UPDATE 3-PMI Group Q1 loss narrows, still looking for capital

* Q1 net loss cont ops $1.41/shr vs yr-ago loss $3.77/shr

* Q1 revenue up 6 pct to $245.1 mln

* Shares rise as much as 53 pct (Recasts; adds details from conference call, background, updates share movement)

May 11 (Reuters) - Mortgage insurer PMI Group Inc PMI.N reported a narrower first-quarter loss, helped mainly by a higher net gain from credit default swaps and lower expenses, and said it was still seeking ways to raise capital.

In a conference call with analysts, the company said it continues to seek alternatives to enhance its liquidity, and that capital would need to come from the U.S. government or from internal restructuring.

"At the current time, third party capital, if available, would most likely come from the U.S. treasury under their financial stability plan or under various other government programs," a company executive said.

U.S. officials are currently conducting a review of the mortgage insurance industry to determine the present health and future viability of the specialty finance firms battered by the housing downturn.

Mortgage insurers like PMI and rivals Radian Group Inc (RDN.N) and MGIC Investment Corp (MTG.N) have suffered huge losses from backing subprime bonds and mortgages that saw a surge in defaults as U.S. credit and housing markets worsened.

Radian and MGIC have also been looking at options to raise capital. However, Radian said last week that it had sufficient capital to write new business throughout 2009.

Q1 NARROWS

PMI reported a net loss of $115.3 million, or $1.41 per share, from continuing operations, compared with a loss of $305.9 million, or $3.77 per share, a year ago.

Revenue rose about 6 percent to $245.1 million, boosted by an almost 10-fold jump in net gain from credit default swaps to $7.8 million.

Losses and loss adjustment expenses fell 31 percent to $382.9 million.

Net premiums earned for the quarter was $188.1 million, compared with $211 million a year ago.

PMI shares, which jumped more than 53 percent in the morning session, were trading up 60 cents at $2.46 Monday afternoon on the New York Stock Exchange.

For alerts, please double-click [ID:nWNAB7098] (Reporting by Santosh Nadgir and Amiteshwar Singh in Bangalore; Editing by Vinu Pilakkott, Anne Pallivathuckal)