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Losses and LAE | 12 Months Ended
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Dec. 31, 2022
Insurance Loss Reserves [Abstract] |
Losses and LAE | Losses and LAE Our reserve for losses and LAE, at the end of each period indicated, consisted of the following.
Reserve for losses and LAE |  |  |  |
|  | December 31,
(In thousands) |  | 2022 |  | 2021
Primary case |  | $ | 398,874 |  |  | $ | 790,380 |
Primary IBNR and LAE |  | 12,169 |  |  | 22,745 |
Pool and other |  | 9,912 |  |  | 10,011 |
Mortgage insurance |  | 420,955 |  |  | 823,136 |
Title insurance |  | 5,888 |  |  | 5,506 |
Total reserve for losses and LAE |  | $ | 426,843 |  |  | $ | 828,642 |
For the periods indicated, the following table presents information relating to our mortgage insurance reserve for losses, including our IBNR reserve and LAE.
Rollforward of mortgage insurance reserve for losses |  |  |  |  |  |
|  | Years Ended December 31,
(In thousands) |  | 2022 |  | 2021 |  | 2020
Balance at beginning of year |  | $ | 823,136 |  |  | $ | 844,107 |  |  | $ | 401,273 |
Less: Reinsurance recoverable (1) |  | 66,676 |  |  | 71,769 |  |  | 14,594 |
Balance at beginning of year, net of reinsurance recoverable |  | 756,460 |  |  | 772,338 |  |  | 386,679 |
Add: Losses and LAE incurred in respect of default notices reported and unreported in: |  |  |  |  |  |
Current year (2) |  | 160,049 |  |  | 160,565 |  |  | 517,807 |
Prior years |  | (499,423) |  |  | (141,126) |  |  | (34,547) |
Total incurred |  | (339,374) |  |  | 19,439 |  |  | 483,260 |
Deduct: Paid claims and LAE related to: |  |  |  |  |  |
Current year (2) |  | 499 |  |  | 1,112 |  |  | 4,148 |
Prior years |  | 20,359 |  |  | 34,205 |  |  | 93,453 |
Total paid |  | 20,858 |  |  | 35,317 |  |  | 97,601 |
Balance at end of period, net of reinsurance recoverable |  | 396,228 |  |  | 756,460 |  |  | 772,338 |
Add: reinsurance recoverable (1) |  | 24,727 |  |  | 66,676 |  |  | 71,769 |
Balance at end of year |  | $ | 420,955 |  |  | $ | 823,136 |  |  | $ | 844,107 |
(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. Reserve Activity Incurred Losses Total incurred losses are driven by: (i) case reserves established for new default notices, which are primarily impacted by both 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 and (ii) reserve developments on prior period defaults, which are primarily impacted by changes to our prior Default to Claim Rate assumptions. New primary default notices totaled 37,738 for the year ended December 31, 2022, compared to 37,470 for the year ended December 31, 2021, and 108,025 for the year ended December 31, 2020. For the year ended December 31, 2020, the significant number of new primary default notices were substantially all related to defaults of loans subject to forbearance programs implemented in response to the COVID-19 pandemic. Our gross Default to Claim Rate assumption applied to new defaults was 8.0% as of both December 31, 2022 and 2021, compared to 8.5% as of December 31, 2020. We continue to closely monitor the trends in Cures and claims paid for our default inventory, while also weighing the risks and uncertainties associated with the current economic environment. Our provision for losses during 2022 and 2021 was positively impacted by favorable reserve development on prior year defaults, primarily as a result of more favorable trends in Cures than originally estimated, due to favorable outcomes resulting from mortgage forbearance programs implemented in response to the COVID-19 pandemic as well as positive trends in home price appreciation. These favorable observed trends resulted in reductions in our Default to Claim Rate assumptions for prior year default notices, particularly for those defaults first reported in 2020 following the start of the COVID-19 pandemic. Our provision for losses during 2020 was also positively impacted by favorable reserve development on prior year defaults, primarily driven by a reduction in certain Default to Claim Rate assumptions for those prior year defaults based on observed trends. 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. While our estimates of ultimate losses on defaults from prior years declined in each recent year due to elevated Cures, which reduced our inventory of primary defaults, COVID-19- related hardship forbearance plans and foreclosure moratoriums resulted in delays in resolving the remaining defaults, leading to an increase in the Default to Claim Rates applied to the remaining inventory in 2021. During 2022, the ongoing favorable trend in Cures led to reductions in our Default to Claim Rate assumptions. 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.
