NEW YORK (Bloomberg) — American International Group Inc., the insurer bailed out by the US, replaced the head of its mortgage insurance unit as the company weighs whether to shut the money-losing business.

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 car insurer Safeco Corp. and utility AGL Resources Inc.

"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 US housing slump since the Great Depression, posting more than $3 billion in operating losses in the past eight 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.

AIG is "considering all options on United Guaranty", Monfried said yesterday.

AIG's other ties to the housing market include a unit that originated mortgages and another that invested in securities backed by home loans. Those bets helped force AIG to seek a government rescue, and the insurer has since promised to sell businesses to repay a loan included in a government bailout package valued at $182.5 billion.

The insurer has announced about $5.6 billion of asset sales since the September bailout. The company has disclosed plans to place its two biggest non-US life insurers into trusts for eventual initial public offerings or sales as the credit crisis hobbles potential buyers' ability to make bids.

United Guaranty was ranked the fifth-largest US mortgage insurer by 2008 sales, behind No. 1 ranked MGIC Investment Corp., Genworth Financial Inc., Radian Group Inc. and PMI Group Inc., according to Inside Mortgage Finance, a trade journal.