Note 10 - Losses and LAE Level 3 (Tables)

12 Months Ended

Dec. 31, 2012

Losses and LAE Mortgage Insurance [Abstract]

Loss Reserves By Segment [Table Text Block]

Our reserve for losses and LAE, as of the dates indicated, consisted of:



	December 31,
(In thousands)	2012		2011
Mortgage insurance reserves	$	3,083,608	$	3,247,900
Financial guaranty reserves	66,328		63,002
Total reserve for losses and LAE	$	3,149,936	$	3,310,902

Schedule of Liability for Unpaid Claims and Claims Adjustment Expense [Table Text Block]

The following table presents information relating to our mortgage insurance reserves for losses, including IBNR, and LAE as of the dates indicated:



	Year Ended December 31,
(In thousands)	2012		2011		2010
Mortgage Insurance
Balance at January 1	$	3,247,900	$	3,524,971	$	3,450,538
Less reinsurance recoverables (1)	151,569		223,254		621,644
Balance at January 1, net of reinsurance recoverables	3,096,331		3,301,717		2,828,894
Add losses and LAE incurred in respect of default notices reported and unreported in:
Current year (2)	899,511		1,127,079		1,173,035
Prior years	21,996		166,778		557,766
Total incurred	921,507		1,293,857		1,730,801
Deduct paid claims and LAE related to:
Current year (2)	12,503		39,642		54,410
Prior years	1,004,965		1,459,601		1,203,568
Total paid	1,017,468		1,499,243		1,257,978
Balance at end of period, net of reinsurance recoverables	3,000,370		3,096,331		3,301,717
Add reinsurance recoverables (1)	83,238		151,569		223,254
Balance at December 31	$	3,083,608	$	3,247,900	$	3,524,971

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(1)	Related to ceded losses on captive reinsurance transactions, Smart Home and quota share reinsurance transactions. See Note 9 for additional information.


(2)	Related to underlying defaulted loans with a most recent default notice dated in the year indicated. For example, if a loan had defaulted in a prior year, but then subsequently cured and later re-defaulted in the current year, that default would be considered a current year default.

Rescissions And Denials [Table Text Block]

The following table illustrates the amount of first-lien claims submitted to us for payment that were rescinded or denied, for the periods indicated, net of any reinstatements of previously rescinded policies or denied claims within each period:



	Year Ended December 31,
(In millions)	2012		2011		2010
Rescissions	$	279.3	$	474.2	$	538.3
Denials	539.4		170.9		261.7
Total first-lien claims submitted for payment that were rescinded or denied (1)	$	818.7	$	645.1	$	800.0

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(1)	Includes an amount related to a small number of submitted claims that were subsequently withdrawn by the insured.

We estimate our claim liability related to the potential future reinstatement of these previously rescinded policies and denied claims by estimating an initial gross reinstatement rate at the time of denial or rescission, which then declines over a 12 or 24 month timeframe as certain denials and rescissions are reinstated. As of December 31, 2012, for previously denied claims, this initial gross reinstatement assumption begins at approximately 60% and declines to 0% after 12 months, while for previously rescinded policies, the initial assumed reinstatement rate begins at approximately 16% and declines to 0% after 24 months. Our IBNR reserve estimate also includes projected impacts from future estimated rescissions (with respect to reinstated denials) and future claim curtailments (with respect to both reinstated denials and rescissions). Therefore, at any particular point in time, our IBNR reserve estimate with respect to previously rescinded policies or denied claims is affected by not only our initial reinstatement assumption, but by the length of time since the denial or rescission, our estimated likelihood of such reinstatements resulting in a paid claim, expected claim curtailments on such paid claims, as well as potential settlement discussions with our lender customers.

The cumulative amount of first-lien claims submitted to us for payment that have been rescinded in the last two years for primary loans and in the last three years for pool loans, and then subsequently were challenged (“rebutted”) by the lenders and policyholders, but have not been reinstated, was $461.4 million for the applicable period through December 31, 2012.

While the total potential claim amount of non-overturned rebuttals outstanding represents all challenged rescissions for which coverage has not been reinstated, our ongoing, active discussions with our lender customers typically involve only a small number of these non-overturned rebuttals. Accordingly, we expect that some portion of these rescinded claims may be reinstated in future periods. Absent litigation or other legal proceedings in which we are not successful, we do not expect that these discussions are likely to result in settlements that would materially impact our liquidity or results of operations.

