S&P affirms PMI

Standard & Poor's said it affirmed and removed the A counterparty credit rating on PMI Group Inc. and its AA counterparty credit ratings on PMI's mortgage insurance subsidiaries from CreditWatch with negative implications.

The outlook is negative.

The affirmation is based on the company's excellent capitalization, which will enable it to weather a difficult period in the mortgage insurance industry, the agency said.

The negative outlook reflects expectations that operating results will be inconsistent with the rating until at least 2009, S&P said. The ratings had been placed on CreditWatch on Oct. 19 after PMI announced a large increase in loss reserves.

The factors responsible for the mortgage insurance company's current weak operating performance, the agency said, are also the catalyst for an improved competitive position featuring more conservative lending practices, a higher portion of prime loans, improved persistency, lower expense ratios and greater penetration of mortgage insurance.

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