AIG 2015 Annual Report Download - page 90

ITEM 7 / RESULTS OF OPERATIONS / COMMERCIAL INSURANCE
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New Insurance Written
Domestic first-lien new insurance written increased to a record level of $50.8 billion in 2015 compared to $42.0 billion in
2014, driven by an increase in refinancing, improvements in existing home sales due to lower down payment requirements
and new purchase volume.
The decline in domestic first-lien new insurance written to $42.0 billion in 2014 from $49.4 billion in 2013 was primarily due to
the contraction in the mortgage originations market and an increase in competition.
Delinquency Inventory
The delinquency inventory for domestic first-lien business declined during 2015 as a result of cures and paid claims exceeding
the number of newly reported delinquencies. Mortgage Guaranty’s first-lien primary delinquency ratio at December 31, 2015
was 3.4 percent compared to 4.4 percent at December 31, 2014. Over the last several years, Mortgage Guaranty has
experienced a decline in newly reported defaults and an increase in cure rates.
The delinquency inventory for domestic first lien business declined during 2014 as a result of cures and paid claims exceeding
the number of newly reported delinquencies. Mortgage Guaranty’s first lien primary delinquency ratio at December 31, 2014
was 4.4 percent compared to 5.9 percent at December 31, 2013.
The following table provides a summary of activity in Mortgage Guaranty’s domestic first lien delinquency inventory:
Years Ended December 31,
(number of policies) 2015 2014 2013
Number of delinquencies at the beginning of the year 38,357 47,518 62,832
Newly reported 39,619 47,239 56,194
Cures (36,279) (42,680) (51,283)
Claims paid (8,451) (11,601) (19,862)
Other (1,961) (2,119) (363)
Number of delinquencies at the end of the year 31,285 38,357 47,518
Mortgage Guaranty Underwriting Ratios
The following tables present the Mortgage Guaranty combined ratios based on GAAP data:
Years Ended December 31, Increase (Decrease)
2015 2014 2013 2015 vs. 2014 2014 vs. 2013
Loss ratio 17.5 24.7 63.5 (7.2) (38.8)
Acquisition ratio 8.9 7.8 9.9 1.1 (2.1)
General operating expense ratio 18.2 17.3 17.5 0.9 (0.2)
Expense ratio 27.1 25.1 27.4 2.0 (2.3)
Combined ratio 44.6 49.8 90.9 (5.2) (41.1)
2015 and 2014 Comparison
The combined ratio decreased by 5.2 points in 2015 compared to 2014. The decrease in the ratio in 2015 was driven primarily
by a reduction in the loss ratio due to a decrease in incurred losses driven by lower delinquencies and higher cure rates,
partially offset by a reduction in favorable prior year loss development.
The acquisition ratio increased by 1.1 points in 2015 compared to 2014, primarily due to the increases in sales-related
activities supporting the $8.8 billion increase in new insurance written.