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Note 11 - Losses and LAE Level 1 (Notes) | 12 Months Ended
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Dec. 31, 2019
Insurance Loss Reserves [Abstract] |
Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block] | Losses and Loss Adjustment Expenses Our reserve for losses and LAE, at the end of each period indicated, consisted of:
| Year Ended December 31,
(In thousands) | 2019 |  | 2018
Mortgage Insurance loss reserves (1) | $ | 401,273 |  |  | $ | 397,891 |
Services loss reserves (2) | 3,492 |  |  | 3,470 |
Total reserve for losses and LAE | $ | 404,765 |  |  | $ | 401,361 |
______________________
(1) | Primarily comprises first lien primary case reserves of $339.8 million and $361.7 million at December 31, 2019 and 2018, respectively.
(2) | 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 Radian Title Insurance. For all periods presented, total incurred losses and paid claims for Radian Title Insurance were not material.
For the periods indicated, 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) | 2019 |  | 2018 |  | 2017 |
Balance at January 1, | $ | 397,891 |  |  | $ | 507,588 |  |  | $ | 760,269 |  |
Less: Reinsurance recoverables (1) | 11,009 |  |  | 8,350 |  |  | 6,851 |  |
Balance at January 1, net of reinsurance recoverables | 386,882 |  |  | 499,238 |  |  | 753,418 |  |
Add: Losses and LAE incurred in respect of default notices reported and unreported in: |  |  |  |  |  |
Current year (2) | 146,733 |  |  | 135,291 |  |  | 185,486 |  |
Prior years | (14,709 | ) |  | (31,699 | ) |  | (49,286 | ) |
Total incurred | 132,024 |  |  | 103,592 |  |  | 136,200 |  |
Deduct: Paid claims and LAE related to: |  |  |  |  |  |
Current year (2) | 4,220 |  |  | 5,856 |  |  | 25,011 |  |
Prior years | 128,007 |  |  | 210,092 |  |  | 365,369 |  |
Total paid | 132,227 |  |  | 215,948 |  |  | 390,380 |  | (3)
Balance at end of period, net of reinsurance recoverables | 386,679 |  |  | 386,882 |  |  | 499,238 |  |
Add: reinsurance recoverables (1) | 14,594 |  |  | 11,009 |  |  | 8,350 |  |
Balance at December 31, | $ | 401,273 |  |  | $ | 397,891 |  |  | $ | 507,588 |  |
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(1) | Related to ceded losses recoverable, if any, on reinsurance transactions. 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.
Reserve Activity Incurred Losses For all periods presented, our case reserves established for new first-lien primary default notices were the primary driver of our total incurred losses, and they were primarily impacted by the number of new primary default notices received in the period and our related gross Default to Claim Rate assumption applied to those new defaults, as reflected in the Default to Claim Rate table below. Additionally, our provision for losses was positively impacted by favorable reserve development on prior year defaults. This favorable development in all periods was primarily driven by a reduction during the period in certain Default to Claim Rate assumptions for these prior year defaults based on observed trends. For 2019, this favorable development was partially offset by a $30.5 million increase in our IBNR reserve estimate. The increase in our IBNR reserve estimate is related to certain legal proceedings involving challenges from certain servicers regarding our Loss Mitigation Activities, which challenges may result in the reversal of certain decisions regarding prior Rescissions, Claim Denials or Claim Curtailments. See Note 13 for additional information. Hurricane Impact 2018/2017. During the third quarter of 2017, Hurricanes Harvey and Irma caused extensive property damage to areas of Texas, Florida and Georgia, as well as other general disruptions including power outages and flooding. Following Hurricanes Harvey and Irma, we observed an increase in new primary defaults from FEMA Designated Areas associated with these hurricanes. As expected, most of these hurricane-related defaults cured by the end of 2018, and at higher cure rates than the rates for our general population of defaults. These incremental defaults did not have a material impact on our provision for losses in 2017 or 2018. Default to Claim Rate. Our Default to Claim Rate estimates on defaulted loans are mainly developed based on the Stage of Default and Time in Default of the underlying defaulted loans grouped according to the period in which the default occurred, as measured by the progress toward foreclosure sale and the number of months in default. Our estimate of expected Rescissions and Claim Denials (net of expected Reinstatements) embedded in our estimated Default to Claim Rate is generally based on our recent experience. Consideration is also given to differences in characteristics between those rescinded policies and denied claims and the loans remaining in our defaulted inventory. The following table shows our gross Default to Claim Rates on our primary portfolio based on the Time in Default and as of the dates indicated:
| December 31,
| 2019 |  | 2018 |  | 2017
Default to Claim Rate on: |  |  |  |  |
New defaults (1) | 7.5 | % |  | 8.0 | % |  | 10.0 | %
Defaults not in Foreclosure Stage: |  |  |  |  |
Time in Default: <= 5 years (1) (2) | 23.9 | % |  | 25.8 | % |  | 28.3 | %
Time in Default: > 5 years | 63.0 | % |  | 68.0 | % |  | 62.0 | %
Foreclosure Stage Defaults | 70.0 | % |  | 75.0 | % |  | 81.0 | %
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(1) | A 3% Default to Claim Rate assumption was assigned to the new primary defaults from FEMA Designated Areas associated with Hurricanes Harvey and Irma that were reported subsequent to those two natural disasters in 2017 and through February 2018.
(2) | Represents the weighted average Default to Claim Rate for all defaults not in foreclosure stage that have been in default for up to five years, including new defaults. The estimated Default to Claim Rates applied to defaults within this population vary by Time in Default, and range from the Default to Claim Rates on new defaults shown above, up to 55.6%, 57.4% and 62.0% for more aged defaults in this category as of December 31, 2019, 2018, and 2017, respectively.
Claims Paid Total claims paid continue to decrease consistent with the ongoing decline in the outstanding default inventory. Claims paid for 2017 were higher because they included payments that were made in connection with the scheduled final settlement of the Freddie Mac Agreement in the third quarter of 2017. Concentration of Risk As of December 31, 2019, California is the only state that accounted for more than 10% of our mortgage insurance business measured by primary RIF. California accounted for 11.2% of our Mortgage Insurance segment’s primary RIF at December 31, 2019, compared to 12.3% at December 31, 2018. California accounted for 10.6% of our Mortgage Insurance segment’s direct primary NIW for the year ended December 31, 2019, compared to 11.9% and 14.1% for the years ended December 31, 2018 and 2017, respectively. Additional Disclosures The following tables provide information as of and for the periods indicated about: (i) incurred losses, net of reinsurance; (ii) the total of IBNR liabilities plus expected development on reported claims, included within the net incurred loss amounts; (iii) the cumulative number of reported defaults; and (iv) cumulative paid claims, net of reinsurance. The default year represents the period that a new default notice is first reported to us by loan servicers, related to borrowers that missed two monthly payments. The information about net incurred losses and paid claims development for the years ended prior to 2019 is presented as supplementary information.
| Incurred Losses, Net of Reinsurance |  |  |  |
| Year Ended December 31, |  | As of December 31, 2019
($ in thousands) |  |  |  |  |  |  |  |  |  |  | Total of IBNR Liabilities Plus Expected Development on Reported Claims (1) |  | Cumulative Number of Reported Defaults (2)
| Unaudited |  |
Default Year | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
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 |  | $ | 1,225,474 |  |  | $ | 5,292 |  |  | 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 |  | 1,064,054 |  |  | 5,020 |  |  | 118,972 |
2012 |  |  | 803,831 |  | 763,969 |  | 711,213 |  | 720,502 |  | 715,646 |  | 714,783 |  | 713,750 |  | 713,839 |  |  | 2,652 |  |  | 89,845 |
2013 |  |  |  | 505,732 |  | 405,334 |  | 401,444 |  | 404,333 |  | 402,259 |  | 400,243 |  | 399,356 |  |  | 1,172 |  |  | 71,749 |
2014 |  |  |  |  | 337,784 |  | 247,074 |  | 265,891 |  | 264,620 |  | 260,098 |  | 261,507 |  |  | 398 |  |  | 58,215 |
2015 |  |  |  |  |  | 222,555 |  | 198,186 |  | 178,042 |  | 183,952 |  | 183,546 |  |  | 160 |  |  | 49,825 |
2016 |  |  |  |  |  |  | 201,016 |  | 165,440 |  | 149,753 |  | 148,811 |  |  | 115 |  |  | 46,264 |
2017 |  |  |  |  |  |  |  | 180,851 |  | 151,802 |  | 133,357 |  |  | 264 |  |  | 47,283 |
2018 |  |  |  |  |  |  |  |  | 131,513 |  | 116,634 |  |  | 650 |  |  | 39,598 |
2019 |  |  |  |  |  |  |  |  |  | 143,475 |  |  | 3,117 |  |  | 42,884 |
|  |  |  |  |  |  |  |  | Total |  | $ | 4,390,053 |  |  |  |  |  |  |
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(1) | Represents reserves as of December 31, 2019 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.
