Mortgage insurer PMI Group Inc. filed for Chapter 11 bankruptcy protection Wednesday, following the seizure last month of its main operating unit by Arizona insurance regulators.
PMI's filing came one day after Richard Gama, an Arizona Superior Court judge in Phoenix, rejected its request to overturn the seizure by the Arizona Department of Insurance.
That department took control of PMI's main unit, PMI Mortgage Insurance Co., on Oct. 20, and directed that it pay claims at just 50 cents on the dollar.
The seizure came two months after Arizona told PMI to stop writing new policies because the company did not have enough capital.
A call to the office of Christina Urias, Arizona's director of insurance, was not immediately returned. None of PMI's units is part of the Chapter 11 filing with the U.S. bankruptcy court in Wilmington, Delaware.
PMI's bankruptcy reflects broad deterioration among mortgage insurers, many of which suffered big losses as the nation's housing downturn and weakened economy left the industry facing large claims on unpaid home loans.
In its bankruptcy petition, PMI said it had more than $225 million of assets and $736 million of debts as of Aug. 4.
"Continued high unemployment in the United States and the slow economic recovery (as compared to previous recoveries) in U.S. residential mortgage and housing markets are reflected in PMI's recent elevated loss ratios," PMI Chief Executive L. Stephen Smith said in a court filing.
Smith said bankruptcy is needed to maximize what creditors of the Walnut Creek, California-based company might recover.
PMI lost $412.1 million from continuing operations between January and June, a regulatory filing shows. It said it could not prepare its third-quarter financial report after Arizona locked employees out of their offices following the seizure.
Earlier this month, rival Triad Guaranty Inc said it was also unlikely to meet its financial obligations.
PMI said its debts include $685 million of senior unsecured notes and $51.5 million of junior subordinated unsecured notes, all of which are now due and payable. It said the bankruptcy filing blocks noteholders from enforcing their remedies.
Shares of PMI last traded at 31 cents on Oct. 21, Reuters data shows.
The case is In re: PMI Group Inc., U.S. Bankruptcy Court, District of Delaware, No. 11-13730.
© 2013 Thomson/Reuters. All rights reserved.