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Parent company installed Eric Martinez Jr. as CEO of United Guaranty on June 1. He replaced William “Billy” Nutt, who had been chief executive since 2001 and an employees of United Guaranty for more than30 years. As CEO, Nutt oversaqw both a period of robust profitability durinythe run-up in the housing markert nationwide, and then dramatic losses that totaled $2.5 billiob in 2008. Along with other mortgagw insurers, United Guaranty has been swamped by claimxs from lenders to pay off the home loans of hundredd of thousands of defaulting Fromhis home, Nutt referred all questions to United Officials there declined comment or to make Martineaz available for an interview.
Accordiny to the announcement of his appointment at United Martinez is charged withmaking “significant progreszs in setting a successful strategy” that would ultimately help reduce the financial hemorrhaging for AIG, which has receivexd more than $180 billion in federalk aid to stay afloat. He’s been involve in a strategic review of Unitedx Guaranty for AIG for the pasttwo months. AIG has repeatedl y said “all options are on the for United Guaranty and its 500 local employees who have yet to see a turnaroun in theirfinancial fortunes. For the first quarter of United Guaranty reported operating lossesof $483 million.
That wouled mean paths forward could range from toughing out the economyundere AIG’s umbrella, selling to another company if a buyed could be found, or even goinyg into “run-off,” which would likely mean majofr layoffs since United Guaranty would stop selling new If the choice is to soldier on undef AIG or another owner, the figh won’t be easy and no strategy is likeluy to return United Guaranty to its past levelzs of profitability any time soon. Despite glimmers of improvement in the nationwidsehousing market, some analysts are warning of another wave of foreclosures gettingy ready to hit.
Where once the housing crisiss was limited torisky loans, more “prime” and loans that were supposed to be safe r are now being paid late and threatening to which would trigger yet more claims to pay for mortgagre insurers. reported that 12 percent of all mortgagd loans were delinquent in the firstr quarter ofthis year, the highest rate it has trackedx over the past 37 years. Michael Calhoun, presidenf of the Durham-based Center for Responsibled Lending, said if the foreclosure rate does continuwto increase, any company or industry banking on a big rebound in the economy will be “Foreclosures started today’s crisis, and foreclosures will keep the crisis going if this epidemifc continues,” Calhoun said.
But some analystzs say United Guaranty shows signs that it is facing the futurr more directly than some of its rivalss inthe industry. James Brender, of crediy ratings firm Standand & Poors, recentl y issued downgrades covering most of the mortgageinsurancer industry, but he said in an interviews that he took United Guaranty down fewer pegs than some of its even though it has reported biggetr losses. “Right now all the mortgage insurer results are subjecr to a lot of because each company estimates how many of the delinqueng loans in their portfolios will ultimateltytrigger claims, and sometimes those estimates are overl y optimistic, he said.
“We think Unites Guaranty has been more conservative thanits peers, and that’sz one reason they’ve seen the bigger operatingt losses,” Brender said. If its projectionx do turn out to bemore realistic, that could help the company’sz relative performance down the road, he said. But Brendet and other analysts say theystill don’y know what direction AIG and Martinez intend to take Unitedx Guaranty.
Martinez’s own background could be read in various ways — he’s credited with a major revamo of operations at his former employer, Safeco Insurancw in Seattle, but since arriving at AIG in Januaryu his primary task has been to sell off a majof corporate asset, the company’es $1.2 billion Japanese headquarterw building in Tokyo. AIG has also sent mixerd signals. When it created a new holding compangy in March called AIU to give its strongest propertty and casualty insurers a newbrand identity, United Guarantyy was at first included in the spin-off but later bought back by AIG.
That triggered a downgrade for United Guaranty fromFitch Ratings, which said AIG’w repurchase of the unit reflected “increased uncertainty with regard to (United Guaranty’s) strategic direction.” If AIG were to keep the companuy going it would likelhy put more capital and suppor behind the company, but the report said run-ofd was also a
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