Just one day after the disclosure that PMI Mortgage Insurance Co. might not be able to stay in business, the parent of United Guaranty Corp. said that the company is thriving.
Yesterday, The PMI Group Inc. reported in its second-quarter earnings report that the primary regulator of its main operating subsidiary could shut down the mortgage insurer at any time.
“If the department were to determine that PMI Mortgage Insurance’s financial condition warranted regulatory action, it could, among other actions, issue an administrative corrective order requiring PMI Mortgage Insurance to suspend writing new business in all states,” a filing with the Securities and Exchange Commission said.
But in a conference call on Friday, American International Group Inc. Chief Executive Officer Robert Benmosche said that subsidiary United Guaranty is thriving.
The mortgage insurance unit earned $13 million in quarterly operating income, whereas PMI sees no end in sight to its losses.
In response to a question from a Goldman Sachs analyst, Benmosche said the United Guaranty has had a “dramatic turnaround,” has “employed excellent technology” for their claims process and has got the legacy portfolio “very much under control.”
He said the unit’s performance has been exceptional relative to both AIG and the industry.
“They’ve done a wonderful job of reinventing how they underwrite mortgages,” Benmosche explained. “So they have a model now that works very effectively on new business.”
The CEO added that the unit is pricing for the right risk now.
United Guaranty’s market share has grown “dramatically,” he said.
“With that performance, we don’t see any need to help anyone else out,” he said — apparently referencing potential investment opportunities at PMI and other struggling mortgage insurers.
Benmosche said the mortgage insurance subsidiary also provides AIG with valuable insight into the mortgage market — which is a major aspect of AIG’s business.
He sees potential growth opportunities as the government extracts itself from the mortgage business.
“For now we see it as a keeper,” he concluded.
