The PMI Group, Inc. Reports First Quarter 2005 Net Income of $101.2 Mi

The PMI Group, Inc. Reports First Quarter 2005 Net Income of $101.2 Million; Net Income Per Diluted Share of $1.00; Net Income Per Diluted Share from Continuing Operations up 20% over First Quarter 2004

    Business Editors

    WALNUT CREEK, Calif.--(BUSINESS WIRE)--May 5, 2005--The PMI Group, Inc. (NYSE:PMI) (the "Company") today announced that consolidated net income from continuing operations totaled $101.2 million, compared to $85.6 million for the same period a year ago, an increase of 18 percent. The significant improvement in net income from continuing operations in the first quarter was driven primarily by net income increases in the U.S. Mortgage Insurance Operations and Financial Guaranty segments. In the first quarter of 2005, net income per diluted share from continuing operations was $1.00, compared to net income of $0.83 per diluted share for the same period a year ago, an increase of 20 percent. The net income results for the first quarter of 2005 led to a book value per share of $33.93 at March 31, 2005, compared to a book value per share of $30.70 at March 31, 2004.
    Consolidated net income and net income per share were $101.2 million, or $1.00 per diluted share, for the quarter ended March 31, 2005, compared to net income of $119.5 million, or $1.16 per diluted share, for the first quarter of 2004. Included in the consolidated net income for the first quarter of 2004 was a $30.1 million ($0.29 per share) after tax gain on the sale of American Pioneer Title Insurance Company ("APTIC").

RECONCILIATION OF EARNINGS PER SHARE ---------------------------------------------------------------------- (Dollars and shares, except per share amounts, in millions) Q1 2005 Q1 2004 ---------------------------------------------------------------------- Income from continuing operations after taxes $101.2 $85.6 Plus: Interest expense on contingently convertible debt, net of taxes 1.9 1.9 --------- --------- Net income from continuing operations after assumed conversion of contingently convertible debt $103.1 $87.5 ========= ========= Diluted weighted average shares after assumed conversion of contingently convertible debt 103.5 105.0 ========= ========= Per Share Data: Diluted net income from continuing operations per share: $1.00 $0.83 Income from discontinued operations after taxes - 0.04 Gain on sale of discontinued operations, net of taxes - 0.29 --------- --------- Diluted net income per share $1.00 $1.16 ========= ========= ----------------------------------------------------------------------

    First Quarter 2005 Highlights

--	Combined(1) insurance in force grew to $267.0 billion at March 31, 2005 from $244.0 billion at March 31, 2004;
--	Net income for the U.S. Mortgage Insurance Operations(2) segment grew by approximately 24 percent to $66.3 million in the first quarter of 2005, compared to $53.6 million in the first quarter of 2004;
--	The U.S. Mortgage Insurance Operations segment realized a 10 percent increase in earned premiums over the same period in 2004. Also, expense savings of approximately $1 million to $1.5 million were realized in the quarter attributable to the U.S. Mortgage Operations segment field restructuring undertaken in 2004. The Company continues to expect a pre-tax expense savings of $5 million to $6 million in 2005;
--	U.S. credit trends: Delinquent loan inventory was down 9 percent from December 31, 2004; the primary default rate declined to 4.53 percent at March 31, 2005, compared to 4.86 percent at December 31, 2004;
--	The International Operations(3) segment benefited from a continuation of favorable credit trends in Australia, the signing of our first mortgage insurance contract with an Italian bank and robust growth in written gross premiums in Hong Kong.
--	The Company's investment in FGIC Corporation ("FGIC") yielded equity in earnings of $18.1 million (after tax) in the first quarter of 2005 compared to $12.7 million (after tax) in the same period last year.

    Results for the Company include:

    Mark-to-market losses related to the foreign currency put options purchased to mitigate the effects of a strengthening in the U.S. Dollar spot rate at quarter end were $1.1 million in the first quarter of 2005. Net income was favorably impacted by $0.5 million for the quarter related to the translation gains from a change in the average foreign currency exchange rates compared to the same period a year ago.
    The diluted weighted average common shares outstanding for the quarter were 103.5 million compared to 105.0 million for the same period a year ago. In the first quarter of 2005, approximately 832,200 common shares were repurchased at a cost of $33.3 million. The Company has $66.7 million in remaining capacity under its $100 million common stock repurchase program authorized on February 17, 2005.
    Combined primary new insurance written for the quarter was $17.0 billion, compared to $18.1 billion for the same period a year ago. The decrease was due primarily to declines in new insurance written by our U.S. Mortgage Insurance Operations segment and by PMI Australia primarily attributable to slowdowns in mortgage originations in the U.S. and Australian markets. Combined insurance in force at March 31, 2005 was $267.0 billion, compared to $244.0 billion at March 31, 2004. The increase was due primarily to an increase in insurance in force for PMI Australia.
    Consolidated net premiums written for the quarter totaled $193.7 million, relatively unchanged from $193.4 million for the same period a year ago.
    Consolidated premiums earned for the quarter were $199.6 million, compared to $185.3 million for the same period a year ago. The increase for the quarter was primarily due to the recognition of premiums associated with loan cancellations under non-refundable single premium policies and the increase in premiums earned as a result of higher average premium rates for U.S. Mortgage Insurance Operations.
    Consolidated net investment income for the quarter totaled $43.8 million, compared to $40.0 million for the same period a year ago. The increase for the first quarter 2005 compared to the corresponding period in 2004, was due primarily to growth in our U.S. and Australian investment portfolios, partially offset by a decrease in the book yield of our U.S. investment portfolio.
    Consolidated losses and loss adjustment expenses for the quarter totaled $64.5 million compared to $59.8 million for the same period a year ago. The increase, when compared to the first quarter of 2004, was primarily due to higher claims paid for U.S. Mortgage Insurance Operations and is consistent with the Company's revised expectation for total incurred losses in 2005.
    Consolidated reserve for losses and loss adjustment expenses totaled $364.8 million at March 31, 2005, unchanged from $364.8 million at December 31, 2004.
    Amortization of deferred policy acquisition costs was $20.4 million in the first quarter of 2004, compared to $23.1 million for the same period a year ago. The decrease is due to the seasoning of the 2003 book year and increased efficiencies resulting from our field restructuring in 2004.
    Consolidated other underwriting and operating expenses for the quarter totaled $45.6 million, compared to $50.3 million for the same period a year ago. The decrease for the first quarter of 2005 when compared to the same period a year ago was due primarily to the higher expenses incurred in the first quarter of 2004 that related to 2003 employee compensation and field restructuring costs of approximately $1.2 million (pre-tax) in the U.S. Mortgage Insurance Operations segment.
    Consolidated income tax expense from continuing operations for the quarter totaled $33.5 million and was affected by an increase in the effective tax rate from 24.2% to 24.9% and the increase in pre-tax income from continuing operations. The increase in our effective tax rate for the first quarter of 2005 was primarily due to increases in our U.S. Mortgage Insurance Operations underwriting income which is taxed at 35.0%.

