Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Oct. 30, 2015 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | MGIC INVESTMENT CORP | |
Entity Central Index Key | 876,437 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 339,656,530 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2015 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Securities, available-for-sale, at fair value: | ||
Fixed maturities (amortized cost, 2015 - $4,598,347; 2014 - $4,602,514) | $ 4,588,331 | $ 4,609,614 |
Equity securities | 5,634 | 3,055 |
Total investment portfolio | 4,593,965 | 4,612,669 |
Cash and cash equivalents | 384,536 | 197,882 |
Restricted cash and cash equivalents | 0 | 17,212 |
Accrued investment income | 36,861 | 30,518 |
Prepaid reinsurance premiums | 187 | 47,623 |
Reinsurance recoverable on loss reserves | 38,748 | 57,841 |
Reinsurance recoverable on paid losses | 4,275 | 6,424 |
Premiums receivable | 51,579 | 57,442 |
Home office and equipment, net | 29,265 | 28,693 |
Deferred insurance policy acquisition costs | 14,997 | 12,240 |
Profit commission receivable | 0 | 91,500 |
Deferred income taxes, net | 758,851 | 0 |
Other assets | 94,886 | 106,390 |
Total assets | 6,008,150 | 5,266,434 |
Liabilities: | ||
Loss reserves | 1,979,943 | 2,396,807 |
Premium deficiency reserve | 0 | 23,751 |
Unearned premiums | 265,119 | 203,414 |
Senior notes | 61,953 | 61,918 |
Convertible senior notes | 845,000 | 845,000 |
Convertible junior debentures | 389,522 | 389,522 |
Other liabilities | 318,094 | 309,119 |
Total liabilities | $ 3,859,631 | $ 4,229,531 |
Contingencies | ||
Shareholders' equity: | ||
Common stock (one dollar par value, shares authorized 1,000,000; shares issued 2015 - 340,091; 2014 - 340,047; shares outstanding 2015 - 339,651; 2014 - 338,560) | $ 340,091 | $ 340,047 |
Paid-in capital | 1,667,307 | 1,663,592 |
Treasury stock (shares at cost 2015 - 440; 2014 - 1,487) | (3,362) | (32,937) |
Accumulated other comprehensive loss, net of tax | (43,147) | (81,341) |
Retained earnings (deficit) | 187,630 | (852,458) |
Total shareholders' equity | 2,148,519 | 1,036,903 |
Total liabilities and shareholders' equity | $ 6,008,150 | $ 5,266,434 |
CONSOLIDATED BALANCE SHEETS (U3
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Fixed maturities, amortized cost | $ 4,598,347 | $ 4,602,514 |
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, shares authorized (in shares) | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued (in shares) | 340,091,000 | 340,047,000 |
Common stock, shares outstanding (in shares) | 339,651,000 | 338,560,000 |
Treasury stock, shares at cost (in shares) | 440,000 | 1,487,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Premiums written: | ||||
Direct | $ 273,803 | $ 255,041 | $ 800,619 | $ 740,479 |
Assumed | 285 | 400 | 931 | 1,281 |
Ceded | 43,897 | (32,536) | (22,334) | (87,450) |
Net premiums written | 317,985 | 222,905 | 779,216 | 654,310 |
Increase in unearned premiums, net | (78,751) | (13,870) | (109,186) | (23,528) |
Net premiums earned | 239,234 | 209,035 | 670,030 | 630,782 |
Investment income, net of expenses | 25,939 | 22,355 | 75,815 | 63,691 |
Net realized investment gains (losses): | ||||
Total other-than-temporary impairment losses | 0 | 0 | 0 | 0 |
Portion of losses recognized in comprehensive income, before taxes | 0 | 0 | 0 | 0 |
Net impairment losses recognized in earnings | 0 | 0 | 0 | 0 |
Other realized investment gains | 640 | 632 | 27,133 | 923 |
Net realized investment gains | 640 | 632 | 27,133 | 923 |
Other revenue | 3,698 | 3,093 | 9,877 | 6,037 |
Total revenues | 269,511 | 235,115 | 782,855 | 701,433 |
Losses and expenses: | ||||
Losses incurred, net | 76,458 | 115,254 | 248,481 | 379,003 |
Change in premium deficiency reserve | 0 | (6,744) | (23,751) | (19,750) |
Amortization of deferred policy acquisition costs | 2,368 | 2,096 | 6,191 | 5,191 |
Other underwriting and operating expenses, net | 46,075 | 34,882 | 121,152 | 105,101 |
Interest expense | 17,362 | 17,361 | 52,097 | 52,274 |
Total losses and expenses | 142,263 | 162,849 | 404,170 | 521,819 |
Income before tax | 127,248 | 72,266 | 378,685 | 179,614 |
(Benefit from) provision for income taxes | (695,604) | 249 | (690,897) | 2,093 |
Net income | $ 822,852 | $ 72,017 | $ 1,069,582 | $ 177,521 |
Income per share | ||||
Basic (in dollars per share) | $ 2.42 | $ 0.21 | $ 3.15 | $ 0.52 |
Diluted (in dollars per share) | $ 1.78 | $ 0.18 | $ 2.35 | $ 0.45 |
Weighted average shares outstanding - basic and diluted | ||||
Weighted average common shares outstanding - basic (in shares) | 339,701 | 338,626 | 339,504 | 338,488 |
Weighted average common shares outstanding - diluted (in shares) | 468,149 | 413,576 | 468,097 | 413,473 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 822,852 | $ 72,017 | $ 1,069,582 | $ 177,521 |
Other comprehensive (loss) income, net of tax: | ||||
Change in unrealized investment gains and losses | 95,295 | (17,301) | 51,212 | 66,798 |
Benefit plan adjustments | (7,355) | (1,732) | (8,447) | (5,198) |
Foreign currency translation adjustment | (2,947) | (2,490) | (4,571) | (650) |
Other comprehensive income (loss), net of tax | 84,993 | (21,523) | 38,194 | 60,950 |
Comprehensive income | $ 907,845 | $ 50,494 | $ 1,107,776 | $ 238,471 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands | Total | Common stock | Paid-in capital | Treasury stock | Accumulated other comprehensive income (loss) | Retained earnings (deficit) |
Balance, beginning of period at Dec. 31, 2013 | $ 340,047 | $ 1,661,269 | $ (64,435) | $ (117,726) | $ (1,074,617) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | $ 177,521 | 177,521 | ||||
Net common stock issued under share-based compensation plans | 0 | 0 | ||||
Reissuance of treasury stock, net | (6,680) | 31,498 | (29,791) | |||
Tax benefit from share-based compensation | 0 | |||||
Equity compensation | 6,472 | |||||
Other comprehensive income | 60,950 | 60,950 | ||||
Balance, end of period at Sep. 30, 2014 | 984,508 | 340,047 | 1,661,061 | (32,937) | (56,776) | (926,887) |
Balance, beginning of period at Dec. 31, 2014 | 1,036,903 | 340,047 | 1,663,592 | (32,937) | (81,341) | (852,458) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 1,069,582 | 1,069,582 | ||||
Net common stock issued under share-based compensation plans | 44 | (446) | ||||
Reissuance of treasury stock, net | (6,894) | 29,575 | (29,494) | |||
Tax benefit from share-based compensation | 2,113 | |||||
Equity compensation | 8,942 | |||||
Other comprehensive income | 38,194 | 38,194 | ||||
Balance, end of period at Sep. 30, 2015 | $ 2,148,519 | $ 340,091 | $ 1,667,307 | $ (3,362) | $ (43,147) | $ 187,630 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities: | ||
Net income | $ 1,069,582 | $ 177,521 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 38,361 | 38,229 |
Deferred tax (benefit) expense | (698,177) | 336 |
Realized investment gains, net | (27,133) | (923) |
Loss on repurchases of senior notes | 0 | 837 |
Excess tax benefits related to share-based compensation | (2,113) | 0 |
Other | (21,795) | 19,845 |
Change in certain assets and liabilities: | ||
Accrued investment income | (6,343) | 1,177 |
Prepaid insurance premium | 47,436 | (7,987) |
Reinsurance recoverable on loss reserves | 19,093 | 6,187 |
Reinsurance recoverable on paid losses | 2,149 | 3,975 |
Premium receivable | 5,863 | 1,971 |
Deferred insurance policy acquisition costs | (2,757) | (1,929) |
Profit commission receivable | 91,500 | (66,584) |
Real estate | 2,574 | (3,285) |
Loss reserves | (416,864) | (533,819) |
Premium deficiency reserve | (23,751) | (19,750) |
Unearned premiums | 61,705 | 31,513 |
Return premium accrual | (6,400) | 16,200 |
Income taxes payable - current | 2,101 | (1,180) |
Net cash provided by (used in) operating activities | 135,031 | (337,666) |
Purchases of investments: | ||
Fixed maturities | (1,970,402) | (1,549,883) |
Equity securities | (2,593) | (59) |
Proceeds from sales of fixed maturities | 1,527,680 | 902,660 |
Proceeds from maturity of fixed maturities | 432,328 | 914,465 |
Net increase in payable for securities | 48,120 | 7,245 |
Net decrease in restricted cash | 17,212 | 233 |
Additions to property and equipment | (2,835) | (3,998) |
Net cash provided by investing activities | 49,510 | 270,663 |
Cash flows from financing activities: | ||
Repayment of long-term debt | 0 | (21,767) |
Excess tax benefits related to share-based compensation | 2,113 | 0 |
Net cash provided by (used in) financing activities | 2,113 | (21,767) |
Net increase (decrease) in cash and cash equivalents | 186,654 | (88,770) |
Cash and cash equivalents at beginning of period | 197,882 | 332,692 |
Cash and cash equivalents at end of period | $ 384,536 | $ 243,922 |
Nature of Business and Basis of
Nature of Business and Basis of Presentation | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business and Basis of Presentation | Nature of Business and Basis of Presentation MGIC Investment Corporation is a holding company which, through Mortgage Guaranty Insurance Corporation ("MGIC"), MGIC Indemnity Corporation (“MIC”) and several other subsidiaries, is principally engaged in the mortgage insurance business. We provide mortgage insurance to lenders throughout the United States and to government sponsored entities to protect against loss from defaults on low down payment residential mortgage loans. The accompanying unaudited consolidated financial statements of MGIC Investment Corporation and its wholly-owned subsidiaries have been prepared in accordance with the instructions to Form 10-Q as prescribed by the Securities and Exchange Commission (“SEC”) for interim reporting and do not include all of the other information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2014 included in our Annual Report on Form 10-K. As used below, “we,” “our” and “us” refer to MGIC Investment Corporation’s consolidated operations or to MGIC Investment Corporation, as the context requires. In the opinion of management the accompanying financial statements include all adjustments, consisting primarily of normal recurring accruals, necessary to fairly state our financial position and results of operations for the periods indicated. The results of operations for the interim period may not be indicative of the results that may be expected for the year ending December 31, 2015 . Capital - GSEs Since 2008, substantially all of our insurance written has been for loans sold to Fannie Mae and Freddie Mac (the “GSEs”). In April 2015, the GSEs each released revised private mortgage insurer eligibility requirements (the “PMIERs”) that become effective December 31, 2015. The PMIERs include revised financial requirements for mortgage insurers under which a mortgage insurer’s “Available Assets” (generally only the most liquid assets of an insurer) must meet or exceed “Minimum Required Assets” (which are based on an insurer’s book and are calculated from tables of factors with several risk dimensions and are subject to a floor amount). Based on our interpretation of the PMIERs, we expect that MGIC will be in compliance with the PMIERs when they become effective. This expectation reflects, among other things, that the GSEs have allowed full credit under the PMIERs for the risk ceded under our restructured quota share reinsurance transaction. In the third quarter of 2015, the restructured transaction became effective after being approved by each of the GSEs and the Office of the Commissioner of Insurance of the State of Wisconsin (“OCI”). The GSEs’ ongoing approval of the transaction is subject to several conditions and the transaction will be reviewed under the PMIERs at least annually by the GSEs. We expect to increase our Available Assets in the future by repatriating to MGIC certain assets of MGIC's MIC subsidiary. If additional Available Assets are required in the future, we believe that a portion of our holding company’s cash and investments may be available for future contribution to MGIC. Factors that may negatively impact MGIC’s ability to comply with the PMIERs after their effective date include the following: • The GSEs may reduce the amount of credit they allow under the PMIERs for the risk ceded under our quota share reinsurance transaction. • We may not obtain regulatory authorization to repatriate assets from MIC to MGIC to the extent we are assuming because regulators project higher losses than we project or require a level of capital be maintained in MIC higher than we are assuming. • MGIC may not receive additional capital contributions from our holding company due to competing demands on the holding company resources, including for repayment of debt. • Our future operating results may be negatively impacted by the matters discussed in the rest of these footnotes. Such matters could decrease our revenues, increase our losses or require the use of assets, thereby creating a shortfall in Available Assets. There can be no assurance that the GSEs will not make the PMIERs more onerous in the future; in this regard, the PMIERs provide that the tables of factors that determine Minimum Required Assets will be updated every two years and may be updated more frequently to reflect changes in macroeconomic conditions or loan performance. The GSEs will provide notice 180 days prior to the effective date of table updates. In addition, the GSEs may amend the PMIERs at any time. If MGIC ceases to be eligible to insure loans purchased by one or both of the GSEs, it would significantly reduce the volume of our new business writings. While on an overall basis, the amount of Available Assets we must hold in order to continue to insure GSE loans has increased under the PMIERs over what state regulation currently provides, our reinsurance transaction mitigates the negative effect of the PMIERs on our returns. In this regard, see the first bullet point above. See additional disclosure regarding statutory capital in Note 16 – “Statutory Capital.” Reclassifications Certain reclassifications have been made in the accompanying financial statements to 2014 amounts to conform to 2015 presentation. For the nine months ended September 30, 2014 cash used for additions to property and equipment was previously presented as “Other” within cash flows from operating activities and is presented separately as “Additions to property and equipment” within cash flows from investing activities as of September 30, 2015 . This revision is not material to amounts reported or disclosed by us in prior periods. Restricted cash and cash equivalents During the second quarter of 2013, approximately $60.3 million was placed in escrow in connection with the two agreements we entered into to resolve our dispute with Countrywide Home Loans, Inc. (“CHL”) and its affiliate, Bank of America, N.A., as successor to Countrywide Home Loans Servicing LP (“BANA” and collectively with CHL, “Countrywide”) regarding rescissions. In the fourth quarter of 2013, approximately $42.9 million was released from escrow in connection with the BANA agreement. In the first quarter of 2015, the remaining escrow funds were disbursed to us pursuant to the amended and restated settlement agreement and release entered into with CHL on March 2, 2015. See additional discussion of these settlement agreements in Note 5 – “Litigation and Contingencies.” Subsequent events We have considered subsequent events through the date of this filing. As discussed in Note 3 – "Debt" we have repaid our Senior Notes that matured on November 1, 2015 in the amount of $61.9 million . |
New Accounting Pronouncements
New Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2015 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board ("FASB") issued guidance to clarify the principles for recognizing revenue. While insurance contracts are not within the scope of this updated guidance, our fee income related to contract underwriting and other fee-based services provided to lenders will be subject to this guidance. The updated guidance requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. The guidance is effective for reporting periods beginning after December 15, 2017 with early adoption for reporting periods beginning after December 15, 2016 permitted. We are currently evaluating the impact of this update, but it is not expected to have a significant impact on our consolidated financial statements and disclosures. Presentation of Debt Issuance Costs In April 2015, the FASB amended existing guidance related to the presentation of debt issuance costs. The new standard requires the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. It is effective for annual reporting periods beginning after December 15, 2015, but early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on our consolidated financial statements. Disclosures about Short-Duration Contracts In May 2015, the FASB issued guidance requiring expanded disclosures for insurance entities that issue short-duration contracts. The expanded disclosures are designed to provide additional insight into an insurance entity's ability to underwrite and anticipate costs associated with claims. The disclosures include information about incurred and paid claims development by accident year, on a net of reinsurance basis, for the number of years claims incurred typically remain outstanding, not to exceed ten years. Each period presented in the disclosure about claims development that precedes the current reporting periods is considered supplementary information. The expanded disclosures also include more transparent information about significant changes in methodologies and assumptions used to estimate claims, and the timing, frequency, and severity of claims. The disclosures required by this update are effective for annual periods beginning after December 31, 2015, and interim periods within annual periods beginning after December 31, 2016, and is to be applied retrospectively. We are evaluating the impact, if any, of the new disclosure requirements. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Debt | Debt Long-term debt as of September 30, 2015 and December 31, 2014 consists of the following obligations. September 30, December 31, (In millions) Senior Notes, interest at 5.375% per annum, due November 2015 $ 61.9 $ 61.9 Convertible Senior Notes, interest at 5% per annum, due May 2017 (1) 345.0 345.0 Convertible Senior Notes, interest at 2% per annum, due April 2020 (2) (3) 500.0 500.0 Convertible Junior Subordinated Debentures, interest at 9% per annum, due April 2063 (4) 389.5 389.5 Total debt 1,296.4 1,296.4 Less current portion of debt (61.9 ) (61.9 ) Total long-term debt $ 1,234.5 $ 1,234.5 (1) Convertible at any time prior to maturity at the holder's option, at an initial conversion rate, which is subject to adjustment, of 74.4186 shares per $1,000 principal amount, representing an initial conversion price of approximately $13.44 per share. (2) Prior to January 1, 2020, the 2% Convertible Senior Notes are convertible only upon satisfaction of one or more conditions. One such condition is that during any calendar quarter commencing after March 31, 2014, the last reported sale price of our common stock for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter be greater than or equal to 130% of the applicable conversion price on each applicable trading day. The 2% Notes are convertible at an initial conversion rate, which is subject to adjustment, of 143.8332 shares per $1,000 principal amount, representing an initial conversion price of approximately $6.95 per share. 130% of such conversion price is $9.03 . On or after January 1, 2020, holders may convert their notes irrespective of satisfaction of the conditions. Our common stock price was greater than or equal to 130% of the applicable conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, September 30, 2015 . (3) Prior to April 10, 2017, the notes will not be redeemable. On any business day on or after April 10, 2017 we may redeem for cash all or part of the notes, at our option, at a redemption rate equal to 100% of the principal amount of the notes being redeemed, plus any accrued and unpaid interest, if the closing sale price of our common stock exceeds 130% of the then prevailing conversion price of the notes for each of at least 20 of the 30 consecutive trading days preceding notice of the redemption. (4) Convertible at any time prior to maturity at the holder's option, at an initial conversion rate, which is subject to adjustment, of 74.0741 shares per $1,000 principal amount, representing an initial conversion price of approximately $13.50 per share. If a holder elects to convert their debentures, deferred interest owed on the debentures being converted is also converted into shares of our common stock. The conversion rate for any deferred interest is based on the average price that our shares traded at during a 5 -day period immediately prior to the election to convert. In lieu of issuing shares of common stock upon conversion of the debentures, we may, at our option, make a cash payment to converting holders for all or some of the shares of our common stock otherwise issuable upon conversion. Interest payments on our existing debt obligations appear below. Nine Months Ended 2015 2014 (In millions) Senior Notes, interest at 5.375% per annum, due November 2015 $ 1.7 $ 1.7 Convertible Senior Notes, interest at 5% per annum, due May 2017 8.6 8.6 Convertible Senior Notes, interest at 2% per annum, due April 2020 5.0 5.0 Convertible Junior Subordinated Debentures, interest at 9% per annum, due April 2063 17.5 17.5 Total interest payments $ 32.8 $ 32.8 The Senior Notes, Convertible Senior Notes and Convertible Junior Subordinated Debentures are obligations of our holding company, MGIC Investment Corporation, and not of its subsidiaries. We repaid our Senior Notes on November 2, 2015 in the amount of $61.9 million with MGIC Investment Corporation cash on hand. The repayment of our Senior Notes had no significant impact on our liquidity or financial position. As of September 30, 2015 , we had approximately $469 million in cash and investments at our holding company. The net unrealized losses on our holding company investment portfolio were approximately $0.4 million as of September 30, 2015 . The modified duration of the holding company investment portfolio, excluding cash and cash equivalents, was 2.9 years at September 30, 2015 . |
Reinsurance
Reinsurance | 9 Months Ended |
Sep. 30, 2015 | |
Reinsurance Disclosures [Abstract] | |
