at www.pmi-us.com

Technical Analysis

Source: http://stockcharts.com

PMI is trading near its lower Bollinger Band. This suggests that the stock price is low relative to its recent price action.

The MACD for PMI currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

Comparative Analysis

Source: Thomson Financial

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority.  We are neither licensed nor qualified to provide investment advice.

The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice.  The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities.  We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company.  An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report.  Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research.

Any individual who chooses to invest in any securities should do so with caution.  Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested.  Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing.

Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934.  Subscribers are cautioned not to place undue reliance upon these forward looking statements.  These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated.  Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC.  You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.

We are committed to providing factual information on the companies that are profiled.  However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions.  We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so.  Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

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