Note 11 - Losses and Loss Adjustment Expense (Note)

3 Months Ended

Mar. 31, 2021

Losses and LAE

Our reserve for losses and LAE, at the end of each period indicated, consisted of the following.


(In thousands)	March 31, 2021		December 31, 2020
Mortgage insurance loss reserves (1)	$	882,838	$	844,107
Title insurance loss reserves	4,517		4,306
Total reserve for losses and LAE	$	887,355	$	848,413

(1)Primarily comprises first lien primary case reserves of $841.6 million and $799.5 million at March 31, 2021 and December 31, 2020, respectively.

For the periods indicated, the following table presents information relating to our mortgage insurance reserve for losses, including our IBNR reserve and LAE, but excluding our second-lien mortgage loan premium deficiency reserve.


	Three Months Ended March 31,
(In thousands)	2021		2020
Balance at beginning of period	$	844,107	$	401,273
Less: Reinsurance recoverables (1)	71,769		14,594
Balance at beginning of period, net of reinsurance recoverables	772,338		386,679
Add: Losses and LAE incurred in respect of default notices reported and unreported in:
Current year (2)	50,312		41,242
Prior years	(4,513)		(5,876)
Total incurred	45,799		35,366
Deduct: Paid claims and LAE related to:
Current year (2)	16		—
Prior years	10,457		23,391
Total paid	10,473		23,391
Balance at end of period, net of reinsurance recoverables	807,664		398,654
Add: Reinsurance recoverables (1)	75,174		16,024
Balance at end of period	$	882,838	$	414,678

(1)Related to ceded losses recoverable, if any, on reinsurance transactions. See Note 8 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.

Reserve Activity

Incurred Losses

Case reserves established for new default notices were the primary driver of our total incurred losses for the three months ended March 31, 2021 and 2020, and they were primarily impacted by the number of new primary default notices received in the period and our related gross Default to Claim Rate assumption applied to those new defaults.

For the three months ended March 31, 2021, we experienced an increase in the number of new primary default notices, compared to the three months ended March 31, 2020, substantially all related to defaults subject to forbearance programs implemented in response to the COVID-19 pandemic. Our gross Default to Claim Rate assumption applied to new defaults was 8.0% as of March 31, 2021. While our Default to Claim Rate assumptions for prior year defaults were not materially changed as of March 31, 2021, our provision for losses during the first three months of 2021 was positively impacted by favorable reserve development on prior year defaults, primarily due to higher Cures than previously estimated. See Note 1 for additional information on the elevated risks and uncertainties resulting from the COVID-19 pandemic to our business.

Our gross Default to Claim Rate assumption applied to new defaults was 7.5% as of March 31, 2020. Our provision for losses during the first three months of 2020 was positively impacted by favorable reserve development on prior year defaults. This favorable development was primarily driven by a reduction during the periods in certain Default to Claim Rate assumptions for these prior year defaults based on observed trends, primarily higher Cures than previously estimated.

Claims Paid

Total claims paid decreased for the three months ended March 31, 2021 compared to the same period in 2020. Claims paid in 2021 include payments made to settle certain previously disclosed legal proceedings. See Note 13 for additional information about these legal proceedings. The decrease in claims paid is primarily attributable to COVID-19-related hardship forbearance plans and suspensions of foreclosure and evictions.

For additional information about our Reserve for Losses and LAE, including our accounting policies, see Notes 2 and 11 of Notes to Consolidated Financial Statements in our 2020 Form 10-K.