Reinsurance | Reinsurance Effective July 1, 2015, we settled our 2013 quota share reinsurance agreement ("2013 QSR Transaction") by commutation. The settlement included any premiums, losses, and profit commission. The commutation resulted in an increase in net premiums written and earned of $69.4 million and $11.6 million , respectively, and a decrease in ceding commissions of $11.6 million in the third quarter of 2015. Receipt of our profit commission of $142.5 million , in addition to other premium and loss amounts, was also completed as part of the settlement. Effective July 1, 2015, we entered into a quota share reinsurance agreement ("2015 QSR Transaction") with a group of unaffiliated reinsurers that are the same as our 2013 QSR Transaction. Each of the reinsurers has an insurer financial strength rating of A- or better by Standard and Poor’s Rating Services, A.M. Best or both. The 2015 QSR Transaction will provide coverage on policies that were in the 2013 QSR Transaction with some exclusions; additional qualifying in force policies as of the agreement effective date which either had no history of defaults, or where a single default has been cured for twelve or more months at the agreement effective date; and all qualifying new insurance written through December 31, 2016. The agreement will provide coverage on losses incurred on or after the effective date with renewal premium through December 31, 2024, at which time the agreement expires. The 2015 QSR Transaction increases the amount of our insurance in force covered by reinsurance and will result in an increase in the amount of premiums and losses ceded. Early termination of the agreement can be elected by us effective December 31, 2018 for a fee, or under specified scenarios for no fee upon prior written notice. Further, at our sole discretion we may elect to terminate the agreement if we will receive less than 90% of the full PMIERs credit amount for the risk ceded under the 2015 QSR Transaction in any required calculation period. The structure of the 2015 QSR Transaction is a 30% quota share for all policies covered, with a 20% ceding commission as well as a profit commission. Generally, under the 2015 QSR Transaction, we will receive a profit commission provided that the loss ratio on the loans covered under the agreement remains below 60% . A summary of our quota share reinsurance agreements, excluding captive agreements, appears below. 2013 QSR Transaction Three Months Ended September 30, Nine months ended September 30, 2015 (1) 2014 2015 (1) 2014 (In thousands) Ceded premiums written, net of profit commission $ (69,410 ) $ 27,725 $ (11,355 ) $ 72,414 Ceded premiums earned, net of profit commission (11,568 ) 23,736 35,999 64,330 Ceded losses incurred — 4,689 6,060 10,347 Ceding commissions (2) (11,568 ) 9,922 10,235 27,800 Ceded unearned premiums — 39,946 — 43,935 Profit commission 11,568 21,887 62,525 66,584 (1) The three and nine months ended September 30, 2015 include the non-recurring impact of commuting our 2013 QSR Transaction in the third quarter. The commutation had no impact on ceded losses incurred. (2) Ceding commissions are reported within Other underwriting and operating expenses, net on the consolidated statements of operations. 2015 QSR Transaction Three and Nine Months Ended September 30, 2015 (In thousands) Ceded premiums written, net of profit commission (1) $ 22,626 Ceded premiums earned, net of profit commission (1) 22,626 Ceded losses incurred 4,236 Ceding commissions (2) 9,195 Profit commission 23,347 (1) As of July 1, 2015 premiums are ceded on an earned and received basis as defined in our 2015 QSR Transaction. (2) Ceding commissions are reported within Other underwriting and operating expenses, net on the consolidated statements of operations. Under the terms of 2015 QSR Transaction, reinsurance premiums, ceding commission and profit commission are settled net on a quarterly basis. The reinsurance premium due after deducting the related ceding commission and profit commission is reported within "Other liabilities" on the consolidated balance sheet. For periods ending June 30, 2015 and prior, the profit commission accrued has been reported separately on the consolidated balance sheet. As of December 31, 2014 , we had accrued a profit commission receivable of $91.5 million . In the past, MGIC also obtained captive reinsurance. In a captive reinsurance arrangement, the reinsurer is affiliated with the lender for whom MGIC provides mortgage insurance. As part of our settlement with the Consumer Financial Protection Bureau (“CFPB”) in 2013 and with the Minnesota Department of Commerce (the “MN Department”) in June 2015, discussed in Note 5 – “Litigation and Contingencies” MGIC has agreed to not enter into any new captive reinsurance agreement or reinsure any new loans under any existing captive reinsurance agreement for a period of ten years subsequent to the respective settlements. In accordance with the CFPB settlement, all of our active captive arrangements were placed into run-off. In addition, at the time PMIERs become effective on December 31, 2015 the GSEs will not approve any future reinsurance or risk sharing transaction with a mortgage enterprise or an affiliate of a mortgage enterprise. Captive agreements were generally written on an annual book of business and each captive reinsurer is required to maintain a separate trust account to support its combined reinsured risk on all annual books. MGIC is the sole beneficiary of the trusts, and the trust accounts are made up of capital deposits by the captive reinsurers, premium deposits by MGIC, and investment income earned. These amounts are held in the trust account and are available to pay reinsured losses. The reinsurance recoverable on loss reserves related to captive agreements was $34 million at September 30, 2015 which was supported by $159 million of trust assets, while at December 31, 2014 , the reinsurance recoverable on loss reserves related to captive agreements was $45 million , which was supported by $198 million of trust assets. |
Litigation and Contingencies
Litigation and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Litigation and Contingencies | Litigation and Contingencies Before paying a claim, we review the loan and servicing files to determine the appropriateness of the claim amount. All of our insurance policies provide that we can reduce or deny a claim if the servicer did not comply with its obligations under our insurance policy, including the requirement to mitigate our loss by performing reasonable loss mitigation efforts or, for example, diligently pursuing a foreclosure or bankruptcy relief in a timely manner. We call such reduction of claims submitted to us “curtailments.” In 2014 and the first three quarters of 2015, curtailments reduced our average claim paid by approximately 6.7% and 7.0% , respectively. After we pay a claim, servicers and insureds sometimes object to our curtailments and other adjustments. We review these objections if they are sent to us within 90 days after the claim was paid. When reviewing the loan file associated with a claim, we may determine that we have the right to rescind coverage on the loan. (In our SEC reports, we refer to insurance rescissions and denials of claims collectively as "rescissions" and variations of that term.) In recent quarters, approximately 5% of claims received in a quarter have been resolved by rescissions, down from the peak of approximately 28% in the first half of 2009. We estimate rescissions mitigated our incurred losses by approximately $2.5 billion in 2009 and $0.2 billion in 2010 and have not significantly mitigated our incurred losses since then. Our loss reserving methodology incorporates our estimates of future rescissions and reversals of rescissions. Historically, reversals of rescissions have been immaterial. A variance between ultimate actual rescission and reversal rates and our estimates, as a result of the outcome of litigation, settlements or other factors, could materially affect our losses. If the insured disputes our right to rescind coverage, we generally engage in discussions in an attempt to settle the dispute. As part of those discussions, we may voluntarily suspend rescissions we believe may be part of a settlement. Certain settlements require GSE approval. The GSEs consented to two settlement agreements we entered into with Countrywide Home Loans, Inc. (“CHL”) and its affiliate, Bank of America, N.A., as successor to Countrywide Home Loans Servicing LP (“BANA” and collectively with CHL, “Countrywide”), but there is no guarantee they will approve others. We have reached and implemented settlement agreements that do not require GSE approval, but they have not been material in the aggregate. If we are unable to reach a settlement, the outcome of a dispute ultimately would be determined by legal proceedings. Under our policies in effect prior to October 1, 2014, legal proceedings disputing our right to rescind coverage may be brought up to three years after the lender has obtained title to the property (typically through a foreclosure) or the property was sold in a sale that we approved, whichever is applicable, and under our master policy effective October 1, 2014, such proceedings may be brought up to two years from the date of the notice of rescission. In a few jurisdictions there is a longer time to bring such proceedings. Until a liability associated with a settlement agreement or litigation becomes probable and can be reasonably estimated, we consider our claim payment or rescission resolved for financial reporting purposes even though discussions and legal proceedings may have been initiated and are ongoing. Under ASC 450-20, an estimated loss from such discussions and proceedings is accrued for only if we determine that the loss is probable and can be reasonably estimated. In December 2009, we entered into legal proceedings with Countrywide in which Countrywide alleged that MGIC denied valid mortgage insurance claims. In April 2013, MGIC entered into separate settlement agreements with CHL and BANA, pursuant to which the parties agreed to settle the Countrywide litigation as it relates to MGIC’s rescission practices (as amended from time to time, the “Agreements”). The Agreement with BANA covers loans purchased by the GSEs. That original Agreement was implemented beginning in November 2013 and we resolved all related suspended rescissions in November and December 2013 by paying the associated claim or processing the rescission. On March 2, 2015, the parties to the Agreement with CHL amended and restated that Agreement. The Agreement with CHL covers loans that were purchased by non-GSE investors, including securitization trusts. The original Agreement addressed rescission and denial rights; the amended and restated Agreement also addressed curtailment rights. Implementation of that Agreement occurred in June 2015 with respect to loans for which consent to the Agreement was received. The estimated impact of the Agreements has been recorded in our financial statements. The pending arbitration proceedings concerning the loans covered by the Agreements have been dismissed, the mutual releases regarding loans for which consent was received have become effective and the litigation between the parties regarding loans covered by the Agreements has been dismissed. Consent was received for approximately 89% of the dollar amount of exposure on loans covered by the Agreement with CHL; the holders of loans that did not consent retain their rights to assert claims with respect to such loans. The estimated impact that we have recorded for probable settlements, including those that have been implemented, is our best estimate of our loss from these matters. We estimate that as of September 30, 2015, the maximum exposure above the best estimate provision we recorded is $124.9 million . If we are not able to implement settlements we consider probable that have not yet been implemented, we intend to defend MGIC vigorously against any related legal proceedings. The flow policies at issue with Countrywide are in the same form as the flow policies that we used with all of our customers during the period covered by the Agreements, and the bulk policies at issue vary from one another, but are generally similar to those used in the majority of our Wall Street bulk transactions. In addition to the discussions and/or proceedings for which we have recorded a loss, we are involved in other discussions and/or proceedings with insureds with respect to our claims paying practices. In addition, holders of loans covered by our previously disclosed and implemented settlement agreement with CHL that did not consent to that agreement (approximately 11% of the dollar amount of exposure under that agreement) may bring legal proceedings against MGIC with respect to such loans. Although it is reasonably possible that when these matters are resolved we will not prevail in all cases, we are unable to make a reasonable estimate or range of estimates of the potential liability. We estimate the maximum exposure associated with these matters to be approximately $202.5 million , although we believe we will ultimately resolve these matters for significantly less than this amount. The estimates of our maximum exposure referred to above do not include interest or consequential or exemplary damages. Consumers continue to bring lawsuits against home mortgage lenders and settlement service providers. Mortgage insurers, including MGIC, have been involved in litigation alleging violations of the anti-referral fee provisions of the Real Estate Settlement Procedures Act, which is commonly known as RESPA, and the notice provisions of the Fair Credit Reporting Act, which is commonly known as FCRA. MGIC’s settlement of class action litigation against it under RESPA became final in October 2003. MGIC settled the named plaintiffs’ claims in litigation against it under FCRA in December 2004, following denial of class certification in June 2004. Since December 2006, class action litigation has been brought against a number of large lenders alleging that their captive mortgage reinsurance arrangements violated RESPA. Beginning in December 2011, MGIC, together with various mortgage lenders and other mortgage insurers, was named as a defendant in twelve lawsuits, alleged to be class actions, filed in various U.S. District Courts. The complaints in all of the cases alleged various causes of action related to the captive mortgage reinsurance arrangements of the mortgage lenders, including that the lenders’ captive reinsurers received excessive premiums in relation to the risk assumed by those captives, thereby violating RESPA. As of the end of the first quarter of 2015, MGIC has been dismissed from all twelve cases. There can be no assurance that we will not be subject to further litigation under RESPA (or FCRA) or that the outcome of any such litigation would not have a material adverse effect on us. In 2013, the U.S. District Court for the Southern District of Florida approved a settlement with the CFPB that resolved a federal investigation of MGIC’s participation in captive reinsurance arrangements in the mortgage insurance industry. The settlement concluded the investigation with respect to MGIC without the CFPB or the court making any findings of wrongdoing. As part of the settlement, MGIC agreed that it would not enter into any new captive reinsurance agreement or reinsure any new loans under any existing captive reinsurance agreement for a period of ten years . MGIC had voluntarily suspended most of its captive arrangements in 2008 in response to market conditions and GSE requests. In connection with the settlement, MGIC paid a civil penalty of $2.65 million and the court issued an injunction prohibiting MGIC from violating any provisions of RESPA. We received requests from the Minnesota Department of Commerce (the “MN Department”) beginning in February 2006 regarding captive mortgage reinsurance and certain other matters in response to which MGIC provided information on several occasions. In June 2015, MGIC executed a Consent Order with the MN Department that resolved the MN Department’s investigation of captive reinsurance matters without making any findings of wrongdoing. The Consent Order provided, among other things, that MGIC is prohibited from entering into any new captive reinsurance agreement or reinsuring any new loans under any existing captive reinsurance agreement for a period of ten years . We also received a request in June 2005 from the New York Department of Financial Services for information regarding captive mortgage reinsurance arrangements and other types of arrangements in which lenders receive compensation. Various regulators, including the CFPB, state insurance commissioners and state attorneys general may bring actions seeking various forms of relief in connection with alleged violations of RESPA. The insurance law provisions of many states prohibit paying for the referral of insurance business and provide various mechanisms to enforce this prohibition. While we believe our practices are in conformity with applicable laws and regulations, it is not possible to predict the eventual scope, duration or outcome of any such reviews or investigations nor is it possible to predict their effect on us or the mortgage insurance industry. In December 2013, the U.S. Treasury Department’s Federal Insurance Office released a report that calls for federal standards and oversight for mortgage insurers to be developed and implemented. It is uncertain what form the standards and oversight will take and when they will become effective. In addition to the matters described above, we are involved in other legal proceedings in the ordinary course of business. In our opinion, based on the facts known at this time, the ultimate resolution of these ordinary course legal proceedings will not have a material adverse effect on our financial position or results of operations. Through a non-insurance subsidiary, we utilize our underwriting skills to provide an outsourced underwriting service to our customers known as contract underwriting. As part of the contract underwriting activities, that subsidiary is responsible for the quality of the underwriting decisions in accordance with the terms of the contract underwriting agreements with customers. That subsidiary may be required to provide certain remedies to its customers if certain standards relating to the quality of our underwriting work are not met, and we have an established reserve for such future obligations. Claims for remedies may be made a number of years after the underwriting work was performed. Beginning in the second half of 2009, our subsidiary experienced an increase in claims for contract underwriting remedies, which continued throughout 2012. The underwriting remedy expense for 2014 and the first nine months of 2015 was approximately $4 million and $1 million , respectively, but may increase in the future. See Note 11 – “Income Taxes” for a description of federal income tax contingencies. |
Earnings per Share
Earnings per Share | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Earnings per Share | Earnings per Share Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted EPS includes the components of basic EPS and also gives effect to dilutive common equivalent shares outstanding during the reporting period. We calculate diluted EPS using the treasury stock method for unvested restricted stock, and the if-converted method for convertible debt instruments. For unvested restricted stock, assumed proceeds under the treasury stock method would include unamortized compensation expense and windfall tax benefits or shortfalls. The determination of potentially issuable shares from our convertible debt instruments does not consider satisfaction of the conversion requirements and the shares are included in the determination of diluted EPS as of the beginning of the period, if dilutive. In addition, interest expense, net of tax, related to dilutive convertible debt instruments is added back to earnings in calculating diluted EPS. The following table reconciles the numerators and denominators used to calculate basic and diluted EPS and also indicates the number of antidilutive securities. Three months ended September 30, Nine months ended September 30, 2015 2014 2015 2014 (In thousands, except per share data and as otherwise noted) Basic earnings per share: Net income $ 822,852 $ 72,017 $ 1,069,582 $ 177,521 Weighted average common shares outstanding 339,701 338,626 339,504 338,488 Basic income per share $ 2.42 $ 0.21 $ 3.15 $ 0.52 Diluted earnings per share: Net income $ 822,852 $ 72,017 $ 1,069,582 $ 177,521 Interest expense, net of tax (1): 2% Convertible Senior Notes due 2020 1,982 3,049 5,946 9,148 5% Convertible Senior Notes due 2017 3,050 — 9,150 — 9% Convertible Junior Subordinated Debentures due 2063 5,697 — 17,090 — Diluted income available to common shareholders $ 833,581 $ 75,066 $ 1,101,768 $ 186,669 Weighted average shares - basic 339,701 338,626 339,504 338,488 Effect of dilutive securities: Unvested restricted stock units 1,983 3,008 2,128 3,043 2% Convertible Senior Notes due 2020 71,942 71,942 71,942 71,942 5% Convertible Senior Notes due 2017 25,670 — 25,670 — 9% Convertible Junior Subordinated Debentures due 2063 28,853 — 28,853 — Weighted average shares - diluted 468,149 413,576 468,097 413,473 Diluted income per share $ 1.78 $ 0.18 $ 2.35 $ 0.45 Antidilutive securities (in millions) — 54.5 — 54.5 (1) Due to the valuation allowance recorded against deferred tax assets, the three and nine months ended September 30, 2014 were not tax effected. The three and nine months ended September 30, 2015 have been tax effected at a rate of 35% . |
Investments
Investments | 9 Months Ended |
Sep. 30, 2015 | |
Investments [Abstract] | |
