NU Online News Service, Nov. 28, 3:05 p.m. EST

The PMI Group has filed for Chapter 11 bankruptcy in order to “assess its strategic and other options for preserving stakeholder value” after the Arizona Department of Insurance's (ADI) seizure of the company's primary regulated subsidiaries last month.

While the PMI Group is based in Walnut Creek, Calif., its operating subsidiary, mortgage insurer PMI Mortgage Insurance Co. (MIC) is based in Arizona. As noted on the PMI Group's website, “On Aug. 19, 2011, PMI informed you of regulatory decisions that impacted our ability to write new commitments of insurance. Specifically, PMI Mortgage Insurance Co. was required to cease writing new commitments.”

The message continues that on Oct. 20, the Arizona department obtained an order giving it full possession, management and control of MIC. The director of insurance then instituted a partial claim-payment plan on Oct. 24, stipulating that claim payments would be made at 50 percent, with the remaining amount deferred as a policyholder claim.

In its Chapter 11 announcement, the PMI Group says ADI's actions were undertaken without notice to the company, and were “inconsistent with recent informal assurances” that ADI had given MIC that no such action was likely in the near term.

The company says it was trying to raise capital from investors in a transaction that would have allowed a wholly-owned subsidiary of MIC, PMI Mortgage Assurance Company (PMAC), to write new mortgage insurance risks nationwide.

“The company believed that the PMAC transaction offered the prospect of significantly enhancing the value of the company and was potentially substantially more favorable to the company's stakeholders than the liquidation of the company's assets,” the PMI Group says in a statement.

Now, according to the PMI Group, “The company has concluded that the [ADI's] Interim Order and the prospect of the appointment of a receiver in respect of MIC make it impractical for the company to pursue the PMAC transaction at this time without bankruptcy protection. As a consequence, the company's board of directors has concluded that filing for Chapter 11 protection is in the best interest of the company's stakeholders and is the most effective means of preserving the company's remaining assets for the benefit of its stakeholders.

The PMI Group notes that none of its subsidiaries commenced Chapter 11 proceedings. “The company will continue to operate in the ordinary course of business as 'debtor-in-possession' under the jurisdiction of the bankruptcy court and in accordance with the applicable provisions of the bankruptcy code and the orders of the bankruptcy court,” the PMI Group says.

PMI ran into trouble with its mortgage-insurance business during the housing crisis. In the 2011 second quarter, the PMI Group reported a The PMI Group, Inc. (NYSE: PMI) today reported a net loss of $134.8 million, including U.S. mortgage insurance operations losses of $338.4 million. The company did not file its third-quarter results.

Special Reports /

The PMI Group Files for Chapter 11 Bankruptcy

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