FIRST QUARTER 2005 SEGMENT HIGHLIGHTS

U.S. Mortgage (Dollars in Insurance International Financial millions) Operations Operations Guaranty(4) Other(5) Total ---------------------------------------------------------------------- Net premiums written $154.5 $39.2 $-- $0.0 $193.7 Premiums earned 164.1 35.4 -- 0.0 199.6(a) Equity in earnings 4.1 -- 20.8 0.3 25.2 Total revenues 194.2 49.4 20.8 10.4 274.8 Losses, expenses and interest expense 102.7 12.8 -- 24.6 140.1 Net income $66.3 $25.1 $18.9 ($9.2) $101.2(a)

(a) Does not total due to rounding ----------------------------------------------------------------------

    U.S. Mortgage Insurance Operations

    Net income for U.S. Mortgage Insurance Operations for the quarter totaled $66.3 million, compared to $53.6 million for the same period a year ago. The increase was due primarily to increases in premiums earned, decreases in underwriting and operating expenses and equity in earnings from unconsolidated strategic investments.
    Net premiums written for U.S. Mortgage Insurance Operations for the quarter totaled $154.5 million, compared to $153.1 million for the same period a year ago. The increase was due to an increase in average premium rates and, to a lesser extent, higher primary risk in force.
    Premiums earned for the quarter totaled $164.1 million, compared to $149.0 million for the same period a year ago. The increase was due primarily to the recognition of premiums associated with loan cancellations under non-refundable single premium policies, an increase in the average premium rate and, to a lesser extent, higher primary risk in force.
    Net investment income for the quarter totaled $25.6 million, compared to $24.5 million for the same period a year ago due to year-over-year increases in cash, cash equivalents and investments, partially offset by lower book yields as a result of higher liquidity levels.
    Equity in earnings from CMG Mortgage Insurance Company for the quarter totaled $4.1 million (pre-tax), compared to $3.3 million (pre-tax) for the same period a year ago. The increase was due primarily to the growth of insurance in force and premiums earned.
    Losses and loss adjustment expenses for the quarter totaled $63.1 million, compared to $59.0 million for the same period a year ago. The increase was due primarily to increases in the number of primary claims paid associated with the seasoning of the primary portfolio, partially offset by a decrease in the average primary claim size.
    Amortization of deferred policy acquisition costs for the quarter totaled $16.0 million, compared to $19.4 million for the same period a year ago. The decrease was due primarily to the continued amortization of expenses related to policies originated in 2003, expense savings realized from the 2004 field restructuring and the decline in new insurance written (NIW) compared to prior periods.
    Other underwriting and operating expenses for the quarter totaled $23.6 million, compared to $26.1 million for the same period a year ago. The decrease for the quarter was due primarily to expenses incurred in the first quarter of 2004 related to 2003 employee compensation, $1.2 million of field restructuring costs and, to a lesser extent, expense savings realized in the first quarter of 2005 as a result of the field restructuring.

DOMESTIC NEW INSURANCE WRITTEN

(Dollars in billions) Q1 2005 Q1 2004 ---------------------------------------------------------------------- Domestic(6) primary new insurance written $9.2 $9.8 Excluding CMG 8.2 8.8 Bulk new insurance written 1.9 0.3 Domestic pool new insurance written 1.3 3.9 ----------------------------------------------------------------------

    Domestic primary new insurance written for the quarter totaled $9.2 billion, compared to $9.8 billion for the same period a year ago. The decrease in the first quarter of 2005 compared to the corresponding period in 2004 was driven primarily by lower volumes in the residential mortgage origination and mortgage insurance markets, partially offset by increased bulk insurance writings.

PRIMARY INSURANCE AND RISK IN FORCE

(Dollars in billions) As of As of As of 3/31/05 12/31/04 3/31/04 ---------------------------------------------------------------------- Domestic primary insurance in force $118.2 $119.4 $117.0 Excluding CMG 104.0 105.3 104.3 Domestic primary risk in force 28.8 28.9 27.4 Excluding CMG 25.5 25.7 24.5 Domestic annual primary persistency rate 61.7% 61.8% 48.6% Excluding CMG 60.8% 60.9% 47.8% ----------------------------------------------------------------------

    Domestic primary insurance in force totaled $118.2 billion at March 31, 2005, compared to $117.0 billion a year ago. Domestic primary risk in force totaled $28.8 billion, compared to $27.4 billion at the end of the first quarter of 2004 and was driven primarily by a greater number of high LTV loans with deeper coverage and higher average loan balances. The domestic annual persistency rate increased to 61.7% as of March 31, 2005 from 48.6% as of March 31, 2004.
    Pool risk in force as of March 31, 2005 was $2.4 billion, compared to $2.6 billion at March 31, 2004.

DEFAULT RATES

As of As of As of 3/31/05 12/31/04 3/31/04 ---------------------------------------------------------------------- Domestic primary mortgage insurance 4.07% 4.37% 3.86% Excluding CMG 4.53% 4.86% 4.26% Excluding CMG and bulk transactions 4.04% 4.30% 3.71% Bulk transactions only 8.17% 9.19% 8.68% Pool insurance 5.65% 5.50% 4.39% ----------------------------------------------------------------------

    At March 31, 2005, the Company's U.S. primary insurance default rate, excluding CMG, was 4.53 percent compared to 4.86 percent at December 31, 2004. The decrease was primarily due to a decrease in primary loans in default from 39,054 at December 31, 2004 to 35,716 at March 31, 2005, partially offset by a decrease in primary policies in force from 803,236 at December 31, 2004 to 788,847 at March 31, 2005.
    At March 31, 2005, the Company's U.S. pool insurance default rate was 5.65 percent compared to 5.50 percent at December 31, 2004. The increase was due primarily to a 4 percent decrease in pool insurance policies in force.

CLAIMS PAID

(Dollars in millions) Q1 2005 Q4 2004 Q1 2004 ---------------------------------------------------------------------- Primary - flow $41.7 $36.9 $31.1 Primary - bulk 13.8 10.8 12.5 --------- -------- -------- Total primary 55.5 47.7 43.6 Total pool and other 4.7 4.4 3.9 --------- -------- -------- Total claims paid $60.2 $52.1 $47.5 =========================== ----------------------------------------------------------------------

    Primary claims paid for the quarter totaled $55.5 million, compared to $43.6 million in the first quarter of 2004. The increase in claims paid in the first quarter of 2005 was influenced by the seasoning of our primary insurance portfolio and higher claim rates associated with the portion of the portfolio that contain ARMs, high LTV, Alt-A and less-than-A quality loans. Performance in the first quarter of 2005 was consistent with the Company's revised expectation for total incurred losses in 2005.