Investments | Investments The amortized cost, gross unrealized gains and losses and fair value of the investment portfolio at September 30, 2015 and December 31, 2014 are shown below. September 30, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) Fair Value (In thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 104,419 $ 2,287 $ (1,740 ) $ 104,966 Obligations of U.S. states and political subdivisions 1,595,458 24,306 (7,243 ) 1,612,521 Corporate debt securities 2,142,500 7,722 (29,650 ) 2,120,572 Asset-backed securities 132,271 346 (80 ) 132,537 Residential mortgage-backed securities 278,737 275 (7,541 ) 271,471 Commercial mortgage-backed securities 253,143 1,048 (1,504 ) 252,687 Collateralized loan obligations 61,342 — (1,056 ) 60,286 Debt securities issued by foreign sovereign governments 30,477 2,876 (62 ) 33,291 Total debt securities 4,598,347 38,860 (48,876 ) 4,588,331 Equity securities 5,595 52 (13 ) 5,634 Total investment portfolio $ 4,603,942 $ 38,912 $ (48,889 ) $ 4,593,965 December 31, 2014 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) Fair Value (In thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 349,153 $ 2,752 $ (5,130 ) $ 346,775 Obligations of U.S. states and political subdivisions 844,942 12,961 (2,761 ) 855,142 Corporate debt securities 2,418,991 16,325 (10,035 ) 2,425,281 Asset-backed securities 286,260 535 (140 ) 286,655 Residential mortgage-backed securities 329,983 254 (9,000 ) 321,237 Commercial mortgage-backed securities 276,215 1,221 (2,158 ) 275,278 Collateralized loan obligations 61,340 — (1,264 ) 60,076 Debt securities issued by foreign sovereign governments 35,630 3,540 — 39,170 Total debt securities 4,602,514 37,588 (30,488 ) 4,609,614 Equity securities 3,003 61 (9 ) 3,055 Total investment portfolio $ 4,605,517 $ 37,649 $ (30,497 ) $ 4,612,669 (1) At September 30, 2015 and December 31, 2014 , there were no other-than-temporary impairment losses recorded in other comprehensive income. Our foreign investments primarily consist of the investment portfolio supporting our Australian domiciled subsidiary. This portfolio is comprised of Australian government and semi government securities, representing 86% of the market value of our foreign investments with the remainder invested in corporate securities and cash equivalents with allocations of 10% and 4% , respectively. Eighty-seven percent of the Australian portfolio is rated AAA or its equivalent, by one or more of Moody’s, Standard & Poor’s and Fitch Ratings, and the remaining 13% is rated AA or its equivalent. The amortized cost and fair values of debt securities at September 30, 2015 , by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most asset-backed and mortgage-backed securities and collateralized loan obligations provide for periodic payments throughout their lives, they are listed below in separate categories. September 30, 2015 Amortized Cost Fair Value (In thousands) Due in one year or less $ 191,371 $ 192,007 Due after one year through five years 1,611,819 1,622,178 Due after five years through ten years 1,130,625 1,113,217 Due after ten years 939,039 943,948 $ 3,872,854 $ 3,871,350 Asset-backed securities 132,271 132,537 Residential mortgage-backed securities 278,737 271,471 Commercial mortgage-backed securities 253,143 252,687 Collateralized loan obligations 61,342 60,286 Total at September 30, 2015 $ 4,598,347 $ 4,588,331 At September 30, 2015 and December 31, 2014 , the investment portfolio had gross unrealized losses of $48.9 million and $30.5 million , respectively. For those securities in an unrealized loss position, the length of time the securities were in such a position, as measured by their month-end fair values, is as follows: Less Than 12 Months 12 Months or Greater Total September 30, 2015 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses (In thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 25,781 $ 295 $ 15,534 $ 1,445 $ 41,315 $ 1,740 Obligations of U.S. states and political subdivisions 231,647 6,626 43,865 617 275,512 7,243 Corporate debt securities 1,045,477 27,190 140,995 2,460 1,186,472 29,650 Asset-backed securities 36,920 64 5,567 16 42,487 80 Residential mortgage-backed securities 39,870 414 201,435 7,127 241,305 7,541 Commercial mortgage-backed securities 74,403 698 79,411 806 153,814 1,504 Collateralized loan obligations — — 60,286 1,056 60,286 1,056 Foreign government securities 2,177 62 — — 2,177 62 Equity securities 319 4 173 9 492 13 Total $ 1,456,594 $ 35,353 $ 547,266 $ 13,536 $ 2,003,860 $ 48,889 Less Than 12 Months 12 Months or Greater Total December 31, 2014 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses (In thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 58,166 $ 138 $ 232,351 $ 4,992 $ 290,517 $ 5,130 Obligations of U.S. states and political subdivisions 166,408 1,066 114,465 1,695 280,873 2,761 Corporate debt securities 816,555 5,259 243,208 4,776 1,059,763 10,035 Asset-backed securities 54,491 80 11,895 60 66,386 140 Residential mortgage-backed securities 24,168 34 263,002 8,966 287,170 9,000 Commercial mortgage-backed securities 89,301 810 110,652 1,348 199,953 2,158 Collateralized loan obligations — — 60,076 1,264 60,076 1,264 Equity securities 167 1 235 8 402 9 Total $ 1,209,256 $ 7,388 $ 1,035,884 $ 23,109 $ 2,245,140 $ 30,497 The unrealized losses in all categories of our investments at September 30, 2015 and December 31, 2014 were primarily caused by the difference in interest rates at each respective period, compared to interest rates at the time of purchase. There were 369 and 423 securities in an unrealized loss position at September 30, 2015 and December 31, 2014 , respectively. During each of the three and nine months ended September 30, 2015 and 2014 there were no other-than-temporary impairments (“OTTI”) recognized. The net realized investment gains (losses) on the investment portfolio are as follows: Three Months Ended Nine Months Ended 2015 2014 2015 2014 (In thousands) Realized investment gains (losses) on investments: Fixed maturities $ 638 $ 629 $ 27,123 $ 755 Equity securities 2 3 10 168 Net realized investment gains $ 640 $ 632 $ 27,133 $ 923 Three Months Ended Nine Months Ended 2015 2014 2015 2014 (In thousands) Realized investment gains (losses) on investments: Gains on sales $ 720 $ 1,161 $ 28,711 $ 3,273 Losses on sales (80 ) (529 ) (1,578 ) (2,350 ) Net realized investment gains $ 640 $ 632 $ 27,133 $ 923 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements In accordance with fair value guidance, we applied the following fair value hierarchy in order to measure fair value for assets and liabilities: Level 1 – Quoted prices for identical instruments in active markets that we can access. Financial assets utilizing Level 1 inputs primarily include U.S. Treasury securities, equity securities, and Australian government and semi government securities. Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and inputs, other than quoted prices, that are observable in the marketplace for the financial instrument. The observable inputs are used in valuation models to calculate the fair value of the financial instruments. Financial assets utilizing Level 2 inputs primarily include obligations of U.S. government corporations and agencies and certain municipal and corporate bonds. Level 3 – Valuations are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable or are par values for equity securities restricted in their ability to be redeemed or sold. Level 3 inputs reflect our own assumptions about the assumptions a market participant would use in pricing an asset or liability. Financial assets utilizing Level 3 inputs primarily include equity securities that can only be redeemed or sold at their par value and only to the security issuer and certain state premium tax credit investments. The state premium tax credit investments have an average maturity of less than 3 years , credit ratings of AA+ or higher, and their balance reflects their remaining scheduled payments discounted at an average annual rate of 7.2% . Our non-financial assets that are classified as Level 3 securities consist of real estate acquired through claim settlement. The fair value of real estate acquired is the lower of our acquisition cost or a percentage of the appraised value. The percentage applied to the appraised value is based upon our historical sales experience adjusted for current trends. To determine the fair value of securities available-for-sale in Level 1 and Level 2 of the fair value hierarchy, independent pricing sources have been utilized. One price is provided per security based on observable market data. To ensure securities are appropriately classified in the fair value hierarchy, we review the pricing techniques and methodologies of the independent pricing sources and believe that their policies adequately consider market activity, either based on specific transactions for the issue valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded. A variety of inputs are utilized by the independent pricing sources including benchmark yields, reported trades, non-binding broker/dealer quotes, issuer spreads, two sided markets, benchmark securities, bids, offers and reference data including data published in market research publications. Inputs may be weighted differently for any security, and not all inputs are used for each security evaluation. Market indicators, industry and economic events are also considered. This information is evaluated using a multidimensional pricing model. Quality controls are performed by the independent pricing sources throughout this process, which include reviewing tolerance reports, trading information and data changes, and directional moves compared to market moves. This model combines all inputs to arrive at a value assigned to each security. In addition, on a quarterly basis, we perform quality controls over values received from the pricing sources which include reviewing tolerance reports, trading information and data changes, and directional moves compared to market moves. We have not made any adjustments to the prices obtained from the independent pricing sources. Fair value measurements for assets measured at fair value included the following as of September 30, 2015 and December 31, 2014 : September 30, 2015 Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 104,966 $ 18,418 $ 86,548 $ — Obligations of U.S. states and political subdivisions 1,612,521 — 1,611,134 1,387 Corporate debt securities 2,120,572 — 2,120,572 — Asset-backed securities 132,537 — 132,537 — Residential mortgage-backed securities 271,471 — 271,471 — Commercial mortgage-backed securities 252,687 — 252,687 — Collateralized loan obligations 60,286 — 60,286 — Debt securities issued by foreign sovereign governments 33,291 33,291 — — Total debt securities 4,588,331 51,709 4,535,235 1,387 Equity securities (1) 5,634 2,778 — 2,856 Total investment portfolio $ 4,593,965 $ 54,487 $ 4,535,235 $ 4,243 Real estate acquired (2) $ 10,084 $ — $ — $ 10,084 December 31, 2014 Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 346,775 $ 188,824 $ 157,951 $ — Obligations of U.S. states and political subdivisions 855,142 — 853,296 1,846 Corporate debt securities 2,425,281 — 2,425,281 — Asset-backed securities 286,655 — 286,655 — Residential mortgage-backed securities 321,237 — 321,237 — Commercial mortgage-backed securities 275,278 — 275,278 — Collateralized loan obligations 60,076 — 60,076 — Debt securities issued by foreign sovereign governments 39,170 39,170 — — Total debt securities 4,609,614 227,994 4,379,774 1,846 Equity securities (1) 3,055 2,734 — 321 Total investment portfolio $ 4,612,669 $ 230,728 $ 4,379,774 $ 2,167 Real estate acquired (2) $ 12,658 $ — $ — $ 12,658 (1) Equity securities in Level 3 are carried at cost, which approximates fair value. (2) Real estate acquired through claim settlement, which is held for sale, is reported in Other assets on the consolidated balance sheets. There were no transfers of securities between Level 1 and Level 2 during the first nine months of 2015. For assets measured at fair value using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances for the three and nine months ended September 30, 2015 and 2014 is as follows: Debt Securities Equity Securities Total Investments Real Estate Acquired (In thousands) Balance at June 30, 2015 $ 1,634 $ 321 $ 1,955 $ 7,995 Total realized/unrealized gains (losses): Included in earnings and reported as losses incurred, net — — — (1,031 ) Purchases — 2,535 2,535 9,632 Sales (247 ) — (247 ) (6,512 ) Transfers into Level 3 — — — — Transfers out of Level 3 — — — — Balance at September 30, 2015 $ 1,387 $ 2,856 $ 4,243 $ 10,084 Amount of total losses included in earnings for the three months ended September 30, 2015 attributable to the change in unrealized losses on assets still held at September 30, 2015 $ — $ — $ — $ — Debt Securities Equity Securities Total Investments Real Estate Acquired (In thousands) Balance at December 31, 2014 $ 1,846 $ 321 $ 2,167 $ 12,658 Total realized/unrealized gains (losses): Included in earnings and reported as losses incurred, net — — — (1,503 ) Purchases 7 2,535 2,542 26,346 Sales (466 ) — (466 ) (27,417 ) Transfers into Level 3 — — — — Transfers out of Level 3 — — — — Balance at September 30, 2015 $ 1,387 $ 2,856 $ 4,243 $ 10,084 Amount of total losses included in earnings for the nine months ended September 30, 2015 attributable to the change in unrealized losses on assets still held at September 30, 2015 $ — $ — $ — $ — Debt Securities Equity Securities Total Investments Real Estate Acquired (In thousands) Balance at June 30, 2014 $ 2,231 $ 321 $ 2,552 $ 10,804 Total realized/unrealized gains (losses): Included in earnings and reported as losses incurred, net — — — (2,062 ) Purchases — — — 14,107 Sales (237 ) — (237 ) (6,284 ) Transfers into Level 3 — — — — Transfers out of Level 3 — — — — Balance at September 30, 2014 $ 1,994 $ 321 $ 2,315 $ 16,565 Amount of total losses included in earnings for the three months ended September 30, 2014 attributable to the change in unrealized losses on assets still held at September 30, 2014 $ — $ — $ — $ — Debt Securities Equity Securities Total Investments Real Estate Acquired (In thousands) Balance at December 31, 2013 $ 2,423 $ 321 $ 2,744 $ 13,280 Total realized/unrealized gains (losses): Included in earnings and reported as losses incurred, net — — — (4,378 ) Purchases 30 — 30 33,484 Sales (459 ) — (459 ) (25,821 ) Transfers into Level 3 — — — — Transfers out of Level 3 — — — — Balance at September 30, 2014 $ 1,994 $ 321 $ 2,315 $ 16,565 Amount of total losses included in earnings for the nine months ended September 30, 2014 attributable to the change in unrealized losses on assets still held at September 30, 2014 $ — $ — $ — $ — Authoritative guidance over disclosures about the fair value of financial instruments requires additional disclosure for financial instruments not measured at fair value. Certain financial instruments, including insurance contracts, are excluded from these fair value disclosure requirements. The carrying values of cash and cash equivalents (Level 1) and accrued investment income (Level 2) approximated their fair values. Additional fair value disclosures related to our investment portfolio are included in Note 7 – “Investments.” We incur financial liabilities in the normal course of our business. The following tables present the carrying value and fair value of our financial liabilities disclosed, but not carried, at fair value at September 30, 2015 and December 31, 2014 , and the level within the fair value hierarchy at which such liabilities are measured on a recurring basis. September 30, 2015 Par Value Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Financial liabilities: Senior Notes $ 61,953 $ 62,027 $ — $ 62,027 $ — Convertible Senior Notes due 2017 345,000 366,749 — 366,749 — Convertible Senior Notes due 2020 500,000 719,375 — 719,375 — Convertible Junior Subordinated Debentures 389,522 485,648 — 485,648 — Total Debt $ 1,296,475 $ 1,633,799 $ — $ 1,633,799 $ — December 31, 2014 Par Value Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Financial liabilities: Senior Notes $ 61,953 $ 63,618 $ — $ 63,618 $ — Convertible Senior Notes due 2017 345,000 387,997 — 387,997 — Convertible Senior Notes due 2020 500,000 735,075 — 735,075 — Convertible Junior Subordinated Debentures 389,522 500,201 — 500,201 — Total Debt $ 1,296,475 $ 1,686,891 $ — $ 1,686,891 $ — The fair values of our Senior Notes, Convertible Senior Notes and Debentures were determined using available pricing for these notes or debentures and are considered Level 2 securities. |
Other Comprehensive Income
Other Comprehensive Income | 9 Months Ended |
Sep. 30, 2015 | |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |
Other Comprehensive Income | Other Comprehensive Income The pretax components of our other comprehensive income (loss) and the related income tax (expense) benefit for the three and nine months ended September 30, 2015 and 2014 are included in the tables below. Three Months Ended September 30, 2015 2014 (In thousands) Net unrealized holding gains (losses) arising during the period $ 27,271 $ (17,377 ) Income tax (expense) benefit (9,531 ) 6,069 Valuation allowance (1) 77,555 (5,993 ) Net of taxes 95,295 (17,301 ) Net changes in benefit plan assets and obligations (546 ) (1,732 ) Income tax benefit 192 606 Valuation allowance (1) (7,001 ) (606 ) Net of taxes (7,355 ) (1,732 ) Net changes in unrealized foreign currency translation adjustment (3,724 ) (3,835 ) Income tax benefit 1,306 1,345 Valuation allowance (1) (529 ) — Net of taxes (2,947 ) (2,490 ) Total other comprehensive income (loss) 23,001 (22,944 ) Total income tax benefit, net of valuation allowance 61,992 1,421 Total other comprehensive income (loss), net of tax $ 84,993 $ (21,523 ) Nine Months Ended September 30, 2015 2014 (In thousands) Net unrealized holding (losses) gains arising during the period $ (17,126 ) $ 67,102 Income tax benefit (expense) 5,955 (23,436 ) Valuation allowance (1) 62,383 23,132 Net of taxes 51,212 66,798 Net changes in benefit plan assets and obligations (1,638 ) (5,198 ) Income tax benefit 574 1,819 Valuation allowance (1) (7,383 ) (1,819 ) Net of taxes (8,447 ) (5,198 ) Net changes in unrealized foreign currency translation adjustment (6,228 ) (1,000 ) Income tax benefit 2,186 350 Valuation allowance (1) (529 ) — Net of taxes (4,571 ) (650 ) Total other comprehensive (loss) income (24,992 ) 60,904 Total income tax benefit, net of valuation allowance 63,186 46 Total other comprehensive income, net of tax $ 38,194 $ 60,950 (1) See Note 11 – “Income Taxes” for a discussion of the valuation allowance recorded against deferred tax assets. The pretax and related income tax (expense) benefit components of the amounts reclassified from our accumulated other comprehensive loss to our consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014 are included in the tables below. Three Months Ended September 30, 2015 2014 (In thousands) Reclassification adjustment for net realized gains (losses) included in net income $ (1,120 ) $ (840 ) Income tax benefit 395 299 Valuation allowance (413 ) (330 ) Net of taxes (1,138 ) (871 ) Reclassification adjustment related to benefit plan assets and obligations 546 1,732 Income tax expense (192 ) (606 ) Valuation allowance 192 606 Net of taxes 546 1,732 Total reclassifications (574 ) 892 Total income tax expense, net of valuation allowance (18 ) (31 ) Total reclassifications, net of tax $ (592 ) $ 861 Nine Months Ended September 30, 2015 2014 (In thousands) Reclassification adjustment for net realized gains (losses) included in net income (1) $ 10,591 $ (5,725 ) Income tax (expense) benefit (3,697 ) 2,014 Valuation allowance 3,635 (2,075 ) Net of taxes 10,529 (5,786 ) Reclassification adjustment related to benefit plan assets and obligations 1,638 5,198 Income tax expense (574 ) (1,819 ) Valuation allowance 574 1,819 Net of taxes 1,638 5,198 Total reclassifications 12,229 (527 ) Total income tax expense, net of valuation allowance (62 ) (61 ) Total reclassifications, net of tax $ 12,167 $ (588 ) (1) The reclassification adjustment for the nine months ended September 30, 2014 has been recast to conform to the 2015 method for determining amounts included in net income. This revision had no impact to our consolidated financial statements and is not material to amounts disclosed by us in prior periods. Changes in our accumulated other comprehensive loss (“AOCL”), including amounts reclassified from other comprehensive income (loss), for the nine months ended September 30, 2015 are included in the table below. Nine Months Ended September 30, 2015 Unrealized gains and losses on available-for- sale securities Defined benefit plans Foreign currency translation Total accumulated other comprehensive loss (In thousands) Balance at December 31, 2014, net of tax $ (57,551 ) $ (28,938 ) $ 5,148 $ (81,341 ) Other comprehensive income (loss) before reclassifications 61,741 (6,809 ) (4,571 ) 50,361 Less: Amounts reclassified from AOCL 10,529 (1) 1,638 (2) — 12,167 Balance at September 30, 2015, net of tax $ (6,339 ) $ (37,385 ) $ 577 $ (43,147 ) (1) Increases Net realized investment gains on the consolidated statements of operations. (2) Decreases Other underwriting and operating expenses, net on the consolidated statements of operations. |
Benefit Plans
Benefit Plans | 9 Months Ended |
Sep. 30, 2015 | |
Compensation and Retirement Disclosure [Abstract] | |
Benefit Plans | Benefit Plans The following table provides the components of net periodic benefit cost for the pension, supplemental executive retirement and other postretirement benefit plans: Three Months Ended September 30, Pension and Supplemental Other Postretirement 2015 2014 2015 2014 (In thousands) Service cost $ 2,564 $ 2,142 $ 208 $ 165 Interest cost 3,962 3,997 174 164 Expected return on plan assets (5,278 ) (5,258 ) (1,248 ) (1,162 ) Recognized net actuarial loss (gain) 1,372 271 (44 ) (109 ) Amortization of prior service cost (211 ) (233 ) (1,661 ) (1,663 ) Net periodic benefit cost (benefit) $ 2,409 $ 919 $ (2,571 ) $ (2,605 ) Nine Months Ended September 30, Pension and Supplemental Other Postretirement 2015 2014 2015 2014 (In thousands) Service cost $ 7,692 $ 6,425 $ 624 $ 494 Interest cost 11,886 11,991 523 491 Expected return on plan assets (15,832 ) (15,773 ) (3,743 ) (3,486 ) Recognized net actuarial loss (gain) 4,114 812 (132 ) (326 ) Amortization of prior service cost (633 ) (698 ) (4,986 ) (4,988 ) Net periodic benefit cost (benefit) $ 7,227 $ 2,757 $ (7,714 ) $ (7,815 ) We have made payments totaling $17 million in connection with our qualified pension and supplemental executive retirement plans, completing our annual funding for 2015. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2015 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Valuation Allowance We review the need to maintain the deferred tax asset valuation allowance on a quarterly basis. We analyze many factors, among which are the severity and frequency of operating losses, our capacity for the carryback or carryforward of any losses, the existence and current level of taxable operating income, operating results on a three year cumulative basis, the expected occurrence of future income or loss, the expiration dates of the loss carryforwards, the cyclical nature of our operating results, and available tax planning strategies. Based on our analysis, we reduced our benefit from income tax through the recognition of a valuation allowance from the first quarter of 2009 through the second quarter of 2015. In the third quarter of 2015, based on our analysis, as described more fully below, we concluded that it was more likely than not that our deferred tax assets would be fully realizable and that the valuation allowance was no longer necessary. Therefore, we reversed the valuation allowance under the applicable accounting rules for a reversal in an interim period. Specifically, the portion of the valuation allowance release related to the deferred tax asset that is expected to be realized in the current year is included in the computation of the annual estimated effective tax rate. This amount, which totaled $124.4 million and $25.3 million for the first three quarters and the fourth quarter of 2015, respectively, is or will be applied to net income through a reduction of the tax provision. The portion of the valuation allowance release related to deferred tax assets that are expected to be realized in future years, totaling $758.9 million , is treated as a discrete period item and is recognized as a component of the tax provision in continuing operations in the period of the release. Furthermore, in determining the discrete period impact from the release, we removed the prior period disproportionate tax effects that had arisen in other comprehensive income because of the valuation allowance. This reduced the amount of tax benefit included in net income and resulted in an allocation of tax benefit of $60.8 million to components of other comprehensive income. For each of the three and nine months ended September 30, 2015, the reversal of our valuation allowance against our net deferred tax assets resulted in a $698.1 million benefit in our provision for income taxes. In addition, we reversed $41.2 million and $124.4 million of our valuation allowance and reduced our tax provision on income for the three and nine months ended September 30, 2015, respectively. The change in valuation allowance that was included in other comprehensive income for the three and nine months ended September 30, 2015 was $70.0 million and $54.5 million , respectively. The total valuation allowance as of December 31, 2014 was $902.3 million . The following table provides a roll forward of our deferred tax asset valuation allowance for the nine months ended September 30, 2015. For the nine months ended September 30, 2015 and period then ended (In millions) Beginning Balance December 31, 2014 $ 902.3 Reduction in tax provision for the nine months ended September 30, 2015 (124.4 ) Reduction in tax provision allocated to the three months ended December 31, 2015 (25.3 ) Amounts recorded in other comprehensive income for the nine months ended September 30, 2015 6.3 Change in valuation allowance for deferred tax assets in the current year (143.4 ) Amounts related to the release of the deferred