Refinancing Shortens Life of MI Policies, but Adds New Business as Well.(PMI Group Inc)

The chief financial officer of The PMI Group Inc., San Francisco, said refinancing has shortened the life span of the company's policies but also generated new opportunities to sell insurance.

John Lorenzen Jr. spoke at an insurance industry conference sponsored by the New York Society of Securities Analysts here.

PMI is divided into two business segments: its core U.S. mortgage guaranty business and its strategic investments. The second segment includes lender services such as title insurance and mortgage servicing (Fairbanks Capital), the financial guaranty business and its international mortgage guaranty business.

Mr. Lorenzen pointed out that PMI's rate of growth in insurance in force in the U.S. is faster than its two main publicly-traded rivals, Mortgage Guaranty Insurance Corp., Milwaukee, and Radian Group, Philadelphia.

The average policy life for PMI's overall book of business is six years. For loans that refinance during the current boom cycle, the life on that book of business is seven years. But for 2000, a year where interest rates were high, that book of business is expected to have an average life of less than six years, he said.

Speaking about the industry in general, Mr. Lorenzen noted that historically only 6% to 7% of the refinance market would get mortgage insurance on their new loan. In 2001, the industry got 13% to 14% of refis, which he called "highly unusual."

During the past year, Mr. Lorenzen, said PMI has noticed a "phenomena" regarding its costs. In 2001, approximately 60% of its loans came to the company in "an electronic environment." This allowed PMI to see efficiencies, with the result being its cost per application in 2001 was 30% lower than it was in 2000.