We also accrue for the premiums that we expect to refund to our lender customers in connection with our estimated insurance rescission activity. Our accrued liability for such refunds, which is included within accounts payable and accrued expenses on our consolidated balance sheets, was $48.0 million and $57.2 million as of December 31, 2012 and 2011, respectively.

Rescission and denial rates in 2011 and 2012 have been affected by an increase in the number of claims received that we are reviewing for potential violations of our insurance policies. The following table shows the projected net cumulative denial and rescission rates in our total first-lien portfolio, net of both actual and expected reinstatements, as of December 31, 2012, with respect to claims received in each quarter indicated below:



Claim Received Quarter	Cumulative Rescission/Denial Rate for Each Quarter (1)		Percentage of Claims Resolved (2)
Q1 2010	18.5	%	100	%
Q2 2010	17.6	%	100	%
Q3 2010	16.0	%	100	%
Q4 2010	17.4	%	100	%
Q1 2011	20.8	%	99	%
Q2 2011	24.6	%	99	%
Q3 2011	28.1	%	97	%
Q4 2011	23.2	%	94	%
Q1 2012	21.3	%	84	%
Q2 2012	19.4	%	59	%

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(1)

Projected net cumulative rescission/denial rates represent the ratio of claims rescinded or denied to claims received (by claim count). Rescissions and denials are net of actual reinstatements, plus our current estimate for expected reinstatements of previously rescinded or denied claims. These amounts represent the cumulative rates for each quarter as of December 31, 2012. Until all of the claims received during the periods shown have been internally resolved, the rescission/denial rates for each quarter will be subject to change. As discussed in footnote (2) below, these rates also will remain subject to change based on differences between estimated and actual reinstatements of previously rescinded policies or denied claims.

(2)

The percentage of claims resolved for each quarter represents the number of claims that have been internally resolved as a percentage of the total number of claims received for that specific quarter. A claim is considered internally resolved when it is either paid or it is concluded that the claim should be denied or rescinded, though such denials or rescissions could be challenged and potentially reinstated or overturned, respectively. For the third and fourth quarters of 2012, a significant portion of claims received for those quarters have not been internally resolved; therefore, we do not believe the cumulative rescission/denial rates for those periods are presently meaningful and, therefore, they are not presented.

Schedule of Liability for Future Policy Benefits, by Product Segment [Table Text Block]

The following table shows our mortgage insurance reserve for losses and LAE by category at the end of each period indicated:



	Year Ended December 31,
(In thousands)	2012		2011
Reserves for losses by category:
Prime	$	1,739,968	$	1,748,412
Alt-A	564,719		612,423
A minus and below	361,533		370,806
Reinsurance recoverable (1)	83,238		151,569
Total primary reserves	2,749,458		2,883,210
Pool insurance	323,403		353,583
Total first-lien reserves	3,072,861		3,236,793
Second-lien and other (2)	10,747		11,107
Total reserve for losses	$	3,083,608	$	3,247,900

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(1)	Primarily represents ceded losses on captive transactions and Smart Home.


(2)	Does not include second-lien premium deficiency reserve.

- Definition

The entire disclosure for the present values of future benefits to be paid to or on behalf of policyholders and related expenses less the present value of future net premiums using assumptions such as estimates of expected investment yields, mortality, morbidity, terminations and expenses, applicable at the time the insurance contracts are made and unpaid claim costs relating to insurance contracts including estimates of costs relating to incurred but not reported claims based on the estimated ultimate cost of settling the claims (including effects of inflation and other societal and economic factors), using past experience adjusted for current trends and any other factors that would modify past experience by element such as business segment, country and interest rate range.

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- Definition

Tabular disclosure of the activity in the reserve for settling insured claims and expenses incurred in the claims settlement process for the period. The estimated liability includes the amount of money that will be required for future payments of (a) claims that have been reported to the insurer, (b) claims related to insured events that have occurred but that have not been reported to the insurer as of the date the liability is estimated, and (c) claim adjustment expenses. Claim adjustment expenses include costs incurred in the claim settlement process such as legal fees; outside adjuster fees; and costs to record, process, and adjust claims.

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