Note 4: Insurance Activity

The Company, through WMMRC, reinsures mortgage guaranty risks of mortgage loans originated by affiliates of the Company during the period from 1997 through 2008. WMMRC is (or was) a party to reinsurance agreements with UGRIC, GMIC, MGIC, PMI, Radian, RMIC and Triad. The agreements with UGRIC and Triad were placed into runoff effective May 31, 2008. The agreements with all other primary mortgage insurers were placed into runoff effective September 26, 2008. The reinsurance agreements with Triad and PMI were commuted on August 31, 2009 and October 2, 2012, respectively.

All agreements are on an excess of loss basis, except for certain reinsurance treaties with GMIC and Radian during 2007 and 2008, which are reinsured on a 50 percent quota share basis. Pursuant to the excess of loss reinsurance treaties, WMMRC reinsures a second loss layer which ranges from 5 percent to 10 percent of the risk in force in excess of the primary mortgage insurer’s first loss percentages which range from 4 percent to 5 percent.

As security for the ceding insurers, WMMRC has entered into separate trust agreements with each of the primary mortgage insurance companies whereby a portion of the funds from premiums assumed are held in trust accounts for the benefit of each separate insurer. Pursuant to the terms of the reinsurance agreements, WMMRC is required to keep such assets in trust for a minimum of five (5) years and is subject to claims for up to ten (10) years from termination of obligations arising from the last year in which insurance business was written prior to runoff. Release of funds from the trust by WMMRC requires approval from the primary mortgage guaranty companies.

Premiums assumed and earned are as follows for the periods ended December 31, 2013, 2012 and 2011, respectively:


	Successor		Successor		Predecessor		Predecessor
	Year ended December 31, 2013		Period from March 20, 2012 through December 31, 2012		Period from January 1, 2012 through March 19, 2012		Year ended December 31, 2011
Premiums assumed	$	12,115	$	14,210	$	6,130	$	34,562
Change in unearned premiums		(1,169)		184		47		222

Premiums earned	$	10,946	$	14,394	$	6,177	$	34,784

The components of the liability for losses and loss adjustment reserves are as follows as of December 31, 2013 and 2012, respectively:


	Successor		Successor
	December 31, 2013		December 31, 2012
Case-basis reserves	$	41,159	$	66,173
IBNR reserves		713		1,298
Premium deficit reserves		2,442		15,053

Total	$	44,314	$	82,524

Losses and loss adjustment reserve activity are as follows for the years ended December 31, 2013, 2012 and 2011, respectively:


	Successor		Successor		Predecessor
	December 31, 2013		December 31, 2012		December 31, 2011
Balance at beginning of period	$	82,524	$	142,119	$	190,036
Incurred—prior periods		(6,159)		30,111		47,321
Paid or terminated—prior periods		(32,051)		(89,706)		(95,238)

Total	$	44,314	$	82,524	$	142,119

The loss contract fair market reserve balance is analyzed and adjusted quarterly. The balances in the reserve was $46.3 million at December 31, 2013 and $52.2 million at December 31, 2012. The loss contract fair market reserve was established on March 19, 2012 at $63.1 million (as more fully described in Note 3: Fresh Start Accounting). The fair market value of this reserve was decreased by $5.9 million and $10.9 million during the periods ended December 31, 2013 and 2012, respectively, resulting in corresponding decreases in expense of the respective amount for each period.