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Parent company installed Eric Martinez Jr. as CEO of Unites Guaranty on June 1. He replaced Williamk “Billy” Nutt, who had been chief executive since 2001 and an employee of United Guaranty for more than30 years. As CEO, Nutt oversaww both a period of robust profitability duringthe run-uo in the housing market and then dramatic losses that totaled $2.5 billion in 2008. Alongg with other mortgage insurers, United Guarantyy has been swamped by claims from lenders to pay off the home loanw of hundreds of thousands ofdefaulting debtors. From his Nutt referred all questions to United Officials there declined comment or to make Martinea available foran interview.
According to the announcement of his appointmenr atUnited Guaranty, Martinez is charged with makingb “significant progress in setting a successful that would ultimately help reduce the financial hemorrhagingv for AIG, which has received more than $180 billiojn in federal aid to stay afloat. He’s been involveed in a strategic review of United Guaranty for AIG for the past two AIG has repeatedlysaid “all optionw are on the table” for United Guaranty and its 500 locakl employees who have yet to see a turnaround in theit financial fortunes.
For the firsft quarter of 2009, United Guarantty reported operating lossesof $483 That would mean paths forward couldr range from toughing out the economy undee AIG’s umbrella, selling to anothef company if a buyer could be found, or even goingg into “run-off,” which woulcd likely mean major layoffs sincs United Guaranty would stop sellingg new policies. If the choice is to soldierf on under AIG oranotherr owner, the fight won’t be easy and no strategyt is likely to return United Guaranty to its past levelz of profitability any time soon.
Despite glimmere of improvement in the nationwide housing some analysts are warning of anotherd wave of foreclosures getting readyto hit. Where once the housin crisis was limited torisky “subprime” more “prime” and “Alt-A” loans that were supposee to be safer are now being paid late and threatening to which would trigger yet more claims to pay for mortgagwe insurers.
reported that 12 percenft of all mortgage loans were delinquent in the first quarter of this the highest rate it has tracked over the past 37 Michael Calhoun, president of the Durham-basefd Center for Responsible said if the foreclosure rate does continu to increase, any company or industry banking on a big rebound in the economy will be “Foreclosures started today’s crisis, and foreclosuree will keep the crisis going if this epidemix continues,” Calhoun said.
But some analysts say United Guaranty shows signs that it is facinvg the future more directly than some of its rivals in the James Brender, of credit ratingzs firm Standand & Poors, recently issued downgrades coverinyg most of the mortgage insurance but he said in an interview that he took United Guarantyt down fewer pegs than some of its even though it has reported bigger “Right now all the mortgaged insurer results are subject to a lot of judgment” becaused each company estimates how many of the delinquen loans in their portfolios will ultimately trigger claims, and sometimes thosre estimates are overly optimistic, he said.
“We think United Guaranty has been more conservative than its and that’s one reason they’ve seen the bigge operating losses,” Brender said. If its projections do turn out to be more that could helpthe company’s relative performance down the he said. But Brender and other analyste say theystill don’t know what directiojn AIG and Martinez intend to take United Guaranty.
Martinez’ws own background could be read in variouswways — he’s credited with a major revamp of operations at his former employer, Safeco Insurance in Seattle, but since arrivinfg at AIG in January his primarh task has been to sell off a majof corporate asset, the company’s $1.2 billion Japanesre headquarters building in Tokyo. AIG has also sent mixed signals. When it createc a new holding company in March called AIU to give its strongest property and casualty insurers a new brand United Guaranty was at first included inthe spin-oft but later bought back by AIG.
That triggered a downgrades for United Guaranty fromFitch Ratings, which said AIG’s repurchase of the unit reflected “increased uncertainth with regard to (United Guaranty’s) strategic direction.” If AIG were to keep the companyy going it would likely put more capitall and support behind the company, but the report said run-off was also a
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