Note 13 – Premium Deficiency Reserve

The components of the premium deficiency reserve at June 30, 2011, December 31, 2010 and June 30, 2010 appear in the table below.


	June 30,			December 31,			June 30,
	2011			2010			2010
	(In millions)
Present value of expected future paid losses and expenses, net of expected future premium	$	(1,060	)	$	(1,254	)	$	(1,421	)

Established loss reserves		901			1,075			1,252

Net deficiency	$	(159	)	$	(179	)	$	(169	)

The decrease in the premium deficiency reserve for the three and six months ended June 30, 2011 was $11 million and $20 million, respectively as shown in the table below, which represents the net result of actual premiums, losses and expenses as well as a net change in assumptions for these periods. The net change in assumptions for the second quarter and first six months of 2011 is primarily related to lower estimated ultimate losses and higher estimated ultimate premiums.

	Three Months Ended						Six Months Ended
	June 30, 2011
	(In millions)

Premium Deficiency Reserve at beginning of period				$	(170	)				$	(179	)

Paid claims and loss adjustment expenses	$	97					$	172
Decrease in loss reserves		(99	)					(174	)
Premium earned		(29	)					(61	)
Effects of present valuing on future premiums, losses and expenses		2						(10	)

Change in premium deficiency reserve to reflect actual premium, losses and expenses recognized					(29	)					(73	)
					40						93
Change in premium deficiency reserve to reflect change in assumptions relating to future premiums, losses, expenses and discount rate (1)

Premium Deficiency Reserve at end of period				$	(159	)				$	(159	)

(1) A positive number for changes in assumptions relating to premiums, losses, expenses and discount rate indicates a redundancy of prior premium deficiency reserves.