AIG's Mortgage Insurer Posts First Profit in Three Years

The mortgage insurance subsidiary of American International Group earned $73 million in the first quarter -- its first quarterly profit in three years. AIG's United Guaranty Corp. affiliate reported improving levels of delinquencies and defaults. In the first quarter of 2009, UGC lost $483 million. Despite the good news on the MI unit, AIG's residential finance division, American General Finance, posted a 1Q operating loss of $132 million. In the same period a year earlier AGF lost $203 million. AIG said the improvement resulted from a decline in provisions for loan losses resulting from improved delinquency rates, lower interest expense due to lower average debt balances, and lower operating expenses. Meanwhile, AIG itself reported a profit of $809 million for the quarter, compared with a loss of $2.1 billion the prior year. The giant insurer's financial products unit, which piled up huge losses on credit default swaps during the financial crisis, had a $298 million operating loss -- an improvement over the $1.1 billion lost in 1Q09. AIG Financial Products also reduced the notional amount of its derivatives portfolio during the first quarter to $755.4 billion.