Note 3 - Segment Reporting Level 1 (Notes)

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Segment Reporting

Our mortgage insurance and financial guaranty segments are strategic business units that are managed separately. We allocate corporate income and expenses to our mortgage insurance and financial guaranty segments based on either an allocated percentage of time spent on each segment or internally allocated capital, which is based on the relative GAAP equity of each segment. We allocate corporate cash and investments to our segments based on internally allocated capital. The results for each segment for each reporting period can cause significant volatility in internally allocated capital based on relative GAAP equity, which can impact the allocations of income and expenses to our segments.

In 2013, management determined that the allocation of our consolidated provision for taxes to the segments was no longer material to the evaluation of our business results. Therefore, financial information for our business segments is disclosed on a pretax basis because senior management uses pretax results in the allocation of resources and in assessing the performance of the segments.

Summarized financial information concerning our operating segments, as of and for the periods indicated, is as follows:

	December 31, 2013
(In thousands)	Mortgage Insurance			Financial Guaranty			Consolidated
Net premiums written—insurance	$	950,998		$	(10,181	)	$	940,817
Net premiums earned—insurance	$	781,420		$	49,474		$	830,894
Net investment income	61,615			46,473			108,088
Net losses on investments	(93,821		)	(55,899		)	(149,720		)
Net impairment losses recognized in earnings	—			(3		)	(3		)
Change in fair value of derivative instruments	635			(32,406		)	(31,771		)
Net losses on other financial instruments	(2,840		)	(1,896		)	(4,736		)
Other income	6,024			211			6,235
Total revenues	753,033			5,954			758,987
Provision for losses	564,648			2,486			567,134
Change in PDR	(1,901		)	—			(1,901		)
Policy acquisition costs	28,485			13,179			41,664
Other operating expenses	236,959			47,569			284,528
Interest expense	17,995			56,623			74,618
Total expenses	846,186			119,857			966,043
Equity in net income of affiliates	—			1			1
Pretax loss	$	(93,153	)	$	(113,902	)	$	(207,055	)
Cash and investments	$	2,683,467		$	2,294,075		$	4,977,542
Deferred policy acquisition costs	29,741			37,185			66,926
Total assets	3,120,904			2,500,787			5,621,691
Unearned premiums	567,072			201,799			768,871
Reserve for losses and LAE	2,164,353			21,068			2,185,421
VIE debt	2,845			91,800			94,645
Derivative liabilities	—			307,185			307,185
NIW (in millions)	$	47,255

	December 31, 2012
(In thousands)	Mortgage Insurance			Financial Guaranty			Consolidated
Net premiums written—insurance	$	806,305		$	(119,675	)	$	686,630
Net premiums earned—insurance	$	702,385		$	36,597		$	738,982
Net investment income	63,191			51,146			114,337
Net gains on investments	103,666			81,222			184,888
Net impairment losses recognized in earnings	—			(3		)	(3		)
Change in fair value of derivative instruments	(330		)	(143,695		)	(144,025		)
Net losses on other financial instruments	(3,491		)	(78,778		)	(82,269		)
Gain on sale of affiliate	—			7,708			7,708
Other income	5,516			274			5,790
Total revenues	870,937			(45,529		)	825,408
Provision for losses	921,507			37,664			959,171
Change in PDR	41			—			41
Policy acquisition costs	34,131			27,745			61,876
Other operating expenses	152,448			44,224			196,672
Interest expense	7,454			44,378			51,832
Total expenses	1,115,581			154,011			1,269,592
Equity in net loss of affiliates	—			(13		)	(13		)
Pretax loss	$	(244,644	)	$	(199,553	)	$	(444,197	)
Cash and investments	$	3,118,153		$	2,090,046		$	5,208,199
Deferred policy acquisition costs	38,478			49,724			88,202
Total assets	3,575,427			2,327,773			5,903,200
Unearned premiums	382,413			266,269			648,682
Reserve for losses and LAE	3,083,608			66,328			3,149,936
VIE debt	9,875			98,983			108,858
Derivative liabilities	—			266,873			266,873
NIW (in millions)	$	37,061

	December 31, 2011
(In thousands)	Mortgage Insurance			Financial Guaranty			Consolidated
Net premiums written—insurance	$	717,264		$	(10,017	)	$	707,247
Net premiums earned—insurance	$	680,895		$	75,130		$	756,025
Net investment income	93,678			69,842			163,520
Net gains on investments	126,205			75,972			202,177
Net impairment losses recognized in earnings	(1,202		)	—			(1,202		)
Change in fair value of derivative instruments	(632		)	629,027			628,395
Net gains on other financial instruments	3,864			189,465			193,329
Other income	5,369			230			5,599
Total revenues	908,177			1,039,666			1,947,843
Provision for losses	1,293,857			2,664			1,296,521
Change in PDR	(7,092		)	—			(7,092		)
Policy acquisition costs	36,051			16,712			52,763
Other operating expenses	132,225			43,585			175,810
Interest expense	13,894			47,500			61,394
Total expenses	1,468,935			110,461			1,579,396
Equity in net income of affiliates	—			65			65
Pretax (loss) income	$	(560,758	)	$	929,270		$	368,512
Cash and investments	$	3,210,279		$	2,635,889		$	5,846,168
Deferred policy acquisition costs	52,094			87,812			139,906
Total assets	3,470,103			3,186,662			6,656,765
Unearned premiums	233,446			403,926			637,372
Reserve for losses and LAE	3,247,900			63,002			3,310,902
VIE debt	9,450			218,790			228,240
Derivative liabilities	—			126,006			126,006
NIW (in millions)	$	15,510

A reconciliation of segment pretax (loss) income to consolidated net (loss) income is as follows:

	Year Ended December 31,
	2013			2012			2011
(In thousands)
Mortgage Insurance pretax loss	$	(93,153	)	$	(244,644	)	$	(560,758	)
Financial Guaranty pretax (loss) income	(113,902		)	(199,553		)	929,270
Income tax (benefit) provision	(10,070		)	7,271			66,362
Consolidated net (loss) income	$	(196,985	)	$	(451,468	)	$	302,150

Concentration of Risk

Net premiums earned attributable to foreign countries and long-lived assets located in foreign countries were immaterial for the periods presented.

As of December 31, 2013, California is the only state that accounted for more than 10% of our mortgage insurance business measured by primary RIF. California accounted for 13.7% of our mortgage insurance segment’s primary RIF at December 31, 2013, compared to 12.8% at December 31, 2012. California also accounted for 10.0% of our mortgage insurance segment’s pool RIF at December 31, 2013, compared to 10.4% at December 31, 2012. California accounted for 18.4% of our mortgage insurance segment’s direct primary NIW for the year ended December 31, 2013, compared to 17.1% and 15.3% for the years ended December 31, 2012 and 2011, respectively.

The largest single mortgage insurance customer (including branches and affiliates), measured by primary NIW, accounted for 5.8% of NIW during 2013, compared to 6.2% and 10.1% in 2012 and 2011, respectively. Earned premiums from one mortgage insurance customer exceeded 10% of our consolidated revenues in 2013, compared to the prior year, when earned premiums from two mortgage insurance customers both exceeded 10% of our consolidated revenues for the year.