(Dollars in thousands, except per share data)

Loss from continuing operations

Loss from discontinued operations, net of income taxes*

Net loss

Diluted loss from continuing operations per share

Diluted income from discontinued operations per share*

Diluted net loss per share

On a consolidated basis, the Company had available funds, consisting of cash and cash equivalents and investments of $3.2 billion and total shareholders’ equity of $577.4 million.

At the holding company level, The PMI Group, Inc. had available cash and cash equivalents and investments of $49.7 million.

MIC had available funds, consisting of cash and cash equivalents and investments, of $2.4 billion and total assets in captive trust accounts of approximately $931.4 million.

During the first quarter of 2010, U.S. Mortgage Insurance Operations restructured certain modified pool policies resulting in the acceleration of $163.7 million in payments to the counterparty and the elimination of the remaining risk in force associated with the underlying pool contracts of $212.9 million. Notwithstanding the elimination of the risk in force, the Company retained a contractual right to a future cash flow stream, with an estimated fair value of approximately $66 million.

The Company realized $7.4 million of investment gains primarily from the sale of municipal bonds and preferred equity securities.

Preliminarily, the Company estimates that, MIC’s policyholders’ position will be below the minimum policyholders’ position required by capital adequacy requirements by approximately $57.4 million and MIC’s risk to capital will be approximately 26.6 to 1, each as of March 31, 2010. As of December 31, 2009, MIC’s policyholders’ position exceeded the minimum policyholders’ position by $63.9 million and MIC’s risk to capital ratio was 22.1 to 1.

In the event that MIC is unable to write new mortgage insurance in a limited number of states, the Company plans to write new mortgage insurance in those states through its subsidiary, PMI Mortgage Assurance Co. (“PMAC”). As announced during the first quarter, PMAC has been approved as a limited, direct insurer by Freddie Mac and Fannie Mae.

Potential significant future losses as a result of a variety of factors that are outside our control and difficult to predict. Increased losses could cause MIC to be out of compliance or more substantially out of compliance with applicable regulatory requirements and could require MIC to cease writing new business. Among other factors affecting future losses and that could cause losses to increase more rapidly or to higher levels than expected are the following:

Future economic conditions, including unemployment rates, interest rates and home prices.

The level of new delinquencies, the cure and claim rates of delinquencies (including the level of future modifications of delinquent loans) and the claim severity within MIC’s mortgage insurance portfolio.

The level of future rescissions and claim denials and future reversals of rescissions and claim denials;

The timing of future claims paid; and

Future levels of new insurance written (and the profitability of such business), which will impact future premiums written and earned and future losses.

The risk that we may be required to cease writing new business in some or all states due to our financial condition and/or our inability to maintain minimum regulatory risk-to-capital and policyholders’ surplus requirements;

In sixteen states, so long as a mortgage insurer does not meet a required minimum policyholders’ position or exceeds a maximum permitted risk-to-capital ratio (generally 25 to 1), it may be prohibited from writing new business. In other states, including Arizona, MIC’s state of domicile, the applicable regulator has discretion as to whether the mortgage insurer may continue to write new business. The Arizona Department of Insurance has issued to MIC a letter that waives, until December 31, 2011, the requirement that MIC maintain the required minimum policyholders’ position in order to write new business. The waiver requires periodic reporting to the Department and the Department’s approval of annual operating plans. The Department may modify or terminate the waiver at any time. If we are not successful in raising significant additional capital or obtaining significant capital relief, we believe that there is a risk that the Department may withdraw the waiver. If the Department terminated the waiver and MIC failed to maintain the minimum policyholders’ position, MIC would likely be required to suspend writing new business in all states. In addition, the Department of Insurance of the State of Illinois and the Department of Insurance of the State of Missouri have each granted MIC temporary waivers from their respective minimum policyholders’ position or risk to capital ratio requirements, which are subject to conditions and may be withdrawn at any time at the sole discretion of the relevant regulator.

Even with the waivers described above, other states could require MIC to cease new business writings if we fail to comply with the applicable capital adequacy requirements. We believe that there are five state insurance departments that at present will not, or cannot, exercise discretion to permit MIC to write new business if it does not comply with applicable capital requirements. We have submitted waiver requests, which we believe are currently under review, to insurance departments in a number of other states. It is not clear what actions the insurance regulators in states that do not have capital adequacy requirements would take if MIC were to fail to meet capital adequacy requirements established by one or more other states.

We have discussed with certain state insurance regulators their financially hazardous condition regulations applicable to licensed insurance companies and those states’ interpretive positions that we are, or could be, in violation of their respective regulations. None of these states has taken any action against MIC to date. If any of those states or other states having similar regulations were to conclude that MIC was in financially hazardous condition, MIC may be required to cease writing new business in that state.