    International Operations

    Net income from International Operations for the quarter totaled $25.1 million, compared to $27.0 million for the first quarter of 2004. The decrease in net income in the first quarter of 2005 was due primarily to decreases in PMI Europe's premiums earned and other income. The results of our International Operations are subject to fluctuations in the foreign currency exchange rate of the U.S. dollar, principally with the Australian dollar and the Euro. The change in average foreign currency exchange rates from the first quarter of 2005 to the corresponding period in 2004 favorably impacted net income from International Operation's by $0.5 million.
    In January 2005, PMI Australia and PMI Europe purchased Australian dollar and Euro put options, respectively, designed to partially mitigate the negative financial impact of a potential strengthening of the U.S. dollar relative to the Australian dollar and the Euro in 2005. For the quarter, International Operations recognized a charge of $1.1 million in other income due to the changes in fair value of the foreign currency put options.
    Net investment income for International Operations for the quarter totaled $13.8 million, compared to $11.8 million for the same period a year ago. The increase was due primarily to an increase in the investment portfolio of PMI Australia and an increase in the yield on our investments in the PMI Australia investment portfolio, partially offset by a reduction in foreign currency remeasurement gains for PMI Europe.
    Net income from PMI Australia for the quarter totaled $20.6 million, compared to $20.3 million for the same period a year ago. In local currency, net income from PMI Australia for the quarter totaled AU$26.5 million, unchanged from AU$26.5 million for the same period a year ago.
    Credit trends continued to remain favorable for PMI Australia. Losses and loss adjustment expenses for PMI Australia continued at low levels of claim payments and default rates. PMI Australia's default rate at March 31, 2005 was 0.13% compared to 0.16% at March 31, 2004. Claims paid totaled $0.3 million in the first quarter of 2005, compared to $0.2 million for the same period a year ago.
    Premiums earned for PMI Australia for the quarter totaled $29.4 million, compared to $28.9 million for the same period a year ago. In local currency terms, earned premiums in the first quarter of 2005 of AU$37.8 million were unchanged from AU$37.8 million in the first quarter of 2004. This comparison also reflects a change in the rate at which PMI Australia is recognizing unearned premiums into net income for the current book year. This change is driven primarily by the continued low loss levels experienced by PMI Australia over the last year. The refinement of the premiums earnings pattern methodology had the effect of deferring higher premiums earnings into future periods and reducing net income in the first quarter of 2005 by approximately $1 million. PMI Australia's unearned premiums at March 31, 2005 were AU$382.8 million compared to AU$330.5 million at March 31, 2004, an increase of 16 percent.
    Primary insurance in force for PMI Australia was $117.4 billion at March 31, 2005, compared to $93.2 billion at March 31, 2004. Primary risk in force for PMI Australia was $106.7 billion at March 31, 2005, compared to $84.5 billion at March 31, 2004.
    New insurance written for PMI Australia for the quarter totaled $7.7 billion, compared to $8.3 billion for the same period a year ago. The decrease in primary NIW generated by PMI Australia's flow channel in the first quarter of 2005 compared to the first quarter of 2004 was primarily due to a lower mortgage origination activity combined with increasingly competitive pricing. PMI Australia's primary new insurance written includes flow channel insurance as well as insurance written on residential mortgage-backed securities, or RMBS. RMBS transactions include insurance on seasoned portfolios comprising prime credit quality loans with loan-to-values principally below 80 percent. RMBS new insurance written for the quarter totaled $3.8 billion in the first quarter of 2005, compared to $3.0 billion for the same period a year ago.
    Net income for PMI Europe for the quarter totaled $3.0 million, compared to $4.7 million for the same period a year ago. The decrease was due primarily to a decrease in premiums earned and other income. In local currency, net income from PMI Europe for the quarter totaled EUR 2.3 million, compared to EUR 3.8 million for the same period a year ago.
    Net premiums written for PMI Europe for the quarter totaled $1.5 million, compared to $2.7 million for the same period a year ago. The decrease in net premiums written was due to the uneven nature of business activity in the European structured markets.
    Premiums earned for PMI Europe for the quarter totaled $4.4 million, compared to $5.4 million for the same period a year ago. The decrease for the quarter was due primarily to a decrease in premiums earned associated with the U.K. lenders' mortgage insurance portfolio acquired by PMI Europe in 2004. As this portfolio continues to season, we expect premiums earned and risk in force associated with this portfolio to decline.
    Net investment income for PMI Europe for the quarter totaled $2.5 million, compared to $2.7 million for the same period a year ago. Insurance in force (including credit default swaps) for PMI Europe was $31.4 billion at March 31, 2005, compared to $33.7 billion at March 31, 2004. Risk in force (including credit default swaps) for PMI Europe was $2.4 billion at March 31, 2005, compared to $3.3 billion at March 31, 2004.
    Other income for PMI Europe in the first quarter of 2005 included a $0.4 million gain related to a change in fair value for credit default swaps, which are accounted for as derivative instruments.
    PMI's Hong Kong reinsurance premiums written for the quarter totaled $5.3 million, compared to $1.8 million for the same period a year ago. The increase was due primarily to an increase in mortgage origination activity in Hong Kong and product expansion.

    Financial Guaranty

    Financial Guaranty, which includes equity in earnings from the Company's investments in FGIC and RAM Re, reported net income for the quarter of $18.9 million, compared to $13.5 million for the same period a year ago. Equity in earnings from FGIC totaled $19.6 million (pre-tax) in the first quarter of 2005, compared to $13.6 (pre-tax) million in the first quarter of 2004. The increase was due primarily to increases in refundings and premiums written combined with a reduction in loss reserves during the quarter, offset by higher underwriting expenses in the first quarter of 2005.
    Equity in earnings from RAM Re for the quarter totaled $1.2 million (pre-tax), compared to $1.3 million (pre-tax) for the same period a year ago. The Company reports equity in earnings from RAM Re on a one-quarter lag.

    Other

    The Other segment consists of revenues and expenses of the holding company, PMI Mortgage Services Co., SPS Holding Corp. (SPS), and for the first quarter of 2004, the gain on sale and the discontinued operations of APTIC.
    In January 2005, the Company signed a Summary of Terms granting Credit Suisse First Boston (USA) an option to buy 100 percent of the outstanding stock of our outstanding stock of SPS. As of March 31, 2005, our total investment in SPS was $123.1 million, consisting of $110.4 million carrying value of our equity investment held for sale and $12.7 million in related party receivables, which are current. As a result of reclassifying our investment in SPS as held for sale, effective January 1, 2005, we have recorded equity earnings of SPS in other income.
    Net loss for the quarter totaled $9.2 million compared to net income of $25.3 million for the same period a year ago. The increase in the net loss for the quarter was due primarily to the effect of the $30.1 million (after tax) gain from the sale of APTIC recorded in the first quarter of 2004.
    Equity in the earnings of SPS for the quarter totaled $0.9 million (pre-tax), compared to $0.3 million (pre-tax) for the same period a year ago. The increase for the first quarter of 2005 was primarily driven by a decrease in SPS's total expenses, which exceeded the decrease in gross revenues during the quarter.
    Other income totaled $5.6 million for the quarter, compared to $7.2 million for the same period a year ago. The decline was principally the result of a decline in contract underwriting volume and corresponding revenue at PMI Mortgage Services Co.
    Other underwriting and operating expenses for the quarter totaled $15.1 million, compared to $17.3 million for the same period a year ago. The level of expenses reflects lower contract underwriting expenses due to decreased underwriting activity, partially offset by higher holding company expenses including compensation and interest expense.

    (1) "Combined" includes results from U.S. Mortgage Insurance Operations, CMG Mortgage Insurance Company and its affiliates ("CMG"), PMI Australia and PMI Europe, primary insurance and credit default swap transactions.

    (2) "U.S. Mortgage Insurance Operations" includes the results of PMI Mortgage Insurance Co. and affiliated U.S. reinsurance companies and equity in earnings from CMG.

    (3) "International Operations" includes the results of PMI Australia, PMI Europe and the results of operations in Hong Kong.

    (4) "Financial Guaranty" includes the equity in earnings from FGIC and RAM Re.

    (5) "Other" includes other income and related operating expenses of PMI Mortgage Services Co.; investment income, interest expense and corporate overhead of The PMI Group, Inc.; the results of Commercial Loans Insurance Co. and WMAC Credit Insurance Corporation; equity in earnings from SPS and certain limited partnerships; and the results from discontinued operations of APTIC.

    (6) "Domestic" includes results from U.S. Mortgage Insurance Operations and CMG.

    ABOUT THE PMI GROUP, INC.

    The PMI Group, Inc. (NYSE:PMI) headquartered in Walnut Creek, California is an international provider of credit enhancement products that promotes homeownership and facilitates mortgage transactions in the capital markets. Through its wholly owned subsidiaries and unconsolidated strategic investments, the Company offers residential mortgage insurance and credit enhancement products domestically and internationally as well as financial guaranty insurance and reinsurance.
    The Company is an advocate of affordable housing and supports a number of organizations that foster greater access to affordable housing. The Company's approach to affordable housing lending is to develop products and services that assist responsible borrowers who may not qualify for mortgage loans under traditional underwriting practices.

