AIG unit expects to insure 140,000 mortgages by 2013

By
Monday, September 8, 2008

The Mexican unit of AIG United Guaranty, which launched operations at end-August, expects to have insured some 140,000 mortgages by the end of 2013, CFO Carlos Pérez-Villanueva told BNamericas.

The goal for the company's first year of operations is to have provided mortgage insurance for 25,000 homes and to have teamed up with 10 mortgage lending institutions, the executive said.

The insurer, AIG United Guaranty México, launched operations with a US$7mn capital base and is not expected to need additional capital until 2010 or 2012, Pérez-Villanueva said.

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AIG United Guaranty, which has been active in Mexico since 2004 but operating out of the US, initially planned to launch operations in Mexico last year with a target of providing insurance for 250,000 mortgages in its first five years.

TAPPING THE MARKET

While AIG United Guaranty México is willing to take risk on almost all types of mortgages, the company's portfolio will likely be more heavily weighted towards higher-value mortgages.

The firm plans to provide direct insurance for mortgages issued by banks and non-bank lenders to middle and high-income earners and reinsure mortgages insured by state-run Sociedad Hipotecaria Federal granted to low-income workers, Pérez-Villanueva said.

In Mexico, banks have traditionally targeted higher-income earners, while non-bank lenders have served low-income individuals, something reflected in the loan quality of their credit portfolios. Banks reported a mortgage past-due loan ratio of 3.3% as of end-June, while non-bank mortgage lenders' loan delinquency ratio was 6%.

AIG United Guaranty, part of New York-based American International Group (NYSE: AIG), has provided mortgage insurance products and services since 1963. In Latin America, AIG United Guaranty only has a presence in Mexico.