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Note 11 - Losses and LAE Level 3 (Tables)

12 Months Ended

Dec. 31, 2018

Insurance Loss Reserves [Abstract]

Schedule of Liability for Unpaid Claims and Claim Adjustment Expenses, by Segment [Table Text Block]

Our reserve for losses and LAE, at the end of each period indicated, consisted of:

	Year Ended December 31,
(In thousands)	2018				2017
Mortgage Insurance loss reserves	$	397,891			$	507,588
Services loss reserves (1)	3,470				—
Total reserve for losses and LAE	$	401,361			$	507,588

______________________

(1)

A majority of this amount is subject to reinsurance, with the related reinsurance recoverables reported in other assets in our consolidated balance sheet, and relates to the acquisition of EnTitle Direct, completed on March 27, 2018. See Note 8 for information about our use of reinsurance in our title insurance business.

Schedule of MI Loss Reserves and LAE by Category [Table Text Block]

The following table shows our mortgage insurance reserve for losses and LAE by category at the end of each period indicated:

	Year Ended December 31,
(In thousands)	2018				2017
Reserves for losses by category:
Prime	$	231,169			$	285,022
Alt-A and A minus and below	119,527				170,873
IBNR and other	13,864				16,021
LAE	10,271				13,349
Reinsurance recoverable (1)	10,992				8,315
Total primary reserves	385,823				493,580
Total pool reserves (2)	11,640				13,463
Total First-lien reserves	397,463				507,043
Other (3)	428				545
Total reserve for losses	$	397,891			$	507,588

______________________

(1) Represents ceded losses on reinsurance transactions, including the QSR Program and the Single Premium QSR Program. These amounts are included in the reinsurance recoverables reported in other assets in our consolidated balance sheets.

(2) Includes reinsurance recoverable of $17 thousand and $35 thousand as of December 31, 2018 and December 31, 2017, respectively.

(3)

Does not include our second-lien PDR that is included in other liabilities.

Schedule of Liability for Unpaid Claims and Claims Adjustment Expense [Table Text Block]

the following table presents information relating to our mortgage insurance reserve for losses, including our IBNR reserve and LAE, but excluding our second-lien mortgage loan PDR:

	Year Ended December 31,
(In thousands)	2018				2017				2016
Balance at January 1,	$	507,588			$	760,269			$	976,399
Less: Reinsurance recoverables (1)	8,350				6,851				8,286
Balance at January 1, net of reinsurance recoverables	499,238				753,418				968,113
Add: Losses and LAE incurred in respect of default notices reported and unreported in:
Current year (2)	135,291				185,486				206,383
Prior years	(31,699		)		(49,286		)		(3,516		)
Total incurred	103,592				136,200				202,867
Deduct: Paid claims and LAE related to:
Current year (2)	5,856				25,011				11,410
Prior years	210,092				365,369				406,152
Total paid	215,948				390,380			(3)	417,562
Balance at end of period, net of reinsurance recoverables	386,882				499,238				753,418
Add: reinsurance recoverables (1)	11,009				8,350				6,851
Balance at December 31,	$	397,891			$	507,588			$	760,269

______________________

(1) Related to ceded losses recoverable, if any, on reinsurance transactions, the QSR Program and the Single Premium QSR Program. See Note 8 for additional information.

(2) Related to underlying defaulted loans with a most recent default notice dated in the year indicated. For example, if a loan had defaulted in a prior year, but then subsequently cured and later re-defaulted in the current year, that default

would be considered a current year default. For 2017, includes payments made on pool commutations, in some cases for loans not previously in default.

(3)

Includes the payment of $54.8 million made in connection with the scheduled final settlement of the Freddie Mac Agreement in the third quarter of 2017.

Short-duration Insurance Contracts, Claims Development [Table Text Block]

The information about net incurred losses and paid claims development for the years ended prior to 2018 is presented as supplementary information.

