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ITEM 1 / BUSINESS / OTHER OPERATIONS.....................................................................................................................................................................................Other OperationsMortgage Guaranty (United Guaranty Corporation or UGC) offers private residential mortgage guaranty insurance,which protects mortgage lenders and investors from loss due to borrower default and loan foreclosure. With over1,100 employees, United Guaranty currently insures over one million mortgage loans in the United States and hasoperations in nine other countries. In 2012, United Guaranty generated more than $37 billion in new insurancewritten, which represents the original principal balance of the insured mortgages, becoming the leading provider ofprivate mortgage insurance in the United States and is the highest rated private mortgage insurance company in theU.S.Mortgage Guaranty Business StrategyRisk Selection: Ensure the high quality of our business through a continuous focus on riskselection and risk based pricing using a proprietary, multi-variant risk evaluation model anddisciplined underwriting approach...............................................................................................................................................................................................Innovation: Focus on innovation through the development and enhancement of products,technology, and processes, addressing the needs of stakeholders in the mortgage system...............................................................................................................................................................................................Ease of Use: Eliminate complexity in the mortgage insurance system to create growthwithout sacrificing disciplined risk selection and management...............................................................................................................................................................................................Expense Management: Streamline our processes through the use of technology and sharedservices to more quickly react to the changing dynamics of the mortgage industry...............................................................................................................................................................................................Mortgage Guaranty InsuranceProducts and Services: United Guaranty provides an array of products and services including first-lien mortgageguaranty insurance in a range of premium payment plans. United Guaranty’s primary product is private mortgageinsurance. The coverage we provide – which is called mortgage guaranty insurance, mortgage insurance, or simply‘‘MI’’ – enables borrowers to purchase a house with a modest down payment. This is because MI protects lendersagainst the increased risk of borrower default related to high loan-to-value (LTV) mortgages – those with less than20 percent equity. In short, MI lets lenders provide more mortgage loans to more people.Homeowner Support: United Guaranty also works with homeowners who are behind on their mortgage paymentsto identify ways to retain their home. As a liaison between the borrower and the mortgage servicer, United Guarantyprovides the added support to qualified homeowners to help them avoid foreclosure...................................................................................................................................................................................................................................18 AIG 2012 Form 10-K