A warning from PMI Group ( PMI) weighed on the entire mortgage-insurance sector Thursday.

The company said second-quarter and full-year 2003 earnings will be 71 cents to 78 cents a share, below analysts' consensus estimates of 96 cents a share. PMI also predicted its 2003 profit will fall short of Wall Street projections of $3.96 a share. In 2002, the insurer earned $3.87 per share.

PMI insures property loans for lenders and is hurt by both defaults and prepayments, the latter of which impairs what it calls the "persistency rate" of policies in effect. "PMI believes that the primary factors affecting quarterly and annual net income are higher than expected claims payments in its U.S. mortgage insurance portfolio, record low persistency rates in its U.S. mortgage insurance portfolio" and a reduced contribution from an unconsolidated unit called Fairbanks Capital.

The company said losses in its U.S. mortgage portfolio are currently around $210 million to $230 million, higher than its initial guidance of $195 million to $205 million.

Other mortgage insurers were suffering declines after the announcement, including MGIC Investment ( MTG), which was $1.67 lower, or 3.5%, at $46.39, and Radian Group ( RDN), down $1.45, or 3.8%, at $36.59.

Shares of PMI were losing $1.68, or 5.8%, at $27.37 in midday trading.

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