Loss Reserves (Tables)

12 Months Ended

Dec. 31, 2016

Reconciliation of beginning and ending loss reserves

The following table provides a reconciliation of beginning and ending loss reserves for each of the past three years:



(In thousands)	2016			2015			2014
Reserve at beginning of year	$	1,893,402		$	2,396,807		$	3,061,401
Less reinsurance recoverable	44,487			57,841			64,085
Net reserve at beginning of year	1,848,915			2,338,966			2,997,316

Losses incurred:
Losses and LAE incurred in respect of default notices received in:
Current year	387,815			453,849			596,436
Prior years ⁽¹⁾	(147,658		)	(110,302		)	(100,359		)
Total losses incurred	240,157			343,547			496,077

Losses paid:
Losses and LAE paid in respect of default notices received in:
Current year	14,823			25,980			32,919
Prior years	689,258			823,058			1,121,508
Reinsurance terminations ⁽²⁾	(3,329		)	(15,440		)	—
Total losses paid	700,752			833,598			1,154,427
Net reserve at end of year	1,388,320			1,848,915			2,338,966
Plus reinsurance recoverables	50,493			44,487			57,841
Reserve at end of year	$	1,438,813		$	1,893,402		$	2,396,807


⁽¹⁾	A negative number for prior year losses incurred indicates a redundancy of prior year loss reserves. See table below for more information about prior year loss development.

⁽²⁾

In a termination, the reinsurance agreement is cancelled, with no future premium ceded and funds for any incurred but unpaid losses transferred to us. The transferred funds result in an increase in our investment portfolio (including cash and cash equivalents) and a decrease in net losses paid (reduction to losses incurred). In addition, there is an offsetting decrease in the reinsurance recoverable (increase in losses incurred), and thus there is no net impact to losses incurred. (See Note 9 – “Reinsurance”)

Prior year development of the reserves

The prior year development of the reserves in 2016, 2015 and 2014 is reflected in the table below.



(In millions)	2016			2015			2014
Decrease in estimated claim rate on primary defaults	$	(148	)	$	(141	)	$	(43	)
Increase (decrease) in estimated severity on primary defaults	9			43			(35		)
Change in estimates related to pool reserves, LAE reserves, reinsurance and other	(9		)	(12		)	(22		)
Total prior year loss development ⁽¹⁾	$	(148	)	$	(110	)	$	(100	)


⁽¹⁾	A negative number for prior year loss development indicates a redundancy of prior year loss reserves.

Rollforward of primary default inventory

A rollforward of our primary default inventory for the years ended December 31, 2016, 2015 and 2014 appears in the table below. The information concerning new notices and cures is compiled from monthly reports received from loan servicers. The level of new notice and cure activity reported in a particular month can be influenced by, among other things, the date on which a servicer generates its report, the number of business days in a month and transfers of servicing between loan servicers.



	2016		2015		2014
Default inventory at beginning of year	62,633		79,901		103,328
New Notices	67,434		74,315		88,844
Cures	(65,516	)	(73,610	)	(87,278	)
Paids (including those charged to a deductible or captive)	(12,367	)	(16,004	)	(23,494	)
Rescissions and denials	(629	)	(848	)	(1,306	)
Other items removed from inventory	(1,273	)	(1,121	)	(193	)
Default inventory at end of year	50,282		62,633		79,901

Aging of the primary default inventory

The percentage of loans that have been in default for 12 or more consecutive months and the number of loans in our primary claims received inventory have been affected by our suspended rescissions and the resolution of certain of those rescissions discussed below and in Note 17 - "Litigation and Contingencies".

The number of consecutive months that a borrower has been delinquent is shown in the table below.

Consecutive months in default

	December 31,
	2016			2015			2014
3 months or less	12,194	24	%	13,053	21	%	15,319	19	%
4 - 11 months	13,450	27	%	15,763	25	%	19,710	25	%
12 months or more⁽¹⁾	24,638	49	%	33,817	54	%	44,872	56	%
Total primary default inventory	50,282	100	%	62,633	100	%	79,901	100	%

Primary claims received inventory included in ending default inventory	1,385	3	%	2,769	4	%	4,746	6	%


⁽¹⁾	Approximately 47%, 50% and 53% of the primary default inventory in default for 12 consecutive months or more has been in default for at least 36 consecutive months as of December 31, 2016, 2015 and 2014, respectively.

Number of payments delinquent

The number of payments that a borrower is delinquent is shown in the table below.

Number of payments delinquent

	December 31,
	2016			2015			2014
3 payments or less	18,419	36	%	20,360	33	%	23,253	29	%
4 - 11 payments	12,892	26	%	15,092	24	%	19,427	24	%
12 payments or more	18,971	38	%	27,181	43	%	37,221	47	%
Total primary default inventory	50,282	100	%	62,633	100	%	79,901	100	%