    Cautionary Statement: Statements in this earnings release that are not historical facts, and that relate to future plans, events or performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include our expectations with respect to future expenses and incurred losses of U.S. Mortgage Insurance Operations and earned premiums of International Operations. Readers are cautioned that forward-looking statements by their nature involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Many factors could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. Risks and uncertainties that could affect the Company are discussed in our Form 10-K for the year ended December 31, 2004 and include changes in economic conditions such as interest rates, home values, employment rates and refinance activity. We undertake no obligation to update forward-looking statements.

THE PMI GROUP, INC. AND SUBSIDIARIES

FINANCIAL RESULTS AND STATISTICAL INFORMATION FOR THE PERIOD ENDED MARCH 31, 2005

---------------------------------------------------------------------- Contents ----------------------------------------------------------------------

Consolidated Statements of Operations and Balance Sheets

Business Segments Results of Operations -- Three Months Ended March 31, 2005 and 2004

Business Segments Balance Sheets

U.S. Mortgage Insurance Operations Analysis of Reserve for Losses and LAE and Statistical Information

U.S. Mortgage Insurance Operations and CMG Mortgage Insurance Company Statistical Information

PMI Australia and PMI Europe Statistical Information

Appendix A -- U.S. Mortgage Insurance Operations Supplemental Statistical Information

Appendix B -- PMI Australia and PMI Europe Quarterly Financial Information

Appendix C -- Business Segment Results of Operations by Quarter

Please refer to the following when noted:

(1) For the quarter ended March 31, 2005, the Company's equity earnings in unconsolidated subsidiaries include FGIC Corporation, CMG Mortgage Insurance Company ("CMG"), RAM Reinsurance Company, Ltd. ("RAM Re"), other limited partnership interests and the trust subsidiary that issued the Company's preferred securities. As of December 31, 2004, the equity investment in SPS Holding Corp. ("SPS") was reclassified from investments in unconsolidated subsidiaries to equity investment held for sale. Effective January 1, 2005, SPS's equity earnings are reported in other income.

(2) The operating results, assets and liabilities of American Pioneer Title Insurance Company ("APTIC") were reflected as discontinued operations in the fourth quarter of 2003 with prior period financial information reclassified accordingly. The Company completed its sale of APTIC in March 2004 and recorded a gain on sale of discontinued operations of $30.1 million, net of $17.1 million of income tax expense.

(3) In January 2005, PMI signed a letter of intent with Credit Suisse First Boston (USA), Inc. ("CSFB") pursuant to which CSFB has an option to acquire 100% of PMI's outstanding stock of SPS. In the fourth quarter of 2004, PMI recorded a write-down of its equity investment in SPS for $20.4 million (pre-tax). The write-down was recorded as a realized loss of discontinued operations of equity investment due to PMI's decision to sell SPS. According to Statement of Financial Accounting Standards No. 144, Accounting for the Impairment and Disposal of Long- Lived Assets, we are not permitted to present the disposal of equity method investments as discontinued operations.

(4) U.S. Mortgage Insurance Operations include the operating results of PMI Mortgage Insurance Co. and affiliated U.S. mortgage insurance and reinsurance Companies. CMG and its affiliates are included under the equity method of accounting in equity in earnings from unconsolidated subsidiaries.

(5) International Operations include PMI Australia, PMI Europe and PMI's Hong Kong results of operations.

(6) Financial Guaranty represents our equity investments in FGIC Corporation and RAM Re.

(7) The "Other" segment includes other income and related operating expenses of PMI Mortgage Services Co.; investment income, interest expense and corporate overhead of The PMI Group, Inc.; the results of Commercial Loans Insurance Co. and WMAC Credit Insurance Corporation; equity in earnings from SPS and certain limited partnerships; and the results from discontinued operations of APTIC.

(8) The expense ratio is the ratio, expressed as a percentage, of the sum of amortization of policy acquisition costs and other underwriting expenses to net premiums written. The loss ratio is the ratio, expressed as a percentage, of the sum of losses and loss adjustment expenses to premiums earned.

(9) Pool insurance includes modified pool, GSE pool, old pool and all other pool insurance products for U.S. Mortgage Insurance Operations.

(10) Statutory risk-to-capital ratio for PMI Mortgage Insurance Co.

Note: The interim financial and statistical information contained in this material are unaudited. Certain prior year information has been reclassified to conform to the current quarters' presentation.

THE PMI GROUP, INC. AND SUBSIDIARIES ---------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS ----------------------------------------------------------------------

Three Months Ended March 31, ------------------------ 2005 2004 ----------- ----------- (Unaudited) (Unaudited) (Dollars in thousands, except per share data)

Net premiums written $193,746 $193,404 =========== ===========

Revenues Premiums earned $199,567 $185,302 Net investment income 43,790 40,041 Equity in earnings from unconsolidated subsidiaries(1) 25,212 19,098 Net realized investment gains 721 1,275 Other income 5,535 8,851 ----------- ----------- Total revenues 274,825 254,567 ----------- -----------

Losses and expenses Losses and loss adjustment expenses 64,481 59,820 Amortization of policy acquisition costs 20,443 23,095 Other underwriting and operating expenses 45,645 50,320 Interest expense 9,553 8,515 ----------- ----------- Total losses and expenses 140,122 141,750 ----------- -----------

Income from continuing operations before income taxes 134,703 112,817 Income taxes from continuing operations 33,545 27,254 ----------- ----------- Income from continuing operations after income taxes 101,158 85,563 ----------- -----------

Income from discontinued operations before income taxes(2) - 5,756 Income taxes from discontinued operations(2) - 1,958 ----------- ----------- Income from discontinued operations after income taxes(2) - 3,798 ----------- -----------

Gain on sale of discontinued operations, net of income taxes of $17,131(2) - 30,108 ----------- -----------

Net income $101,158 $119,469 =========== ===========

Diluted weighted average common shares outstanding (shares in thousands) 103,462 105,041 =========== ===========

Diluted net income per share $1.00 $1.16 =========== ===========

---------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS ----------------------------------------------------------------------

March 31, Dec. 31, March 31, 2005 2004 2004 ----------- ----------- ----------- (Unaudited) (Unaudited) (Dollars in thousands, except per share data) Assets Cash and investments, at fair value $3,644,480 $3,621,550 $3,502,014 Investments in unconsolidated subsidiaries(1) 919,869 911,604 956,929 Equity investment held for sale(3) 110,373 109,519 - Related party receivables 13,764 18,439 27,664 Reinsurance receivables, reinsurance recoverables and prepaid premiums 43,915 49,657 56,258 Deferred policy acquisition costs 89,578 92,438 97,368 Other assets 339,691 342,760 341,417 ----------- ----------- ----------- Total assets $5,161,670 $5,145,967 $4,981,650 =========== =========== ===========

Liabilities Reserve for losses and loss adjustment expenses $364,782 $364,847 $356,987 Unearned premiums 474,761 484,815 480,576 Long-term debt 819,529 819,529 819,543 Other liabilities 330,427 339,021 390,299 ----------- ----------- ----------- Total liabilities 1,989,499 2,008,212 2,047,405

Shareholders' equity 3,172,171 3,137,755 2,934,245 ----------- ----------- -----------

Total liabilities and shareholders' equity $5,161,670 $5,145,967 $4,981,650 =========== =========== ===========

Basic shares issued and outstanding (shares in thousands) 93,492 94,025 95,567 =========== =========== ===========

Book value per share $33.93 $33.37 $30.70 =========== =========== ===========

THE PMI GROUP, INC. AND SUBSIDIARIES ---------------------------------------------------------------------- BUSINESS SEGMENTS RESULTS OF OPERATIONS ----------------------------------------------------------------------