tax asset valuation allowance recorded in the three months ending September 30, 2015 Reduction in tax provision for amounts to be realized in future years (698.1 ) Amounts recorded in other comprehensive income to be realized in future years (60.8 ) Change in valuation allowance for deferred tax assets realizable in future years (758.9 ) Ending Balance September 30, 2015 $ — In our analysis we evaluated both subjective and objective evidence and assigned a weight to each one. Significant weight was given to our most recent operating results and our ability to sustain them. We have experienced a significant reduction in losses incurred as our level of default notices received and in inventory has declined, as the effects of the financial crisis continue to ebb. New insurance written in recent years has been of high quality and is expected to be profitable well into the future. Historically, the results of mortgage insurers have been cyclical, where periods of operating losses have been followed by significant amounts of income. All of these factors have had a positive effect on operating results. Our level of income for each of the first three quarters of 2015 exceeded $100 million . We viewed the recurring nature of our income as very important, objectively verifiable evidence and gave it great weight in our analysis. Based on the above, we believe that we will have significant sources of income which will allow for utilization of our deferred tax assets. Generally, a significant component of any analysis for the recognition of deferred tax assets includes the objective observation of operating results for a period of time. In this regard, we considered the level of cumulative operating income, as adjusted for any permanent tax differences. There is no specific requirement that indicates the time span for this evaluation. In our evaluation, we used a three year period, which, based on our investigation, is commonly used by many publicly held entities. Prior to the third quarter of 2015, this three year cumulative total had been materially negative for an extended period of time, which we considered to be objective, negative evidence which would not support the release of the valuation allowance. In the third quarter, this amount became positive and totaled $194.1 million , which we believe provided additional objective evidence which supports the release of the valuation allowance. In the fourth quarter of 2013, our net operating loss carryforward (“NOL”) for U.S. federal regular income tax purposes reached $2.6 billion , which was the highest amount it attained. As of September 30, 2015, the estimated remaining NOLs total $2.1 billion , a reduction of approximately $500 million in less than two years. At this rate, and without taking into account any improvement in earnings, we would utilize the NOL in approximately seven years. In addition to this history of the utilization of our NOLs, we considered that the amount of income that we have been generating has been increasing over time. In the first three quarters of 2015, we reduced our NOLs by an average of $120.4 million per quarter, whereas in 2014 that amount was $52.2 million per quarter. At the 2015 rate, we would utilize the NOLs on our return by the end of 2020. The earliest current expiration date for our NOLs is 2029. This recent history of positive earnings trends indicates that it is more likely than not that the NOLs would be utilized well before they expire. Further, we currently have no limitations under the change in control provisions of Internal Revenue Code Section 382, which would reduce our ability to utilize our NOLs. We have taken steps, primarily through our Amended and Restated Rights Agreement, to attempt to prevent any change in control which would limit the utilization of our NOLs. The effect of the change in valuation allowance on the provision for income taxes was as follows: Three months ended September 30, Nine months ended September 30, 2015 2014 2015 2014 (In thousands) Provision for income tax $ 43,694 $ 25,030 $ 131,568 $ 65,322 Change in valuation allowance (739,298 ) (24,781 ) (822,465 ) (63,229 ) (Benefit from) provision for income taxes $ (695,604 ) $ 249 $ (690,897 ) $ 2,093 The change in the valuation allowance that was included in other comprehensive income for the three months ended September 30, 2015 and 2014 was a decrease of $70.0 million and an increase of $6.6 million , respectively. The change in the valuation allowance that was included in other comprehensive income for the nine months ended September 30, 2015 and 2014 was a decrease of $54.5 million and a decrease of $21.3 million , respectively. We have approximately $2.1 billion of NOL carryforwards on a regular tax basis and $1.2 billion of NOL carryforwards for computing the alternative minimum tax as of September 30, 2015 . Any unutilized carryforwards are scheduled to expire at the end of tax years 2029 through 2033. In future years with taxable income and until such time as our NOL carryforwards are exhausted or expired, our provision for income tax would likely exceed the amount of cash tax payments. Tax Contingencies As previously disclosed, the Internal Revenue Service (“IRS”) completed examinations of our federal income tax returns for the years 2000 through 2007 and issued proposed assessments for taxes, interest and penalties related to our treatment of the flow-through income and loss from an investment in a portfolio of residual interests of Real Estate Mortgage Investment Conduits (“REMICs”). The IRS indicated that it did not believe that, for various reasons, we had established sufficient tax basis in the REMIC residual interests to deduct the losses from taxable income. We appealed these assessments within the IRS and in August 2010, we reached a tentative settlement agreement with the IRS which was not finalized. On September 10, 2014, we received Notices of Deficiency (commonly referred to as “90 day letters”) covering the 2000-2007 tax years. The Notices of Deficiency reflect taxes and penalties related to the REMIC matters of $197.5 million and at September 30, 2015 , there would also be interest related to these matters of approximately $179.2 million . In 2007, we made a payment of $65.2 million to the United States Department of the Treasury which will reduce any amounts we would ultimately owe. The Notices of Deficiency also reflect additional amounts due of $261.4 million , which are primarily associated with the disallowance of the carryback of the 2009 net operating loss to the 2004-2007 tax years. We believe the IRS included the carryback adjustments as a precaution to keep open the statute of limitations on collection of the tax that was refunded when this loss was carried back, and not because the IRS actually intends to disallow the carryback permanently. We filed a petition with the U.S. Tax Court contesting most of the IRS' proposed adjustments reflected in the Notices of Deficiency and the IRS has filed an answer to our petition which continues to assert their claim. Litigation to resolve our dispute with the IRS could be lengthy and costly in terms of legal fees and related expenses. We can provide no assurance regarding the outcome of any such litigation or whether a compromised settlement with the IRS will ultimately be reached and finalized. Depending on the outcome of this matter, additional state income taxes and state interest may become due when a final resolution is reached. As of September 30, 2015 , those state taxes and interest would approximate $48.4 million . In addition, there could also be state tax penalties. Our total amount of unrecognized tax benefits as of September 30, 2015 is $106.9 million , which represents the tax benefits generated by the REMIC portfolio included in our tax returns that we have not taken benefit for in our financial statements, including any related interest. We continue to believe that our previously recorded tax provisions and liabilities are appropriate. However, we would need to make appropriate adjustments, which could be material, to our tax provision and liabilities if our view of the probability of success in this matter changes, and the ultimate resolution of this matter could have a material negative impact on our effective tax rate, results of operations, cash flows, available assets and statutory capital. In this regard, see Note 1 – “Nature of Business – Capital-GSEs.” In October 2014, we received a Revenue Agent’s Report from the IRS related to the examination of our federal income tax returns for the years 2011 and 2012. The result of the examination had no material effect on the financial statements. The total amount of the unrecognized tax benefits, related to our aforementioned REMIC issue that would affect our effective tax rate is $93.7 million . We recognize interest accrued and penalties related to unrecognized tax benefits in income taxes. As of September 30, 2015 and December 31, 2014 , we had accrued $27.6 million and $26.9 million , respectively, for the payment of interest. |
Loss Reserves
Loss Reserves | 9 Months Ended |
Sep. 30, 2015 | |
Insurance Loss Reserves [Abstract] | |
Loss Reserves | Loss Reserves We establish reserves to recognize the estimated liability for losses and loss adjustment expenses (“LAE”) related to defaults on insured mortgage loans. Loss reserves are established by estimating the number of loans in our inventory of delinquent loans that will result in a claim payment, which is referred to as the claim rate, and further estimating the amount of the claim payment, which is referred to as claim severity. Estimation of losses is inherently judgmental. The conditions that affect the claim rate and claim severity include the current and future state of the domestic economy, including unemployment, and the current and future strength of local housing markets. The actual amount of the claim payments may be substantially different than our loss reserve estimates. Our estimates could be adversely affected by several factors, including a deterioration of regional or national economic conditions, including unemployment, leading to a reduction in borrower income and thus their ability to make mortgage payments, and a drop in housing values which may affect borrower willingness to continue to make mortgage payments when the value of the home is below the mortgage balance. Changes to our estimates could result in a material impact to our results of operations and capital position, even in a stable economic environment. The following table provides a reconciliation of beginning and ending loss reserves for the nine months ended September 30, 2015 and 2014 : Nine months ended September 30, 2015 2014 (In thousands) Reserve at beginning of period $ 2,396,807 $ 3,061,401 Less reinsurance recoverable 57,841 64,085 Net reserve at beginning of period 2,338,966 2,997,316 Losses incurred: Losses and LAE incurred in respect of default notices related to: Current year 338,611 454,390 Prior years (1) (90,130 ) (75,387 ) Subtotal 248,481 379,003 Losses paid: Losses and LAE paid in respect of default notices related to: Current year 9,227 11,574 Prior years 652,465 895,061 Reinsurance terminations (2) (15,440 ) — Subtotal 646,252 906,635 Net reserve at end of period 1,941,195 2,469,684 Plus reinsurance recoverables 38,748 57,898 Reserve at end of period $ 1,979,943 $ 2,527,582 (1) A negative number for prior year losses incurred indicates a redundancy of prior year loss reserves and a positive number for prior year losses incurred indicates a deficiency of prior year loss reserves. (2) In a termination or commutation, the reinsurance agreement is cancelled, with no future premium ceded and funds for any incurred but unpaid losses transferred to us. The transferred funds result in an increase in our investment portfolio (including cash and cash equivalents) and a decrease in net losses paid (reduction in losses incurred). In addition, there is an offsetting decrease in the reinsurance recoverable (increase in losses incurred), and thus there is no net impact to losses incurred. The “Losses incurred” section of the table above shows losses incurred on default notices received in the current year and in prior years. The amount of losses incurred relating to default notices received in the current year represents the estimated amount to be ultimately paid on such default notices. The amount of losses incurred relating to default notices received in prior years represents the actual claim rate and severity associated with those default notices resolved in the current year differing from the estimated liability at the prior year-end, as well as a re-estimation of amounts to be ultimately paid on defaults remaining in inventory from the end of the prior year. This re-estimation of the estimated claim rate and estimated severity is the result of our review of current trends in the default inventory, such as percentages of defaults that have resulted in a claim, the amount of the claims, changes in the relative level of defaults by geography and changes in average loan exposure. Losses incurred on default notices received in the current year decreased in the first nine months of 2015 compared to the same period in 2014 , primarily due to a decrease in the number of new default notices received, net of related cures, as well as a decrease in the estimated claim rate on new delinquencies. The prior year development of the reserves in the first nine months of 2015 and 2014 is reflected in the table below. Nine months ended September 30, 2015 2014 (In millions) Decrease in estimated claim rate on primary defaults $ (95 ) $ (38 ) Increase in estimated severity on primary defaults 12 (20 ) Change in estimates related to pool reserves, LAE reserves and reinsurance (7 ) (17 ) Total prior year loss development (1) $ (90 ) $ (75 ) (1) A negative number for prior year loss development indicates a redundancy of prior year loss reserves, and a positive number indicates a deficiency of prior year loss reserves. For the nine months ended September 30, 2015 and 2014 we experienced favorable prior year loss reserve development. This development was primarily due to a lower claim rate on the approximately 52% and 50% of prior year default inventory that was resolved during the nine months ended September 30, 2015 and 2014 , respectively. In addition, during the first nine months of 2015 , the claim rate development was favorably impacted by $21 million due to re-estimation of previously recorded reserves relating to disputes on our claims paying practices and adjustments to incurred but not reported losses (IBNR). This favorable development was offset, in part, by an increase in the claim rate and severity on prior year defaults remaining in the delinquent inventory. The “Losses paid” section of the table above shows the breakdown between claims paid on default notices received in the current year and claims paid on default notices received in prior years. Until a few years ago, it took, on average, approximately twelve months for a default that is not cured to develop into a paid claim. Over the past several years, the average time it takes to receive a claim associated with a default has increased. This is, in part, due to new loss mitigation protocols established by servicers and to changes in some state foreclosure laws that may include, for example, a requirement for additional review and/or mediation processes. It is difficult to estimate how long it may take for current and future defaults that do not cure to develop into paid claims. The liability associated with our estimate of premiums to be refunded on expected claim payments is accrued for separately at September 30, 2015 and December 31, 2014 and approximated $105 million and $115 million , respectively. Separate components of this liability are included in “Other liabilities” and, for December 31, 2014 , “Premium deficiency reserve” on our consolidated balance sheet. Changes in the liability affect premiums written and earned and change in premium deficiency reserve. A rollforward of our primary default inventory for the three and nine months ended September 30, 2015 and 2014 appears in the table below. The information concerning new notices and cures is compiled from monthly reports received from loan servicers. The level of new notice and cure activity reported in a particular month can be influenced by, among other things, the date on which a servicer generates its report, the number of business days in a month and transfers of servicing between loan servicers. Three months ended September 30, Nine months ended September 30, 2015 2014 2015 2014 Default inventory at beginning of period 66,357 85,416 79,901 103,328 New notices 19,509 22,927 55,856 67,451 Cures (17,036 ) (19,582 ) (56,700 ) (68,082 ) Paids (including those charged to a deductible or captive) (3,958 ) (5,288 ) (12,671 ) (18,420 ) Rescissions and denials (230 ) (319 ) (623 ) (1,123 ) Items removed from inventory resulting from the Countrywide settlement on GSE loans — — (1,121 ) — Default inventory at end of period 64,642 83,154 64,642 83,154 Pool insurance notice inventory was 2,950 at September 30, 2015 and 4,525 at September 30, 2014 . The decrease in the primary default inventory experienced during 2015 and 2014 was generally across all markets and primarily in book years 2008 and prior. As of September 30, 2015 the percentage of loans in the inventory that have been in default for 12 or more consecutive months has declined compared with the prior year end and one year prior, as shown in the table below. Historically as a default ages it becomes more likely to result in a claim. The percentage of loans that have been in default for 12 or more consecutive months and the number of loans in our primary claims received inventory have been affected by our suspended rescissions and the resolution of certain of those rescissions discussed below and in Note 5 – “Litigation and Contingencies.” September 30, 2015 December 31, 2014 September 30, 2014 Consecutive months in default 3 months or less 13,991 22 % 15,319 19 % 16,209 19 % 4 - 11 months 14,703 23 % 19,710 25 % 18,890 23 % 12 months or more 35,948 55 % 44,872 56 % 48,055 58 % Total primary default inventory 64,642 100 % 79,901 100 % 83,154 100 % Primary claims received inventory included in ending default inventory (1) 2,982 5 % 4,746 6 % 5,194 6 % (1) Our claims received inventory includes suspended rescissions, as we have voluntarily suspended rescissions of coverage related to loans that we believed would be included in a potential resolution. As of September 30, 2015 , rescissions of coverage on approximately 430 loans had been voluntarily suspended compared to 1,425 at December 31, 2014 and 1,575 at September 30, 2014 . The number of months a loan is in the default inventory can differ from the number of payments that the borrower has not made or is considered delinquent. These differences typically result from a borrower making monthly payments that do not result in the loan becoming fully current. The number of payments that a borrower is delinquent is shown in the table below. September 30, 2015 December 31, 2014 September 30, 2014 Number of payments delinquent 3 payments or less 20,637 32 % 23,253 29 % 23,769 28 % 4 - 11 payments 14,890 23 % 19,427 24 % 18,985 23 % 12 payments or more 29,115 45 % 37,221 47 % 40,400 49 % Total primary default inventory 64,642 100 % 79,901 100 % 83,154 100 % Claims paying practices Our loss reserving methodology incorporates our estimates of future rescissions. A variance between ultimate actual rescission rates and our estimates, as a result of the outcome of litigation, settlements or other factors, could materially affect our losses. The liability associated with our estimate of premiums to be refunded on expected future rescissions is accrued for separately. At September 30, 2015 and December 31, 2014 the estimate of this liability totaled $7 million and $28 million , respectively. Separate components of this liability are included in “Other liabilities” and, for December 31, 2014 , “Premium deficiency reserve” on our consolidated balance sheets. Changes in the liability affect premiums written and earned and change in premium deficiency reserve. For information about discussions and legal proceedings with customers with respect to our claims paying practices, including settlements that we believe are probable, as defined in ASC 450-20, see Note 5 – “Litigation and Contingencies.” |
Premium Deficiency Reserve
Premium Deficiency Reserve | 9 Months Ended |
Sep. 30, 2015 | |
Premium Deficiency Reserve [Abstract] | |
Premium Deficiency Reserve | Premium Deficiency Reserve The premium deficiency reserve reflects the present value of expected future losses and expenses that exceed the present value of expected future premiums and established loss reserves. Each quarter, we re-estimate the premium deficiency reserve on the remaining Wall Street bulk insurance in force. As of September 30, 2015 , no premium deficiency was required, consistent with the period ended June 30, 2015. The decrease in the premium deficiency reserve for the nine months ended September 30, 2015 was $24 million , and the decrease for the three and nine months ended September 30, 2014 was $6 million and $19 million , respectively. |
Shareholders' Equity
Shareholders' Equity | 9 Months Ended |
Sep. 30, 2015 | |
Stockholders' Equity Note [Abstract] | |
Shareholders' Equity | Shareholders’ Equity Our Shareholders Rights Agreement dated July 25, 2012, which was approved by shareholders, was amended and restated on July 23, 2015 (the “Agreement”). The Agreement seeks to diminish the risk that our ability to use our net operating losses (“NOLs”) to reduce potential future federal income tax obligations may become substantially limited and to deter certain abusive takeover practices. The benefit of the NOLs would be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, if we were to experience an “ownership change” as defined by Section 382 of the Internal Revenue Code. Under the Agreement each outstanding share of our Common Stock is accompanied by one Right. The Distribution Date occurs on the earlier of ten days after a public announcement that a person has become an Acquiring Person, or ten business days after a person announces or begins a tender offer in which consummation of such offer would result in a person becoming an Acquiring Person. An Acquiring Person is any person that becomes, by itself or together with its affiliates and associates, a beneficial owner of 5% or more of the shares of our Common Stock then outstanding, but excludes, among others, certain exempt and grandfathered persons as defined in the Agreement. The Rights are not exercisable until the Distribution Date. Each Right will initially entitle shareholders to buy one-tenth of one share of our Common Stock at a Purchase Price of $45 per full share (equivalent to $4.50 for each one-tenth share), subject to adjustment. Each exercisable Right (subject to certain limitations) will entitle its holder to purchase, at the Rights’ then-current Purchase Price, a number of our shares of Common Stock (or if after the Shares Acquisition Date, we are acquired in a business combination, common shares of the acquiror) having a market value at the time equal to twice the Purchase Price. The Rights will expire on August 1, 2018, or earlier as described in the Agreement. The Rights are redeemable at a price of $0.001 per Right at any time prior to the time a person becomes an Acquiring Person. Other than certain amendments, the Board of Directors may amend the Rights in any respect without the consent of the holders of the Rights. |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation We have an incentive stock plan under which restricted stock units (“RSUs”) were granted to employees. Our annual grant of share-based compensation to employees takes place during the first quarter of each fiscal year. Under the fair value method, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period which generally corresponds to the vesting period. Awards under our incentive plan generally vest over periods ranging from one to three years . The number of shares granted to employees and the weighted average fair value per share during the periods presented were (shares in thousands): Nine months ended September 30, 2015 2014 Shares Weighted Shares Weighted RSUs subject to performance conditions 1,144 $ 9.04 1,372 $ 8.43 RSUs subject only to service conditions 410 8.99 409 8.43 |
