Note 13 – Premium Deficiency Reserve

The components of the premium deficiency reserve at June 30, 2013, December 31, 2012 and June 30, 2012 appear in the table below.

	June 30,			December 31,			June 30,
	2013			2012			2012
	(In millions)
Present value of expected future paid losses and expenses, net of expected future premium	$	(749	)	$	(840	)	$	(899	)

Established loss reserves		688			766			806

Net deficiency	$	(61	)	$	(74	)	$	(93	)

The decrease in the premium deficiency reserve for the three months and six months ended June 30, 2013 was $11 million and $13 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 months ended June 30, 2013 is primarily related to higher estimated ultimate premiums and lower estimated ultimate losses. The net change in assumptions for the six months ended June 30, 2013 is primarily related to higher estimated ultimate premiums, offset by higher estimated ultimate losses.

	Three Months Ended						Six Months Ended
	June 30, 2013
	(In millions)

Premium Deficiency Reserve at beginning of period				$	(72	)				$	(74	)

Paid claims and loss adjustment expenses	$	63					$	121
Decrease in loss reserves		(48	)					(78	)
Premium earned		(25	)					(48	)
Effects of present valuing on future premiums, losses and expenses		(2	)					(1	)

Change in premium deficiency reserve to reflect actual premium, losses and expenses recognized					(12	)					(6	)
Change in premium deficiency reserve to reflect change in assumptions relating to future premiums, losses, expenses and discount rate (1)					23						19

Premium Deficiency Reserve at end of period				$	(61	)				$	(61	)

(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.

The decrease in the premium deficiency reserve for the three and six months ended June 30, 2012 was $27 million and $42 million, respectively, as shown in the table below. The net change in assumptions for both the three and six months ended June 30, 2012 was primarily related to higher estimated ultimate losses.

	Three Months Ended						Six Months Ended
	June 30, 2012
	(In millions)

Premium Deficiency Reserve at beginning of period				$	(121	)				$	(135	)

Paid claims and loss adjustment expenses	$	76					$	152
Decrease in loss reserves		24						(20	)
Premium earned		(25	)					(53	)
Effects of present valuing on future premiums, losses and expenses		2						2

Change in premium deficiency reserve to reflect actual premium, losses and expenses recognized					77						81

Change in premium deficiency reserve to reflect change in assumptions relating to future premiums, losses, expenses and discount rate (1)					(49	)					(39	)

Premium Deficiency Reserve at end of period				$	(93	)				$	(93	)

(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.