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AIG unit gets reinsurance for pre-2009 mortgage policies

Posted On: May. 10, 2016 12:00 AM CST

AIG unit gets reinsurance for pre-2009 mortgage policies

American International Group Inc. said its mortgage insurance business, United Guaranty Corp., has obtained $298.6 million of indemnity reinsurance from Pembroke, Bermuda-based Bellemeade Re II Ltd.

AIG said in its Monday announcement that the reinsurance is on a portion of United Guaranty's first-lien U.S. mortgage insurance portfolio of policies issued in 2008 and prior years. As of March 31, 2016, less than 20% of United Guaranty's gross risk in force was written in 2008 and prior years, according to AIG.

“We believe this marks the first time a mortgage insurer has accessed the capital markets for a risk transfer involving a mortgage insurance portfolio made up of policies issued in 2008 and earlier years,” said United Guaranty President and CEO Donna DeMaio in the statement. “The transaction not only helps United Guaranty manage risk, but also demonstrates that investors are willing to assign value to this type of portfolio from the 2008 and earlier period.”

AIG announced in January that it would spin off United Guaranty as investor Carl Icahn called for AIG to be split into three separate entities — property/casualty insurance, life insurance and mortgage insurance —to enhance shareholder value and end AIG's designation as a systemically important financial institution by the federal Financial Stability Oversight Council.

This is not the first time that AIG has entered into a reinsurance agreement with Bellemeade. It announced a similar agreement last August in which United Guaranty obtained approximately $300 million of indemnity reinsurance from Bellemeade for a portfolio of mortgage insurance policies from 2009 through the first quarter of 2013.