Statutory Capital
Statutory Capital | 9 Months Ended |
Sep. 30, 2015 | |
Statutory Capital [Abstract] | |
Statutory Capital | Statutory Capital Statutory Capital Requirements The insurance laws of 16 jurisdictions, including Wisconsin, our domiciliary state, require a mortgage insurer to maintain a minimum amount of statutory capital relative to the risk in force (or a similar measure) in order for the mortgage insurer to continue to write new business. We refer to these requirements as the “State Capital Requirements” and, together with the GSE Financial Requirements, the “Financial Requirements.” While they vary among jurisdictions, the most common State Capital Requirements allow for a maximum risk-to-capital ratio of 25 to 1 . A risk-to-capital ratio will increase if (i) the percentage decrease in capital exceeds the percentage decrease in insured risk, or (ii) the percentage increase in capital is less than the percentage increase in insured risk. Wisconsin does not regulate capital by using a risk-to-capital measure but instead requires a minimum policyholder position (“MPP”). The “policyholder position” of a mortgage insurer is its net worth or surplus, contingency reserve and a portion of the reserves for unearned premiums. At September 30, 2015 , MGIC’s risk-to-capital ratio was 12.3 to 1 , below the maximum allowed by the jurisdictions with State Capital Requirements, and its policyholder position was $1.1 billion above the required MPP of $1.1 billion . In calculating our risk-to-capital ratio and MPP, we are allowed full credit for the risk ceded under our reinsurance transaction with a group of unaffiliated reinsurers. It is possible that under the revised State Capital Requirements discussed below, MGIC will not be allowed full credit for the risk ceded to the reinsurers. If MGIC is not allowed an agreed level of credit under either the State Capital Requirements or the PMIERs, MGIC may terminate the reinsurance agreement, without penalty. At this time, we expect MGIC to continue to comply with the current State Capital Requirements; however, you should read the rest of these financial statement footnotes for information about matters that could negatively affect such compliance. At September 30, 2015 , the risk-to-capital ratio of our combined insurance operations (which includes reinsurance affiliates) was 13.6 to 1 . Reinsurance agreements with affiliates permit MGIC to write insurance with a higher coverage percentage than it could on its own under certain state-specific requirements. A higher risk-to-capital ratio on a combined basis may indicate that, in order for MGIC to continue to utilize reinsurance agreements with its affiliates, unless a waiver of the State Capital Requirements of Wisconsin continues to be effective, additional capital contributions to the reinsurance affiliates could be needed. The NAIC previously announced that it plans to revise the minimum capital and surplus requirements for mortgage insurers that are provided for in its Mortgage Guaranty Insurance Model Act. A working group of state regulators is drafting the revisions, although no date has been established by which the NAIC must propose revisions to such requirements. Depending on the scope of revisions made by the NAIC, MGIC may be prevented from writing new business in the jurisdictions adopting such revisions. If MGIC fails to meet the State Capital Requirements of Wisconsin and is unable to obtain a waiver of them from the OCI, MGIC could be prevented from writing new business in all jurisdictions. If MGIC fails to meet the State Capital Requirements of a jurisdiction other than Wisconsin and is unable to obtain a waiver of them, MGIC could be prevented from writing new business in that particular jurisdiction. It is possible that regulatory action by one or more jurisdictions, including those that do not have specific State Capital Requirements, may prevent MGIC from continuing to write new insurance in such jurisdictions. If we are unable to write business in all jurisdictions, lenders may be unwilling to procure insurance from us anywhere. In addition, a lender’s assessment of the future ability of our insurance operations to meet the Financial Requirements may affect its willingness to procure insurance from us. A possible future failure by MGIC to meet the Financial Requirements will not necessarily mean that MGIC lacks sufficient resources to pay claims on its insurance liabilities. While we believe MGIC has sufficient claims paying resources to meet its claim obligations on its insurance in force on a timely basis, you should read the rest of these financial statement footnotes for information about matters that could negatively affect MGIC’s claims paying resources. Statement of Statutory Accounting Principles No. 101 (“SSAP No. 101”) became effective January 1, 2012 and prescribed new standards for determining the amount of deferred tax assets that can be recognized as admitted assets for determining statutory capital. Under a permitted practice effective September 30, 2012 the OCI approved MGIC to report its net deferred tax asset as an admitted asset in an amount not to exceed 10% of adjusted surplus as regards policyholders, notwithstanding any contrary provisions of SSAP No. 101. Net deferred tax assets of $138 million were included in MGIC’s statutory capital at December 31, 2014 . Due to the deferred tax asset valuation allowance reversal as of September 30, 2015 , MGIC no longer relies on the permitted practice and the deferred tax asset is admitted according to the stated provisions of SSAP No. 101. Under the stated provisions of SSAP No. 101, the admitted net deferred tax asset is 15% of adjusted surplus as regards policyholders. Net deferred tax assets of $211 million were included in MGIC's statutory capital as of September 30, 2015 . See Note 1 – “Nature of Business and Basis of Presentation – Capital” for additional information regarding the capital standards of the GSEs. |
New Accounting Pronouncements (
New Accounting Pronouncements (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Pronouncements | Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board ("FASB") issued guidance to clarify the principles for recognizing revenue. While insurance contracts are not within the scope of this updated guidance, our fee income related to contract underwriting and other fee-based services provided to lenders will be subject to this guidance. The updated guidance requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. The guidance is effective for reporting periods beginning after December 15, 2017 with early adoption for reporting periods beginning after December 15, 2016 permitted. We are currently evaluating the impact of this update, but it is not expected to have a significant impact on our consolidated financial statements and disclosures. Presentation of Debt Issuance Costs In April 2015, the FASB amended existing guidance related to the presentation of debt issuance costs. The new standard requires the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. It is effective for annual reporting periods beginning after December 15, 2015, but early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on our consolidated financial statements. Disclosures about Short-Duration Contracts In May 2015, the FASB issued guidance requiring expanded disclosures for insurance entities that issue short-duration contracts. The expanded disclosures are designed to provide additional insight into an insurance entity's ability to underwrite and anticipate costs associated with claims. The disclosures include information about incurred and paid claims development by accident year, on a net of reinsurance basis, for the number of years claims incurred typically remain outstanding, not to exceed ten years. Each period presented in the disclosure about claims development that precedes the current reporting periods is considered supplementary information. The expanded disclosures also include more transparent information about significant changes in methodologies and assumptions used to estimate claims, and the timing, frequency, and severity of claims. The disclosures required by this update are effective for annual periods beginning after December 31, 2015, and interim periods within annual periods beginning after December 31, 2016, and is to be applied retrospectively. We are evaluating the impact, if any, of the new disclosure requirements. |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Long-term debt | Long-term debt as of September 30, 2015 and December 31, 2014 consists of the following obligations. September 30, December 31, (In millions) Senior Notes, interest at 5.375% per annum, due November 2015 $ 61.9 $ 61.9 Convertible Senior Notes, interest at 5% per annum, due May 2017 (1) 345.0 345.0 Convertible Senior Notes, interest at 2% per annum, due April 2020 (2) (3) 500.0 500.0 Convertible Junior Subordinated Debentures, interest at 9% per annum, due April 2063 (4) 389.5 389.5 Total debt 1,296.4 1,296.4 Less current portion of debt (61.9 ) (61.9 ) Total long-term debt $ 1,234.5 $ 1,234.5 (1) Convertible at any time prior to maturity at the holder's option, at an initial conversion rate, which is subject to adjustment, of 74.4186 shares per $1,000 principal amount, representing an initial conversion price of approximately $13.44 per share. (2) Prior to January 1, 2020, the 2% Convertible Senior Notes are convertible only upon satisfaction of one or more conditions. One such condition is that during any calendar quarter commencing after March 31, 2014, the last reported sale price of our common stock for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter be greater than or equal to 130% of the applicable conversion price on each applicable trading day. The 2% Notes are convertible at an initial conversion rate, which is subject to adjustment, of 143.8332 shares per $1,000 principal amount, representing an initial conversion price of approximately $6.95 per share. 130% of such conversion price is $9.03 . On or after January 1, 2020, holders may convert their notes irrespective of satisfaction of the conditions. Our common stock price was greater than or equal to 130% of the applicable conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, September 30, 2015 . (3) Prior to April 10, 2017, the notes will not be redeemable. On any business day on or after April 10, 2017 we may redeem for cash all or part of the notes, at our option, at a redemption rate equal to 100% of the principal amount of the notes being redeemed, plus any accrued and unpaid interest, if the closing sale price of our common stock exceeds 130% of the then prevailing conversion price of the notes for each of at least 20 of the 30 consecutive trading days preceding notice of the redemption. (4) Convertible at any time prior to maturity at the holder's option, at an initial conversion rate, which is subject to adjustment, of 74.0741 shares per $1,000 principal amount, representing an initial conversion price of approximately $13.50 per share. If a holder elects to convert their debentures, deferred interest owed on the debentures being converted is also converted into shares of our common stock. The conversion rate for any deferred interest is based on the average price that our shares traded at during a 5 -day period immediately prior to the election to convert. In lieu of issuing shares of common stock upon conversion of the debentures, we may, at our option, make a cash payment to converting holders for all or some of the shares of our common stock otherwise issuable upon conversion. |
Interest payments made | Interest payments on our existing debt obligations appear below. Nine Months Ended 2015 2014 (In millions) Senior Notes, interest at 5.375% per annum, due November 2015 $ 1.7 $ 1.7 Convertible Senior Notes, interest at 5% per annum, due May 2017 8.6 8.6 Convertible Senior Notes, interest at 2% per annum, due April 2020 5.0 5.0 Convertible Junior Subordinated Debentures, interest at 9% per annum, due April 2063 17.5 17.5 Total interest payments $ 32.8 $ 32.8 |
Reinsurance (Tables)
Reinsurance (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Reinsurance Disclosures [Abstract] | |
Effect of reinsurance agreement | A summary of our quota share reinsurance agreements, excluding captive agreements, appears below. 2013 QSR Transaction Three Months Ended September 30, Nine months ended September 30, 2015 (1) 2014 2015 (1) 2014 (In thousands) Ceded premiums written, net of profit commission $ (69,410 ) $ 27,725 $ (11,355 ) $ 72,414 Ceded premiums earned, net of profit commission (11,568 ) 23,736 35,999 64,330 Ceded losses incurred — 4,689 6,060 10,347 Ceding commissions (2) (11,568 ) 9,922 10,235 27,800 Ceded unearned premiums — 39,946 — 43,935 Profit commission 11,568 21,887 62,525 66,584 (1) The three and nine months ended September 30, 2015 include the non-recurring impact of commuting our 2013 QSR Transaction in the third quarter. The commutation had no impact on ceded losses incurred. (2) Ceding commissions are reported within Other underwriting and operating expenses, net on the consolidated statements of operations. 2015 QSR Transaction Three and Nine Months Ended September 30, 2015 (In thousands) Ceded premiums written, net of profit commission (1) $ 22,626 Ceded premiums earned, net of profit commission (1) 22,626 Ceded losses incurred 4,236 Ceding commissions (2) 9,195 Profit commission 23,347 (1) As of July 1, 2015 premiums are ceded on an earned and received basis as defined in our 2015 QSR Transaction. (2) Ceding commissions are reported within Other underwriting and operating expenses, net on the consolidated statements of operations. |
Earnings per Share (Tables)
Earnings per Share (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Calculation of earnings (loss) per share | The following table reconciles the numerators and denominators used to calculate basic and diluted EPS and also indicates the number of antidilutive securities. Three months ended September 30, Nine months ended September 30, 2015 2014 2015 2014 (In thousands, except per share data and as otherwise noted) Basic earnings per share: Net income $ 822,852 $ 72,017 $ 1,069,582 $ 177,521 Weighted average common shares outstanding 339,701 338,626 339,504 338,488 Basic income per share $ 2.42 $ 0.21 $ 3.15 $ 0.52 Diluted earnings per share: Net income $ 822,852 $ 72,017 $ 1,069,582 $ 177,521 Interest expense, net of tax (1): 2% Convertible Senior Notes due 2020 1,982 3,049 5,946 9,148 5% Convertible Senior Notes due 2017 3,050 — 9,150 — 9% Convertible Junior Subordinated Debentures due 2063 5,697 — 17,090 — Diluted income available to common shareholders $ 833,581 $ 75,066 $ 1,101,768 $ 186,669 Weighted average shares - basic 339,701 338,626 339,504 338,488 Effect of dilutive securities: Unvested restricted stock units 1,983 3,008 2,128 3,043 2% Convertible Senior Notes due 2020 71,942 71,942 71,942 71,942 5% Convertible Senior Notes due 2017 25,670 — 25,670 — 9% Convertible Junior Subordinated Debentures due 2063 28,853 — 28,853 — Weighted average shares - diluted 468,149 413,576 468,097 413,473 Diluted income per share $ 1.78 $ 0.18 $ 2.35 $ 0.45 Antidilutive securities (in millions) — 54.5 — 54.5 (1) Due to the valuation allowance recorded against deferred tax assets, the three and nine months ended September 30, 2014 were not tax effected. The three and nine months ended September 30, 2015 have been tax effected at a rate of 35% . |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Investments [Abstract] | |
Amortized cost, gross unrealized gains and losses and fair value of investments portfolio | The amortized cost, gross unrealized gains and losses and fair value of the investment portfolio at September 30, 2015 and December 31, 2014 are shown below. September 30, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) Fair Value (In thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 104,419 $ 2,287 $ (1,740 ) $ 104,966 Obligations of U.S. states and political subdivisions 1,595,458 24,306 (7,243 ) 1,612,521 Corporate debt securities 2,142,500 7,722 (29,650 ) 2,120,572 Asset-backed securities 132,271 346 (80 ) 132,537 Residential mortgage-backed securities 278,737 275 (7,541 ) 271,471 Commercial mortgage-backed securities 253,143 1,048 (1,504 ) 252,687 Collateralized loan obligations 61,342 — (1,056 ) 60,286 Debt securities issued by foreign sovereign governments 30,477 2,876 (62 ) 33,291 Total debt securities 4,598,347 38,860 (48,876 ) 4,588,331 Equity securities 5,595 52 (13 ) 5,634 Total investment portfolio $ 4,603,942 $ 38,912 $ (48,889 ) $ 4,593,965 December 31, 2014 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) Fair Value (In thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 349,153 $ 2,752 $ (5,130 ) $ 346,775 Obligations of U.S. states and political subdivisions 844,942 12,961 (2,761 ) 855,142 Corporate debt securities 2,418,991 16,325 (10,035 ) 2,425,281 Asset-backed securities 286,260 535 (140 ) 286,655 Residential mortgage-backed securities 329,983 254 (9,000 ) 321,237 Commercial mortgage-backed securities 276,215 1,221 (2,158 ) 275,278 Collateralized loan obligations 61,340 — (1,264 ) 60,076 Debt securities issued by foreign sovereign governments 35,630 3,540 — 39,170 Total debt securities 4,602,514 37,588 (30,488 ) 4,609,614 Equity securities 3,003 61 (9 ) 3,055 Total investment portfolio $ 4,605,517 $ 37,649 $ (30,497 ) $ 4,612,669 (1) At September 30, 2015 and December 31, 2014 , there were no other-than-temporary impairment losses recorded in other comprehensive income. |
Amortized cost and fair values of debt securities by contractual maturity | The amortized cost and fair values of debt securities at September 30, 2015 , by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most asset-backed and mortgage-backed securities and collateralized loan obligations provide for periodic payments throughout their lives, they are listed below in separate categories. September 30, 2015 Amortized Cost Fair Value (In thousands) Due in one year or less $ 191,371 $ 192,007 Due after one year through five years 1,611,819 1,622,178 Due after five years through ten years 1,130,625 1,113,217 Due after ten years 939,039 943,948 $ 3,872,854 $ 3,871,350 Asset-backed securities 132,271 132,537 Residential mortgage-backed securities 278,737 271,471 Commercial mortgage-backed securities 253,143 252,687 Collateralized loan obligations 61,342 60,286 Total at September 30, 2015 $ 4,598,347 $ 4,588,331 |
Aging of the fair values of securities in an unrealized loss position | For those securities in an unrealized loss position, the length of time the securities were in such a position, as measured by their month-end fair values, is as follows: Less Than 12 Months 12 Months or Greater Total September 30, 2015 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses (In thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 25,781 $ 295 $ 15,534 $ 1,445 $ 41,315 $ 1,740 Obligations of U.S. states and political subdivisions 231,647 6,626 43,865 617 275,512 7,243 Corporate debt securities 1,045,477 27,190 140,995 2,460 1,186,472 29,650 Asset-backed securities 36,920 64 5,567 16 42,487 80 Residential mortgage-backed securities 39,870 414 201,435 7,127 241,305 7,541 Commercial mortgage-backed securities 74,403 698 79,411 806 153,814 1,504 Collateralized loan obligations — — 60,286 1,056 60,286 1,056 Foreign government securities 2,177 62 — — 2,177 62 Equity securities 319 4 173 9 492 13 Total $ 1,456,594 $ 35,353 $ 547,266 $ 13,536 $ 2,003,860 $ 48,889 Less Than 12 Months 12 Months or Greater Total December 31, 2014 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses (In thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 58,166 $ 138 $ 232,351 $ 4,992 $ 290,517 $ 5,130 Obligations of U.S. states and political subdivisions 166,408 1,066 114,465 1,695 280,873 2,761 Corporate debt securities 816,555 5,259 243,208 4,776 1,059,763 10,035 Asset-backed securities 54,491 80 11,895 60 66,386 140 Residential mortgage-backed securities 24,168 34 263,002 8,966 287,170 9,000 Commercial mortgage-backed securities 89,301 810 110,652 1,348 199,953 2,158 Collateralized loan obligations — — 60,076 1,264 60,076 1,264 Equity securities 167 1 235 8 402 9 Total $ 1,209,256 $ 7,388 $ 1,035,884 $ 23,109 $ 2,245,140 $ 30,497 |
Net realized investment gains (losses) and OTTI on investments | The net realized investment gains (losses) on the investment portfolio are as follows: Three Months Ended Nine Months Ended 2015 2014 2015 2014 (In thousands) Realized investment gains (losses) on investments: Fixed maturities $ 638 $ 629 $ 27,123 $ 755 Equity securities 2 3 10 168 Net realized investment gains $ 640 $ 632 $ 27,133 $ 923 Three Months Ended Nine Months Ended 2015 2014 2015 2014 (In thousands) Realized investment gains (losses) on investments: Gains on sales $ 720 $ 1,161 $ 28,711 $ 3,273 Losses on sales (80 ) (529 ) (1,578 ) (2,350 ) Net realized investment gains $ 640 $ 632 $ 27,133 $ 923 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair value measurements for items measured at fair value | Fair value measurements for assets measured at fair value included the following as of September 30, 2015 and December 31, 2014 : September 30, 2015 Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 104,966 $ 18,418 $ 86,548 $ — Obligations of U.S. states and political subdivisions 1,612,521 — 1,611,134 1,387 Corporate debt securities 2,120,572 — 2,120,572 — Asset-backed securities 132,537 — 132,537 — Residential mortgage-backed securities 271,471 — 271,471 — Commercial mortgage-backed securities 252,687 — 252,687 — Collateralized loan obligations 60,286 — 60,286 — Debt securities issued by foreign sovereign governments 33,291 33,291 — — Total debt securities 4,588,331 51,709 4,535,235 1,387 Equity securities (1) 5,634 2,778 — 2,856 Total investment portfolio $ 4,593,965 $ 54,487 $ 4,535,235 $ 4,243 Real estate acquired (2) $ 10,084 $ — $ — $ 10,084 December 31, 2014 Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 346,775 $ 188,824 $ 157,951 $ — Obligations of U.S. states and political subdivisions 855,142 — 853,296 1,846 Corporate debt securities 2,425,281 — 2,425,281 — Asset-backed securities 286,655 — 286,655 — Residential mortgage-backed securities 321,237 — 321,237 — Commercial mortgage-backed securities 275,278 — 275,278 — Collateralized loan obligations 60,076 — 60,076 — Debt securities issued by foreign sovereign governments 39,170 39,170 — — Total debt securities 4,609,614 227,994 4,379,774 1,846 Equity securities (1) 3,055 2,734 — 321 Total investment portfolio $ 4,612,669 $ 230,728 $ 4,379,774 $ 2,167 Real estate acquired (2) $ 12,658 $ — $ — $ 12,658 (1) Equity securities in Level 3 are carried at cost, which approximates fair value. (2) Real estate acquired through claim settlement, which is held for sale, is reported in Other assets on the consolidated balance sheets. |
