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Reserves for Insurance Claims and Claim Expenses | 9 Months Ended
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Sep. 30, 2025
Insurance [Abstract] |
Reserves for Insurance Claims and Claim Expenses | Reserves for Insurance Claims and Claim Expenses We hold gross reserves in an amount equal to the estimated liability for insurance claims and claim expenses related to defaults on insured mortgage loans. A loan is considered to be in “default” as of the payment date at which a borrower has missed the preceding two or more consecutive monthly payments. We establish reserves for loans that have been reported to us in default by servicers, referred to as case reserves, and additional loans that we estimate (based on actuarial review and other factors) to be in default that have not yet been reported to us by servicers, referred to as incurred but not reported (IBNR) reserves. We also establish reserves for claim expenses, which represent the estimated cost of the claim administration process, including legal and other fees, as well as other general expenses of administering the claim settlement process. As of September 30, 2025, we held gross reserves for insurance claims and claim expenses of $180.3 million. During the nine months ended September 30, 2025, we paid 281 claims totaling $16.1 million, including 271 claims covered under the QSR Transactions representing $3.2 million of ceded claims and claim expenses. We had 7,093 loans in default in our primary insured portfolio as of September 30, 2025, which represented a 1.05% default rate against 677,010 total policies in-force, and 6,642 loans in default in our primary portfolio as of December 31, 2024, which represented a 1.01% default rate against 659,567 total policies in-force. The size of the reserve we establish for each defaulted loan (and by extension our aggregate reserve for claims and claim expenses) reflects our best estimate of the future claim payment to be made for each individual loan in default. Our future claims exposure is a function of the number of defaulted loans that progress to claim payment (which we refer to as frequency) and the amount to be paid to settle such claims (which we refer to as severity). Our estimates of claims frequency and severity are not formulaic, rather they are broadly synthesized based on historical observed experience for similarly situated loans and assumptions about future macroeconomic factors. The following table provides a reconciliation of the beginning and ending gross reserve balances for insurance claims and claim expenses:
| For the nine months ended September 30,
| 2025 |  | 2024
| (In Thousands)
Beginning balance | $ | 152,071 |  |  | $ | 123,974 |
Less reinsurance recoverables (1) | (32,260) |  |  | (27,514) |
Beginning balance, net of reinsurance recoverables | 119,811 |  |  | 96,460 |
Add claims incurred: |  |  |
Claims and claim expenses incurred: |  |  |
Current year (2) | 88,584 |  |  | 71,532 |
Prior years (3) | (52,440) |  |  | (57,241) |
Total claims and claim expenses incurred (4) | 36,144 |  |  | 14,291 |
Less claims paid: |  |  |
Claims and claim expenses paid: |  |  |
Current year (2) | 280 |  |  | 180 |
Prior years (3) | 12,607 |  |  | 4,265 |
Reinsurance terminations (5) | (1,964) |  |  | — |
Total claims and claim expenses paid | 10,923 |  |  | 4,445 |
Reserve at end of period, net of reinsurance recoverables | 145,032 |  |  | 106,306 |
Add reinsurance recoverables (1) | 35,315 |  |  | 29,214 |
Ending balance | $ | 180,347 |  |  | $ | 135,520 |
(1) Related to ceded losses recoverable under the QSR Transactions. See Note 5, “Reinsurance” for additional information. (2) Related to insured loans with their most recent defaults occurring in the current year. For example, if a loan defaulted in a prior year and subsequently cured and later re-defaulted in the current year, the default would be included in the current year. Amounts are presented net of reinsurance and included $77.2 million attributed to net case reserves and $9.8 million attributed to net IBNR reserves for the nine months ended September 30, 2025 and $63.2 million attributed to net case reserves and $7.0 million attributed to net IBNR reserves for the nine months ended September 30, 2024. (3) Related to insured loans with defaults occurring in prior years, which have been continuously in default before the start of the current year. Amounts are presented net of reinsurance and included $43.2 million attributed to net case reserves and $8.1 million attributed to net IBNR reserves for the nine months ended September 30, 2025 and $49.8 million attributed to net case reserves and $6.3 million attributed to net IBNR reserves for the nine months ended September 30, 2024. (4) Excludes aggregate termination fees of $0.3 million for the nine months ended September 30, 2025 incurred in connection with the termination of the 2016 QSR Transaction and amendment of the 2018 and 2021 QSR Transactions. (5) Represents the settlement of reinsurance recoverables in conjunction with the termination of the 2016 QSR Transaction and amendment of the 2018 and 2021 QSR Transactions. The “claims incurred” section of the table above shows claims and claim expenses incurred on defaults occurring in current and prior years, including IBNR reserves, and is presented net of reinsurance. The amount of claims incurred relating to current year defaults increased during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, primarily due to an increase in the total number of new delinquencies emerging during the period tied to the growth and natural seasoning of our portfolio and an increase in the average case reserve established against newly defaulted loans. Our provision for claims and claim expenses during both the nine months ended September 30, 2025 and 2024 benefited from favorable development on prior year defaults. We recognized $52.4 million and $57.2 million of favorable prior year development during the nine months ended September 30, 2025 and 2024, respectively, primarily due to cure activity and ongoing analysis of recent loss development trends. We may increase or decrease our claim estimates and reserves as we learn additional information about individual defaulted loans, and continue to observe and analyze loss development trends in our portfolio. Gross reserves of $70.6 million related to prior year defaults remained as of September 30, 2025.

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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 -Topic 944 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480081/944-40-50-3 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -SubTopic 40 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/944-40/tableOfContent + Details
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