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Reserve for Losses and Loss Adjustment Expenses | 12 Months Ended
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Dec. 31, 2024
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] |
Reserve for Losses and Loss Adjustment Expenses | Reserve for Losses and Loss Adjustment Expenses The following table provides a reconciliation of the beginning and ending reserve balances for losses and loss adjustment expenses ("LAE") for the years ended December 31:
(In thousands) |  | 2024 |  | 2023 |  | 2022
Reserve for losses and LAE at beginning of year |  | $ | 260,095 |  |  | $ | 216,464 |  |  | $ | 407,445 |
Less: Reinsurance recoverables |  | 24,104 |  |  | 14,618 |  |  | 25,940 |
Net reserve for losses and LAE at beginning of year |  | 235,991 |  |  | 201,846 |  |  | 381,505 |
Net reserves acquired during the period |  | — |  |  | 14,049 |  |  | — |
Add provision for losses and LAE, net of reinsurance, occurring in: |  |  |  |  |  |
Current year |  | 177,037 |  |  | 141,191 |  |  | 99,372 |
Prior years |  | (95,817) |  |  | (109,649) |  |  | (274,076) |
Net incurred losses and LAE during the current year |  | 81,220 |  |  | 31,542 |  |  | (174,704) |
Deduct payments for losses and LAE, net of reinsurance, occurring in: |  |  |  |  |  |
Current year |  | 3,356 |  |  | 694 |  |  | 224 |
Prior years |  | 21,743 |  |  | 10,752 |  |  | 4,731 |
Net loss and LAE payments during the current year |  | 25,099 |  |  | 11,446 |  |  | 4,955 |
Net reserve for losses and LAE at end of year |  | 292,112 |  |  | 235,991 |  |  | 201,846 |
Plus: Reinsurance recoverables |  | 36,754 |  |  | 24,104 |  |  | 14,618 |
Reserve for losses and LAE at end of year |  | $ | 328,866 |  |  | $ | 260,095 |  |  | $ | 216,464 |
For the year ended December 31, 2024, $21.7 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There has been a $95.8 million favorable prior year development during the year ended December 31, 2024. Reserves remaining as of December 31, 2024 for prior years are $118.4 million as a result of re-estimation of unpaid losses and loss adjustment expenses. For the year ended December 31, 2023, $10.8 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There was a $109.6 million favorable prior year development during the year ended December 31, 2023. Reserves remaining as of December 31, 2023 for prior years were $81.4 million as a result of re-estimation of unpaid losses and loss adjustment expenses. In both periods, the favorable prior years' loss development was the result of a re-estimation of amounts ultimately to be paid on prior year defaults in the default inventory, including the impact of previously identified defaults that cured. Original estimates are increased or decreased as additional information becomes known regarding individual claims. During the year ended December 31 2023, we acquired $14.0 million of reserves, excluding $0.1 million of reinsurance recoverables, in connection with the acquisition of our title insurance operations. Due to business restrictions, stay-at-home orders and travel restrictions initially implemented in March 2020 as a result of COVID-19, unemployment in the United States increased significantly in the second quarter of 2020, declining during the second half of 2020 and through 2022. As unemployment is one of the most common reasons for borrowers to default on their mortgage, the increase in unemployment has increased the number of delinquencies on the mortgages that we insure and has the potential to increase claim frequencies on defaults. In response to the COVID-19 pandemic, the United States government enacted a number of policies to provide fiscal stimulus to the economy and relief to those affected by this global disaster. Specifically, mortgage forbearance programs and foreclosure moratoriums were instituted by Federal legislation along with actions taken by the Federal Housing Finance Agency (“FHFA”), Fannie Mae and Freddie Mac (collectively the “GSEs”). The mortgage forbearance plans provide for eligible homeowners who were adversely impacted by COVID-19 to temporarily reduce or suspend their mortgage payments for up to 18 months for loans in an active COVID-19-related forbearance program as of February 28, 2021. For borrowers that have the ability to begin to pay their mortgage at the end of the forbearance period, we expect that mortgage servicers will work with them to modify their loans at which time the mortgage will be removed from delinquency status. Based on the fiscal stimulus, forbearance programs and the foreclosure moratoriums put in place and the credit characteristics of the defaulted