Reconciliation of beginning and ending balance for assets and liabilities measured at fair value with significant unobservable inputs (level 3) | For assets measured at fair value using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances for the three and nine months ended September 30, 2015 and 2014 is as follows: Debt Securities Equity Securities Total Investments Real Estate Acquired (In thousands) Balance at June 30, 2015 $ 1,634 $ 321 $ 1,955 $ 7,995 Total realized/unrealized gains (losses): Included in earnings and reported as losses incurred, net — — — (1,031 ) Purchases — 2,535 2,535 9,632 Sales (247 ) — (247 ) (6,512 ) Transfers into Level 3 — — — — Transfers out of Level 3 — — — — Balance at September 30, 2015 $ 1,387 $ 2,856 $ 4,243 $ 10,084 Amount of total losses included in earnings for the three months ended September 30, 2015 attributable to the change in unrealized losses on assets still held at September 30, 2015 $ — $ — $ — $ — Debt Securities Equity Securities Total Investments Real Estate Acquired (In thousands) Balance at December 31, 2014 $ 1,846 $ 321 $ 2,167 $ 12,658 Total realized/unrealized gains (losses): Included in earnings and reported as losses incurred, net — — — (1,503 ) Purchases 7 2,535 2,542 26,346 Sales (466 ) — (466 ) (27,417 ) Transfers into Level 3 — — — — Transfers out of Level 3 — — — — Balance at September 30, 2015 $ 1,387 $ 2,856 $ 4,243 $ 10,084 Amount of total losses included in earnings for the nine months ended September 30, 2015 attributable to the change in unrealized losses on assets still held at September 30, 2015 $ — $ — $ — $ — Debt Securities Equity Securities Total Investments Real Estate Acquired (In thousands) Balance at June 30, 2014 $ 2,231 $ 321 $ 2,552 $ 10,804 Total realized/unrealized gains (losses): Included in earnings and reported as losses incurred, net — — — (2,062 ) Purchases — — — 14,107 Sales (237 ) — (237 ) (6,284 ) Transfers into Level 3 — — — — Transfers out of Level 3 — — — — Balance at September 30, 2014 $ 1,994 $ 321 $ 2,315 $ 16,565 Amount of total losses included in earnings for the three months ended September 30, 2014 attributable to the change in unrealized losses on assets still held at September 30, 2014 $ — $ — $ — $ — Debt Securities Equity Securities Total Investments Real Estate Acquired (In thousands) Balance at December 31, 2013 $ 2,423 $ 321 $ 2,744 $ 13,280 Total realized/unrealized gains (losses): Included in earnings and reported as losses incurred, net — — — (4,378 ) Purchases 30 — 30 33,484 Sales (459 ) — (459 ) (25,821 ) Transfers into Level 3 — — — — Transfers out of Level 3 — — — — Balance at September 30, 2014 $ 1,994 $ 321 $ 2,315 $ 16,565 Amount of total losses included in earnings for the nine months ended September 30, 2014 attributable to the change in unrealized losses on assets still held at September 30, 2014 $ — $ — $ — $ — |
Par value and fair value of debt | The following tables present the carrying value and fair value of our financial liabilities disclosed, but not carried, at fair value at September 30, 2015 and December 31, 2014 , and the level within the fair value hierarchy at which such liabilities are measured on a recurring basis. September 30, 2015 Par Value Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Financial liabilities: Senior Notes $ 61,953 $ 62,027 $ — $ 62,027 $ — Convertible Senior Notes due 2017 345,000 366,749 — 366,749 — Convertible Senior Notes due 2020 500,000 719,375 — 719,375 — Convertible Junior Subordinated Debentures 389,522 485,648 — 485,648 — Total Debt $ 1,296,475 $ 1,633,799 $ — $ 1,633,799 $ — December 31, 2014 Par Value Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Financial liabilities: Senior Notes $ 61,953 $ 63,618 $ — $ 63,618 $ — Convertible Senior Notes due 2017 345,000 387,997 — 387,997 — Convertible Senior Notes due 2020 500,000 735,075 — 735,075 — Convertible Junior Subordinated Debentures 389,522 500,201 — 500,201 — Total Debt $ 1,296,475 $ 1,686,891 $ — $ 1,686,891 $ — |
Other Comprehensive Income (Tab
Other Comprehensive Income (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |
Other comprehensive income | The pretax components of our other comprehensive income (loss) and the related income tax (expense) benefit for the three and nine months ended September 30, 2015 and 2014 are included in the tables below. Three Months Ended September 30, 2015 2014 (In thousands) Net unrealized holding gains (losses) arising during the period $ 27,271 $ (17,377 ) Income tax (expense) benefit (9,531 ) 6,069 Valuation allowance (1) 77,555 (5,993 ) Net of taxes 95,295 (17,301 ) Net changes in benefit plan assets and obligations (546 ) (1,732 ) Income tax benefit 192 606 Valuation allowance (1) (7,001 ) (606 ) Net of taxes (7,355 ) (1,732 ) Net changes in unrealized foreign currency translation adjustment (3,724 ) (3,835 ) Income tax benefit 1,306 1,345 Valuation allowance (1) (529 ) — Net of taxes (2,947 ) (2,490 ) Total other comprehensive income (loss) 23,001 (22,944 ) Total income tax benefit, net of valuation allowance 61,992 1,421 Total other comprehensive income (loss), net of tax $ 84,993 $ (21,523 ) Nine Months Ended September 30, 2015 2014 (In thousands) Net unrealized holding (losses) gains arising during the period $ (17,126 ) $ 67,102 Income tax benefit (expense) 5,955 (23,436 ) Valuation allowance (1) 62,383 23,132 Net of taxes 51,212 66,798 Net changes in benefit plan assets and obligations (1,638 ) (5,198 ) Income tax benefit 574 1,819 Valuation allowance (1) (7,383 ) (1,819 ) Net of taxes (8,447 ) (5,198 ) Net changes in unrealized foreign currency translation adjustment (6,228 ) (1,000 ) Income tax benefit 2,186 350 Valuation allowance (1) (529 ) — Net of taxes (4,571 ) (650 ) Total other comprehensive (loss) income (24,992 ) 60,904 Total income tax benefit, net of valuation allowance 63,186 46 Total other comprehensive income, net of tax $ 38,194 $ 60,950 (1) See Note 11 – “Income Taxes” for a discussion of the valuation allowance recorded against deferred tax assets. |
Reclassification out of accumulated other comprehensive income | The pretax and related income tax (expense) benefit components of the amounts reclassified from our accumulated other comprehensive loss to our consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014 are included in the tables below. Three Months Ended September 30, 2015 2014 (In thousands) Reclassification adjustment for net realized gains (losses) included in net income $ (1,120 ) $ (840 ) Income tax benefit 395 299 Valuation allowance (413 ) (330 ) Net of taxes (1,138 ) (871 ) Reclassification adjustment related to benefit plan assets and obligations 546 1,732 Income tax expense (192 ) (606 ) Valuation allowance 192 606 Net of taxes 546 1,732 Total reclassifications (574 ) 892 Total income tax expense, net of valuation allowance (18 ) (31 ) Total reclassifications, net of tax $ (592 ) $ 861 Nine Months Ended September 30, 2015 2014 (In thousands) Reclassification adjustment for net realized gains (losses) included in net income (1) $ 10,591 $ (5,725 ) Income tax (expense) benefit (3,697 ) 2,014 Valuation allowance 3,635 (2,075 ) Net of taxes 10,529 (5,786 ) Reclassification adjustment related to benefit plan assets and obligations 1,638 5,198 Income tax expense (574 ) (1,819 ) Valuation allowance 574 1,819 Net of taxes 1,638 5,198 Total reclassifications 12,229 (527 ) Total income tax expense, net of valuation allowance (62 ) (61 ) Total reclassifications, net of tax $ 12,167 $ (588 ) (1) The reclassification adjustment for the nine months ended September 30, 2014 has been recast to conform to the 2015 method for determining amounts included in net income. This revision had no impact to our consolidated financial statements and is not material to amounts disclosed by us in prior periods. |
Accumulated other comprehensive income (loss) | Changes in our accumulated other comprehensive loss (“AOCL”), including amounts reclassified from other comprehensive income (loss), for the nine months ended September 30, 2015 are included in the table below. Nine Months Ended September 30, 2015 Unrealized gains and losses on available-for- sale securities Defined benefit plans Foreign currency translation Total accumulated other comprehensive loss (In thousands) Balance at December 31, 2014, net of tax $ (57,551 ) $ (28,938 ) $ 5,148 $ (81,341 ) Other comprehensive income (loss) before reclassifications 61,741 (6,809 ) (4,571 ) 50,361 Less: Amounts reclassified from AOCL 10,529 (1) 1,638 (2) — 12,167 Balance at September 30, 2015, net of tax $ (6,339 ) $ (37,385 ) $ 577 $ (43,147 ) (1) Increases Net realized investment gains on the consolidated statements of operations. (2) Decreases Other underwriting and operating expenses, net on the consolidated statements of operations. |
Benefit Plans (Tables)
Benefit Plans (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Compensation and Retirement Disclosure [Abstract] | |
Components of net periodic benefit cost | The following table provides the components of net periodic benefit cost for the pension, supplemental executive retirement and other postretirement benefit plans: Three Months Ended September 30, Pension and Supplemental Other Postretirement 2015 2014 2015 2014 (In thousands) Service cost $ 2,564 $ 2,142 $ 208 $ 165 Interest cost 3,962 3,997 174 164 Expected return on plan assets (5,278 ) (5,258 ) (1,248 ) (1,162 ) Recognized net actuarial loss (gain) 1,372 271 (44 ) (109 ) Amortization of prior service cost (211 ) (233 ) (1,661 ) (1,663 ) Net periodic benefit cost (benefit) $ 2,409 $ 919 $ (2,571 ) $ (2,605 ) Nine Months Ended September 30, Pension and Supplemental Other Postretirement 2015 2014 2015 2014 (In thousands) Service cost $ 7,692 $ 6,425 $ 624 $ 494 Interest cost 11,886 11,991 523 491 Expected return on plan assets (15,832 ) (15,773 ) (3,743 ) (3,486 ) Recognized net actuarial loss (gain) 4,114 812 (132 ) (326 ) Amortization of prior service cost (633 ) (698 ) (4,986 ) (4,988 ) Net periodic benefit cost (benefit) $ 7,227 $ 2,757 $ (7,714 ) $ (7,815 ) |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Income Tax Disclosure [Abstract] | |
Schedule of valuation allowance | The following table provides a roll forward of our deferred tax asset valuation allowance for the nine months ended September 30, 2015. For the nine months ended September 30, 2015 and period then ended (In millions) Beginning Balance December 31, 2014 $ 902.3 Reduction in tax provision for the nine months ended September 30, 2015 (124.4 ) Reduction in tax provision allocated to the three months ended December 31, 2015 (25.3 ) Amounts recorded in other comprehensive income for the nine months ended September 30, 2015 6.3 Change in valuation allowance for deferred tax assets in the current year (143.4 ) Amounts related to the release of the deferred tax asset valuation allowance recorded in the three months ending September 30, 2015 Reduction in tax provision for amounts to be realized in future years (698.1 ) Amounts recorded in other comprehensive income to be realized in future years (60.8 ) Change in valuation allowance for deferred tax assets realizable in future years (758.9 ) Ending Balance September 30, 2015 $ — |
Tax provision (benefit) | The effect of the change in valuation allowance on the provision for income taxes was as follows: Three months ended September 30, Nine months ended September 30, 2015 2014 2015 2014 (In thousands) Provision for income tax $ 43,694 $ 25,030 $ 131,568 $ 65,322 Change in valuation allowance (739,298 ) (24,781 ) (822,465 ) (63,229 ) (Benefit from) provision for income taxes $ (695,604 ) $ 249 $ (690,897 ) $ 2,093 |
Loss Reserves (Tables)
Loss Reserves (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Insurance Loss Reserves [Abstract] | |
Reconciliation of beginning and ending loss reserves | The following table provides a reconciliation of beginning and ending loss reserves for the nine months ended September 30, 2015 and 2014 : Nine months ended September 30, 2015 2014 (In thousands) Reserve at beginning of period $ 2,396,807 $ 3,061,401 Less reinsurance recoverable 57,841 64,085 Net reserve at beginning of period 2,338,966 2,997,316 Losses incurred: Losses and LAE incurred in respect of default notices related to: Current year 338,611 454,390 Prior years (1) (90,130 ) (75,387 ) Subtotal 248,481 379,003 Losses paid: Losses and LAE paid in respect of default notices related to: Current year 9,227 11,574 Prior years 652,465 895,061 Reinsurance terminations (2) (15,440 ) — Subtotal 646,252 906,635 Net reserve at end of period 1,941,195 2,469,684 Plus reinsurance recoverables 38,748 57,898 Reserve at end of period $ 1,979,943 $ 2,527,582 (1) A negative number for prior year losses incurred indicates a redundancy of prior year loss reserves and a positive number for prior year losses incurred indicates a deficiency of prior year loss reserves. (2) In a termination or commutation, the reinsurance agreement is cancelled, with no future premium ceded and funds for any incurred but unpaid losses transferred to us. The transferred funds result in an increase in our investment portfolio (including cash and cash equivalents) and a decrease in net losses paid (reduction in losses incurred). In addition, there is an offsetting decrease in the reinsurance recoverable (increase in losses incurred), and thus there is no net impact to losses incurred. |
Prior year development of the reserves | The prior year development of the reserves in the first nine months of 2015 and 2014 is reflected in the table below. Nine months ended September 30, 2015 2014 (In millions) Decrease in estimated claim rate on primary defaults $ (95 ) $ (38 ) Increase in estimated severity on primary defaults 12 (20 ) Change in estimates related to pool reserves, LAE reserves and reinsurance (7 ) (17 ) Total prior year loss development (1) $ (90 ) $ (75 ) (1) A negative number for prior year loss development indicates a redundancy of prior year loss reserves, and a positive number indicates a deficiency of prior year loss reserves |
Rollforward of primary default inventory | A rollforward of our primary default inventory for the three and nine months ended September 30, 2015 and 2014 appears in the table below. The information concerning new notices and cures is compiled from monthly reports received from loan servicers. The level of new notice and cure activity reported in a particular month can be influenced by, among other things, the date on which a servicer generates its report, the number of business days in a month and transfers of servicing between loan servicers. Three months ended September 30, Nine months ended September 30, 2015 2014 2015 2014 Default inventory at beginning of period 66,357 85,416 79,901 103,328 New notices 19,509 22,927 55,856 67,451 Cures (17,036 ) (19,582 ) (56,700 ) (68,082 ) Paids (including those charged to a deductible or captive) (3,958 ) (5,288 ) (12,671 ) (18,420 ) Rescissions and denials (230 ) (319 ) (623 ) (1,123 ) Items removed from inventory resulting from the Countrywide settlement on GSE loans — — (1,121 ) — Default inventory at end of period 64,642 83,154 64,642 83,154 |
Aging of the primary default inventory | As of September 30, 2015 the percentage of loans in the inventory that have been in default for 12 or more consecutive months has declined compared with the prior year end and one year prior, as shown in the table below. Historically as a default ages it becomes more likely to result in a claim. The percentage of loans that have been in default for 12 or more consecutive months and the number of loans in our primary claims received inventory have been affected by our suspended rescissions and the resolution of certain of those rescissions discussed below and in Note 5 – “Litigation and Contingencies.” September 30, 2015 December 31, 2014 September 30, 2014 Consecutive months in default 3 months or less 13,991 22 % 15,319 19 % 16,209 19 % 4 - 11 months 14,703 23 % 19,710 25 % 18,890 23 % 12 months or more 35,948 55 % 44,872 56 % 48,055 58 % Total primary default inventory 64,642 100 % 79,901 100 % 83,154 100 % Primary claims received inventory included in ending default inventory (1) 2,982 5 % 4,746 6 % 5,194 6 % (1) Our claims received inventory includes suspended rescissions, as we have voluntarily suspended rescissions of coverage related to loans that we believed would be included in a potential resolution. As of September 30, 2015 , rescissions of coverage on approximately 430 loans had been voluntarily suspended compared to 1,425 at December 31, 2014 and 1,575 at September 30, 2014 . |
Number of payments delinquent | The number of payments that a borrower is delinquent is shown in the table below. September 30, 2015 December 31, 2014 September 30, 2014 Number of payments delinquent 3 payments or less 20,637 32 % 23,253 29 % 23,769 28 % 4 - 11 payments 14,890 23 % 19,427 24 % 18,985 23 % 12 payments or more 29,115 45 % 37,221 47 % 40,400 49 % Total primary default inventory 64,642 100 % 79,901 100 % 83,154 100 % |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of stock-based compensation, activity | The number of shares granted to employees and the weighted average fair value per share during the periods presented were (shares in thousands): Nine months ended September 30, 2015 2014 Shares Weighted Shares Weighted RSUs subject to performance conditions 1,144 $ 9.04 1,372 $ 8.43 RSUs subject only to service conditions 410 8.99 409 8.43 |
Nature of Business and Basis 35
Nature of Business and Basis of Presentation (Details) $ in Thousands | Nov. 02, 2015USD ($) | Dec. 31, 2013USD ($) | Jun. 30, 2013USD ($)agreement | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
PMIERs tables expected review period | 2 years | ||||
Notice period for updates to PMIERs tables | 180 days | ||||
(Increase) decrease in restricted cash | $ 42,900 | $ (60,300) | $ 17,212 | $ 233 | |
Number of agreements entered into to resolve disputes | agreement | 2 | ||||
Senior Notes, interest at 5.375% per annum, due November 2015 | Subsequent Event | |||||
Debt Instrument [Line Items] | |||||
Repayments of debt | $ 61,900 |
Debt (Details)
Debt (Details) - USD ($) | Nov. 02, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Debt Instrument [Line Items] | |||||
Total debt | $ 1,296,400,000 | $ 1,296,400,000 | |||
Less current portion of debt | (61,900,000) | (61,900,000) | |||
Total long-term debt | $ 1,234,500,000 | 1,234,500,000 | |||
Period preceding election to convert | 5 days | ||||
Interest payments made | $ 32,800,000 | $ 32,800,000 | |||
Holding company cash and investments | 469,000,000 | ||||
Unrealized gain loss on holding company investments | $ 400,000 | ||||
Modified duration of holding company investments | 2 years 10 months 24 days | ||||
Senior Notes, interest at 5.375% per annum, due November 2015 | |||||
Debt Instrument [Line Items] | |||||
Total debt | $ 61,900,000 | 61,900,000 | |||
Interest payments made | $ 1,700,000 | 1,700,000 | |||
Senior Notes, interest at 5.375% per annum, due November 2015 | Subsequent Event | |||||
Debt Instrument [Line Items] | |||||
Repayments of debt | $ 61,900,000 | ||||
Senior Notes, interest at 5.375% per annum, due November 2015 | Senior Notes Due 2015 | |||||
Debt Instrument [Line Items] | |||||
Stated interest rate (in hundredths) | 5.375% | ||||
Maturity date | Nov. 1, 2015 | ||||
Convertible Senior Notes, interest at 5% per annum, due May 2017 | |||||
Debt Instrument [Line Items] | |||||
Total debt | [1] | $ 345,000,000 | 345,000,000 | ||
Stated interest rate (in hundredths) | 5.00% | ||||
Maturity date | May 1, 2017 | ||||
Conversion rate (in shares per $1,000 note) | 74.4186 | ||||
Principal amount of notes used in determining conversion rate | $ 1,000 | ||||
Initial conversion price (in dollars per share) | $ 13.44 | ||||
Interest payments made | $ 8,600,000 | 8,600,000 | |||
Convertible Senior Notes, interest at 2% per annum, due April 2020 | |||||
Debt Instrument [Line Items] | |||||
Total debt | [2],[3] | $ 500,000,000 | 500,000,000 | ||
Stated interest rate (in hundredths) | 2.00% | ||||
Maturity date | Apr. 1, 2020 | ||||
Conversion rate (in shares per $1,000 note) | 143.8332 | ||||
Principal amount of notes used in determining conversion rate | $ 1,000 | ||||
Initial conversion price (in dollars per share) | $ 6.95 | ||||
Minimum number of trading days | 20 days | ||||
Maximum number of trading days | 30 days | ||||
Percentage of conversion price (in hundredths) | 130.00% | ||||
Convertible debt, conversion price | $ 9.03 | ||||
Redemption price, percentage (in hundredths) | 100.00% | ||||
Interest payments made | $ 5,000,000 | 5,000,000 | |||
Convertible Junior Subordinated Debentures, interest at 9% per annum, due April 2063 | |||||
Debt Instrument [Line Items] | |||||
Total debt | [4] | $ 389,500,000 | $ 389,500,000 | ||
Stated interest rate (in hundredths) | 9.00% | ||||
Maturity date | Apr. 1, 2063 | ||||
Conversion rate (in shares per $1,000 note) | 74.0741 | ||||
Principal amount of notes used in determining conversion rate | $ 1,000 | ||||
Initial conversion price (in dollars per share) | $ 13.50 | ||||
Interest payments made | $ 17,500,000 | $ 17,500,000 | |||
[1] | Convertible at any time prior to maturity at the holder's option, at an initial conversion rate, which is subject to adjustment, of 74.4186 shares per $1,000 principal amount, representing an initial conversion price of approximately $13.44 per share. | ||||
[2] | Prior to April 10, 2017, the notes will not be redeemable. On any business day on or after April 10, 2017 we may redeem for cash all or part of the notes, at our option, at a redemption rate equal to 100% of the principal amount of the notes being redeemed, plus any accrued and unpaid interest, if the closing sale price of our common stock exceeds 130% of the then prevailing conversion price of the notes for each of at least 20 of the 30 consecutive trading days preceding notice of the redemption. | ||||
[3] | Prior to January 1, 2020, the 2% Convertible Senior Notes are convertible only upon satisfaction of one or more conditions. One such condition is that during any calendar quarter commencing after March 31, 2014, the last reported sale price of our common stock for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter be greater than or equal to 130% of the applicable conversion price on each applicable trading day. The 2% Notes are convertible at an initial conversion rate, which is subject to adjustment, of 143.8332 shares per $1,000 principal amount, representing an initial conversion price of approximately $6.95 per share. 130% of such conversion price is $9.03. On or after January 1, 2020, holders may convert their notes irrespective of satisfaction of the conditions. Our common stock price was greater than or equal to 130% of the applicable conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, September 30, 2015. | ||||
