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Loss Reserves (Tables) | 9 Months Ended
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Sep. 30, 2016
Insurance Loss Reserves [Abstract] |
Reconciliation of beginning and ending loss reserves | The following table provides a reconciliation of beginning and ending loss reserves for the nine months ended September 30, 2016 and 2015:
|  | Nine months ended September 30,
(In thousands) |  | 2016 |  | 2015
Reserve at beginning of period |  | $ | 1,893,402 |  |  | $ | 2,396,807 |
Less reinsurance recoverable |  | 44,487 |  |  | 57,841 |
Net reserve at beginning of period |  | 1,848,915 |  |  | 2,338,966 |
Losses incurred: |  |  |  |
Losses and LAE incurred in respect of defaults related to: |  |  |  |
Current year |  | 292,090 |  |  | 338,611 |
Prior years (1) |  | (99,591 | ) |  | (90,130 | )
Subtotal |  | 192,499 |  |  | 248,481 |
Losses paid: |  |  |  |
Losses and LAE paid in respect of defaults related to: |  |  |  |
Current year |  | 5,942 |  |  | 9,227 |
Prior years |  | 549,706 |  |  | 652,465 |
Reinsurance terminations (2) |  | (2,854 | ) |  | (15,440 | )
Subtotal |  | 552,794 |  |  | 646,252 |
Net reserve at end of period |  | 1,488,620 |  |  | 1,941,195 |
Plus reinsurance recoverables |  | 46,863 |  |  | 38,748 |
Reserve at end of period |  | $ | 1,535,483 |  |  | $ | 1,979,943 |
(1) | A negative number for prior year losses incurred indicates a redundancy of prior year loss reserves.
(2) | In a termination or commutation, the reinsurance agreement is cancelled, with no future premium ceded and funds for any incurred but unpaid losses transferred to us. The transferred funds result in an increase in our investment portfolio (including cash and cash equivalents) and a decrease in net losses paid (reduction in losses incurred). In addition, there is an offsetting decrease in the reinsurance recoverable (increase in losses incurred), and thus there is no net impact to losses incurred.
Prior year development of the reserves | The prior year development of the reserves in the first nine months of 2016 and 2015 is reflected in the following table.
|  | Nine months ended September 30,
(In millions) |  | 2016 |  | 2015
Decrease in estimated claim rate on primary defaults |  | $ | (108 | ) |  | $ | (95 | )
Increase in estimated severity on primary defaults |  | 12 |  |  | 12 |
Change in estimates related to pool reserves, LAE reserves and reinsurance |  | (4 | ) |  | (7 | )
Total prior year loss development (1) |  | $ | (100 | ) |  | $ | (90 | )
(1) | A negative number for prior year loss development indicates a redundancy of prior year loss reserves, and a positive number indicates a deficiency of prior year loss reserves.
Rollforward of primary default inventory | A rollforward of our primary default inventory for the three and nine months ended September 30, 2016 and 2015 appears in the following table. The information concerning new notices and cures is compiled from monthly reports received from loan servicers. The level of new notice and cure activity reported in a particular month can be influenced by, among other things, the date on which a servicer generates its report, the number of business days in a month and transfers of servicing between loan servicers.
|  | Three months ended September 30, |  | Nine months ended September 30,
|  | 2016 |  | 2015 |  | 2016 |  | 2015
Default inventory at beginning of period |  | 52,558 |  |  | 66,357 |  |  | 62,633 |  |  | 79,901 |
New notices |  | 17,607 |  |  | 19,509 |  |  | 50,418 |  |  | 55,856 |
Cures |  | (15,556 | ) |  | (17,036 | ) |  | (50,249 | ) |  | (56,700 | )
Paids (including those charged to a deductible or captive) |  | (3,051 | ) |  | (3,958 | ) |  | (9,619 | ) |  | (12,671 | )
Rescissions and denials |  | (125 | ) |  | (230 | ) |  | (477 | ) |  | (623 | )
Other items removed from inventory |  | — |  |  | — |  |  | (1,273 | ) |  | (1,121 | )
Default inventory at end of period |  | 51,433 |  |  | 64,642 |  |  | 51,433 |  |  | 64,642 |
Aging of the primary default inventory | As of September 30, 2016 the percentage of loans in the inventory that have been in default for 12 or more consecutive months has declined compared with the prior year end and one year prior, as shown in the following table. Historically as a default ages it becomes more likely to result in a claim. The percentage of loans that have been in default for 12 or more consecutive months and the number of loans in our primary claims received inventory have been affected by our suspended rescissions and the resolution of certain of those rescissions discussed below and in Note 5 – “Litigation and Contingencies.”
Consecutive months in default
| September 30, 2016 |  | December 31, 2015 |  | September 30, 2015
3 months or less | 12,333 |  |  | 24 | % |  | 13,053 |  |  | 21 | % |  | 13,991 |  |  | 22 | %
4 - 11 months | 12,648 |  |  | 25 | % |  | 15,763 |  |  | 25 | % |  | 14,703 |  |  | 23 | %
12 months or more (1) | 26,452 |  |  | 51 | % |  | 33,817 |  |  | 54 | % |  | 35,948 |  |  | 55 | %
Total primary default inventory | 51,433 |  |  | 100 | % |  | 62,633 |  |  | 100 | % |  | 64,642 |  |  | 100 | %
Primary claims received inventory included in ending default inventory | 1,636 |  |  | 3 | % |  | 2,769 |  |  | 4 | % |  | 2,982 |  |  | 5 | %
(1) | Approximately 48%, 50%, and 50% of the primary default inventory in default for 12 consecutive months or more has been in default for at least 36 consecutive months as of September 30, 2016, December 31, 2015, and September 30, 2015, respectively.
Number of payments delinquent | The number of payments that a borrower is delinquent is shown in the table below.
Number of payments delinquent
| September 30, 2016 |  | December 31, 2015 |  | September 30, 2015
3 payments or less | 18,374 |  |  | 36 | % |  | 20,360 |  |  | 33 | % |  | 20,637 |  |  | 32 | %
4 - 11 payments | 12,282 |  |  | 24 | % |  | 15,092 |  |  | 24 | % |  | 14,890 |  |  | 23 | %
12 payments or more | 20,777 |  |  | 40 | % |  | 27,181 |  |  | 43 | % |  | 29,115 |  |  | 45 | %
Total primary default inventory | 51,433 |  |  | 100 | % |  | 62,633 |  |  | 100 | % |  | 64,642 |  |  | 100 | %

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- Definition Tabular disclosure of the activity in the reserve for settling insured claims and expenses incurred in the claims settlement process for the period. The estimated liability includes the amount of money that will be required for future payments of (a) claims that have been reported to the insurer, (b) claims related to insured events that have occurred but that have not been reported to the insurer as of the date the liability is estimated, and (c) claim adjustment expenses. Claim adjustment expenses include costs incurred in the claim settlement process such as legal fees; outside adjuster fees; and costs to record, process, and adjust claims. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 40 -Section 50 -Paragraph 3 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=6482485&loc=d3e14764-158437 + Details
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