Note 13 – Premium Deficiency Reserve

The components of the premium deficiency reserve at September 30, 2012, December 31, 2011 and September 30, 2011 appear in the table below.

	September 30,			December 31,			September 30,
	2012			2011			2011
	(In millions)
Present value of expected future paid losses and expenses, net of expected future premium	$	(865	)	$	(961	)	$	(1,039	)

Established loss reserves		781			826			892

Net deficiency	$	(84	)	$	(135	)	$	(147	)

The decrease in the premium deficiency reserve for the three and nine months ended September 30, 2012 was $9 million and $51 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 three and nine months ended September 30, 2012 are both primarily related to higher estimated ultimate losses. The decrease in the premium deficiency reserve for the three and nine months ended September 30, 2011 was $12 million and $32 million, respectively. The net change in assumptions for the third quarter of 2011 was primarily related to higher estimated ultimate losses. The net change in assumptions for the first nine months of 2011 was primarily related to higher estimated ultimate premiums and lower estimated ultimate losses.

	Three Months Ended						Nine Months Ended
	September 30, 2012
	(In millions)

Premium Deficiency Reserve at beginning of period				$	(93	)				$	(135	)

Paid claims and loss adjustment expenses	$	67					$	219
Decrease in loss reserves		(25	)					(45	)
Premium earned		(25	)					(77	)
Effects of present valuing on future premiums, losses and expenses		(4	)					(8	)

Change in premium deficiency reserve to reflect actual premium, losses and expenses recognized					13						89

Change in premium deficiency reserve to reflect change in assumptions relating to future premiums, losses, expenses and discount rate (1)					(4	)					(38	)

Premium Deficiency Reserve at end of period				$	(84	)				$	(84	)

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

	Three Months Ended						Nine Months Ended
	September 30, 2011
	(In millions)

Premium Deficiency Reserve at beginning of period				$	(159	)				$	(179	)

Paid claims and loss adjustment expenses	$	85					$	257
Decrease in loss reserves		(8	)					(182	)
Premium earned		(30	)					(91	)
Effects of present valuing on future premiums, losses and expenses		(6	)					(15	)

Change in premium deficiency reserve to reflect actual premium, losses and expenses recognized					41						(31	)

Change in premium deficiency reserve to reflect change in assumptions relating to future premiums, losses, expenses and discount rate (1)					(29	)					63

Premium Deficiency Reserve at end of period				$	(147	)				$	(147	)

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