AIG 2012 Annual Report Download - page 36

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A Look at Mortgage Guaranty
Mortgage Guaranty Distribution Channels
• National Mortgage Bankers • Community Banks
• Money Center Banks • State Housing Finance Agencies
• Regional Mortgage Lenders • Builder-owned Mortgage Lenders
• Credit Unions • Internet-sourced lenders
Mortgage Guaranty Competition and Competitive Strengths
United Guaranty competes with six private providers of mortgage insurance, both well-established and new entrants
to the industry, and The Federal Housing Administration, which is the largest provider of mortgage insurance in the
United States.
The United Guaranty brand has 50 years of history and is well regarded in the industry. We differentiate ourselves
through our financial strength, our risk based pricing strategy, which provides for lower premiums for lower risk
mortgages, our innovative products and our rigorous approach to risk management. Despite these strengths there
are potential challenges arising in the mortgage market from increasingly complex regulations relating to mortgage
originations as well as uncertainty in the government’s involvement in the domestic residential housing finance
system in the future. These challenges may have an adverse impact on our business.
Other operations also include:
consist of the operations of AIG Markets, Inc. (AIG Markets) and the remaining
derivatives portfolio of AIG Financial Products Corp. and AIG Trading Group Inc. and their respective subsidiaries
(collectively AIGFP). AIG Markets acts as the derivatives intermediary between AIG and its subsidiaries and third
parties to provide hedging services. The AIGFP portfolio continues to be wound down and is managed consistent
with AIG’s risk management objectives. Although the portfolio may experience periodic fair value volatility, it consists
predominantly of transactions that AIG believes are of low complexity, low risk or currently not economically
appropriate to unwind based on a cost versus benefit analysis.
consists of a portfolio of assets and liabilities held directly by AIG Parent in the
Matched Investment Program (MIP) and certain subsidiaries not related to AIG’s core insurance operations (including
certain non-derivative assets and liabilities of AIGFP). The management of the DIB portfolio is focused on an orderly
wind down to maximize returns consistent with AIG’s risk management objectives. Certain non-derivative assets and
liabilities of the DIB are accounted for under the fair value option and thus operating results are subject to periodic
market volatility.
includes the fair value gains or losses, prior to their sale, of the AIA ordinary shares retained
following the AIA initial public offering and the MetLife, Inc. (MetLife) securities that were received as consideration
from the sale of American Life Insurance Company (ALICO) and the fair value gains or losses, prior to the FRBNY
liquidation of ML III assets, on the retained interest in ML III.
Global Capital Markets (GCM)
Direct Investment Book (DIB)
Retained Interests
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AIG 2012 Form 10-K 19
ITEM 1 / BUSINESS / OTHER OPERATIONS