Note 4: Insurance Activity

The Company, through WMMRC, reinsures mortgage guaranty risks of mortgage loans originated by affiliates of the Company during the period from 1997 through 2008. WMMRC is (or was) a party to reinsurance agreements with UGRIC, GMIC, MGIC, PMI, Radian, RMIC and Triad. The agreements with UGRIC and Triad were placed into runoff effective May 31, 2008. The agreements with all other primary mortgage insurers were placed into runoff effective September 26, 2008. The reinsurance agreements with Triad, PMI and UGRIC were commuted on August 31, 2009, October 2, 2012 and April 3, 2014, respectively.

All agreements WMMRC and the primary mortgage insurers are on an excess of loss basis, except for certain reinsurance treaties with GMIC and Radian during 2007 and 2008, which are reinsured on a 50 percent quota share basis. Pursuant to the excess of loss reinsurance treaties, WMMRC reinsures a second loss layer which ranges from 5 percent to 10 percent of the risk in force in excess of the primary mortgage insurer’s first loss percentages which range from 4 percent to 5 percent. Each calendar year, or book year, is treated separately from other years when calculating losses. In return for accepting a portion of the risk, WMMRC receives, net of ceding commission, a percentage of the premium that ranges from 25 to 40 percent.

As security for the ceding insurers, WMMRC has entered into separate trust agreements with each of the primary mortgage insurance companies whereby a portion of the funds from premiums assumed are held in trust accounts for the benefit of each separate insurer. Pursuant to the terms of the reinsurance agreements, WMMRC is required to keep such assets in trust for a minimum of five (5) years and is subject to claims for up to ten (10) years from termination of obligations arising from the last year in which insurance business was written prior to runoff. Release of funds from the trust by WMMRC requires approval from the primary mortgage guaranty companies.

Premiums assumed and earned are as follows for the periods ended December 31, 2014, 2013 and 2012, respectively:

	Successor							Predecessor
	Year ended		Year ended			Period from March 20 through		Period from January 1, 2012 through
	December 31,		December 31,			December 31,		March 19,
	2014		2013			2012		2012
Premiums assumed	$	6,869	$	12,115		$	14,210	$	6,130
Change in unearned premiums		300		(1,169	)		184		47
Premiums earned	$	7,169	$	10,946		$	14,394	$	6,177

The components of the liability for losses and loss adjustment reserves are as follows as of December 31, 2014, 2013 and 2012, respectively:

	December 31,		December 31,		December 31,
	2014		2013		2012
Case-basis reserves	$	16,538	$	41,159	$	66,173
IBNR reserves		110		713		1,298
Premium deficiency reserves		2,299		2,442		15,053
Total losses and loss adjustment reserves	$	18,947	$	44,314	$	82,524

Losses and loss adjustment reserve activity are as follows for the years ended December 31, 2014, 2013 and 2012, respectively:

	December 31,			December 31,			December 31,
	2014			2013			2012
Balance at beginning of period	$	44,314		$	82,524		$	142,119
Incurred (released) - prior periods		3,281			(6,159	)		30,111
Paid - prior periods		(28,648	)		(32,051	)		(89,706	)
Total losses and loss adjustment reserves	$	18,947		$	44,314		$	82,524

The loss contract fair market reserve balance is analyzed and adjusted quarterly. The balances in the reserve was $12.5 million at December 31, 2014 and $46.3 million at December 31, 2013. The loss contract fair market reserve was established on March 19, 2012 at $63.1 million (as more fully described in Note 3: Fresh Start Accounting). The fair market value of this reserve was decreased by $33.8 million and $5.9 million and $10.9 million during the periods ended December 31, 2014, 2013 and 2012, respectively, resulting in corresponding decreases in expense of the respective amount for each period.