U.S. Mortgage Interna- Insurance tional Financial Consoli- Operations Operations Guaranty Other dated (4) (5) (6) (7) Total -------------------------------------------------- Three Months Ended March 31, 2005 (Unaudited) -------------------------------------------------- (Dollars in thousands)

Net premiums written $154,538 $39,185 $- $23 $193,746 ========== =========== ======== ======== =========

Revenues Premiums earned $164,112 $35,435 $- $20 $199,567 Net investment income 25,579 13,756 - 4,455 43,790 Equity in earnings from unconsolidated subsidiaries(1) 4,074 - 20,846 292 25,212 Net realized investment gains (losses) 420 340 - (39) 721 Other income (loss) 4 (113) - 5,644 5,535 ---------- ----------- -------- -------- --------- Total revenues 194,189 49,418 20,846 10,372 274,825 ---------- ----------- -------- -------- ---------

Losses and expenses Losses and loss adjustment expenses 63,118 1,363 - - 64,481 Amortization of policy acquisition costs 16,026 4,417 - - 20,443 Other underwriting and operating expenses 23,553 7,006 - 15,086 45,645 Interest expense 1 - - 9,552 9,553 ---------- ----------- -------- -------- --------- Total losses and expenses 102,698 12,786 - 24,638 140,122 ---------- ----------- -------- -------- ---------

Income (loss) before income taxes 91,491 36,632 20,846 (14,266) 134,703 Income tax (benefit) 25,149 11,485 1,956 (5,045) 33,545 ---------- ----------- -------- -------- ---------

Net income (loss) $66,342 $25,147 $18,890 $(9,221) $101,158 ========== =========== ======== ======== =========

Expense ratio(8) 25.6% 29.1% Loss ratio(8) 38.5% 3.8% Combined ratio 64.1% 32.9%

Three Months Ended March 31, 2004 (Unaudited) -------------------------------------------------- (Dollars in thousands)

Net premiums written $153,064 $40,323 $- $17 $193,404 ========== =========== ======== ======== =========

Revenues Premiums earned $149,023 $36,259 $- $20 $185,302 Net investment income 24,458 11,807 - 3,776 40,041 Equity in earnings from unconsolidated subsidiaries(1) 3,328 - 14,928 842 19,098 Net realized investment gains (losses) 1,087 225 - (37) 1,275 Other income 81 1,602 - 7,168 8,851 ---------- ----------- -------- -------- --------- Total revenues 177,977 49,893 14,928 11,769 254,567 ---------- ----------- -------- -------- ---------

Losses and expenses Losses and loss adjustment expenses 58,956 864 - - 59,820 Amortization of policy acquisition costs 19,433 3,662 - - 23,095 Other underwriting and operating expenses 26,137 6,867 - 17,316 50,320 Interest expense 21 1 - 8,493 8,515 ---------- ----------- -------- -------- --------- Total losses and expenses 104,547 11,394 - 25,809 141,750 ---------- ----------- -------- -------- ---------

Income (loss) from continuing operations before income taxes 73,430 38,499 14,928 (14,040) 112,817 Income tax (benefit) from continuing operations 19,822 11,470 1,413 (5,451) 27,254 ---------- ----------- -------- -------- --------- Income (loss) from continuing operations after income taxes 53,608 27,029 13,515 (8,589) 85,563 ---------- ----------- -------- -------- ---------

Income from discontinued operations before taxes(2) - - - 5,756 5,756 Income taxes from discontinued operations(2) - - - 1,958 1,958 ---------- ----------- -------- -------- --------- Income from discontinued operations after income taxes(2) - - - 3,798 3,798 ---------- ----------- -------- -------- ---------

Gain on sale of discontinued operations, net of income taxes(2) - - - 30,108 30,108 ---------- ----------- -------- -------- ---------

Net income $53,608 $27,029 $13,515 $25,317 $119,469 ========== =========== ======== ======== =========

Expense ratio(8) 29.8% 26.1% Loss ratio(8) 39.6% 2.4% Combined ratio 69.4% 28.5%

THE PMI GROUP, INC. AND SUBSIDIARIES

---------------------------------------------------------------------- BUSINESS SEGMENTS BALANCE SHEETS ----------------------------------------------------------------------

U.S. Mortgage Interna- Insurance tional Financial Consol- Operations Operations Guaranty idated (4) (5) (6) Other (7) Total --------------------------------------------------------- March 31, 2005 --------------------------------------------------------- (Dollars in thousands) Assets Cash and investments, at fair value $2,212,968 $1,025,957 $- $405,555 $3,644,480 Investments in unconsol- idated subsid- iaries(1) 115,309 - 781,952 22,608 919,869 Equity investment held for sale(3) - - - 110,373 110,373 Related party receivables 966 - - 12,798 13,764 Reinsurance receivables, recoverables and prepaid premiums 23,044 20,871 - - 43,915 Deferred policy acquisition costs 50,999 38,579 - - 89,578 Other assets 199,813 27,334 - 112,544 339,691 ----------- ----------- --------- --------- ----------- Total assets $2,603,099 $1,112,741 $781,952 $663,878 $5,161,670 =========== =========== ========= ========= ===========

Liabilities Reserve for losses and loss adjustment expenses $338,477 $26,302 $- $3 $364,782 Unearned premiums 146,816 327,904 - 41 474,761 Long-term debt - - - 819,529 819,529 Other liabilities 247,917 63,408 14,187 4,915 330,427 ----------- ----------- --------- --------- ----------- Total liabilities 733,210 417,614 14,187 824,488 1,989,499

Shareholders' equity 1,869,889 695,127 767,765 (160,610) 3,172,171 ----------- ----------- --------- --------- ----------- Total liabil- ities and share- holders' equity $2,603,099 $1,112,741 $781,952 $663,878 $5,161,670 =========== =========== ========= ========= ===========

December 31, 2004 --------------------------------------------------------- (Dollars in thousands) Assets Cash and investments, at fair value $2,132,300 $1,030,751 $- $458,499 $3,621,550 Investments in unconsol- idated subsid- iaries(1) 112,456 - 774,880 24,268 911,604 Equity investment held for sale(3) - - - 109,519 109,519 Related party receivables 1,633 - - 16,806 18,439 Reinsurance receivables, recoverables and prepaid premiums 31,110 18,547 - - 49,657 Deferred policy acquisition costs 53,998 38,440 - - 92,438 Other assets 208,806 26,460 - 107,494 342,760 ----------- ----------- --------- --------- ----------- Total assets $2,540,303 $1,114,198 $774,880 $716,586 $5,145,967 =========== =========== ========= ========= ===========

Liabilities Reserve for losses and loss adjustment expenses $338,620 $26,224 $- $3 $364,847 Unearned premiums 152,685 332,091 - 39 484,815 Long-term debt - - - 819,529 819,529 Other liabilities 237,431 71,740 12,424 17,426 339,021 ----------- ----------- --------- --------- ----------- Total liabilities 728,736 430,055 12,424 836,997 2,008,212

Shareholders' equity 1,811,567 684,143 762,456 (120,411) 3,137,755 ----------- ----------- --------- --------- ----------- Total liabil- ities and share- holders' equity $2,540,303 $1,114,198 $774,880 $716,586 $5,145,967 =========== =========== ========= ========= ===========

