United Guaranty Corp., the mortgage insurance subsidiary of American International Group, posted operating income of $154 million for the fourth quarter, compared to a $241 million loss in the year ago period.
The company said the profit was due to continued improvement in market conditions, lower levels of new delinquencies, a decline in claims and claim adjustment expenses, and commutations of certain blocks of business.
In a statement, UGC attributed the improvement to the adoption of pricing and risk management tools, in a program it calls 'Performance Premium.'
In the Feb. 7 issue of National Mortgage News, UGC chief operating officer Kim Garland said the concept comes from the personal lines-auto insurance business, where companies are fanatical about trying to get the right price for each individual risk. This was lacking in the firm's MI unit, Garland said. Using a number of criteria, including location, UGC now seeks to price each risk properly, he said.
For the quarter, all of AIG earned $11 billion – but much of it was tied to money it received from selling some of its core businesses. For the quarter, the firm had an after tax operating loss of $2.2 billion.
