PMI Group Inc. shares dropped by up to 41 percent on August 22st, following an announcement that two of the units of this mortgage insurance company were forced to stop writing new business because they had fallen short of meeting their capital requirements.
Just before this announcement was made, PMI had stated that both PMI Mortgage Insurance Co. (MIC) and PMI Insurance Co. had been placed under regulatory supervision by the Arizona Department of Insurance.
Since then, PMI has also revealed that the MIC subsidiary, PMI Mortgage Assurance Co., was no longer qualified for writing new insurance, which has left the insurer without any way to write new business.
Jim Ryan, an analyst from Morning Star, has said that “As far we know, these were the only units writing insurance for PMI.”
It will now be necessary for units from PMI to obtain the assistance of the regulators in order to ease the run-off of their present policies.
As has been the case with other American mortgage insurers, PMI has struggled throughout the housing market crisis which has exceptionally elevated risk-to-capital ratios, which have led many to wonder whether it will be capable of surviving.
PMI has explained that the department might move forward by beginning proceedings for state court receivership for the rebuilding or the liquidation of MIC, which will mean that the approximately $735 million in outstanding debts that are currently held by the insurer will immediately become due and payable. The company has stated that it cannot obtain adequate funds for those debt repayments.