American International Group Inc., the insurer bailed out by the U.S., replaced the head of its mortgage insurance unit as the company weighs whether to shut the money-losing business.

Mortgage Insurance

Eric Martinez has been named to replace William Nutt as chief executive officer of United Guaranty Corp., said David Monfried, a spokesman for New York-based AIG. Martinez previously worked for AIG restructuring chief Paula Reynolds at Safeco Corp. as executive vice president for claims.

“Paula has a lot of confidence in his leadership capabilities,” Monfried said of Martinez in an interview today. The unit is based in Greensboro, North Carolina and employs about 950 employees worldwide.

United Guaranty turned unprofitable amid the worst U.S. housing slump since the Great Depression, posting more than $3 billion in operating losses in the past eighth quarters. AIG said in October that it may be difficult to find a buyer for the unit, which reimburses mortgage lenders when borrowers don’t meet their obligations and foreclosure fails to cover costs.

AIG is weighing whether to shut the business, two people familiar with the matter said in April. AIG may wind down any parts of the mortgage insurer that can’t be sold, said one of the people, who asked not to be identified because the plans are confidential.

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