PMI Group Inc., the second-biggest U.S. mortgage insurer, cut its estimate of claims to be paid this year for the second time in five weeks.
The Walnut Creek, Calif., company said Thursday that it expects full-year paid claims of $810 million to $835 million, down from its $850 million to $900 million forecast last month. The November estimate was a 7.7% cut from previous projections.
Radian Group Inc., the third-largest mortgage insurer, has also said claims costs are not meeting earlier projections.
"We predicted a number that was much higher than we received in October, a sign certainly that some foreclosures are being prevented," Radian chief financial officer Robert Quint said Wednesday in a presentation to investors in New York. But "we don't know yet" whether loan modifications are being done that "will help us save money in the future," he said.
PMI lost $915.3 million in 2007 and $749.7 million this year through September as record home foreclosures prompted lenders to file policy claims. PMI and its rivals are charging higher prices and being more selective in selling coverage in order to avoid more losses.
Industrywide sales of mortgage insurance coverage fell to a record low in October, according to the Mortgage Insurance Companies of America trade group. The figures included data from five insurers but excluded Radian, which rejoined the association last month.
Another insurer, Triad Guaranty Inc., stopped selling policies in July after running short of capital to fund claims from new business.
Until last year, private mortgage insurance had been among the most profitable types of coverage. From 2004 to 2006, members of the Mortgage Insurance Companies of America reported profit margins of at least 35 cents for every dollar collected in premiums. By contrast, auto insurers made less than 5 cents on every premium dollar in 2006, according to A.M. Best Co.
