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Note 11 - Losses and LAE - Level 1 (Notes) | 12 Months Ended
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Dec. 31, 2020
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 the following.
|  | Year Ended December 31,
(In thousands) |  | 2020 |  | 2019
Mortgage insurance loss reserves (1) |  | $ | 844,107 |  |  | $ | 401,273 |
Title insurance loss reserves |  | 4,306 |  |  | 3,492 |
Total reserve for losses and LAE |  | $ | 848,413 |  |  | $ | 404,765 |
(1)Primarily comprises first lien primary case reserves of $799.5 million and $339.8 million at December 31, 2020 and 2019, respectively. 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) |  | 2020 |  | 2019 |  | 2018
Balance at January 1, |  | $ | 401,273 |  |  | $ | 397,891 |  |  | $ | 507,588 |
Less: Reinsurance recoverables (1) |  | 14,594 |  |  | 11,009 |  |  | 8,350 |
Balance at January 1, net of reinsurance recoverables |  | 386,679 |  |  | 386,882 |  |  | 499,238 |
Add: Losses and LAE incurred in respect of default notices reported and unreported in: |  |  |  |  |  |
Current year (2) |  | 517,807 |  |  | 146,733 |  |  | 135,291 |
Prior years |  | (34,547) |  |  | (14,709) |  |  | (31,699) |
Total incurred |  | 483,260 |  |  | 132,024 |  |  | 103,592 |
Deduct: Paid claims and LAE related to: |  |  |  |  |  |
Current year (2) |  | 4,148 |  |  | 4,220 |  |  | 5,856 |
Prior years |  | 93,453 |  |  | 128,007 |  |  | 210,092 |
Total paid |  | 97,601 |  |  | 132,227 |  |  | 215,948 |
Balance at end of period, net of reinsurance recoverables |  | 772,338 |  |  | 386,679 |  |  | 386,882 |
Add: reinsurance recoverables (1) |  | 71,769 |  |  | 14,594 |  |  | 11,009 |
Balance at December 31, |  | $ | 844,107 |  |  | $ | 401,273 |  |  | $ | 397,891 |
(1)Related to ceded losses recoverable 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. Reserve Activity Incurred Losses For all periods presented, case reserves established for new 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. For the year ended December 31, 2020, we experienced a significant increase in the number of new primary default notices, substantially all related to defaults of loans subject to forbearance programs implemented in response to the COVID-19 pandemic. New primary default notices totaled 108,025 for the year ended December 31, 2020, compared to 40,985 for the year ended December 31, 2019. Our gross Default to Claim Rate assumption applied to new defaults was 8.5% as of December 31, 2020, compared to 7.5% as of December 31, 2019. This increase reflects the estimated impact of a worsening macroeconomic environment, partially offset by the expected beneficial effects of mortgage relief options and other protections, including forbearance programs under the CARES Act. For all periods presented, our provision for losses was also impacted by favorable reserve development on prior year defaults, primarily due to higher Cures than previously estimated. For 2019, this favorable development was partially offset by a $30.5 million increase in our IBNR reserve estimate related to legal proceedings involving challenges from certain servicers regarding our Loss Mitigation Activities. See Note 13 for additional information. See also Note 1 for additional information on the elevated risks and uncertainties resulting from the COVID-19 pandemic to our business and Note 2 for discussion of the reserving methodology for the mortgage insurance industry, which requires that reserves for losses are generally not established until receipt of notification from servicers that a borrower has missed two payments. 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 net 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,
|  | 2020 |  | 2019 |  | 2018
Default to Claim Rate on: |  |  |  |  |  |
New defaults |  | 8.5 | % |  | 7.5 | % |  | 8.0 | %
Defaults not in Foreclosure Stage: |  |  |  |  |  |
Time in Default: < 2 years (1) |  | 21.0 | % |  | 22.0 | % |  | 23.0 | %
Time in Default: 2 - 5 years |  | 62.5 | % |  | 48.0 | % |  | 52.0 | %
Time in Default: > 5 years |  | 70.0 | % |  | 63.0 | % |  | 68.0 | %
Foreclosure Stage Defaults |  | 75.0 | % |  | 70.0 | % |  | 75.0 | %
(1)Represents the weighted average Default to Claim Rate for all defaults not in foreclosure stage that have been in default for up to two 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 55.0%, 55.6% and 57.4% for more aged defaults in this category as of December 31, 2020, 2019, and 2018, respectively. Claims Paid The decrease in claims paid in 2020 is primarily attributable to COVID-19-related forbearance plans and suspensions of foreclosures and evictions. Claims paid in 2020 include payments made to settle certain previously disclosed legal proceedings. See Note 13 for additional information about these legal proceedings. The decrease in total claims paid is consistent with the decline in outstanding default inventory prior to 2020. Concentration of Risk As of December 31, 2020, there was no state that accounted for more than 10% of our mortgage insurance business measured by primary RIF. As of December 31, 2019, California, at 11.2%, was the only state to account for more than 10% of primary RIF. California also accounted for 10.4% of our direct NIW for the year ended December 31, 2020, compared to 10.6% and 11.9% for the years ended December 31, 2019 and 2018, 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 2020 is presented as supplementary information.
