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Reinsurance | 9 Months Ended
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Sep. 30, 2016
Reinsurance Disclosures [Abstract] |
Reinsurance | Reinsurance The reinsurance agreements we have entered into are discussed below. The effect of all of our reinsurance agreements on premiums earned and losses incurred is as follows:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In thousands) |  | 2016 |  | 2015 |  | 2016 |  | 2015
Premiums earned: |  |  |  |  |  |  |  |
Direct |  | $ | 270,718 |  |  | $ | 252,951 |  |  | $ | 789,671 |  |  | $ | 738,870 |
Assumed |  | 152 |  |  | 285 |  |  | 542 |  |  | 931 |
Ceded |  | (33,494 | ) |  | (14,002 | ) |  | (100,040 | ) |  | (69,771 | )
Net premiums earned |  | $ | 237,376 |  |  | $ | 239,234 |  |  | $ | 690,173 |  |  | $ | 670,030 |
Losses incurred: |  |  |  |  |  |  |  |
Direct |  | $ | 69,579 |  |  | $ | 81,699 |  |  | $ | 216,874 |  |  | $ | 265,445 |
Assumed |  | 241 |  |  | 425 |  |  | 681 |  |  | 1,191 |
Ceded |  | (8,923 | ) |  | (5,666 | ) |  | (25,056 | ) |  | (18,155 | )
Net losses incurred |  | $ | 60,897 |  |  | $ | 76,458 |  |  | $ | 192,499 |  |  | $ | 248,481 |
Quota share reinsurance Effective July 1, 2015, we entered into a quota share reinsurance agreement (“2015 QSR Transaction”) and commuted our prior 2013 quota share reinsurance agreement (“2013 QSR Transaction”). The group of unaffiliated reinsurers is the same under our 2015 QSR Transaction as our prior 2013 QSR Transaction and each has an insurer financial strength rating of A- or better by Standard and Poor’s Rating Services, A.M. Best or both. The 2015 QSR Transaction provides coverage on policies that were in the 2013 QSR Transaction; additional qualifying in force policies as of the agreement effective date which either had no history of defaults, or where a single default had been cured for twelve or more months at the agreement effective date; and all qualifying new insurance written through December 31, 2016. The agreement cedes losses incurred and premiums on or after the effective date through December 31, 2024, at which time the agreement expires. Early termination of the agreement can be elected by us effective December 31, 2018 for a fee, or under specified scenarios for no fee upon prior written notice, including if we will receive less than 90% of the full credit amount under the private mortgage insurer eligibility requirements (“PMIERs”) of Fannie Mae and Freddie Mac (collectively, the “GSEs”) for the risk ceded in any required calculation period. The 2015 QSR Transaction increased the amount of our insurance in force covered by reinsurance and will result in an increase in the amount of premiums and losses ceded. A higher level of losses ceded, resulting from an increase in our loss ratio, will reduce our profit commission. The structure of the 2015 QSR Transaction is a 30% quota share for all policies covered, with a 20% ceding commission as well as a profit commission. Generally, under the 2015 QSR Transaction, we will receive a profit commission provided that the loss ratio on the loans covered under the agreement remains below 60%. Following is a summary of our quota share reinsurance agreements, excluding captive agreements, for the three and nine months ended September 30, 2016 and 2015.
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In thousands) |  | 2016 |  | 2015 |  | 2016 |  | 2015
2013 QSR Transaction |  |  |  |  |  |  |  |
Ceded premiums written, net of profit commission |  | n/a |  |  | $ | (69,410 | ) |  | n/a |  |  | $ | (11,355 | )
Ceded premiums earned, net of profit commission |  | n/a |  |  | (11,568 | ) |  | n/a |  |  | 35,999 |
Ceded losses incurred |  | n/a |  |  | — |  |  | n/a |  |  | 6,060 |
Ceding commissions (1) |  | n/a |  |  | (11,568 | ) |  | n/a |  |  | 10,235 |
Profit commission |  | n/a |  |  | 11,568 |  |  | n/a |  |  | 62,525 |
2015 QSR Transaction (Effective July 1, 2015)
Ceded premiums written, net of profit commission (2) |  | 31,707 |  |  | 22,626 |  |  | 93,334 |  |  | 22,626 |
Ceded premiums earned, net of profit commission (2) |  | 31,707 |  |  | 22,626 |  |  | 93,334 |  |  | 22,626 |
Ceded losses incurred |  | 7,432 |  |  | 4,236 |  |  | 22,015 |  |  | 4,236 |
Ceding commissions (1) |  | 12,137 |  |  | 9,195 |  |  | 35,659 |  |  | 9,195 |
Profit commission |  | 28,981 |  |  | 23,347 |  |  | 84,963 |  |  | 23,347 |
(1) | Ceding commissions are reported within Other underwriting and operating expenses, net on the consolidated statements of operations.
(2) | Effective July 1, 2015 premiums are ceded on an earned and received basis as defined in our 2015 QSR Transaction.
Under the terms of the 2015 QSR Transaction, ceded premiums, ceding commission and profit commission are settled net on a quarterly basis. The ceded premium due after deducting the related ceding commission and profit commission is reported within “Other liabilities” on the consolidated balance sheets. The reinsurance recoverable on loss reserves related to our 2015 QSR Transaction was $27 million as of September 30, 2016 and $11 million as of December 31, 2015. The reinsurance recoverable balance is secured by funds on deposit from the reinsurers which are based on the funding requirements of PMIERs that address ceded risk. Captive reinsurance In the past, MGIC also obtained captive reinsurance. In a captive reinsurance arrangement, the reinsurer is affiliated with the lender for whom MGIC provides mortgage insurance. As part of our settlement with the Consumer Financial Protection Bureau (“CFPB”) in 2013 and with the Minnesota Department of Commerce (the “MN Department”) in 2015, MGIC has agreed to not enter into any new captive reinsurance agreement or reinsure any new loans under any existing captive reinsurance agreement for a period of ten years subsequent to the respective settlements. In accordance with the CFPB settlement, all of our active captive arrangements were placed into run-off. In addition, the GSEs will not approve any future reinsurance or risk sharing transaction with a mortgage enterprise or an affiliate of a mortgage enterprise. The reinsurance recoverable on loss reserves related to captive agreements was $20 million as of September 30, 2016, which was supported by $94 million of trust assets, while as of December 31, 2015, the reinsurance recoverable on loss reserves related to captive agreements was $34 million, which was supported by $137 million of trust assets. Each captive reinsurer is required to maintain a separate trust account to support its combined reinsured risk on all annual books. MGIC is the sole beneficiary of the trusts.

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- Definition The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6816-158387 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27374-158547 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.7-03.6,13) -URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6811-158387 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27261-158547 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 55 -Paragraph 13 -URI http://asc.fasb.org/extlink&oid=34714010&loc=d3e27795-158548 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 55 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=34714010&loc=d3e27703-158548 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 310 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6485557&loc=d3e21549-158491 + Details
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