UPDATE 4-PMI Group posts wider Q4 loss, signals better 2010

* Q4 loss/shr $2.76 vs $2.22 yr-ago

* Says delinquencies peaked for book yrs 2005-2007

* Sees lower primary loan default in 2010

* PMI, MGIC get capital waivers

* PMI recovers a bit after falling 9 pct (Recasts; adds conference call comments, analyst comments; updates stock activity)

By Anurag Kotoky

BANGALORE, Feb 16 (Reuters) - PMI Group Inc PMI.N reported another quarterly loss as its U.S. unit continued to post disappointing results, but said delinquencies have peaked for the past few years, signalling that the ailing mortgage insurance industry could well be on the road to recovery.

Liquidity at the holding company is likely to be sufficient to meet payment obligations through the end of 2012, while the number of primary loan defaults is also likely to be lower in 2010, a company official said on a conference call with analysts.

Shares of the company, which fell as much as 9 percent earlier in the day, recovered a portion of their losses to trade down 13 cents at $2.28 Tuesday afternoon on the New York Stock Exchange.

Macquarie Securities analyst Matthew Howlett told Reuters delinquencies at the company looked to be either at or near their peak.

"It is still an uphill battle, but I think with a little bit of help from Home Affordable Modification Program, PMI could be uniquely positioned to see profits this year," Howlett added.

PMI's principal operating subsidiary said on Monday that Fannie Mae FNM.N has approved it as a direct issuer of mortgage guaranty insurance. The unit also obtained a waiver to continue writing new mortgage insurance business, even if it falls below the capital requirements of the Arizona state regulator.

PMI also said it is currently in discussions with Freddie Mac FRE.N regarding approval of PMI Mortgage Assurance Co (PMAC) to transact new mortgage insurance business. PMAC is a subsidiary of PMI Mortgage Insurance Co, PMI's main mortgage insurance company.

The company posted a loss of $228.2 million, or $2.76 a share from continuing operations for the latest fourth quarter, compared with a loss of $181.0 million, or $2.22 a share, a year back.

Analysts on average were looking for a loss of $1.67 a share, according to Thomson Reuters I/B/E/S.

PMI's U.S. mortgage insurance operations posted a net loss of $242 million. This is up sharply from a loss of $174.1 million the unit posted in the same period last year.

GOOD NEWS AT MGIC TOO

Separately, MGIC Investment Corp (MTG.N), the No.1 U.S. mortgage insurer, said Freddie Mac notified the company that it may utilize MGIC Indemnity Corp (MIC) to write new business in states in which the parent company does not meet minimum regulatory capital requirements.

Many mortgage insurers have pumped money into new units lately, as regulators tend to grant conditional approval for a capitalized unit to write new business, even if the parent company fails to meet regulatory capital standards.

Mortgage insurance is bought by homebuyers securing loans with down payments of less than 20 percent to repay the lender if there is a default.

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

MGIC posted its tenth straight quarterly loss last month as a rising number of homeowners failed to pay their mortgages. However, Genworth Financial Inc (GNW.N), which also runs a big mortgage insurance business, posted a better-than-expected profit. (Reporting by Anurag Kotoky in Bangalore; Editing by Aradhana Aravindan, Jarshad Kakkrakandy and Anil D'Silva)