March 31, 2004 --------------------------------------------------------- (Dollars in thousands) Assets Cash and investments, at fair value $2,172,964 $884,839 $- $444,211 $3,502,014 Investments in unconsol- idated subsid- iaries(1) 101,129 - 721,079 134,721 956,929 Related party receivables 1,227 - - 26,437 27,664 Reinsurance receivables, recoverables and prepaid premiums 39,364 16,894 - - 56,258 Deferred policy acquisition costs 63,657 33,711 - - 97,368 Other assets 206,596 23,516 - 111,305 341,417 ----------- ----------- --------- --------- ----------- Total assets $2,584,937 $958,960 $721,079 $716,674 $4,981,650 =========== =========== ========= ========= ===========

Liabilities Reserve for losses and loss adjustment expenses $334,252 $22,733 $- $2 $356,987 Unearned premiums 185,400 295,130 - 46 480,576 Long-term debt - - - 819,543 819,543 Other liabilities 199,390 57,989 7,498 125,422 390,299 ----------- ----------- --------- --------- ----------- Total liabilities 719,042 375,852 7,498 945,013 2,047,405

Shareholders' equity 1,865,895 583,108 713,581 (228,339) 2,934,245 ----------- ----------- --------- --------- ----------- Total liabil- ities and share- holders' equity $2,584,937 $958,960 $721,079 $716,674 $4,981,650 =========== =========== ========= ========= ===========

THE PMI GROUP, INC. AND SUBSIDIARIES

---------------------------------------------------------------------- U.S. MORTGAGE INSURANCE OPERATIONS(4) ANALYSIS OF RESERVE FOR LOSSES AND LAE ----------------------------------------------------------------------

March 31, 2005 December 31, 2004 March 31, 2004 ------------------ -------------------- -------------------- Reserve Reserve Reserve for for for Loans in Losses Loans in Losses Loans in Losses Default and LAE Default and LAE Default and LAE --------- -------- ---------- --------- ---------- --------- (Dollars in thousands)

Primary insurance 35,716 $303,792 39,054 $306,023 34,762 $301,615 Pool insurance 16,992 34,685 17,186 32,597 16,810 32,637 ------- --------- -------- --------- ----------- --------- Total 52,708 $338,477 56,240 $338,620 51,572 $334,252 ======= ========= ======== ========= =========== =========

Reconciliation of Reserve for Losses and LAE --------------------------------------------

March 31, Dec. 31, Reserve 2005 2004 Change --------- ----------- --------- (Dollars in thousands) Gross reserve for losses and LAE: Primary insurance $303,792 $306,023 $(2,231) Pool insurance 34,685 32,597 2,088 --------- ----------- --------- Total gross reserve for losses and LAE 338,477 338,620 (143)

Ceded reserve for losses: Primary insurance (2,158) (2,289) 131 Pool insurance (89) (117) 28 --------- ----------- --------- Total ceded reserve for losses (2,247) (2,406) 159 --------- ----------- ---------

Net reserve for losses and LAE $336,230 $336,214 $16 ========= =========== =========

---------------------------------------------------------------------- U.S. MORTGAGE INSURANCE OPERATIONS(4) STATISTICAL INFORMATION ----------------------------------------------------------------------

Three Months Ended March 31, ------------------- 2005 2004 --------- ---------

Flow insurance written (in millions) $6,303 $8,454 Bulk insurance written (in millions) 1,865 345 --------- --------- Primary new insurance written (in millions) $8,168 $8,799

Primary new risk written (in millions) $2,069 $2,207

Pool insurance written (in millions)(9) $1,306 $3,903

Pool risk written (in millions)(9) $41 $75

Product mix as a % of new insurance written: Above 97% LTV's 13% 10% 90.01% to 95% LTV's 24% 32% 85.01% to 90% LTV's 38% 40% 90.01% to 95% LTV's with greater than or equal to 30% coverage 20% 26% 85.01% to 90% LTV's with greater than or equal to 25% coverage 33% 32% ARMs 33% 15% Monthlies 98% 96% Refinances 37% 34% Bulk transactions 23% 4%

Premiums written (in thousands): Gross premiums written $201,129 $192,842 Ceded premiums, net of assumed premiums (43,287) (36,186) Refunded premiums (3,304) (3,592) --------- --------- Net premiums written 154,538 153,064 Change in unearned premiums 9,574 (4,041) --------- --------- Net premiums earned $164,112 $149,023 ========= =========

THE PMI GROUP, INC. AND SUBSIDIARIES

---------------------------------------------------------------------- U.S. MORTGAGE INSURANCE OPERATIONS(4) STATISTICAL INFORMATION ----------------------------------------------------------------------

March 31, Dec. 31, March 31, 2005 2004 2004 --------- --------- ----------

Primary insurance in force (in millions) $103,997 $105,321 $104,304

Primary risk in force (in millions) $25,507 $25,658 $24,545

Pool risk in force (in millions)(9) $2,417 $2,408 $2,565

Risk-to-capital ratio(10) 8.1 to 1 8.2 to 1 8.8 to 1

Insured primary loans 788,847 803,236 816,624

Persistency 60.8% 60.9% 47.8%

Primary loans in default 35,716 39,054 34,762

Primary default rate 4.53% 4.86% 4.26% Bulk transactions only default rate 8.17% 9.19% 8.68% Pool default rate 5.65% 5.50% 4.39%

Primary claims paid (year-to-date in thousands) $55,510 $193,178 $43,598

Number of primary claims paid (year-to- date) 2,413 8,335 1,840

Average primary claim size (year-to- date in thousands) $23.0 $23.2 $23.7

Percentage of flow NIW subject to captive reinsurance arrangements (year- to-date) 61.1% 63.3% 57.3%

Percentage of NIW subject to captive reinsurance arrangements (year-to-date) 47.1% 55.7% 55.0%

Percentage of IIF subject to captive reinsurance arrangements (year-to-date) 53.7% 53.7% 51.3%

Percentage of RIF subject to captive reinsurance arrangements (year-to-date) 53.6% 55.0% 53.3%

---------------------------------------------------------------------- CMG MORTGAGE INSURANCE COMPANY STATISTICAL INFORMATION ----------------------------------------------------------------------

March 31, Dec. 31, March 31, 2005 2004 2004 --------- --------- ----------

Primary new insurance written (year-to- date in millions) $1,071 $5,355 $1,021

Primary insurance in force (in millions) $14,213 $14,037 $12,735

Primary risk in force (in millions) $3,286 $3,219 $2,824

Insured primary loans 105,928 105,568 98,926

Persistency 69.1% 69.1% 55.8%

Primary loans in default 713 666 544

Primary default rate (year-to-date) 0.67% 0.63% 0.55%

Primary claims paid (year-to-date in thousands) $892 $5,111 $1,124

Number of primary claims paid (year-to- date) 41 244 44

Average primary claims size (year-to- date in thousands) $21.8 $20.9 $25.5

THE PMI GROUP, INC. AND SUBSIDIARIES

---------------------------------------------------------------------- PMI AUSTRALIA STATISTICAL INFORMATION ----------------------------------------------------------------------

March 31, Dec. 31, March 31, 2005 2004 2004 --------- --------- ---------

Net premiums written (year-to-date in thousands) $32,388 $151,164 $35,796

Premiums earned (year-to-date in thousands) $29,399 $109,071 $28,852

Flow insurance written (year-to-date in millions) $3,922 $19,540 $5,276 RMBS insurance written (year-to-date in millions) 3,816 14,669 2,987 --------- --------- --------- New insurance written (year-to-date in millions) $7,738 $34,209 $8,263 ========= ========= =========

Insurance in force (in millions) $117,439 $113,628 $93,232

Risk in force (in millions) $106,724 $103,135 $84,458

Policies in force 955,922 926,073 823,174

Loans in default 1,276 1,020 1,309

Default rate 0.13% 0.11% 0.16%

Claims paid (year-to-date in thousands) $305 $1,111 $189

Number of claims paid (year-to-date) 18 65 14

Average claim size (year-to-date in thousands) $16.9 $17.1 $13.5

---------------------------------------------------------------------- PMI EUROPE STATISTICAL INFORMATION ----------------------------------------------------------------------

