NU Online News Service, Aug. 5, 2:01 p.m.EDT

Standard & Poor's has lowered PMI Mortgage Insurance Co.'s(MIC) financial-strength ratings to CCC-minus from B-minus, sayingstatutory insolvency and/or regulatory action on the company ispossible by the end of the year.

The S&P announcement comes after the company's parent, PMIGroup, reported a 2011 second-quarter net loss of $134.8 million,compared to a net loss of $150.6 million in the 2010 secondquarter. PMI Group says its U.S. Mortgage Insurance Operationssuffered a net loss of $338.4 million in the quarter, driven byelevated losses and loss-adjustment expenses. The company says U.S.Mortgage Insurance Operations' losses were $429.6 million in thequarter, of which $187 million was related to reserves on new loandelinquencies.

PMI Group says MIC's policyholders' position is now $320.3million below the minimum required by Arizona law, and the companyexpects to "further discuss with the Arizona department MIC'sfinancial condition and various capital initiatives the company ispursuing. The company notes that the Arizona department has not yetlimited MIC's ability to transact new insurance business, but thatthe department could, if it determines MIC's condition warrantsregulatory action, issue an administrative order requiring MIC tosuspend writing new business in all states.

S&P says it has a negative rating outlook on MIC based onthe expectation that the company's 2011 and 2012 operating resultswill further erode its statutory capital position. "We will lowerthe rating further as the potential of regulatory takeover and/orstatutory insolvency becomes more likely," the rating agencysays.