Incurred Losses, Net of Reinsurance ($ in thousands) |  | Total of IBNR Liabilities Plus Expected Development on Reported Claims (1) |  | Cumulative Number of Reported Defaults (2)
|  | Year Ended December 31, |  |
Default Year |  | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |  |
| Unaudited |  |  | As of December 31, 2020
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 |  | $ | 1,062,826 |  |  | $ | 578 |  |  | 117,019 |
2012 |  |  | 803,831 |  | 763,969 |  | 711,213 |  | 720,502 |  | 715,646 |  | 714,783 |  | 713,750 |  | 713,839 |  | 713,146 |  |  | 313 |  |  | 88,555 |
2013 |  |  |  | 505,732 |  | 405,334 |  | 401,444 |  | 404,333 |  | 402,259 |  | 400,243 |  | 399,356 |  | 399,317 |  |  | 150 |  |  | 70,723 |
2014 |  |  |  |  | 337,784 |  | 247,074 |  | 265,891 |  | 264,620 |  | 260,098 |  | 261,507 |  | 261,377 |  |  | 73 |  |  | 57,541 |
2015 |  |  |  |  |  | 222,555 |  | 198,186 |  | 178,042 |  | 183,952 |  | 183,546 |  | 184,066 |  |  | 69 |  |  | 49,255 |
2016 |  |  |  |  |  |  | 201,016 |  | 165,440 |  | 149,753 |  | 148,811 |  | 148,640 |  |  | 75 |  |  | 45,824 |
2017 |  |  |  |  |  |  |  | 180,851 |  | 151,802 |  | 133,357 |  | 130,274 |  |  | 144 |  |  | 46,956 |
2018 |  |  |  |  |  |  |  |  | 131,513 |  | 116,634 |  | 95,534 |  |  | 279 |  |  | 39,341 |
2019 |  |  |  |  |  |  |  |  |  | 143,475 |  | 136,860 |  |  | 809 |  |  | 42,884 |
2020 |  |  |  |  |  |  |  |  |  |  | 504,160 |  |  | 4,540 |  |  | 109,411 |
Total |  |  |  |  |  |  |  |  |  |  | $ | 3,636,200 |  |  |  |  |
(1)Represents reserves as of December 31, 2020 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 |  | 2011 |  | 2012 |  | 2013 |  | 2014 |  | 2015 |  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020
2011 |  | $ | 40,392 |  |  | $ | 323,216 |  |  | $ | 756,820 |  |  | $ | 892,959 |  |  | $ | 982,830 |  |  | $ | 1,016,855 |  |  | $ | 1,038,582 |  |  | $ | 1,048,966 |  |  | $ | 1,052,688 |  |  | $ | 1,057,199 |
2012 |  |  |  | 19,200 |  |  | 295,332 |  |  | 528,744 |  |  | 631,982 |  |  | 672,271 |  |  | 692,291 |  |  | 702,136 |  |  | 704,770 |  |  | 708,528 |
2013 |  |  |  |  |  | 34,504 |  |  | 191,040 |  |  | 307,361 |  |  | 357,087 |  |  | 379,036 |  |  | 388,688 |  |  | 392,818 |  |  | 395,093 |
2014 |  |  |  |  |  |  |  | 13,108 |  |  | 115,852 |  |  | 200,422 |  |  | 233,607 |  |  | 246,611 |  |  | 252,619 |  |  | 255,742 |
2015 |  |  |  |  |  |  |  |  |  | 10,479 |  |  | 84,271 |  |  | 142,421 |  |  | 163,916 |  |  | 172,645 |  |  | 174,812 |
2016 |  |  |  |  |  |  |  |  |  |  |  | 11,061 |  |  | 76,616 |  |  | 119,357 |  |  | 134,115 |  |  | 137,306 |
2017 |  |  |  |  |  |  |  |  |  |  |  |  |  | 24,653 |  |  | 66,585 |  |  | 99,678 |  |  | 108,484 |
2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 5,584 |  |  | 36,066 |  |  | 54,625 |
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 4,220 |  |  | 18,703 |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 4,148 |
Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,914,640 |
All outstanding liabilities before 2011, net of reinsurance |  | 30,257 |
Liabilities for claims, net of reinsurance (1) |  | $ | 751,817 |
(1)Calculated as follows:
(In thousands) |  |
Incurred losses, net of reinsurance |  | $ | 3,636,200 |
All outstanding liabilities before 2011, net of reinsurance |  | 30,257 |
Cumulative paid claims, net of reinsurance |  | (2,914,640) |
Liabilities for claims, net of reinsurance |  | $ | 751,817 |
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, 2020.
(In thousands) |  | December 31, 2020
Net outstanding liabilities - mortgage insurance: |  |
Reserve for losses and LAE, net of reinsurance |  | $ | 751,817 |
Reinsurance recoverables on unpaid claims |  | 71,769 |
Unallocated LAE |  | 20,521 |
Total gross reserve for losses and LAE (1) |  | $ | 844,107 |
(1)Excludes title insurance reserve for losses and LAE of $4.3 million. The following is supplementary information about average historical claims duration as of December 31, 2020, 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 |  | 6.2% |  | 33.6% |  | 30.0% |  | 11.5% |  | 5.2% |  | 2.4% |  | 1.4% |  | 0.6% |  | 0.4% |  | 0.4%

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