March 31, Dec. 31, March 31, 2005 2004 2004 --------- --------- ---------

Net premiums written (year-to-date in thousands) $1,547 $9,568 $2,725

Premiums earned (year-to-date in thousands) $4,353 $20,944 $5,369

New credit default swap written (year- to-date in millions) $- $2,603 $2,068

Insurance in force (in millions) $31,365 $34,332 $33,699

Risk in force (in millions) $2,405 $2,747 $3,283

Claims paid (year-to-date in thousands) $825 $979 $489

Number of claims paid (year-to-date) 20 77 31

THE PMI GROUP, INC. AND SUBSIDIARIES

---------------------------------------------------------------------- APPENDIX A - U.S. MORTGAGE INSURANCE OPERATIONS(4) SUPPLEMENTAL STATISTICAL INFORMATION ----------------------------------------------------------------------

3/31/2005 12/31/2004 9/30/2004 6/30/2004 3/31/2004 ---------- ----------- ---------- ---------- ----------

Primary insurance in force (in millions) Flow $91,399 $93,263 $93,601 $92,968 $93,161 Bulk 12,598 12,058 11,181 11,238 11,143 ---------- ----------- ---------- ---------- ---------- Total $103,997 $105,321 $104,782 $104,206 $104,304 ========== =========== ========== ========== ==========

Primary risk in force (in millions) Flow $22,541 $22,885 $22,741 $22,342 $22,143 Bulk 2,966 2,773 2,518 2,460 2,402 ---------- ----------- ---------- ---------- ---------- Total $25,507 $25,658 $25,259 $24,802 $24,545 ========== =========== ========== ========== ==========

Primary policies in force 788,847 803,236 805,859 807,822 816,624

Primary risk in force - credit score distribution Flow 619-575 6.1% 6.2% 6.4% 6.6% 6.8% 574 or below 1.7% 1.8% 1.9% 2.0% 2.1%

Bulk 619-575 20.2% 21.1% 21.6% 21.0% 21.3% 574 or below 12.9% 13.0% 12.7% 12.2% 12.7%

Total 619-575 7.7% 7.8% 7.9% 8.0% 8.3% 574 or below 3.0% 3.0% 3.0% 3.0% 3.1%

Primary average loan size (in thousands) Flow $131.5 $131.3 $130.5 $129.3 $128.1 Bulk $134.1 $129.8 $127.1 $126.9 $124.9 Total $131.8 $131.1 $130.1 $129.0 $127.7

Loss severity - primary (quarterly) Flow 85.6% 84.9% 77.4% 83.0% 82.1% Bulk 90.9% 84.6% 78.8% 83.5% 82.1% Total 86.8% 84.8% 77.8% 83.1% 82.1%

Alt-A primary insurance in force (in millions)

With FICO scores of 660 and above $10,892 $10,250 $9,421 $8,590 $7,623 With FICO scores below 660 and above 619 2,136 2,029 1,836 1,648 1,330 ---------- ----------- ---------- ---------- ---------- Total Alt-A primary insurance in force $13,028 $12,279 $11,257 $10,238 $8,953 ========== =========== ========== ========== ==========

---------------------------------------------------------------------- NEW INSURANCE WRITTEN AND INSURANCE IN FORCE ANALYSIS ----------------------------------------------------------------------

3/31/2005 12/31/2004 9/30/2004 6/30/2004 3/31/2004 ---------- ----------- ---------- ---------- ----------

FICO greater than 700 and LTV greater than 80 (in millions)

Primary new insurance written (year-to- date) $3,049 $16,643 $12,788 $8,633 $3,826 Primary insurance in force $42,974 $43,801 $43,862 $43,640 $43,660

Total portfolio (in millions)

Primary new insurance written (year-to- date) $8,168 $41,213 $30,695 $20,205 $8,799 Primary insurance in force $103,997 $105,321 $104,782 $104,206 $104,304

FICO greater than 700 and LTV greater than 80 as a percentage of total portfolio

Primary new insurance written (year-to- date) 37.3% 40.4% 41.7% 42.7% 43.5% Primary insurance in force 41.3% 41.6% 41.9% 41.9% 41.9%

THE PMI GROUP, INC. AND SUBSIDIARIES

---------------------------------------------------------------------- APPENDIX B - PMI AUSTRALIA AND PMI EUROPE QUARTERLY FINANCIAL INFORMATION ----------------------------------------------------------------------

---------------------------------------------------------------------- PMI AUSTRALIA ----------------------------------------------------------------------

3/31/05 12/31/04 9/30/04 6/30/04 ----------- ----------- ----------- ----------- (Australian $ in thousands, unless otherwise noted)

Income Statement Components - Quarter Ended

Premiums earned $37,840 $35,819 $37,109 $37,308 Net investment income $14,705 $14,087 $13,098 $12,677 Change in fair value of put options $(1,338) $(228) $(1,890) $1,311 Total expenses $13,788 $13,624 $13,413 $12,799 Net income $26,487 $25,447 $24,725 $26,832

Net income (US$ in thousands) $20,584 $19,272 $17,554 $19,219

Balance Sheet Components

Assets

Cash and investments, at fair value $1,037,704 $1,027,236 $973,479 $924,330 Total assets $1,132,961 $1,116,874 $1,068,080 $1,013,102

Liabilities and Shareholders' Equity

Loss reserves $12,549 $12,547 $13,692 $13,556 Unearned premiums $382,781 $378,981 $364,120 $346,748 Shareholders' equity $689,927 $673,124 $642,585 $607,781

3/31/04 12/31/03 9/30/03 6/30/03 --------- --------- --------- --------- (Australian $ in thousands, unless otherwise noted)

Income Statement Components - Quarter Ended

Premiums earned $37,790 $36,766 $32,855 $30,811 Net investment income $12,139 $9,235 $12,309 $9,525 Change in fair value of put options $- $- $- $- Total expenses $12,030 $12,160 $(216) $9,282 Net income $26,518 $21,441 $31,993 $21,412

Net income (US$ in thousands) $20,265 $15,511 $21,073 $13,746

Balance Sheet Components

Assets

Cash and investments, at fair value $892,864 $853,920 $816,143 $777,701 Total assets $976,723 $935,904 $891,787 $853,196

Liabilities and Shareholders' Equity

Loss reserves $13,537 $13,536 $13,698 $25,450 Unearned premiums $330,477 $321,441 $297,042 $277,921 Shareholders' equity $586,842 $556,329 $539,141 $515,622

---------------------------------------------------------------------- PMI EUROPE ----------------------------------------------------------------------

3/31/05 12/31/04 9/30/04 6/30/04 ----------- ------------ ----------- ----------- (Euro EUR in thousands, unless otherwise noted)

Income Statement Components - Quarter Ended

Premiums earned EUR 3,321 EUR 4,140 EUR 4,233 EUR 4,172 Net investment income EUR 2,002 EUR 1,435 EUR 2,294 EUR 1,642 Change in fair value of put options EUR (33) EUR (6) EUR (96) EUR (18) Total expenses EUR 2,031 EUR 3,679 EUR 1,476 EUR 1,462 Net income EUR 2,326 EUR 2,703 EUR 3,942 EUR 3,535

Net income (US$ in thousands) $3,049 $3,489 $4,822 $4,260

Balance Sheet Components

Assets

Cash and investments, at fair value EUR 172,707 EUR 169,165 EUR 164,558 EUR 161,129 Total assets EUR 182,857 EUR 179,134 EUR 175,731 EUR 172,402

