PMI Group Inc’s (PMI) fourth quarter operating loss widened from Zacks Consensus Estimate due to continued large losses and lower premiums earned partially offset by lower underwriting and operating expenses. We expect losses and loss adjustment expenses from mortgage insurance operations, increased valuation allowances and lower premiums earned.
The company is also effectively lowering delinquency rates. Though the company may benefit from the recent U.S. regulatory moves to reduce foreclosures, we expect results to remain pressured in the coming quarters until the housing situation bottoms out.
Valuation looks stretched on a price-to-book basis, given a negative trailing 12-month ROE, versus a positive 11.9% for the industry average. Our six-month target price of $1.75 is based on 0.68x our estimated book value of $2.58 per share.
PMI GROUP (PMI): Free Stock Analysis Report
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