PMI Surges After Saying Default Notices Fell, California, Florida Improved

PMI Group Inc., the mortgage insurer that posted 12 straight quarterly losses, jumped in New York trading after saying the risk of claims declined in the California and Florida markets.

PMI rose 27 cents, or 7.7 percent, to $3.80 at 4:22 p.m. in New York Stock Exchange composite trading after reaching $3.85. The Walnut Creek, California-based insurer has surged 51 percent this year.

PMI’s default notices have declined, Chief Financial Officer Donald Lofe said today at the KBW Insurance Conference in New York.

“The 2008 and 2009 vintages are exhibiting fewer notices of default than previous vintages,” he said. “The composition of our portfolio is clearly improving.”

Mortgage defaults have contributed to 10 bank failures this year in California and 22 in Florida, according to the Federal Deposit Insurance Corp. Mortgage insurers, which pay lenders when homeowners default and foreclosures fail to recoup costs, have tightened underwriting standards and raised prices to recover from losses that began in 2007.

Genworth Financial Inc.’s U.S. mortgage-insurance business will return to profit around mid-2011, according to the Richmond, Virginia-based company’s chief financial officer.

‘Better Performance’

“Attractive new business positions us for better performance as the housing market improves,” CFO Patrick Kelleher said today at the conference. “The average reserve delinquencies peaked in the first quarter of 2009 and have generally trended down.”

Borrowers caught up on overdue mortgages faster than new delinquencies were reported on insured home loans in February for the first time in almost four years as the U.S. economy improved, a trend that continued in March, April and May. The ratio of cures to defaults on guaranteed loans was 0.81 in July compared with 0.57 a year earlier, according to data from the Mortgage Insurance Companies of America.

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net.

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