Liabilities and Shareholders' Equity

Loss reserves EUR 12,807 EUR 12,126 EUR 10,656 EUR 10,497 Unearned premiums EUR 24,719 EUR 26,859 EUR 29,363 EUR 31,748 Shareholders' equity EUR 125,395 EUR 121,494 EUR 117,142 EUR 111,691

3/31/04 12/31/03 9/30/03 6/30/03 ----------- ------------ ------------ ------------ (Euro EUR in thousands, unless otherwise noted)

Income Statement Components - Quarter Ended

Premiums earned EUR 4,295 EUR 7,765 EUR 1,283 EUR 1,867 Net investment income EUR 2,198 EUR 1,199 EUR 1,491 EUR 974 Change in fair value of put options EUR - EUR - EUR - EUR - Total expenses EUR 1,768 EUR 1,723 EUR 1,144 EUR 1,376 Net income EUR 3,781 EUR 5,955 EUR 1,299 EUR 1,329

Net income (US$ in thousands) $4,726 $7,089 $1,469 $1,533

Balance Sheet Components

Assets

Cash and investments, at fair value EUR 162,621 EUR 154,369 EUR 98,847 EUR 94,132 Total assets EUR 170,600 EUR 160,891 EUR 100,878 EUR 100,302

Liabilities and Shareholders' Equity

Loss reserves EUR 10,031 EUR 9,624 EUR 2,109 EUR 1,956 Unearned premiums EUR 33,903 EUR 36,029 EUR 183 EUR 566 Shareholders' equity EUR 109,386 EUR 100,524 EUR 95,289 EUR 95,115

THE PMI GROUP, INC. AND SUBSIDIARIES

---------------------------------------------------------------------- APPENDIX C - BUSINESS SEGMENT RESULTS OF OPERATIONS BY QUARTER ----------------------------------------------------------------------

2005 2004 --------- --------------------------------------- 1st 4th 3rd 2nd 1st Quarter Quarter Quarter Quarter Quarter --------- --------- --------- --------- ---------

(Dollars in thousands)

U.S. Mortgage Insurance Operations(4) ----------------------------------------------------------------------

Net premiums written $154,538 $153,916 $143,732 $147,407 $153,064 ========= ========= ========= ========= =========

Revenues Premiums earned $164,112 $168,313 $162,276 $154,392 $149,023 Net investment income 25,579 25,496 24,332 27,944 24,458 Equity in earnings from unconsolidated subsidiaries(1) 4,074 4,569 3,707 3,676 3,328 Net realized investment gains (losses) 420 (12) 1,672 (166) 1,087 Other income (expense) 4 15 (24) (25) 81 --------- --------- --------- --------- --------- Total revenues 194,189 198,381 191,963 185,821 177,977 --------- ------------------- --------- ---------

Losses and expenses Losses and loss adjustment expenses 63,118 58,355 60,092 55,755 58,956 Amortization of policy acquisition costs 16,026 16,585 18,003 18,109 19,433 Other underwriting and operating expenses 23,554 27,258 22,785 23,445 24,981 Field operations restructuring charge - - 315 1,443 1,156 Legal settlement refund - - (2,574) - - Interest expense 1 12 13 17 21 --------- --------- --------- --------- --------- Total losses and expenses 102,699 102,210 98,634 98,769 104,547 --------- --------- --------- --------- ---------

Income before income taxes 91,490 96,171 93,329 87,052 73,430 Income taxes 25,149 26,328 25,528 23,790 19,822 --------- --------- --------- --------- ---------

Net income $66,341 $69,843 $67,801 $63,262 $53,608 ========= ========= ========= ========= =========

International Operations(5) ----------------------------------------------------------------------

Net premiums written $39,185 $46,156 $43,238 $43,460 $40,323 ========= ========= ========= ========= =========

Revenues Premiums earned $35,435 $33,979 $32,829 $33,255 $36,259 Net investment income 13,756 12,789 11,848 10,646 11,807 Net realized investment gains (losses) 340 (263) 256 377 225 Other income (loss) (113) 3,044 296 2,399 1,602 --------- --------- --------- --------- --------- Total revenues 49,418 49,549 45,229 46,677 49,893 --------- --------- --------- --------- ---------

Losses and expenses Losses and loss adjustment expenses 1,363 1,737 746 777 864 Amortization of policy acquisition costs 4,417 3,065 3,225 3,135 3,662 Other underwriting and operating expenses 7,005 10,235 7,346 6,940 6,867 Interest expense - - 12 60 1 --------- --------- --------- --------- --------- Total losses and expenses 12,785 15,037 11,329 10,912 11,394 --------- --------- --------- --------- ---------

Income before income taxes 36,633 34,512 33,900 35,765 38,499 Income taxes 11,485 10,274 10,218 10,799 11,470 --------- --------- --------- --------- ---------

Net income $25,148 $24,238 $23,682 $24,966 $27,029 ========= ========= ========= ========= =========

Financial Guaranty(6) ----------------------------------------------------------------------

Equity in earnings from unconsolidated subsidiaries(1) $20,846 $16,156 $17,061 $19,699 $14,928 Income taxes 1,956 1,689 1,820 2,220 1,413 --------- --------- --------- --------- ---------

Net income $18,890 $14,467 $15,241 $17,479 $13,515 ========= ========= ========= ========= =========

Other(7) ----------------------------------------------------------------------

Net premiums written $23 $31 $9 $9 $17 ========= ========= ========= ========= =========

Revenues Premiums earned $20 $20 $18 $16 $20 Net investment income 4,455 4,706 5,775 5,032 3,776 Equity in earnings (losses) from unconsolidated subsidiaries(1) 292 (975) 353 210 842 Net realized investment losses (39) - (374) (143) (37) Realized loss from discontinued operations of equity investment(3) - (20,420) - - - Other income 5,644 5,345 6,146 7,424 7,168 --------- ---------- -------- --------- --------- Total revenues 10,372 (11,324) 11,918 12,539 11,769 --------- ---------- -------- --------- ---------

Losses and expenses Other underwriting and operating expenses 15,086 20,272 16,545 17,790 17,316 Interest expense 9,552 8,640 8,612 8,745 8,493 --------- --------- --------- --------- --------- Total losses and expenses 24,638 28,912 25,157 26,535 25,809 --------- --------- --------- --------- ---------

Loss from continuing operations before income tax benefit (14,266) (40,236) (13,239) (13,996) (14,040) Income tax benefit from continuing operations (5,045) (13,339) (9,158) (4,964) (5,451) --------- --------- --------- --------- --------- Loss from continuing operations after income tax benefit (9,221) (26,897) (4,081) (9,032) (8,589) --------- --------- --------- --------- ---------

Income from discontinued operations before income taxes(2) - - - - 5,756 Income taxes from discontinued operations(2) - - - - 1,958 --------- --------- --------- --------- --------- Income from discontinued operations after income taxes(2) - - - - 3,798 --------- --------- --------- --------- ---------

Gain on sale of discontinued operations, net of income taxes(2) - (1,105) - - 30,108 --------- --------- --------- --------- ---------

Net income (loss) $(9,221) $(28,002) $(4,081) $(9,032) $25,317 ========= ========= ========= ========= =========

--30--NL/sf*

CONTACT: The PMI Group, Inc. Bill Horning, 925-658-6193 (Investors) Beth Haiken, 925-658-6192 (Media)

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: REAL ESTATE BUILDING/CONSTRUCTION INSURANCE BANKING EARNINGS SOURCE: The PMI Group, Inc.

Copyright Business Wire 2005