loans, we expected the ultimate number of Early COVID Defaults that result in claims would be less than our historical default-to-claim experience. Accordingly, we recorded a reserve equal to approximately 7% of the initial risk in force for the Early COVID Defaults. The reserve for the Early COVID Defaults had not been adjusted as of December 31, 2021. As of March 31, 2022, the defaulted loans reported to us in the second and third quarters of 2020 had reached the end of their forbearance periods. During the first quarter of 2022, the Early COVID Defaults cured at elevated levels, and the cumulative cure rate for the Early COVID Defaults at March 31, 2022 exceeded our initial estimated cure rate implied by our 7% estimate of ultimate loss for these defaults. Based on cure activity through March 31, 2022 and our expectations for future cure activity, we lowered our estimate of ultimate loss for the Early COVID Defaults from 7% to 4% of the initial risk in force. During the three months ended June 30, 2022, Early COVID Defaults cured at levels that exceeded our estimate as of March 31, 2022, and we further lowered our estimate of loss for these defaults as of June 30, 2022 to 2% of the initial risk in force. These revisions to our estimate of ultimate loss for the Early COVID Defaults resulted in a benefit recorded to the provision for losses of $164.1 million for the year ended December 31, 2022. Due to the level of Early COVID Defaults remaining in the default inventory, during the third quarter of 2022, we resumed reserving for the Early COVID Defaults using our normal reserve methodology. The transition of defaults to foreclosure or claim has not returned to pre-pandemic levels. As a result, the level of defaults in the default inventory that have missed twelve or more payments is above pre-pandemic levels. On September 26, 2024, Hurricane Helene made landfall and caused property damage in certain counties in Florida, Georgia, South Carolina, North Carolina, Tennessee and Virginia. On October 9, 2024, Hurricane Milton made landfall, causing damage in certain counties in Florida. Loans in default increased by 3,620 in the year ended December 31, 2024, including 2,119 defaults we identified as hurricane-related defaults. Based on prior industry experience, we expect the ultimate number of hurricane-related defaults that result in claims will be less than the default-to-claim experience of non-hurricane-related defaults. In addition, under our master policy, our exposure may be limited on hurricane-related claims. For example, we are permitted to exclude a claim entirely where damage to the property underlying a mortgage was the proximate cause of the default and adjust a claim where the property underlying a mortgage in default is subject to unrestored physical damage. Accordingly, when establishing our loss reserves as of December 31, 2024, we applied a lower estimated claim rate to new default notices received in the fourth quarter of 2024 from the affected areas than the claim rate we apply to other notices in our default inventory. The impact on our reserves in future periods will be dependent upon the performance of the hurricane-related defaults and our expectations for the amount of ultimate losses on these delinquencies. In January 2025, several wildfires caused property damage in Southern California. As of January 31, 2025, our insurance in force in areas with Federal Emergency Management Agency ("FEMA") disaster declarations due to these wildfires was less than 0.1% of our total insurance in force. These wildfires have not affected our reserves as of December 31, 2024. The Federal Reserve has increased the target federal funds rate several times during 2022 and 2023 in an effort to reduce consumer price inflation. As a result of progress on inflation, the Federal Reserve reduced the target federal funds rate by 100 basis points since September 2024. Mortgage interest rates remain elevated which has reduced home sale activity and may affect the options available to delinquent borrowers. It is reasonably possible that our estimate of losses could change in the near term as a result of changes in the economic environment, the impact of elevated mortgage interest rates on home sale activity, housing inventory and home prices. The following table summarizes mortgage insurance incurred loss and allocated loss adjustment expense development, net of reinsurance, IBNR plus expected development on reported defaults and the cumulative number of reported defaults. The information about incurred loss development for the years ended December 31, 2015 to 2023 is presented as supplementary information.