Default to Claim Rates
|  | December 31,
|  | 2022 |  | 2021 |  | 2020
Default to Claim Rate on: |  |  |  |  |  |
New defaults |  | 8.0 | % |  | 8.0 | % |  | 8.5 | %
Defaults not in Foreclosure Stage |  |  |  |  |  |
Time in Default: < 2 years (1) |  | 21.8 | % |  | 41.6 | % |  | 21.0 | %
Time in Default: 2 - 5 years |  | 65.0 | % |  | 75.0 | % |  | 62.5 | %
Time in Default: > 5 years |  | 70.0 | % |  | 80.0 | % |  | 70.0 | %
Foreclosure Stage Defaults |  | 75.0 | % |  | 85.0 | % |  | 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%, 80.1% and 55.0% for more aged defaults in this category as of December 31, 2022, 2021 and 2020, respectively. 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. Claims Paid Total claims paid decreased in 2022 compared to 2021. The decrease in claims paid is primarily attributable to a reduction in payments made to settle certain previously disclosed legal proceedings. Concentration of Risk As of December 31, 2022 and 2021, there was no state that accounted for more than 10% of our mortgage insurance business measured by primary RIF. Texas accounted for 12.0% of our direct NIW for the year ended December 31, 2022, while California accounted for 10.9% and 10.4% for the years ended December 31, 2021 and 2020, 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 who missed two monthly payments. The information about net incurred losses and paid claims development for the years ended prior to 2022 is presented as supplementary information.
Incurred losses, net of reinsurance
|  |  |  |  |  |  |  |  |  |  |  |  | Total of IBNR Liabilities Plus Expected Development on Reported Claims (1) |  | Cumulative Number of Reported Defaults (2)
($ in thousands) | Years Ended December 31, |  |  |
|  | Unaudited |  |  |
Default Year |  | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |  | As of December 31, 2022
2013 |  | $ | 505,732 |  | $ | 405,334 |  | $ | 401,444 |  | $ | 404,333 |  | $ | 402,259 |  | $ | 400,243 |  | $ | 399,356 |  | $ | 399,317 |  | $ | 398,820 |  | $ | 397,207 |  |  | $ | 5 |  |  | 58,577 |
2014 |  |  | 337,784 |  | 247,074 |  | 265,891 |  | 264,620 |  | 260,098 |  | 261,507 |  | 261,377 |  | 260,254 |  | 257,773 |  |  | 6 |  |  | 47,976 |
2015 |  |  |  | 222,555 |  | 198,186 |  | 178,042 |  | 183,952 |  | 183,546 |  | 184,066 |  | 182,647 |  | 180,435 |  |  | 9 |  |  | 42,607 |
2016 |  |  |  |  | 201,016 |  | 165,440 |  | 149,753 |  | 148,811 |  | 148,640 |  | 148,349 |  | 145,267 |  |  | 14 |  |  | 40,503 |
2017 |  |  |  |  |  | 180,851 |  | 151,802 |  | 133,357 |  | 130,274 |  | 126,989 |  | 122,407 |  |  | 25 |  |  | 42,888 |
2018 |  |  |  |  |  |  | 131,513 |  | 116,634 |  | 95,534 |  | 88,252 |  | 75,262 |  |  | 32 |  |  | 37,369 |
2019 |  |  |  |  |  |  |  | 143,475 |  | 136,860 |  | 109,416 |  | 66,466 |  |  | 79 |  |  | 40,985 |
2020 |  |  |  |  |  |  |  |  | 504,160 |  | 408,809 |  | 87,213 |  |  | 193 |  |  | 108,025 |
2021 |  |  |  |  |  |  |  |  |  | 156,328 |  | 72,475 |  |  | 184 |  |  | 37,470 |
2022 |  |  |  |  |  |  |  |  |  |  | 155,908 |  |  | 1,550 |  |  | 37,738 |
Total |  |  |  |  |  |  |  |  |  |  | $ | 1,560,413 |  |  |  |  |