[4] | Convertible at any time prior to maturity at the holder's option, at an initial conversion rate, which is subject to adjustment, of 74.0741 shares per $1,000 principal amount, representing an initial conversion price of approximately $13.50 per share. If a holder elects to convert their debentures, deferred interest owed on the debentures being converted is also converted into shares of our common stock. The conversion rate for any deferred interest is based on the average price that our shares traded at during a 5-day period immediately prior to the election to convert. In lieu of issuing shares of common stock upon conversion of the debentures, we may, at our option, make a cash payment to converting holders for all or some of the shares of our common stock otherwise issuable upon conversion. |
Reinsurance (Details)
Reinsurance (Details) - USD ($) | Jul. 01, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | ||
Premiums Written and Earned [Abstract] | ||||||||
Ceded premiums written, net of profit commission | $ (43,897,000) | $ 32,536,000 | $ 22,334,000 | $ 87,450,000 | ||||
Profit commission receivable | 0 | $ 0 | $ 91,500,000 | |||||
Period of existing captive reinsurance agreement | 10 years | |||||||
Reinsurance recoverable on loss reserves related to captive agreements | 34,000,000 | $ 34,000,000 | 45,000,000 | |||||
Fair value of trust fund assets under captive agreements | 159,000,000 | 159,000,000 | $ 198,000,000 | |||||
Quota Share Reinsurance Agreement, 2013 | ||||||||
Premiums Written and Earned [Abstract] | ||||||||
Ceded premiums written, net of profit commission | $ 69,400,000 | (69,410,000) | [1] | 27,725,000 | (11,355,000) | 72,414,000 | ||
Ceded premiums earned, net of profit commission | 11,600,000 | (11,568,000) | [1] | 23,736,000 | 35,999,000 | 64,330,000 | ||
Ceded losses incurred | 0 | [1] | 4,689,000 | 6,060,000 | 10,347,000 | |||
Ceding commissions | [2] | (11,568,000) | [1] | 9,922,000 | 10,235,000 | 27,800,000 | ||
Ceded unearned premiums | 0 | [1] | 39,946,000 | 0 | 43,935,000 | |||
Profit commission | 142,500,000 | 11,568,000 | [1] | $ 21,887,000 | 62,525,000 | $ 66,584,000 | ||
Quota Share Reinsurance Agreement, 2015 | ||||||||
Premiums Written and Earned [Abstract] | ||||||||
Ceded premiums written, net of profit commission | [3] | 22,626,000 | 22,626,000 | |||||
Ceded premiums earned, net of profit commission | [3] | 22,626,000 | 22,626,000 | |||||
Ceded losses incurred | 4,236,000 | 4,236,000 | ||||||
Ceding commissions | [4] | 9,195,000 | 9,195,000 | |||||
Profit commission | $ 23,347,000 | $ 23,347,000 | ||||||
Contingent termination fee | $ 0 | |||||||
Threshold of total PMIERs requirements for termination election | 90.00% | |||||||
Quota share (as a percent) | 30.00% | |||||||
Ceding commission (as a percent) | 20.00% | |||||||
Loss ratio | 60.00% | |||||||
[1] | The three and nine months ended September 30, 2015 include the non-recurring impact of commuting our 2013 QSR Transaction in the third quarter. The commutation had no impact on ceded losses incurred. | |||||||
[2] | Ceding commissions are reported within Other underwriting and operating expenses, net on the consolidated statements of operations. | |||||||
[3] | As of July 1, 2015 premiums are ceded on an earned and received basis as defined in our 2015 QSR Transaction. | |||||||
[4] | Ceding commissions are reported within Other underwriting and operating expenses, net on the consolidated statements of operations. |
Litigation and Contingencies (D
Litigation and Contingencies (Details) $ in Thousands | 6 Months Ended | 9 Months Ended | 12 Months Ended | |||
Jun. 30, 2009 | Sep. 30, 2015USD ($)caselawsuitsettlement | Dec. 31, 2014USD ($) | Dec. 31, 2013USD ($) | Dec. 31, 2010USD ($) | Dec. 31, 2009USD ($) | |
Curtailments [Abstract] | ||||||
Average paid claim reduction due to curtailments (in hundredths) | 7.00% | 6.70% | ||||
Number of days after claim paid within which objection must be received for review | 90 days | |||||
Claims resolved by rescissions [Abstract] | ||||||
Percentage of claims received in a quarter resolved by rescission, lower range limit (in hundredths) | 5.00% | |||||
Percentage of claims received in a quarter resolved by rescission, upper range limit (in hundredths) | 28.00% | |||||
Mitigation of incurred losses by rescission of policies | $ 200,000 | $ 2,500,000 | ||||
Statute of limitations to bring legal proceedings disputing right to rescind coverage | 3 years | |||||
Statute of limitations to bring legal proceedings after notice of rescission | 2 years | |||||
Percentage of loans covered by CHL Agreement for which consent was received (in hundredths) | 89.00% | |||||
Maximum exposure above estimate provision for claims paying practices | $ 124,900 | |||||
Percentage of loans for which consent was not received, percent | 11.00% | |||||
Maximum exposure associated with other discussions and legal proceedings | $ 202,500 | |||||
Class action complaint under RESPA [Abstract] | ||||||
Period of existing captive reinsurance agreement | 10 years | |||||
Civil penalty | $ 2,650 | |||||
Other Legal Proceedings [Abstract] | ||||||
Underwriting remedy expense | $ 1,000 | $ 4,000 | ||||
Class Action Complaint Under RESPA | Pending Litigation | ||||||
Class action complaint under RESPA [Abstract] | ||||||
Number of lawsuits | lawsuit | 12 | |||||
Number of cases dismissed | case | 12 | |||||
Insurance-related Assessments | ||||||
Claims resolved by rescissions [Abstract] | ||||||
Loss Contingency, Claims Settled, Number | settlement | 2 |
Earnings per Share (Details)
Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Basic earnings per share [Abstract] | ||||
Net income | $ 822,852 | $ 72,017 | $ 1,069,582 | $ 177,521 |
Weighted average common shares outstanding (in shares) | 339,701 | 338,626 | 339,504 | 338,488 |
Basic income per share (in dollars per share) | $ 2.42 | $ 0.21 | $ 3.15 | $ 0.52 |
Diluted earnings per share [Abstract] | ||||
Net income | $ 822,852 | $ 72,017 | $ 1,069,582 | $ 177,521 |
Diluted income available to common shareholders | $ 833,581 | $ 75,066 | $ 1,101,768 | $ 186,669 |
Weighted-average shares - Basic (in shares) | 339,701 | 338,626 | 339,504 | 338,488 |
Effect of dilutive securities [Abstract] | ||||
Weighted-average shares - Diluted (in shares) | 468,149 | 413,576 | 468,097 | 413,473 |
Diluted income per share (in dollars per share) | $ 1.78 | $ 0.18 | $ 2.35 | $ 0.45 |
Antidilutive securities (in shares) | 0 | 54,500 | 0 | 54,500 |
Effective income tax rate | 35.00% | 35.00% | ||
Unvested Restricted Stock Units | ||||
Effect of dilutive securities [Abstract] | ||||
Dilutive securities (in shares) | 1,983 | 3,008 | 2,128 | 3,043 |
Convertible Senior Notes, interest at 2% per annum, due April 2020 | ||||
Effect of dilutive securities [Abstract] | ||||
Dilutive securities | $ 1,982 | $ 3,049 | $ 5,946 | $ 9,148 |
Dilutive securities (in shares) | 71,942 | 71,942 | 71,942 | 71,942 |
Stated interest rate | 2.00% | 2.00% | ||
Convertible Senior Notes, interest at 5% per annum, due May 2017 | ||||
Effect of dilutive securities [Abstract] | ||||
Dilutive securities | $ 3,050 | $ 0 | $ 9,150 | $ 0 |
Dilutive securities (in shares) | 25,670 | 0 | 25,670 | 0 |
Stated interest rate | 5.00% | 5.00% | ||
Convertible Junior Debentures at 9% per annum, Due 2063 | ||||
Effect of dilutive securities [Abstract] | ||||
Dilutive securities | $ 5,697 | $ 0 | $ 17,090 | $ 0 |
Dilutive securities (in shares) | 28,853 | 0 | 28,853 | 0 |
Stated interest rate | 9.00% | 9.00% |
Investments (Details)
Investments (Details) $ in Thousands | Sep. 30, 2015USD ($)security | Dec. 31, 2014USD ($)security | |
Schedule of Available-for-sale Securities [Line Items] | |||
Amortized Cost | $ 4,603,942 | $ 4,605,517 | |
Gross Unrealized Gains | 38,912 | 37,649 | |
Gross Unrealized Losses | [1] | (48,889) | (30,497) |
Fair Value | $ 4,593,965 | 4,612,669 | |
Percentage of foreign investments held in government and semi-government securities (in hundredths) | 86.00% | ||
Percentage of foreign investments held in corporate securities (in hundredths) | 10.00% | ||
Percentage of foreign investments held in cash equivalents (in hundredths) | 4.00% | ||
Percentage of Australian portfolio rated AAA (in hundredths) | 87.00% | ||
Percentage of Australian portfolio rated AA (in hundredths) | 13.00% | ||
Gross unrealized (gains) losses | $ 48,900 | 30,500 | |
Continuous Unrealized Loss Portion, Fair Value [Abstract] | |||
Less than 12 months | 1,456,594 | 1,209,256 | |
12 months or greater | 547,266 | 1,035,884 | |
Total investment portfolio | 2,003,860 | 2,245,140 | |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | |||
Less than 12 months | 35,353 | 7,388 | |
12 months or greater | 13,536 | 23,109 | |
Total investment portfolio | $ 48,889 | $ 30,497 | |
Number of securities in unrealized loss position | security | 369 | 423 | |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Amortized Cost | $ 104,419 | $ 349,153 | |
Gross Unrealized Gains | 2,287 | 2,752 | |
Gross Unrealized Losses | [1] | (1,740) | (5,130) |
Fair Value | 104,966 | 346,775 | |
Continuous Unrealized Loss Portion, Fair Value [Abstract] | |||
Less than 12 months | 25,781 | 58,166 | |
12 months or greater | 15,534 | 232,351 | |
Total investment portfolio | 41,315 | 290,517 | |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | |||
Less than 12 months | 295 | 138 | |
12 months or greater | 1,445 | 4,992 | |
Total investment portfolio | 1,740 | 5,130 | |
Obligations of U.S. states and political subdivisions | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Amortized Cost | 1,595,458 | 844,942 | |
Gross Unrealized Gains | 24,306 | 12,961 | |
Gross Unrealized Losses | [1] | (7,243) | (2,761) |
Fair Value | 1,612,521 | 855,142 | |
Continuous Unrealized Loss Portion, Fair Value [Abstract] | |||
Less than 12 months | 231,647 | 166,408 | |
12 months or greater | 43,865 | 114,465 | |
Total investment portfolio | 275,512 | 280,873 | |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | |||
Less than 12 months | 6,626 | 1,066 | |
12 months or greater | 617 | 1,695 | |
Total investment portfolio | 7,243 | 2,761 | |
Corporate debt securities | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Amortized Cost | 2,142,500 | 2,418,991 | |
Gross Unrealized Gains | 7,722 | 16,325 | |
Gross Unrealized Losses | [1] | (29,650) | (10,035) |
Fair Value | 2,120,572 | 2,425,281 | |
Continuous Unrealized Loss Portion, Fair Value [Abstract] | |||
Less than 12 months | 1,045,477 | 816,555 | |
12 months or greater | 140,995 | 243,208 | |
Total investment portfolio | 1,186,472 | 1,059,763 | |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | |||
Less than 12 months | 27,190 | 5,259 | |
12 months or greater | 2,460 | 4,776 | |
Total investment portfolio | 29,650 | 10,035 | |
Asset-backed securities | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Amortized Cost | 132,271 | 286,260 | |
Gross Unrealized Gains | 346 | 535 | |
Gross Unrealized Losses | [1] | (80) | (140) |
Fair Value | 132,537 | 286,655 | |
Continuous Unrealized Loss Portion, Fair Value [Abstract] | |||
Less than 12 months | 36,920 | 54,491 | |
12 months or greater | 5,567 | 11,895 | |
Total investment portfolio | 42,487 | 66,386 | |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | |||
Less than 12 months | 64 | 80 | |
12 months or greater | 16 | 60 | |
Total investment portfolio | 80 | 140 | |
Residential mortgage-backed securities | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Amortized Cost | 278,737 | 329,983 | |
Gross Unrealized Gains | 275 | 254 | |
Gross Unrealized Losses | [1] | (7,541) | (9,000) |
Fair Value | 271,471 | 321,237 | |
Continuous Unrealized Loss Portion, Fair Value [Abstract] | |||
Less than 12 months | 39,870 | 24,168 | |
12 months or greater | 201,435 | 263,002 | |
Total investment portfolio | 241,305 | 287,170 | |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | |||
Less than 12 months | 414 | 34 | |
12 months or greater | 7,127 | 8,966 | |
Total investment portfolio | 7,541 | 9,000 | |
Commercial mortgage-backed securities | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Amortized Cost | 253,143 | 276,215 | |
Gross Unrealized Gains | 1,048 | 1,221 | |
Gross Unrealized Losses | [1] | (1,504) | (2,158) |
Fair Value | 252,687 | 275,278 | |
Continuous Unrealized Loss Portion, Fair Value [Abstract] | |||
Less than 12 months | 74,403 | 89,301 | |
12 months or greater | 79,411 | 110,652 | |
Total investment portfolio | 153,814 | 199,953 | |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | |||
Less than 12 months | 698 | 810 | |
12 months or greater | 806 | 1,348 | |
Total investment portfolio | 1,504 | 2,158 | |
Collateralized loan obligations | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Amortized Cost | 61,342 | 61,340 | |
Gross Unrealized Gains | 0 | 0 | |
Gross Unrealized Losses | [1] | (1,056) | (1,264) |
Fair Value | 60,286 | 60,076 | |
Continuous Unrealized Loss Portion, Fair Value [Abstract] | |||
Less than 12 months | 0 | 0 | |
12 months or greater | 60,286 | 60,076 | |
Total investment portfolio | 60,286 | 60,076 | |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | |||
Less than 12 months | 0 | 0 | |
12 months or greater | 1,056 | 1,264 | |
Total investment portfolio | 1,056 | 1,264 | |
Debt securities issued by foreign sovereign governments | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Amortized Cost | 30,477 | 35,630 | |
Gross Unrealized Gains | 2,876 | 3,540 | |
Gross Unrealized Losses | [1] | (62) | 0 |
Fair Value | 33,291 | 39,170 | |
Continuous Unrealized Loss Portion, Fair Value [Abstract] | |||
Less than 12 months | 2,177 | ||
12 months or greater | 0 | ||
Total investment portfolio | 2,177 | ||
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | |||
Less than 12 months | 62 | ||
12 months or greater | 0 | ||
Total investment portfolio | 62 | ||
Total debt securities | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Amortized Cost | 4,598,347 | 4,602,514 | |
Gross Unrealized Gains | 38,860 | 37,588 | |
Gross Unrealized Losses | [1] | (48,876) | (30,488) |
Fair Value | 4,588,331 | 4,609,614 | |
Equity securities | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Amortized Cost | 5,595 | 3,003 | |
Gross Unrealized Gains | 52 | 61 | |
Gross Unrealized Losses | [1] | (13) | (9) |
Fair Value | 5,634 | 3,055 | |
Continuous Unrealized Loss Portion, Fair Value [Abstract] | |||
Less than 12 months | 319 | 167 | |
12 months or greater | 173 | 235 | |
Total investment portfolio | 492 | 402 | |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | |||
Less than 12 months | 4 | 1 | |
12 months or greater | 9 | 8 | |
Total investment portfolio | $ 13 | $ 9 | |
[1] | At September 30, 2015 and December 31, 2014, there were no other-than-temporary impairment losses recorded in other comprehensive income. |
Investments - Amortized Cost an
Investments - Amortized Cost and Fair Values of Debt Securities (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Maturities, Amortized Cost [Abstract] | ||
Due in one year or less | $ 191,371 | |
Due after one year through five years | 1,611,819 | |
Due after five years through ten years | 1,130,625 | |
Due after ten years | 939,039 | |
Total debt securities with single maturity date, amortized cost | 3,872,854 | |
Total at end of period | 4,598,347 | $ 4,602,514 |
Maturities, Fair Value [Abstract] | ||
Due in one year or less | 192,007 | |
Due after one year through five years | 1,622,178 | |
Due after five years through ten years | 1,113,217 | |
Due after ten years | 943,948 | |
Total debt securities with single maturity date, fair value | 3,871,350 | |
Total at end of period | 4,588,331 | $ 4,609,614 |
Asset-backed securities | ||
Maturities, Amortized Cost [Abstract] | ||
Total debt securities with single maturity date, amortized cost | 132,271 | |
Maturities, Fair Value [Abstract] | ||
Total debt securities with single maturity date, fair value | 132,537 | |
Residential mortgage-backed securities | ||
Maturities, Amortized Cost [Abstract] | ||
Total debt securities with single maturity date, amortized cost | 278,737 | |
Maturities, Fair Value [Abstract] | ||
Total debt securities with single maturity date, fair value | 271,471 | |
Commercial mortgage-backed securities | ||
Maturities, Amortized Cost [Abstract] | ||
Total debt securities with single maturity date, amortized cost | 253,143 | |
Maturities, Fair Value [Abstract] | ||
Total debt securities with single maturity date, fair value | 252,687 | |
Collateralized loan obligations | ||
Maturities, Amortized Cost [Abstract] | ||
Total debt securities with single maturity date, amortized cost | 61,342 | |
Maturities, Fair Value [Abstract] | ||
Total debt securities with single maturity date, fair value | $ 60,286 |
Investments, Gain (Loss) on Inv
Investments, Gain (Loss) on Investments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Gain (Loss) on Investments [Line Items] | ||||
Net realized investment gains (losses) on investments | $ 640 | $ 632 | $ 27,133 | $ 923 |
Gross realized gains, gross realized losses and impairment losses [Abstract] | ||||
Gains on sales | 720 | 1,161 | 28,711 | 3,273 |
Losses on sales | (80) | (529) | (1,578) | (2,350) |
Net realized investment gains | 640 | 632 | 27,133 | 923 |
Fixed maturities | ||||
Gain (Loss) on Investments [Line Items] | ||||
Net realized investment gains (losses) on investments | 638 | 629 | 27,123 | 755 |
Gross realized gains, gross realized losses and impairment losses [Abstract] | ||||
Net realized investment gains | 638 | 629 | 27,123 | 755 |
Equity securities | ||||
Gain (Loss) on Investments [Line Items] | ||||
Net realized investment gains (losses) on investments | 2 | 3 | 10 | 168 |
Gross realized gains, gross realized losses and impairment losses [Abstract] | ||||
Net realized investment gains | $ 2 | $ 3 | $ 10 | $ 168 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ 104,966 | $ 346,775 | |||
Obligations of U.S. states and political subdivisions | 1,612,521 | 855,142 | |||
Corporate debt securities | 2,120,572 | 2,425,281 | |||
Asset-backed securities | 132,537 | 286,655 | |||
Residential mortgage-backed securities | 271,471 | 321,237 | |||
Commercial mortgage-backed securities | 252,687 | 275,278 | |||
Collateralized loan obligations | 60,286 | 60,076 | |||
Debt securities issued by foreign sovereign governments | 33,291 | 39,170 | |||
Total debt securities | 4,588,331 | 4,609,614 | |||
Equity securities | [1] | 5,634 | 3,055 | ||
Total investment portfolio | 4,593,965 | 4,612,669 | |||
Real estate acquired | 10,084 | [2] | 12,658 | [1] | |
Par Value | |||||
Debt [Abstract] | |||||
Senior Notes | 61,953 | 61,953 | |||
Convertible Senior Notes due 2017 | 345,000 | 345,000 | |||
Convertible Senior Notes due 2020 | 500,000 | 500,000 | |||
Convertible Junior Subordinated Debentures | 389,522 | 389,522 | |||
Total Debt | 1,296,475 | 1,296,475 | |||
Total Fair Value | |||||
Debt [Abstract] | |||||
Senior Notes | 62,027 | 63,618 | |||
Convertible Senior Notes due 2017 | 366,749 | 387,997 | |||
Convertible Senior Notes due 2020 | 719,375 | 735,075 | |||
Convertible Junior Subordinated Debentures | 485,648 | 500,201 | |||
Total Debt | 1,633,799 | 1,686,891 | |||
Quoted Prices in Active Markets for Identical Assets (Level 1) | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 18,418 | 188,824 | |||
Obligations of U.S. states and political subdivisions | 0 | 0 | |||
Corporate debt securities | 0 | 0 | |||
Asset-backed securities | 0 | 0 | |||
Residential mortgage-backed securities | 0 | 0 | |||
Commercial mortgage-backed securities | 0 | 0 | |||
Collateralized loan obligations | 0 | 0 | |||
Debt securities issued by foreign sovereign governments | 33,291 | 39,170 | |||
Total debt securities | 51,709 | 227,994 | |||
Equity securities | [1] | 2,778 | 2,734 | ||
Total investment portfolio | 54,487 | 230,728 | |||
Real estate acquired | 0 | [2] | 0 | [1] | |
Debt [Abstract] | |||||
Senior Notes | 0 | 0 | |||
Convertible Senior Notes due 2017 | 0 | 0 | |||
Convertible Senior Notes due 2020 | 0 | 0 | |||
Convertible Junior Subordinated Debentures | 0 | 0 | |||
Total Debt | 0 | 0 | |||
Significant Other Observable Inputs (Level 2) | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 86,548 | 157,951 | |||
Obligations of U.S. states and political subdivisions | 1,611,134 | 853,296 | |||
Corporate debt securities | 2,120,572 | 2,425,281 | |||
Asset-backed securities | 132,537 | 286,655 | |||
Residential mortgage-backed securities | 271,471 | 321,237 | |||
Commercial mortgage-backed securities | 252,687 | 275,278 | |||
Collateralized loan obligations | 60,286 | 60,076 | |||
Debt securities issued by foreign sovereign governments | 0 | 0 | |||
Total debt securities | 4,535,235 | 4,379,774 | |||
Equity securities | [1] | 0 | 0 | ||
Total investment portfolio | 4,535,235 | 4,379,774 | |||
Real estate acquired | 0 | [2] | 0 | [1] | |
Debt [Abstract] | |||||
Senior Notes | 62,027 | 63,618 | |||
Convertible Senior Notes due 2017 | 366,749 | 387,997 | |||
Convertible Senior Notes due 2020 | 719,375 | 735,075 | |||
Convertible Junior Subordinated Debentures | 485,648 | 500,201 | |||
Total Debt | 1,633,799 | 1,686,891 | |||
Significant Unobservable Inputs (Level 3) | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 0 | 0 | |||
Obligations of U.S. states and political subdivisions | 1,387 | 1,846 | |||
Corporate debt securities | 0 | 0 | |||
Asset-backed securities | 0 | 0 | |||
Residential mortgage-backed securities | 0 | 0 | |||
Commercial mortgage-backed securities | 0 | 0 | |||
Collateralized loan obligations | 0 | 0 | |||
Debt securities issued by foreign sovereign governments | 0 | 0 | |||
Total debt securities | 1,387 | 1,846 | |||
Equity securities | [1] | 2,856 | 321 | ||
Total investment portfolio | 4,243 | 2,167 | |||
Real estate acquired | 10,084 | [2] | 12,658 | [1] | |
Debt [Abstract] | |||||
Senior Notes | 0 | 0 | |||
Convertible Senior Notes due 2017 | 0 | 0 | |||
Convertible Senior Notes due 2020 | 0 | 0 | |||
Convertible Junior Subordinated Debentures | 0 | 0 | |||
Total Debt | $ 0 | $ 0 | |||
[1] | Equity securities in Level 3 are carried at cost, which approximates fair value. | ||||
[2] | Real estate acquired through claim settlement, which is held for sale, is reported in Other assets on the consolidated balance sheets. |
Fair Value Measurements, Unobse
Fair Value Measurements, Unobservable Input Reconciliation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Total realized/unrealized gains (losses) [Abstract] | ||||||
State premium tax credit investments, average maturity | 3 years | |||||
Annual average discount rate (in hundredths) | 7.20% | |||||
Debt Securities | ||||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||||
Balance at beginning of period | $ 1,634 | $ 2,231 | $ 1,846 | $ 2,423 | ||
Total realized/unrealized gains (losses) [Abstract] | ||||||
Included in earnings and reported as losses incurred, net | 0 | 0 | 0 | 0 | ||
Purchases | 0 | 0 | 7 | 30 | ||
Sales | (247) | (237) | (466) | (459) | ||
Transfers into Level 3 | 0 | 0 | 0 | 0 | ||
Transfers out of Level 3 | 0 | 0 | 0 | 0 | ||
Balance at end of period | 1,634 | 2,231 | 1,846 | 2,423 | $ 1,387 | $ 1,994 |
Amount of total losses included in earnings attributable to the change in unrealized losses on assets still held | 0 | 0 | 0 | 0 | ||
Equity securities | ||||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||||
Balance at beginning of period | 321 | 321 | 321 | 321 | ||
Total realized/unrealized gains (losses) [Abstract] | ||||||
Included in earnings and reported as losses incurred, net | 0 | 0 | 0 | 0 | ||
Purchases | 2,535 | 0 | 2,535 | 0 | ||
Sales | 0 | 0 | 0 | 0 | ||
Transfers into Level 3 | 0 | 0 | 0 | 0 | ||
Transfers out of Level 3 | 0 | 0 | 0 | 0 | ||
Balance at end of period | 321 | 321 | 321 | 321 | 2,856 | 321 |
Amount of total losses included in earnings attributable to the change in unrealized losses on assets still held | 0 | 0 | 0 | 0 | ||
