A Rebound United Guaranty: The Mortgage Insurance Subsidiary of AIG Has Been Breaking New Ground and Grabbing Market Share with a New Approach to Pricing Its Coverage

By England, Robert Stowe | Mortgage Banking, December 2012 | Go to article overview

A Rebound United Guaranty: The Mortgage Insurance Subsidiary of AIG Has Been Breaking New Ground and Grabbing Market Share with a New Approach to Pricing Its Coverage


England, Robert Stowe, Mortgage Banking


"What doesn't kill you makes you stronger" is an old saying revived by American pop singer Kelly Clarkson, who had a No. I hit by that name last year. It could well be the anthem for United Guaranty Corporation, a Greensboro, North Carolina--based mortgage insurance subsidiary of the insurance giant American International Group (AIG), New York. Like others in the mortgage insurance industry, United Guaranty has faced considerable headwinds since 2008. In spite of strong new books of business since 2009, the private mortgage insurance (MI) industry continues to be ravaged by claims from loans insured during the subprime lending era, with the agony being prolonged by a slow and uninspiring economic recovery. Private MIs mostly insure mortgages purchased by Fannie Mae and Freddie Mac that have less than a 20 percent down payment. Yet, since 2009, United Guaranty has surged in market share in a shrinking overall market for private MI with a new risk-pricing model for its insurance premiums and an emphasis on full-file or front-end underwriting of insured loans. The company, which ranked fifth three years ago, has moved up to become the second-largest underwriter of new private MI business after No. 1-ranked Radian Guaranty Inc., Philadelphia. The other top writers of new business during the second quarter of 2012 are third-ranked Mortgage Guaranty Insurance Corporation (MGIC), Milwaukee; and fourth-place Genworth Mortgage Insurance Co., Raleigh, North Carolina. These four companies combined wrote $34.75 billion or 87 percent of the $40.14 billion in new business written in the second quarter, according to Standard & Poor's (S&P), New York.

[ILLUSTRATION OMITTED]

One reason for United Guaranty's success is its financial strength. United Guaranty Residential Insurance Co., a subsidiary of United Guaranty, is one of only two private MIs with an investment-grade rating. It has a BBB rating with a stable outlook from S&P and a Baal rating with a stable outlook from Moody's Investors Service, New York. (The only other MI rated investment-grade is San Francisco-based CMG Mortgage Insurance Co., which Moody's rated BBB-minus with a negative outlook. CMG provides private mortgage insurance to credit unions.)

Origins of the rebound

United Guaranty traces its rebound to a period of soul-searching following the financial crisis that broke out in September 2008.

In March 2009, United Guaranty parent company AIG brought in a new chief executive officer for United Guaranty, Eric Martinez, and a new chief operating officer, Kim Garland, who is now president and chief executive officer.

(In February 2012, Martinez transferred to Chartis, AIG's property and casualty group, where he serves as executive vice president ot global claims, operations and systems. In May 2012, United Guaranty hired Donna DeMaio, formerly the head of MetLife Bank NA, as chief operating officer.)

Martinez, Garland and other senior executives began an internal review at United Guaranty aimed a deciding whether or not to stay in the business. The review stretched from March through December 2009.

During the review, Garland asked his senior managers if they could design from a blank sheet of paper a new mortgage insurance company "based on the crisis and everything we had experienced and everything we have learned," what kind of company would it be?

To answer that question, senior management tried to analyze what led to failures in underwriting and the pricing of risk.

"When we went back and tried to understand what happened, we looked in the mirror and said, 'We didn't necessarily act like an insurance company. We probably acted more like a mortgage finance company than an insurance company," says Garland.

As the review proceeded, Garland explains, senior managers came to the conclusion that to be a successful mortgage insurance company that could survive all parts of the business cycle, including severe downturns, United Guaranty should be governed by a set of four principles. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

A Rebound United Guaranty: The Mortgage Insurance Subsidiary of AIG Has Been Breaking New Ground and Grabbing Market Share with a New Approach to Pricing Its Coverage
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.