QBE Insurance Group will buy PMI Australia for a little less than net assets, the buyer and vendor announced yesterday. PMI had net assets of $1.03 billion at 30 June 2008, QBE said, and based on US accounting standards.QBE will pay PMI 80 per cent of the value in cash and pay the balance in three years (plus interest). This will be reduced slightly through PMI providing funding of US$46.5 million to buy additional reinsurance.The deferred payment will be reduced if the claims ratio on policies in force exceeds an agreed benchmark, while the two will share half of reinsurance profits over three years.The deal will be extended to cover the much smaller PMI Asia business that provides mortgage reinsurance in Hong Kong, though this aspect of the agreement is in principle at this stage and QBE and PMI did not mention a price for this asset.It isn't clear how long QBE have entertained a serious interest in buying PMI Australia, though the negotiations apparently proceeded quickly.American International Group is thought to have explored an offer for PMI Australia earlier this year though AIG, like PMI, has suffered its own share of problems courtesy of the repricing of risk in credit markets.PMI Australia began business in Australia 40 years ago as a joint venture between MGIC and AMP, with the latter taking full ownership 25 years ago and then selling out to PMI nine years ago.According to data published by QBE yesterday, PMI has a 40 per cent share of the market for residential mortgage insurance in Australia.This is a murky area. The published financial statements of PMI for the year to December 2007 show PMI generated premium revenue of $292 million in 2007. Genworth - PMI's primary rival - shows premium revenue of $548 million.And without reviewing the tiddlers of the mortgage insurance market it's not obvious PMI have a market share as high as 40 per cent.Data published in APRA's General Insurance Bulletin for the same period shows slightly different data for premium revenue for the two major mortgage insurers, but in similar proportions.In the year to December 2007 PMI Mortgage Insurance reported a modest decline in underwriting, down to $94 million from $102 million in 2006. Net profit fell even less, to $76 million from $79 million.PMI generated a nine per cent increase in premium revenue, to $292 million in 2007. Claims incurred increased to $83 million from $58 million.