| Cumulative Paid Claims, Net of Reinsurance
| Year Ended December 31,
(In thousands) |  |  |  |  |  |  |  |  |
| Unaudited |
Default Year | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019
2010 | $ | 11,810 |  | $ | 394,278 |  | $ | 700,316 |  | $ | 956,598 |  | $ | 1,055,935 |  | $ | 1,145,497 |  | $ | 1,178,546 |  | $ | 1,198,031 |  | $ | 1,210,281 |  | $ | 1,214,558 |
2011 |  | 40,392 |  | 323,216 |  | 756,820 |  | 892,959 |  | 982,830 |  | 1,016,855 |  | 1,038,582 |  | 1,048,966 |  | 1,052,688 |
2012 |  |  | 19,200 |  | 295,332 |  | 528,744 |  | 631,982 |  | 672,271 |  | 692,291 |  | 702,136 |  | 704,770 |
2013 |  |  |  | 34,504 |  | 191,040 |  | 307,361 |  | 357,087 |  | 379,036 |  | 388,688 |  | 392,818 |
2014 |  |  |  |  | 13,108 |  | 115,852 |  | 200,422 |  | 233,607 |  | 246,611 |  | 252,619 |
2015 |  |  |  |  |  | 10,479 |  | 84,271 |  | 142,421 |  | 163,916 |  | 172,645 |
2016 |  |  |  |  |  |  | 11,061 |  | 76,616 |  | 119,357 |  | 134,115 |
2017 |  |  |  |  |  |  |  | 24,653 |  | 66,585 |  | 99,678 |
2018 |  |  |  |  |  |  |  |  | 5,584 |  | 36,066 |
2019 |  |  |  |  |  |  |  |  |  | 4,220 |
|  |  |  |  |  |  |  |  | Total |  | $ | 4,064,177 |
|  |  |  |  | All outstanding liabilities before 2010, net of reinsurance |  | 51,883 |
|  |  |  |  | Liabilities for claims, net of reinsurance (1) |  | $ | 377,759 |
______________________
(1) | Calculated as follows:
(In thousands) |
Incurred losses, net of reinsurance | $ | 4,390,053 |
Add: All outstanding liabilities before 2010, net of reinsurance | 51,883 |
Less: Cumulative paid claims, net of reinsurance | 4,064,177 |
Liabilities for claims, net of reinsurance | $ | 377,759 |
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, 2019:
(In thousands) | December 31, 2019
Net outstanding liabilities - Mortgage Insurance: |
Reserve for losses and LAE, net of reinsurance | $ | 377,759 |
Reinsurance recoverables on unpaid claims | 14,594 |
Unallocated LAE | 8,920 |
Total gross reserve for losses and LAE (1) | $ | 401,273 |
______________________
(1) | Excludes Services reserve for losses and LAE of $3.5 million.
The following is supplementary information about average historical claims duration as of December 31, 2019, 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 | 6.0% | 35.2% | 30.6% | 13.6% | 6.2% | 3.6% | 1.8% | 1.0% | 0.7% | 0.3%

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