Loss reserves (Tables)

12 Months Ended

Dec. 31, 2011

Loss reserves [Abstract]

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:

	2011			2010			2009
	(In thousands)
Reserve at beginning of year	$	5,884,171		$	6,704,990		$	4,775,552
Less reinsurance recoverable		275,290			332,227			232,988
Net reserve at beginning of year (1)		5,608,881			6,372,763			4,542,564
Adjustment to reserves (2)		-			(92,000	)		-
Adjusted beginning reserves		5,608,881			6,280,763			4,542,564
Losses incurred:
Losses and LAE incurred in respect of default notices received in:
Current year		1,814,035			1,874,449			2,912,679
Prior years (3)		(99,328	)		(266,908	)		466,765
Subtotal (4)		1,714,707			1,607,541			3,379,444
Losses paid:
Losses and LAE paid in respect of default notices received in:
Current year		121,383			60,897			62,491
Prior years		2,838,069			2,256,206			1,605,668
Reinsurance terminations (5)		(38,769	)		(37,680	)		(118,914	)
Subtotal (6)		2,920,683			2,279,423			1,549,245
Net reserve at end of year (7)		4,402,905			5,608,881			6,372,763
Plus reinsurance recoverables		154,607			275,290			332,227
Reserve at end of year	$	4,557,512		$	5,884,171		$	6,704,990

(1) At December 31, 2010, 2009 and 2008 the estimated reduction in loss reserves related to rescissions approximated $1.3 billion, $2.1 billion and $0.5 billion, respectively.

(2) In periods prior to 2010 an estimate of premium to be refunded in conjunction with claim payments was included in Loss Reserves. In 2010, we separately stated portions of this liability in Other liabilities and Premium deficiency reserve on the consolidated balance sheet.

(3) A negative number for prior year losses incurred indicates a redundancy of prior year loss reserves, and a positive number for prior year losses incurred indicates a deficiency of prior year loss reserves.

(4) Rescissions did not have a significant impact on incurred losses in 2011. Rescissions mitigated our incurred losses by an estimated $0.2 billion and $2.5 billion in 2010 and 2009, respectively.

(5) 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 11 – “Reinsurance”)

(6) Rescissions mitigated our paid losses by an estimated $0.6 billion, $1.0 billion and $0.9 billion in 2011, 2010 and 2009, respectively, which excludes amounts that may have been applied to a deductible.

(7) At December 31, 2011, 2010 and 2009 the estimated reduction in loss reserves related to rescissions approximated $0.7 billion, $1.3 billion and $2.1 billion, respectively.

Aging of the primary default inventory

Aging of the Primary Default Inventory

	December 31,				December 31,				December 31,
	2011				2010				2009
Consecutive months in default
3 months or less		31,456	18	%		37,640	18	%		48,252	19	%
4 - 11 months		46,352	26	%		58,701	27	%		98,210	39	%
12 months or more		97,831	56	%		118,383	55	%		103,978	42	%
Total primary default inventory		175,639	100	%		214,724	100	%		250,440	100	%
Primary claims received inventory included in ending default inventory		12,610	7	%		20,898	10	%		16,389	7	%

Number of payments delinquent

Number of Payments Delinquent

	December 31,				December 31,				December 31,
	2011				2010				2009
3 payments or less		42,804	24	%		51,003	24	%		60,970	24	%
4 - 11 payments		47,864	27	%		65,797	31	%		105,208	42	%
12 payments or more		84,971	49	%		97,924	45	%		84,262	34	%
Total primary default inventory		175,639	100	%		214,724	100	%		250,440	100	%

Estimate of impact of rescissions on loss reserves, paid and incurred losses

The table below represents our estimate of the impact rescissions have had on reducing our loss reserves, paid losses and losses incurred.

	2011		2010			2009
	(In billions)
Estimated rescission reduction - beginning reserve	$	1.3	$	2.1		$	0.5
Estimated rescission reduction - losses incurred		-		0.2			2.5
Rescission reduction - paid claims		0.6		1.2			1.2
Amounts that may have been applied to a deductible		-		(0.2	)		(0.3	)
Net rescission reduction - paid claims		0.6		1.0			0.9
Estimated rescission reduction - ending reserve	$	0.7	$	1.3		$	2.1

Rollforward of primary default inventory

A rollforward of our primary default inventory for the years ended December 31, 2011, 2010 and 2009 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 by transfers of servicing between loan servicers.

	2011			2010			2009
Default inventory at beginning of period		214,724			250,440			182,188
Plus: New Notices		169,305			205,069			259,876
Less: Cures		(149,643	)		(183,017	)		(149,251	)
Less: Paids (including those charged to a deductible or captive)		(51,138	)		(43,826	)		(29,732	)
Less: Rescissions and denials		(7,609	)		(13,942	)		(12,641	)
Default inventory at end of period		175,639			214,724			250,440