Standard & Poor's Report Describes Benefits of Lender Captives
|June 5, 2007|
WALNUT CREEK, Calif., -- A new report from Standard & Poor's states that mortgage lender-owned captive reinsurance companies (lender captives) have value for both mortgage lenders and mortgage insurers.
The report, entitled "Lender Captives Benefit Both Lenders and Mortgage Insurers, For a Price," states, "Standard & Poor's believes lender captives can provide MIs with significant protections, as well as more stable profitability when economic conditions turn bad. Moreover, an MI's risk-adjusted return (as measured by the Sharpe Ratio) can be improved by the use of lender captives." The report is available at http://pmigroup.com/shareholders/.
An independent study by the actuarial consulting firm of Milliman Inc. commissioned by PMI also endorsed the value of lender captives; a summary is also available at PMI's Investor Relations center.
"We are very pleased that two respected, independent entities have endorsed the value of lender captives," commented Steve Smith, Chief Executive Officer of The PMI Group, Inc. (NYSE: PMI) and PMI Mortgage Insurance Co.
Donald P. Lofe, Jr., PMI's Chief Financial Officer, commented, "We have long held that these arrangements do transfer risk and that the price paid is appropriate for the risk that's transferred. The Milliman study validated that conclusion. We're gratified that S&P's conclusions also support the value of lender captives."
Source: PMI Mortgage Insurance Co.