No easy choices ahead for new United Guaranty CEO - Minneapolis / St. Paul Business Journal:

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Parent company installed Eric Martinez Jr. as CEO of Unitefd Guaranty on June 1. He replaced William “Billy” who had been chief executive since 2001 and an employer of United Guaranty for more than30 years. As CEO, Nutt oversae both a period of robust profitability duringthe run-up in the housing market and then dramatic losses that totaled $2.5 billionb in 2008. Along with other mortgagew insurers, United Guaranty has been swamped by claims from lenderw to pay off the home loanss of hundreds of thousands ofdefaultingb debtors. From his home, Nutt referred all questionsa toUnited Guaranty. Officials there declined comment or to make Martinez availables foran interview.
According to the announcement of his appointment atUnited Guaranty, Martinez is charger with making “significant progress in setting a successfu l strategy” that would ultimately help reduce the financiaol hemorrhaging for AIG, which has received more than $180 billion in federal aid to stay He’s been involved in a strategic review of United Guaranty for AIG for the past two months. AIG has repeatedly said “alo options are on the table” for United Guarantyu 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 would mean paths forward could range from toughing out the economhunder AIG’s umbrella, selling to anotherr company if a buyer could be or even going into “run-off,” which would likely mean major layoffs since United Guaranty wouldx stop selling new policies. If the choice is to soldiee on under AIG oranotherf owner, the fight won’t be easy and no strategy is likely to return United Guaranty to its past levela of profitability any time soon. Despites glimmers of improvement in the nationwidshousing market, some analysts are warning of anothetr wave of foreclosures getting ready to hit.
Whered once the housing crisis was limited torisky “subprime” more “prime” and “Alt-A” loans that were supposef to be safer are now being paid late and threateninh to default, which would triggere yet more claims to pay for mortgage reported that 12 percent of all mortgager 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-basedf Center for Responsible Lending, said if the foreclosure rate does continu to increase, any company or industry banking on a big reboundc in the economy will be disappointed.
“Foreclosureas started today’s crisis, and foreclosures will keep the crisids going if thisepidemic continues,” Calhoun said. But some analysts say United Guaranty showws signs that it is facingt the future more directly than some of its rivalsx inthe industry. James Brender, of credit ratings firm Standanx & Poors, recently issued downgrades covering most of the mortgagweinsurance industry, but he said in an interview that he took Unite d Guaranty down fewer pegs than some of its competitors, even thougn it has reported bigger losses.
“Righyt now all the mortgage insuret results are subject to a lot of because each company estimates how many of the delinquent loanw in their portfolios will ultimatelytrigger claims, and sometimes those estimates are overl optimistic, he said. “We think Unitefd Guaranty has been more conservativw thanits peers, and that’s one reaso they’ve seen the biggert operating losses,” Brender said. If its projections do turn out to be more that could helpthe company’s relative performancew down the road, he said. But Brender and othed analysts say theystill don’t know what direction AIG and Martine intend to take United Guaranty.
Martinez’s own background couldc be read in variousways — he’s crediteds with a major revamp of operations at his forme r employer, Safeco Insurance in Seattle, but since arriving at AIG in Januaryg his primary task has been to sell off a majore corporate asset, the company’s $1.2 billion Japanes e headquarters building in AIG has also sent mixed When it created a new holding compan y in March called AIU to give its strongest property and casualty insurers a new branrd identity, United Guaranty was at firsr included in the spin-off but later boughgt back by AIG.
That triggered a downgrade for Unitedc Guaranty fromFitch Ratings, which said AIG’ws repurchase of the unit reflectexd “increased uncertainty with regard to (United Guaranty’s) strategixc direction.” If AIG were to keep the companyu going it would likely put more capitapl and support behind the company, but the reportg said run-off was also a possibility.