AIG chief says bailed-out firm does better in 'red' states
Wednesday, February 2, 2011; 7:19 PM
NEW YORK - American International Group's mortgage insurer does more business in Republican-leaning states, where it signs up more reliable customers than those in "more liberal" areas, AIG chief executive Robert Benmosche said.
"All of the states where we're a leader, where we're the No. 1 insurer, are red states. All of the states where we're at the bottom are blue states," Benmosche said Tuesday at a conference in Washington. "Part of what we found out is that our model is about culture and it's about the attitude in the public. And what we find is where there's more of a tendency for people to be more liberal, more that the government is responsible for what happens to me."
Benmosche oversees an insurer propped up by more than $40 billion in government capital while competing mortgage guarantors operate without Treasury Department assistance. The housing crisis prompted rival MGIC Investment to scale back in 2008 in both "red" Arizona and "blue" California.
"We think we're getting at the essence of the ability of someone to repay their mortgage," said Benmosche, who joined AIG in 2009. "We've plotted it on a map."
AIG's mortgage guarantor, United Guaranty, weighs data including borrowers' credit scores, the property's value and the number of wage earners in a household, Benmosche said. United Guaranty's model doesn't take party affiliation into account, said Mark Herr, a spokesman for AIG.
Rep. Melvin Watt (D-N.C.) criticized Benmosche's remarks. "Even if he thought it was true, it's hard for me to believe that somebody who is feasting at the federal trough would say it," Watt said.
Homeowner defaults pushed U.S. mortgage insurers into losses starting in 2007 as property prices plummeted and foreclosure sales failed to recoup money owed to banks. United Guaranty had more than $4 billion in losses in the three years ended Dec. 31, 2009.
United Guaranty posted a pretax loss of $124 million in the third quarter of 2010, compared with a loss of $461 million a year earlier. The business is heading in the "right direction," the company said in June, citing its new pricing model and market trends.
MGIC, which focuses on backing home loans, posted a fourth-quarter loss of $186.7 million on Jan. 19 and said it can't predict when it will post an annual profit.