Total Investments | ||||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||||
Balance at beginning of period | 1,955 | 2,552 | 2,167 | 2,744 | ||
Total realized/unrealized gains (losses) [Abstract] | ||||||
Included in earnings and reported as losses incurred, net | 0 | 0 | 0 | 0 | ||
Purchases | 2,535 | 0 | 2,542 | 30 | ||
Sales | (247) | (237) | (466) | (459) | ||
Transfers into Level 3 | 0 | 0 | 0 | 0 | ||
Transfers out of Level 3 | 0 | 0 | 0 | 0 | ||
Balance at end of period | 1,955 | 2,552 | 2,167 | 2,744 | 4,243 | 2,315 |
Amount of total losses included in earnings attributable to the change in unrealized losses on assets still held | 0 | 0 | 0 | 0 | ||
Real Estate Acquired | ||||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||||
Balance at beginning of period | 7,995 | 10,804 | 12,658 | 13,280 | ||
Total realized/unrealized gains (losses) [Abstract] | ||||||
Included in earnings and reported as losses incurred, net | (1,031) | (2,062) | (1,503) | (4,378) | ||
Purchases | 9,632 | 14,107 | 26,346 | 33,484 | ||
Sales | (6,512) | (6,284) | (27,417) | (25,821) | ||
Transfers into Level 3 | 0 | 0 | 0 | 0 | ||
Transfers out of Level 3 | 0 | 0 | 0 | 0 | ||
Balance at end of period | 7,995 | 10,804 | 12,658 | 13,280 | $ 10,084 | $ 16,565 |
Amount of total losses included in earnings attributable to the change in unrealized losses on assets still held | $ 0 | $ 0 | $ 0 | $ 0 |
Other Comprehensive Income (Det
Other Comprehensive Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | ||||
Components of Other Comprehensive Income (Loss) [Abstract] | |||||||
Net unrealized holding (losses) gains arising during the period | $ 27,271 | $ (17,377) | $ (17,126) | $ 67,102 | |||
Income tax benefit (expense) | (9,531) | 6,069 | 5,955 | (23,436) | |||
Valuation allowance | [1] | 77,555 | (5,993) | 62,383 | 23,132 | ||
Net of taxes | 95,295 | (17,301) | 51,212 | 66,798 | |||
Net changes in benefit plan assets and obligations | (546) | (1,732) | (1,638) | (5,198) | |||
Income tax benefit | 192 | 606 | 574 | 1,819 | |||
Valuation allowance | [1] | (7,001) | (606) | (7,383) | (1,819) | ||
Net of taxes | (7,355) | (1,732) | (8,447) | (5,198) | |||
Net changes in unrealized foreign currency translation adjustment | (3,724) | (3,835) | (6,228) | (1,000) | |||
Income tax benefit (expense) | 1,306 | 1,345 | 2,186 | 350 | |||
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, before Tax, Portion Attributable to Parent, Valuation Allowance | [1] | (529) | 0 | (529) | 0 | ||
Net of taxes | (2,947) | (2,490) | (4,571) | (650) | |||
Total other comprehensive income (loss) | 23,001 | (22,944) | (24,992) | 60,904 | |||
Total income tax benefit (expense), net of valuation allowance | 61,992 | 1,421 | 63,186 | 46 | |||
Other comprehensive income (loss), net of tax | 84,993 | (21,523) | 38,194 | 60,950 | |||
Amounts Reclassified From Accumulated Other Comprehensive Income [Abstract] | |||||||
Total reclassifications | 127,248 | 72,266 | 378,685 | 179,614 | |||
Income tax (expense) benefit | (43,694) | (25,030) | (131,568) | (65,322) | |||
Change in valuation allowance | (739,298) | (24,781) | (822,465) | (63,229) | |||
Total income tax expense, net of valuation allowance | 695,604 | (249) | 690,897 | (2,093) | |||
Net income | 822,852 | 72,017 | 1,069,582 | 177,521 | |||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||||||
Balance at beginning of period, net of tax | (81,341) | ||||||
Other comprehensive loss before reclassifications | 50,361 | ||||||
Less: Amounts reclassified from AOCL | 12,167 | ||||||
Balance at end of period, net of tax | (43,147) | (43,147) | |||||
Unrealized gains and losses on available-for- sale securities | |||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||||||
Balance at beginning of period, net of tax | (57,551) | ||||||
Other comprehensive loss before reclassifications | 61,741 | ||||||
Less: Amounts reclassified from AOCL | [2] | 10,529 | |||||
Balance at end of period, net of tax | (6,339) | (6,339) | |||||
Defined benefit plans | |||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||||||
Balance at beginning of period, net of tax | (28,938) | ||||||
Other comprehensive loss before reclassifications | (6,809) | ||||||
Less: Amounts reclassified from AOCL | [3] | 1,638 | |||||
Balance at end of period, net of tax | (37,385) | (37,385) | |||||
Foreign currency translation | |||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||||||
Balance at beginning of period, net of tax | 5,148 | ||||||
Other comprehensive loss before reclassifications | (4,571) | ||||||
Less: Amounts reclassified from AOCL | 0 | ||||||
Balance at end of period, net of tax | 577 | 577 | |||||
Reclassification from Accumulated Other Comprehensive Income | |||||||
Amounts Reclassified From Accumulated Other Comprehensive Income [Abstract] | |||||||
Total reclassifications | (574) | 892 | 12,229 | (527) | |||
Total income tax expense, net of valuation allowance | (18) | (31) | (62) | (61) | |||
Net income | (592) | 861 | 12,167 | (588) | |||
Reclassification from Accumulated Other Comprehensive Income | Unrealized gains and losses on available-for- sale securities | |||||||
Amounts Reclassified From Accumulated Other Comprehensive Income [Abstract] | |||||||
Total reclassifications | (1,120) | (840) | 10,591 | [4] | (5,725) | [4] | |
Income tax (expense) benefit | 395 | 299 | (3,697) | 2,014 | |||
Change in valuation allowance | (413) | (330) | 3,635 | (2,075) | |||
Net income | (1,138) | (871) | 10,529 | (5,786) | |||
Reclassification from Accumulated Other Comprehensive Income | Defined benefit plans | |||||||
Amounts Reclassified From Accumulated Other Comprehensive Income [Abstract] | |||||||
Total reclassifications | 546 | 1,732 | 1,638 | 5,198 | |||
Income tax (expense) benefit | (192) | (606) | (574) | (1,819) | |||
Change in valuation allowance | 192 | 606 | 574 | 1,819 | |||
Net income | $ 546 | $ 1,732 | $ 1,638 | $ 5,198 | |||
[1] | See Note 11 – “Income Taxes” for a discussion of the valuation allowance recorded against deferred tax assets. | ||||||
[2] | Increases Net realized investment gains on the consolidated statements of operations. | ||||||
[3] | Decreases Other underwriting and operating expenses, net on the consolidated statements of operations. | ||||||
[4] | The reclassification adjustment for the nine months ended September 30, 2014 has been recast to conform to the 2015 method for determining amounts included in net income. This revision had no impact to our consolidated financial statements and is not material to amounts disclosed by us in prior periods. |
Benefit Plans (Details)
Benefit Plans (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Components of Net Periodic Benefit Cost [Abstract] | ||||
Employer contributions in current fiscal year | $ 17,000 | |||
Pension and Supplemental Executive Retirement Plans | ||||
Components of Net Periodic Benefit Cost [Abstract] | ||||
Service cost | $ 2,564 | $ 2,142 | 7,692 | $ 6,425 |
Interest cost | 3,962 | 3,997 | 11,886 | 11,991 |
Expected return on plan assets | (5,278) | (5,258) | (15,832) | (15,773) |
Recognized net actuarial loss (gain) | 1,372 | 271 | 4,114 | 812 |
Amortization of prior service cost | (211) | (233) | (633) | (698) |
Net periodic benefit cost (benefit) | 2,409 | 919 | 7,227 | 2,757 |
Other Postretirement Benefits | ||||
Components of Net Periodic Benefit Cost [Abstract] | ||||
Service cost | 208 | 165 | 624 | 494 |
Interest cost | 174 | 164 | 523 | 491 |
Expected return on plan assets | (1,248) | (1,162) | (3,743) | (3,486) |
Recognized net actuarial loss (gain) | (44) | (109) | (132) | (326) |
Amortization of prior service cost | (1,661) | (1,663) | (4,986) | (4,988) |
Net periodic benefit cost (benefit) | $ (2,571) | $ (2,605) | $ (7,714) | $ (7,815) |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | 21 Months Ended | |||||
Dec. 31, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2007 | Sep. 30, 2015 | Dec. 31, 2013 | |
Valuation Allowance [Line Items] | |||||||||
Number of years used in the cumulative income position calculation | 3 years | ||||||||
Change in valuation allowance | $ (739,298,000) | $ (24,781,000) | $ (822,465,000) | $ (63,229,000) | |||||
Valuation allowance | 0 | 0 | $ 902,300,000 | $ 0 | |||||
Operating income level that was exceeded | 100,000,000 | ||||||||
Cumulative income position | 194,100,000 | 194,100,000 | 194,100,000 | ||||||
Net operating loss carryforwards, regular tax basis | 2,100,000,000 | 2,100,000,000 | 2,100,000,000 | ||||||
Operating loss carryforward, average quarterly reduction | (120,400,000) | (52,200,000) | |||||||
Provision for income tax | 43,694,000 | 25,030,000 | 131,568,000 | 65,322,000 | |||||
(Benefit from) provision for income taxes | (695,604,000) | 249,000 | (690,897,000) | 2,093,000 | |||||
Net operating loss carryforwards for computing the alternative minimum tax | 1,200,000,000 | 1,200,000,000 | 1,200,000,000 | ||||||
Information regarding income tax examinations [Abstract] | |||||||||
Amount of IRS assessment for unpaid taxes and penalties related to REMIC issue | 197,500,000 | 197,500,000 | 197,500,000 | ||||||
Estimate of federal interest that may be due | 179,200,000 | 179,200,000 | 179,200,000 | ||||||
Amount of payment made related to the IRS assessment on the REMIC issue | $ 65,200,000 | ||||||||
Amount of IRS assessment for unpaid taxes and penalties related to disallowance of carryback of 2009 net operating loss | 261,400,000 | 261,400,000 | 261,400,000 | ||||||
Estimate of additional state income taxes and interest that may be due | 48,400,000 | 48,400,000 | 48,400,000 | ||||||
Total amount of unrecognized tax benefits | 106,900,000 | 106,900,000 | 106,900,000 | ||||||
Total amount of the unrecognized tax benefits that would affect our effective tax rate | 93,700,000 | 93,700,000 | 93,700,000 | ||||||
Unrecognized tax benefits, accrued interest | 27,600,000 | 27,600,000 | $ 26,900,000 | 27,600,000 | |||||
Internal Revenue Service (IRS) | |||||||||
Valuation Allowance [Line Items] | |||||||||
Net operating loss carryforwards, regular tax basis | 2,100,000,000 | $ 2,100,000,000 | 2,100,000,000 | $ 2,600,000,000 | |||||
Operating loss carryforwards, reduction in under two years | $ (500,000,000) | ||||||||
Operating loss carryforward, period over which carryforward will be utilized | 7 years | ||||||||
Other Comprehensive Income (Loss) | |||||||||
Valuation Allowance [Line Items] | |||||||||
Change in valuation allowance | (70,000,000) | $ 6,600,000 | $ (54,500,000) | $ (21,300,000) | |||||
Deferred Tax Asset, Changes In Current Period | |||||||||
Valuation Allowance [Line Items] | |||||||||
Change in valuation allowance | (143,400,000) | ||||||||
Deferred Tax Asset, Changes In Current Period | Other Comprehensive Income (Loss) | |||||||||
Valuation Allowance [Line Items] | |||||||||
Change in valuation allowance | 6,300,000 | ||||||||
Deferred Tax Asset, Changes In Current Period | Income Tax Expense (Benefit) | |||||||||
Valuation Allowance [Line Items] | |||||||||
Change in valuation allowance | (41,200,000) | $ (124,400,000) | |||||||
Deferred Tax Asset, Changes In Current Period | Income Tax Expense (Benefit) | Scenario, Forecast | |||||||||
Valuation Allowance [Line Items] | |||||||||
Change in valuation allowance | $ (25,300,000) | ||||||||
Deferred Tax Asset, Changes In Future Periods | |||||||||
Valuation Allowance [Line Items] | |||||||||
Change in valuation allowance | (758,900,000) | ||||||||
Deferred Tax Asset, Changes In Future Periods | Other Comprehensive Income (Loss) | |||||||||
Valuation Allowance [Line Items] | |||||||||
Change in valuation allowance | (60,800,000) | ||||||||
Deferred Tax Asset, Changes In Future Periods | Income Tax Expense (Benefit) | |||||||||
Valuation Allowance [Line Items] | |||||||||
Change in valuation allowance | $ (698,100,000) |
Income Taxes - Deferred Tax Ass
Income Taxes - Deferred Tax Asset Rollforward (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Movement In Deferred Tax Asset [Roll Forward] | |||||
Beginning Balance December 31, 2014 | $ 0 | $ 902,300 | |||
Change in valuation allowance | $ (739,298) | $ (24,781) | (822,465) | $ (63,229) | |
Ending Balance September 30, 2015 | 0 | 0 | |||
Other Comprehensive Income (Loss) | |||||
Movement In Deferred Tax Asset [Roll Forward] | |||||
Change in valuation allowance | (70,000) | $ 6,600 | (54,500) | $ (21,300) | |
Deferred Tax Asset, Changes In Current Period | |||||
Movement In Deferred Tax Asset [Roll Forward] | |||||
Change in valuation allowance | (143,400) | ||||
Deferred Tax Asset, Changes In Current Period | Other Comprehensive Income (Loss) | |||||
Movement In Deferred Tax Asset [Roll Forward] | |||||
Change in valuation allowance | 6,300 | ||||
Deferred Tax Asset, Changes In Current Period | Income Tax Expense (Benefit) | |||||
Movement In Deferred Tax Asset [Roll Forward] | |||||
Change in valuation allowance | (41,200) | $ (124,400) | |||
Deferred Tax Asset, Changes In Current Period | Income Tax Expense (Benefit) | Scenario, Forecast | |||||
Movement In Deferred Tax Asset [Roll Forward] | |||||
Change in valuation allowance | $ (25,300) | ||||
Deferred Tax Asset, Changes In Future Periods | |||||
Movement In Deferred Tax Asset [Roll Forward] | |||||
Change in valuation allowance | (758,900) | ||||
Deferred Tax Asset, Changes In Future Periods | Other Comprehensive Income (Loss) | |||||
Movement In Deferred Tax Asset [Roll Forward] | |||||
Change in valuation allowance | (60,800) | ||||
Deferred Tax Asset, Changes In Future Periods | Income Tax Expense (Benefit) | |||||
Movement In Deferred Tax Asset [Roll Forward] | |||||
Change in valuation allowance | $ (698,100) |
Loss Reserves (Details)
Loss Reserves (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2015USD ($)loan | Sep. 30, 2014USD ($)loan | Sep. 30, 2015USD ($)loan | Sep. 30, 2014USD ($)loan | Sep. 30, 2015USD ($)loan | Dec. 31, 2014USD ($)loan | Sep. 30, 2014loan | ||
Loss Reserve [Roll Forward] | ||||||||
Reserve at beginning of period | $ 2,396,807 | $ 3,061,401 | ||||||
Less reinsurance recoverable | 57,841 | 64,085 | ||||||
Net reserve at beginning of period | 2,338,966 | 2,997,316 | ||||||
Losses and LAE incurred in respect of default notices related to [Abstract] | ||||||||
Current year | 338,611 | 454,390 | ||||||
Change in loss reserves | [1],[2] | (90,130) | (75,387) | |||||
Subtotal | 248,481 | 379,003 | ||||||
Losses and LAE paid in respect of default notices related to [Abstract] | ||||||||
Current year | 9,227 | 11,574 | ||||||
Prior years | 652,465 | 895,061 | ||||||
Reinsurance terminations | [3] | (15,440) | 0 | |||||
Subtotal | 646,252 | 906,635 | ||||||
Net reserve at end of period | $ 1,941,195 | $ 2,469,684 | 1,941,195 | 2,469,684 | ||||
Plus reinsurance recoverables | 38,748 | 57,898 | 38,748 | 57,898 | ||||
Reserve at end of period | $ 1,979,943 | $ 2,527,582 | 1,979,943 | 2,527,582 | ||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||||||||
Change in loss reserves | [1],[2] | $ (90,130) | $ (75,387) | |||||
Premium refund liability, expected claim payments | $ 105,000 | $ 115,000 | ||||||
Primary Default Inventory [Roll Forward] | ||||||||
Default inventory at the beginning of period | loan | 66,357 | 85,416 | 79,901 | 103,328 | ||||
New notices | loan | 19,509 | 22,927 | 55,856 | 67,451 | ||||
Cures | loan | (17,036) | (19,582) | (56,700) | (68,082) | ||||
Paids (including those charged to a deductible or captive) | loan | (3,958) | (5,288) | (12,671) | (18,420) | ||||
Rescissions and denials | loan | (230) | (319) | (623) | (1,123) | ||||
Items removed from inventory resulting from the Countrywide settlement on GSE loans | loan | 0 | 0 | (1,121) | 0 | ||||
Default inventory at end of period | loan | 64,642 | 83,154 | 64,642 | 83,154 | ||||
Pool insurance notice inventory [Abstract] | ||||||||
Pool insurance notice inventory (in number of loans) | loan | 2,950 | 4,525 | ||||||
Historical average period for uncured default to develop into paid claim | 12 months | |||||||
Aging of the Primary Default Inventory [Abstract] | ||||||||
3 months or less | loan | 13,991 | 15,319 | 16,209 | |||||
3 months or less (in hundredths) | 22.00% | 19.00% | 19.00% | |||||
4 - 11 months | loan | 14,703 | 19,710 | 18,890 | |||||
4 - 11 months (in hundredths) | 23.00% | 25.00% | 23.00% | |||||
12 months or more | loan | 35,948 | 44,872 | 48,055 | |||||
12 months or more (in hundredths) | 55.00% | 56.00% | 58.00% | |||||
Total primary default inventory | loan | 66,357 | 85,416 | 79,901 | 103,328 | 64,642 | 79,901 | 83,154 | |
Total primary default inventory (in hundredths) | 100.00% | 100.00% | 100.00% | |||||
Primary claims received inventory included in ending default inventory | loan | [4] | 2,982 | 4,746 | 5,194 | ||||
Primary claims received inventory included in ending default inventory (in hundredths) | [4] | 5.00% | 6.00% | 6.00% | ||||
Number of rescindable loans affected by Company's decision to voluntarily suspend rescissions | loan | 430 | 1,425 | 1,575 | |||||
Number of payments delinquent [Abstract] | ||||||||
3 payments or less | loan | 20,637 | 23,253 | 23,769 | |||||
3 payments or less (in hundredths) | 32.00% | 29.00% | 28.00% | |||||
4 - 11 payments | loan | 14,890 | 19,427 | 18,985 | |||||
4 - 11 payments (in hundredths) | 23.00% | 24.00% | 23.00% | |||||
12 payments or more | loan | 29,115 | 37,221 | 40,400 | |||||
12 payments or more (in hundredths) | 45.00% | 47.00% | 49.00% | |||||
Total primary default inventory | loan | 66,357 | 85,416 | 79,901 | 103,328 | 64,642 | 79,901 | 83,154 | |
Total primary default inventory (in hundredths) | 100.00% | 100.00% | 100.00% | |||||
Premium refund liability, expected future rescissions | $ 7,000 | $ 28,000 | ||||||
Decrease in estimated claim rate on primary defaults | ||||||||
Losses and LAE incurred in respect of default notices related to [Abstract] | ||||||||
Change in loss reserves | $ (95,000) | $ (38,000) | ||||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||||||||
Change in loss reserves | $ (95,000) | $ (38,000) | ||||||
Percentage of prior year default inventory resolved (in hundredths) | 52.00% | 50.00% | ||||||
Increase in estimated severity on primary defaults | ||||||||
Losses and LAE incurred in respect of default notices related to [Abstract] | ||||||||
Change in loss reserves | $ 12,000 | $ (20,000) | ||||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||||||||
Change in loss reserves | 12,000 | (20,000) | ||||||
Change in estimates related to pool reserves, LAE reserves and reinsurance | ||||||||
Losses and LAE incurred in respect of default notices related to [Abstract] | ||||||||
Change in loss reserves | (7,000) | (17,000) | ||||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||||||||
Change in loss reserves | (7,000) | $ (17,000) | ||||||
Change in estimates related to disputes on claims paying practices and IBNR | ||||||||
Losses and LAE incurred in respect of default notices related to [Abstract] | ||||||||
Change in loss reserves | 21,000 | |||||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | ||||||||
Change in loss reserves | $ 21,000 | |||||||
[1] | A negative number for prior year loss development indicates a redundancy of prior year loss reserves, and a positive number indicates a deficiency of prior year loss reserves. | |||||||
[2] | A negative number for prior year losses incurred indicates a redundancy of prior year loss reserves and a positive number for prior year losses incurred indicates a deficiency of prior year loss reserves. | |||||||
[3] | In a termination or commutation, the reinsurance agreement is cancelled, with no future premium ceded and funds for any incurred but unpaid losses transferred to us. The transferred funds result in an increase in our investment portfolio (including cash and cash equivalents) and a decrease in net losses paid (reduction in losses incurred). In addition, there is an offsetting decrease in the reinsurance recoverable (increase in losses incurred), and thus there is no net impact to losses incurred. | |||||||
[4] | Our claims received inventory includes suspended rescissions, as we have voluntarily suspended rescissions of coverage related to loans that we believed would be included in a potential resolution. As of September 30, 2015, rescissions of coverage on approximately 430 loans had been voluntarily suspended compared to 1,425 at December 31, 2014 and 1,575 at September 30, 2014. |
Premium Deficiency Reserve (Det
Premium Deficiency Reserve (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Premium Deficiency Reserve [Abstract] | |||
Change in premium deficiency reserve | $ 6 | $ 24 | $ 19 |
Shareholders' Equity (Details)
Shareholders' Equity (Details) | 9 Months Ended |
Sep. 30, 2015$ / shares$ / unitshares | |
Class of Warrant or Right [Line Items] | |
Common stock, beneficial ownership threshold to be considered an Acquiring Person (in hundredths) | 5.00% |
Shareholder rights accompanying each outstanding share of the company's common stock (in number of Rights) | 1 |
Purchase price (in dollars per share) | $ / shares | $ 45 |
Purchase price (in dollars per one-tenth share) | $ / shares | $ 4.50 |
Redemption price (in dollars per Right) | $ / unit | 0.001 |
Distribution date, description | The earlier of ten days after a public announcement that a person has become an Acquiring Person, or ten business days after a person announces or begins a tender offer in which consummation of such offer would result in a person becoming an Acquiring Person |
Common shares purchasable per Right (in shares) | 0.1 |
Rights | |
Class of Warrant or Right [Line Items] | |
Number of rights per outstanding share of common stock | 1 |
Period after public announcement that a person has become an acquirer | 10 days |
Period after a person announces a tender offer which would make them an acquirer | 10 days |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - $ / shares shares in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Award vesting period | 1 year | |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Award vesting period | 3 years | |
RSUs subject to performance conditions | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted (in shares) | 1,144 | 1,372 |
Weighted Average Share Fair Value (in dollars per share) | $ 9.04 | $ 8.43 |
RSUs subject only to service conditions | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted (in shares) | 410 | 409 |
Weighted Average Share Fair Value (in dollars per share) | $ 8.99 | $ 8.43 |
Statutory Capital (Details)
Statutory Capital (Details) $ in Millions | 9 Months Ended | |
Sep. 30, 2015USD ($)jurisdiction | Dec. 31, 2014USD ($) | |
Statutory capital requirements [Abstract] | ||
Number of jurisdictions with risk-to-capital requirements | jurisdiction | 16 | |
Maximum permitted risk-to-capital ratio commonly applied | 25 to 1 | |
Risk-to-capital ratio on a combined basis at end of period | 13.6 to 1 | |
Statutory deferred tax assets admitted | $ 211 | $ 138 |
Percentage of surplus as regards policyholders (in hundredths) | 15.00% | |
Statutory Capital Requirements, Risk To Capital Ratio For Combined Insurance Operations | 13.6 | |
Maximum | ||
Statutory capital requirements [Abstract] | ||
Risk-to-capital ratio | 25 | |
Mortgage Guaranty Insurance Corporation | ||
Statutory capital requirements [Abstract] | ||
Risk to capital ratio at end of period | 12.3 to 1 | |
Risk-to-capital ratio | 12.3 | |
Amount of policyholders position above or below required MPP | $ 1,100 | |
Amount of required MPP | $ 1,100 | |
Percentage of surplus as regards policyholders (in hundredths) | 10.00% |