Loss Reserves (Tables)

9 Months Ended

Sep. 30, 2017

Reconciliation of beginning and ending loss reserves

The following table provides a reconciliation of beginning and ending loss reserves as of and for the nine months ended September 30, 2017 and 2016:



	Nine months ended September 30,
(In thousands)	2017			2016
Reserve at beginning of period	$	1,438,813		$	1,893,402
Less reinsurance recoverable	50,493			44,487
Net reserve at beginning of period	1,388,320			1,848,915

Losses incurred:
Losses and LAE incurred in respect of default notices received in:
Current year	219,485			292,090
Prior years ⁽¹⁾	(134,780		)	(99,591		)
Total losses incurred	84,705			192,499

Losses paid:
Losses and LAE paid in respect of default notices received in:
Current year	5,474			5,942
Prior years	407,977			549,706
Reinsurance terminations ⁽²⁾	301			(2,854		)
Total losses paid	413,752			552,794
Net reserve at end of period	1,059,273			1,488,620
Plus reinsurance recoverables	45,878			46,863
Reserve at end of period	$	1,105,151		$	1,535,483


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

⁽²⁾

In a termination, the reinsurance agreement is cancelled, with no future premium ceded and amounts for any incurred but unpaid losses paid to us. Amounts paid to (received from) reinsurers result in an increase (decrease) in net losses paid. The change in net losses paid on our losses incurred is offset by a corresponding change in the reinsurance recoverable, resulting in no net impact on losses incurred.

Prior year development of the reserves

The prior year development of the reserves in the first nine months of 2017 and 2016 is reflected in the following table.



	Nine months ended September 30,
(In millions)	2017			2016
Decrease in estimated claim rate on primary defaults	$	(138	)	$	(108	)
(Decrease) increase in estimated severity on primary defaults	(2		)	12
Change in estimates related to pool reserves, LAE reserves and reinsurance	5			(4		)
Total prior year loss development ⁽¹⁾	$	(135	)	$	(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 three and nine months ended September 30, 2017 and 2016 appears in the following table. 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 accuracy of the data provided by servicers, the number of business days in a month, transfers of servicing between loan servicers and whether all servicers have provided the reports in a given month.



	Three months ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Default inventory at beginning of period	41,317		52,558		50,282		62,633
New notices	15,950		17,607		45,352		50,418
Cures	(13,546	)	(15,556	)	(45,382	)	(50,249	)
Paids (including those charged to a deductible or captive)	(2,195	)	(3,051	)	(7,403	)	(9,619	)
Rescissions and denials	(82	)	(125	)	(277	)	(477	)
Other items removed from inventory	(209	)	—		(1,337	)	(1,273	)
Default inventory at end of period	41,235		51,433		41,235		51,433

Primary default inventory detail of new notices received

As shown in the table below, we received an increased number of new default notices in October 2017 compared to October 2016 related to loans in locations that the Federal Emergency Management Agency has declared Individual Assistance Disaster Areas (“IADA”) in connection with recent hurricane activity primarily impacting Texas, Florida, and Puerto Rico.



	For the month ended October 31,
	2017	2016
Default notices for loans in IADAs	3,394	637
Other default notices	4,549	4,882
Total default notices	7,943	5,519

Aging of the primary default inventory

The number of consecutive months a borrower is delinquent is shown in the following table.

Consecutive months in default

	September 30, 2017			December 31, 2016			September 30, 2016
3 months or less	11,331	27	%	12,194	24	%	12,333	24	%
4-11 months	11,092	27	%	13,450	27	%	12,648	25	%
12 months or more ^{(1) (2)}	18,812	46	%	24,638	49	%	26,452	51	%
Total primary default inventory	41,235	100	%	50,282	100	%	51,433	100	%

Primary claims received inventory included in ending default inventory:
	1,063	3	%	1,385	3	%	1,636	3	%


⁽¹⁾	Approximately 45%, 47%, and 48% 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 September 30, 2017, December 31, 2016, and September 30, 2016, respectively.


⁽²⁾	The majority of items removed from our default inventory were due to commutations of NPLs during the nine months ended September 30, 2017 were in default for 12 consecutive months or more as of December 31, 2016.

Number of payments delinquent

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

Number of payments delinquent

	September 30, 2017			December 31, 2016			September 30, 2016
3 payments or less	16,916	41	%	18,419	36	%	18,374	36	%
4-11 payments	10,583	26	%	12,892	26	%	12,282	24	%
12 payments or more ⁽¹⁾	13,736	33	%	18,971	38	%	20,777	40	%
Total primary default inventory	41,235	100	%	50,282	100	%	51,433	100	%


⁽¹⁾	The majority of items removed from our default inventory were due to commutations of NPLs during the nine months ended September 30, 2017 had 12 or more payments delinquent as of December 31, 2016.