AIG 2013 Annual Report Download - page 87

equity market volatility and changes in interest rates. Additionally, our scale and the breadth of our product offerings
provide diversification of risk across our product portfolio.
See Results of Operations — Segment Results — AIG Life and Retirement Results for additional information.
Executive Overview
Risk Selection — Ensure the high quality of our new business through disciplined underwriting and our multi-
variant risk-based pricing model.
Innovation — Develop and enhance products, technology, and processes while addressing the needs of
stakeholders in the mortgage industry.
Ease of Use — Reduce complexity in the mortgage insurance process.
Expense Management — Streamline our processes through the use of technology and shared services.
Interest rate increases in late 2013 reduced the refinancing activity that drove much of the increased volume in the
mortgage loan industry during the year. As a result, UGC anticipates a decrease in new insurance written during
2014 compared to 2013. However, the majority of UGC’s new business written during 2013 was originated from
home purchases as opposed to refinancing, and we expect the growth in home purchase lending in 2014 to partially
offset the decline in refinancing activity. UGC believes the increase in home purchases will be driven by increased
buyer confidence arising from home price appreciation and interest rates remaining at low levels relative to historical
levels.
Although increasing interest rates may have an unfavorable impact on new mortgage loan volumes, UGC expects
that increasing interest rates will have a favorable impact on the persistency of business written over the last several
quarters since refinancing of mortgage loans would be unattractive to homeowners who originated mortgages at the
historically low interest rates prevalent during the last several periods. We expect that this higher persistency will
continue to benefit our results throughout 2014 and into 2015.
UGC expects cure rates to improve as a result of home value appreciation since such appreciation will encourage
homeowners with delinquent mortgages to sell and purchase another home, or to refinance their existing mortgages.
We believe the combination of higher persistency and improving cure rates, partially offset by changes in new
mortgage loan volumes, will continue to strengthen UGC’s operating results throughout 2014.
During 2014, UGC expects to continue to be a leading provider of mortgage insurance and will differentiate itself
from its competitors by providing superior products to our customers and utilizing its proprietary risk-based pricing
strategy. This pricing strategy provides UGC’s customers with mortgage insurance products that are priced
commensurate with the underwriting risk, which we believe will result in an appropriately priced, high-quality book of
business. UGC plans to continue to execute this strategy in 2014. The business generated under this strategy, which
was initiated during 2009, accounts for approximately 53 percent of net premiums earned in 2013.
OTHER OPERATIONS STRATEGIC INITIATIVES AND OUTLOOK
Mortgage Guaranty (UGC)
Market Conditions and Industry Trends
Strategic Initiatives
Risk Selection
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AIG 2013 Form 10-K 69
ITEM 7 / EXECUTIVE SUMMARY
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