Insurance analyst Charles Titterton, a director with Standard & Poor's, New York, says that United Guaranty's "top-flight analysis of credit quality" is one of the chief ways it differentiates itself from competitors and contributes to the company's sound overall strategy.
Because United Guaranty
is not participating heavily in the bulk market, which includes some subprime lending, it is not booking the kinds of increases in premiums earned that some of its competitors are booking and thus may not outperform them in earnings, Titterton
Both AIG and United Guaranty
believe it is too risky to get into bulk transactions in a big way, Titterton
agrees that bulk transactions are "definitely a riskier market," he
also notes that "it tends to be better priced" and can, thus, allow mortgage insurers to boost their earnings if they have properly evaluated the risk.
Partly as a result of its caution on bulk transactions, United Guaranty's earnings are in the "middle of the pack" for mortgage insurers, Titterton
Even so, he
foresees that "earnings for the coming year should be strong to very strong."
"If the economy went into a significant recession, it would impact the entire mortgage insurance industry," Titterton