AIG, the world’s largest insurer recorded a 34% jump in second-quarter profit Wednesday despite a $78 million operating loss in its mortgage insurance unit.
In the second-quarter earnings release, AIG said total delinquencies made up 2.5% of its $25.9 billion mortgage insurance portfolio.
Additionally, 10.8% of the company’s subprime mortgages were 60 days overdue, along with 4.6% of mortgages in its “non-prime” category, which encompasses credit scores from 620 to 659.
AIG said the delinquency rate for first mortgages rose from 3.56% in April to 3.98% in June, all the way from a low of 3.08% in July of 2005.
First mortgages represent about 90% of AIG’s total domestic mortgage business.
Second mortgages, including home equity lines and lines of credit were also a major factor in the mortgage unit loss.
AIG downplayed the news as CEO Martin Sullivan said in a statement that the insurer was quite comfortable with its current exposure to the U.S. residential mortgage market.
AIG was paying out roughly three times as much as it collected in premiums on mortgage policies, a loss ratio of 318%.
The company recorded delinquencies of 3.68% in subprime, 2.13% in non-prime, and 0.81% in prime as of June 30th.
AIG considers credit scores below 620 as “subprime”, 620-659 as “non-prime”, and 660 and up as “prime”.
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