|  | Incurred Loss and Allocated LAE, For the Years Ended December 31, |  | As of December 31, 2024
(In thousands) |  |  |  |  |  | Total of IBNR plus Expected Development on Reported Defaults |  | Cumulative Number of Reported Defaults (1)
|  | Unaudited |  |  |  |
Accident Year |  | 2015 |  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | 2021 |  | 2022 |  | 2023 |  | 2024 |  |
2015 |  | $ | 14,956 |  |  | $ | 9,625 |  |  | $ | 8,893 |  |  | $ | 8,439 |  |  | $ | 8,461 |  |  | $ | 8,323 |  |  | $ | 8,410 |  |  | $ | 8,434 |  |  | $ | 8,435 |  |  | $ | 8,435 |  |  | $ | 7 |  |  | 124 |
2016 |  |  |  | 21,889 |  |  | 11,890 |  |  | 9,455 |  |  | 9,219 |  |  | 8,972 |  |  | 8,614 |  |  | 8,861 |  |  | 8,709 |  |  | 8,643 |  |  | 8 |  |  | 264 |
2017 |  |  |  |  |  | 38,178 |  |  | 16,261 |  |  | 12,202 |  |  | 11,488 |  |  | 11,249 |  |  | 11,550 |  |  | 11,196 |  |  | 11,101 |  |  | 28 |  |  | 362 |
2018 |  |  |  |  |  |  |  | 36,438 |  |  | 23,168 |  |  | 19,536 |  |  | 17,402 |  |  | 17,249 |  |  | 16,535 |  |  | 15,895 |  |  | 64 |  |  | 511 |
2019 |  |  |  |  |  |  |  |  |  | 50,562 |  |  | 39,085 |  |  | 23,649 |  |  | 24,223 |  |  | 19,455 |  |  | 17,395 |  |  | 153 |  |  | 689 |
2020 |  |  |  |  |  |  |  |  |  |  |  | 317,516 |  |  | 269,410 |  |  | 53,045 |  |  | 23,297 |  |  | 15,561 |  |  | 405 |  |  | 696 |
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  | 97,256 |  |  | 38,551 |  |  | 16,567 |  |  | 9,485 |  |  | 357 |  |  | 445 |
2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 99,372 |  |  | 48,593 |  |  | 29,158 |  |  | 1,535 |  |  | 627 |
2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 138,617 |  |  | 78,940 |  |  | 5,476 |  |  | 2,085 |
2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 171,947 |  |  | 13,413 |  |  | 15,647 |
Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 366,560 |  |  |  |  |
(1) Cumulative number of reported defaults includes cumulative paid claims plus loans in default by accident year as of December 31, 2024.
The following table summarizes cumulative paid losses and allocated loss adjustment expenses, net of reinsurance. The information about paid loss development for the years ended December 31, 2015 through 2023 is presented as supplementary information.
(In thousands) |  | Cumulative Paid Losses and Allocated LAE For the Years Ended December 31,
|  | Unaudited |  |
Accident Year |  | 2015 |  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | 2021 |  | 2022 |  | 2023 |  | 2024
2015 |  | $ | 544 |  |  | $ | 3,610 |  |  | $ | 6,960 |  |  | $ | 7,535 |  |  | $ | 7,961 |  |  | $ | 8,055 |  |  | $ | 8,226 |  |  | $ | 8,335 |  |  | $ | 8,337 |  |  | $ | 8,337 |
2016 |  |  |  | 927 |  |  | 4,896 |  |  | 6,947 |  |  | 7,864 |  |  | 8,270 |  |  | 8,205 |  |  | 8,468 |  |  | 8,542 |  |  | 8,540 |
2017 |  |  |  |  |  | 633 |  |  | 5,370 |  |  | 9,156 |  |  | 10,257 |  |  | 10,536 |  |  | 10,620 |  |  | 10,704 |  |  | 10,705 |
2018 |  |  |  |  |  |  |  | 1,310 |  |  | 8,067 |  |  | 13,406 |  |  | 13,927 |  |  | 14,536 |  |  | 14,781 |  |  | 14,971 |
2019 |  |  |  |  |  |  |  |  |  | 1,288 |  |  | 8,049 |  |  | 10,717 |  |  | 12,392 |  |  | 14,064 |  |  | 15,183 |
2020 |  |  |  |  |  |  |  |  |  |  |  | 1,018 |  |  | 2,499 |  |  | 4,022 |  |  | 6,921 |  |  | 9,875 |
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  | 388 |  |  | 856 |  |  | 2,916 |  |  | 4,740 |
2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 224 |  |  | 3,209 |  |  | 8,633 |
2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 517 |  |  | 9,375 |
2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2,686 |
Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 93,045 |
All outstanding liabilities before 2015, net of reinsurance |  | — |
Reserve for losses and LAE, net of reinsurance |  | $ | 273,552 |
The following table provides a reconciliation of the net incurred losses and paid claims development tables above to the mortgage insurance reserve for losses and LAE at December 31, 2024:
(In thousands) |  | December 31, 2024
Reserve for losses and LAE, net of reinsurance |  | $ | 273,552 |
Reinsurance recoverables on unpaid claims |  | 36,655 |
Total gross reserve for losses and LAE |  | $ | 310,207 |
The above table excludes title insurance reserves as of December 31, 2024, which were $18.7 million. For our mortgage insurance portfolio, our average annual payout of losses as of December 31, 2024 is as follows:
Average Annual Percentage Payout of Incurred Losses and Allocated LAE by Year
Year |  | 1 |  | 2 |  | 3 |  | 4 |  | 5 |  | 6 |  | 7 |  | 8 |  | 9 |  | 10
Average Payout |  | 10 | % |  | 42 | % |  | 28 | % |  | 10 | % |  | 7 | % |  | 2 | % |  | 1 | % |  | 0 | % |  | 0 | % |  | 0 | %

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