(1)Represents reserves as of December 31, 2022, related to IBNR liabilities. (2)Represents total number of new primary 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
(In thousands) |  | Years Ended December 31, |  |
|  | Unaudited |  |
Default Year |  | 2013 |  | 2014 |  | 2015 |  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | 2021 |  | 2022
2013 |  | $ | 34,504 |  |  | $ | 191,040 |  |  | $ | 307,361 |  |  | $ | 357,087 |  |  | $ | 379,036 |  |  | $ | 388,688 |  |  | $ | 392,818 |  |  | $ | 395,093 |  |  | $ | 395,292 |  |  | $ | 395,630 |
2014 |  |  |  | 13,108 |  |  | 115,852 |  |  | 200,422 |  |  | 233,607 |  |  | 246,611 |  |  | 252,619 |  |  | 255,742 |  |  | 256,107 |  |  | 255,981 |
2015 |  |  |  |  |  | 10,479 |  |  | 84,271 |  |  | 142,421 |  |  | 163,916 |  |  | 172,645 |  |  | 174,812 |  |  | 175,874 |  |  | 176,823 |
2016 |  |  |  |  |  |  |  | 11,061 |  |  | 76,616 |  |  | 119,357 |  |  | 134,115 |  |  | 137,306 |  |  | 138,525 |  |  | 139,539 |
2017 |  |  |  |  |  |  |  |  |  | 24,653 |  |  | 66,585 |  |  | 99,678 |  |  | 108,484 |  |  | 111,458 |  |  | 112,445 |
2018 |  |  |  |  |  |  |  |  |  |  |  | 5,584 |  |  | 36,066 |  |  | 54,625 |  |  | 60,926 |  |  | 62,968 |
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  | 4,220 |  |  | 18,703 |  |  | 28,896 |  |  | 35,594 |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 4,148 |  |  | 9,867 |  |  | 14,635 |
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,112 |  |  | 2,561 |
2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 498 |
Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 1,196,674 |
All outstanding liabilities before 2013, net of reinsurance |  | 22,206 |
Liabilities for claims, net of reinsurance (1) |  | $ | 385,945 |
(1)Calculated as follows:
(In thousands) |  |
Incurred losses, net of reinsurance |  | $ | 1,560,413 |
All outstanding liabilities before 2013, net of reinsurance |  | 22,206 |
Cumulative paid claims, net of reinsurance |  | (1,196,674) |
Liabilities for claims, net of reinsurance |  | $ | 385,945 |
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, 2022.
Net outstanding liabilities - mortgage insurance |  |
(In thousands) |  | December 31, 2022
Reserve for losses and LAE, net of reinsurance |  | $ | 385,945 |
Reinsurance recoverable on unpaid claims |  | 24,727 |
Unallocated LAE |  | 10,283 |
Total gross reserve for losses and LAE (1) |  | $ | 420,955 |
(1)Excludes title insurance reserve for losses and LAE of $5.9 million. The following is supplementary information about average historical claims duration as of December 31, 2022, 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 |  | 6.8% |  | 30.0% |  | 24.5% |  | 10.4% |  | 3.8% |  | 1.5% |  | 0.9% |  | 0.4% |  | —% |  | 0.1%

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- Definition The entire disclosure for liabilities related to future policy benefits and unpaid claims and claim adjustments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 40 -URI https://asc.fasb.org/subtopic&trid=2560295 + Details
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