	Incurred Losses, Net of Reinsurance
	Year Ended December 31,																															As of December 31, 2018
($ in thousands)																																Total of IBNR Liabilities Plus Expected Development on Reported Claims (1)				Cumulative Number of Reported Defaults (2)
	Unaudited
Default Year	2009			2010			2011			2012			2013			2014			2015			2016			2017			2018
2009	$	1,671,239		$	1,894,783		$	1,930,263		$	1,939,479		$	1,974,568		$	1,991,796		$	2,016,412		$	2,018,907		$	2,022,629		$	2,025,828			$	1,572			213.836
2010				1,102,856			1,215,136			1,192,482			1,195,056			1,207,774			1,220,289			1,218,264			1,219,469			1,221,938				1,019				146.324
2011							1,058,625			1,152,016			1,052,277			1,050,555			1,062,579			1,061,161			1,059,116			1,060,376				970				118.972
2012										803,831			763,969			711,213			720,502			715,646			714,783			713,750				586				89.845
2013													505,732			405,334			401,444			404,333			402,259			400,243				344				71.749
2014																337,784			247,074			265,891			264,620			260,098				241				58.215
2015																			222,555			198,186			178,042			183,952				292				49.825
2016																						201,016			165,440			149,753				428				46.264
2017																									180,851			151,802				1,212				47.283
2018																												131,513				1,876				39.598
																									Total			$	6,299,253

______________________

(1) Represents reserves as of December 31, 2018 related to IBNR liabilities.

(2) Represents total number of new default notices received in each calendar year as compiled monthly based on reports received from loan servicers. As reflected in our Default to Claim Rate assumptions, a significant portion of reported defaults generally do not result in a claim. In certain instances, a defaulted loan may cure, and then re-default in a later period. Consistent with our reserving practice, each new event of default is treated as a unique occurrence and therefore certain loans that cure and re-default may be included as a reported default in multiple periods. Included in this amount for the year ended December 31, 2018 and December 31, 2017 are 3,776 and 8,862 notices, respectively, of new primary defaults related to the FEMA Designated Areas associated with Hurricanes Harvey and Irma.

	Cumulative Paid Claims, Net of Reinsurance
	Year Ended December 31,
(In thousands)
	Unaudited
Default Year	2009			2010			2011			2012			2013			2014			2015			2016			2017			2018
2009	$	136,413		$	619,496		$	1,236,210		$	1,471,264		$	1,711,019		$	1,807,031		$	1,921,134		$	1,958,660		$	1,986,076		$	2,004,219
2010				11,810			394,278			700,316			956,598			1,055,935			1,145,497			1,178,546			1,198,031			1,210,281
2011							40,392			323,216			756,820			892,959			982,830			1,016,855			1,038,582			1,048,966
2012										19,200			295,332			528,744			631,982			672,271			692,291			702,136
2013													34,504			191,040			307,361			357,087			379,036			388,688
2014																13,108			115,852			200,422			233,607			246,611
2015																			10,479			84,271			142,421			163,916
2016																						11,061			76,616			119,357
2017																									24,653			66,585
2018																												5,584
																									Total			$	5,956,343
													All outstanding liabilities before 2009, net of reinsurance															33,479
													Liabilities for claims, net of reinsurance (1)															$	376,389

______________________

(1) Calculated as follows:

(In thousands)
Incurred losses, net of reinsurance	$	6,299,253
Add: All outstanding liabilities before 2009, net of reinsurance	33,479
Less: Cumulative paid claims, net of reinsurance	5,956,343
Liabilities for claims, net of reinsurance	$	376,389

Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Table Text Block]

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, 2018:

(In thousands)	December 31, 2018
Net outstanding liabilities - Mortgage Insurance:
Reserve for losses and LAE, net of reinsurance	$	376,389
Reinsurance recoverables on unpaid claims	11,009
Unallocated LAE	10,493
Total gross reserve for losses and LAE (1)	$	397,891

Short-duration Insurance Contracts, Schedule of Historical Claims Duration [Table Text Block]

The following is supplementary information about average historical claims duration as of December 31, 2018, representing the average distribution of when claims are paid relative to the year of default:

	Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance (Unaudited)
Years	1	2	3	4	5	6	7	8	9	10
Mortgage Insurance	6.1%	34.5%	31.4%	13.8%	7.4%	4.1%	2.9%	1.5%	1.2%	0.9%

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