CORRECTED - CORRECTED-(Aug 7) UPDATE 3-PMI Group Q2 disappoints

(In the Aug. 7 story, corrects paragraph two to remove reference to financial covenant)

* Q2 loss wider than expected

* Seeks to raise capital

* Q2 rev falls 22 pct

* Says liquidity enough to meet obligations through 2011

* Shares tumble as much as 30 percent (Recasts, adds conference call details, updates share price)

BANGALORE, Aug 7 (Reuters) - PMI Group Inc (PMI.N) posted a wider-than-expected quarterly loss on increased defaults at its U.S. mortgage operations, and said continues to look at ways to raise capital.

In a post earnings call, PMI executives said the company's risk-to-capital ratio may come under pressure as early as the third quarter if it fails to record a capital benefit or get regulatory relief.

PMI shares, which had recovered some of their losses after a 30 percent drop in early trade, fell another 5 percent following comments from the company's conference call.

The company expects termination of certain modified policies to result in a third quarter statutory capital benefit of about $46 million.

Earlier this year, the mortgage insurer said it would seek alternatives to enhance its liquidity, and that capital would need to come from the U.S. government or from internal restructuring. [ID:nBNG40313]

The company said it has sufficient liquidity to meet all payment obligations through end of 2011.

PMI also remains optimistic regarding the impact of the Obama administration's program to reduce defaults and let homeowners keep their homes and said it does not expect to see any meaningful increase in cures from this program until the fourth quarter.

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.

8TH STRAIGHT QUARTERLY LOSS

"Our second quarter results were primarily driven by lower levels of premium earnings in addition to our loss reserves," Chief Financial Officer Donald Lofe said on a conference call with analysts.

Reserves for losses and loss adjustment expenses (LAE) in the U.S. Mortgage insurance operations rose in the second quarter by $330.7 million to $3.2 billion.

The increase was primarily due to higher default inventories, higher average claim rates and claim sizes in the operations' modified pool insurance portfolio, the company said.

Net loss for the second quarter was $222.6 million, or $2.71 a share, compared with loss of $246.3 million, or $3.03 a share, a year ago.

According to Reuters Estimates, the company posted a loss of $2.40 per share, excluding a $25.4 million charge tied to an increase in fair value of certain senior debt instruments, compared with analysts' average expectation of a loss of $1.30 per share.

Consolidated net operating loss from continuing operations in the second quarter were $216 million or $2.63 per share, a company executive said on the call.

Total revenue fell 22 percent to $202.2 million.

Net premiums earned for the second quarter totaled $181.6 million, down 12 percent from the year-ago quarter.

PMI is on track to achieve its full year new insurance written target of about $10 billion, the company said on the call.

Shares of the Walnut Creek, California-based company, were trading down 21 percent at $2.78 in afternoon trade. (Reporting by Brenton Cordeiro, Sweta Singh in Bangalore; Editing by Ratul Ray Chaudhuri, Dinesh Nair)