PMI Group Inc.PMI

Morningstar Rating

Stock Research and Analysis

by Jim Ryan

Combining mortgage insurance with an interest in financial guaranty insurance seemed a surefire bet to strategically position PMI Group about five years ago. Back then, PMI was in growth mode with nascent international mortgage insurance expanding the Read more

Bulls Say

Strict underwriting and higher prices in the second half of 2007 should continue into 2008. Future profits should be much better than they have been in years.

PMI's customers take about four years to pay down their mortgages and cancel their insurance, so each sale the company makes creates a predictable revenue stream.

Mortgage lenders have learned their lesson the hard way. First mortgages with private mortgage insurance are now preferred over "piggybacks." Read more

Bears Say

The mortgage debacle isn't over yet. PMI could become insolvent if the housing crisis doesn't end soon.

The mortgage guaranty business is vulnerable to interest rate swings that PMI can't influence. High rates increase mortgage defaults, and low rates provoke profit-eroding mortgage refinancing.

PMI's exposure to Alt-A is greater than its main competitors'. Alt-A delinquencies were over 25% at the end of the third quarter. Read more

Strategy

PMI has given up on global mortgage insurance expansion, at least in the near term. The company has sold off Australian and Asian operations and folded plans for Canada. PMI is now focused on surviving Read more

Management

Management probably wishes it had preserved capital instead of spending more than $1 billion to repurchase shares during the last three years. While it is hard to fault management for trying to do the right thing by returning capital to shareholders, Read more

Profile

PMI Group is the second-largest private mortgage insurance company in the United States. PMI also owns 50% of CMG Mortgage Insurance Company, a leading provider of mortgage Read more

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