In the event that we are unable to write new mortgage insurance in a limited number of states for the reasons discussed above, we are implementing a plan to enable us to write new mortgage insurance in those states out of an existing subsidiary, PMI Mortgage Assurance Co. There can be no assurance that we will be able to effectuate this plan.

Under the terms of our runoff support agreement with Allstate Insurance Company, MIC is subject to restrictions that apply if its risk-to-capital ratio exceeds 23:1. Any failure to meet the capital requirements set forth in the runoff support agreement could, if pursued by Allstate, have a material adverse impact on our financial condition;

Our expectation that, as a result of continued losses, we will need to raise significant additional capital and the risk that we will be unable to raise additional capital in a timely manner on acceptable terms or at all, and the risk that any additional capital that we raise will be insufficient to address the Company’s liquidity needs and MIC’s capital requirements.

Our expectation that, because our loss reserves are not intended to be an estimate of total future losses, our ultimate actual losses will be higher than, and could substantially exceed, our loss reserve estimates;

The risk that our underwriting policies may not anticipate all risks and/or the magnitude of potential loss;

The limitations we have placed on new business writings and certain mortgage and private mortgage insurance market conditions, which have negatively impacted the private mortgage insurance industry;

The potential litigation risk associated with our increased rescission activity and, in the event that we are unsuccessful in defending our rescission decisions, the need to establish loss reserves for, and reassume risk on, delinquent rescinded loans;

The risk that we overestimate the number of loans that ultimately cure as a result of loan modifications, which management factors in when establishing loss reserve estimates, and which could result in loss reserves that are insufficient to cover our losses on existing delinquent loans;

The aging of our mortgage insurance portfolio and changes in severity or frequency of losses associated with our mortgage insurance policies;

The performance of our insured portfolio of higher risk loans, such as Alternative-A (“Alt-A”) and less than-A quality loans, and adjustable rate and interest-only loans, which have resulted in increased losses in prior periods and are expected to result in further losses;

The risk that Fannie Mae and/or Freddie Mac (collectively, the “GSEs”) determine that we are no longer an eligible provider of mortgage insurance;

The risk that we are not able to continue to comply with the terms of our credit facility and an event of default occurs;

The risk that the value of the contingent note we received in connection with the sale of PMI Australia is reduced and, therefore, reduces or eliminates the commitments of the lenders under our credit facility and requires us to repay amounts borrowed under the credit facility;

Further downgrades or other ratings actions with respect to our credit ratings or insurer financial strength ratings assigned by the major rating agencies;

Heightened competition from the Federal Housing Administration and the Veterans’ Administration or other private mortgage insurers;

Potential changes in the charters or business practices of the GSEs, the largest purchasers of mortgages;

The potential future impairment of the value of certain securities held in our investment portfolios as a result of the significant volatility in the capital markets;

Volatility in our earnings caused by changes in the fair value of our derivative contracts and our need to reevaluate the premium deficiencies in our mortgage insurance business on a quarterly basis; and

Heightened regulatory and litigation risks faced by the financial services industry, the mortgage insurance industry and the Company and MIC;

Potential additional losses in our European operations as a result of deteriorating economic conditions and the potential that we must make additional capital contributions to those operations, and/or CMG Mortgage Insurance Company, pursuant to capital support agreements.

(Dollars and shares in thousands,

except per share data)

Net premiums written

Revenues

Premiums earned

Net gain from credit default swaps

Net investment income

Net realized investment gains (losses)

Change in fair value of certain debt instruments

Other income

Total revenues

Losses and expenses

Losses and loss adjustment expenses

Amortization of deferred policy acquisition costs

Other underwriting and operating expenses

Interest expense

Total losses and expenses

Loss before equity in losses from unconsolidated subsidiaries and income taxes

Equity in losses from unconsolidated subsidiaries

Loss from continuing operations before income taxes

Income tax benefit from continuing operations

Loss from continuing operations

Loss from discontinued operations, net of taxes

Net loss

Diluted loss from continuing operations per share

Diluted income from discontinued operations per share

Diluted net loss per share

(Dollars and shares in thousands,

except per share data)

Assets

Investments

Cash and cash equivalents

Investments in unconsolidated subsidiaries

Reinsurance recoverables

Deferred policy acquisition costs

Property, equipment and software, net of accumulated depreciation and amortization

Other assets

Total assets

Liabilities

Reserve for losses and loss adjustment expenses

Unearned premiums

Debt

Other liabilities

Total liabilities

Shareholders’ equity

Total liabilities and shareholders’ equity

Basic shares issued and outstanding

Book value per share