Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Jul. 31, 2017 | |
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 | 370,561,601 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2017 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Securities, available-for-sale, at fair value: | ||
Fixed income (amortized cost, 2017 - $4,674,965; 2016 - $4,717,211) | $ 4,701,211 | $ 4,685,222 |
Equity securities | 7,209 | 7,128 |
Total investment portfolio | 4,708,420 | 4,692,350 |
Cash and cash equivalents | 127,908 | 155,410 |
Accrued investment income | 44,030 | 44,073 |
Reinsurance recoverable on loss reserves | 44,783 | 50,493 |
Reinsurance recoverable on paid losses | 6,151 | 4,964 |
Premiums receivable | 51,344 | 52,392 |
Home office and equipment, net | 42,212 | 36,088 |
Deferred insurance policy acquisition costs | 18,677 | 17,759 |
Deferred income taxes, net | 481,389 | 607,655 |
Other assets | 75,254 | 73,345 |
Total assets | 5,600,168 | 5,734,529 |
Liabilities: | ||
Loss reserves | 1,187,089 | 1,438,813 |
Unearned premiums | 352,010 | 329,737 |
Federal Home Loan Bank advance | 155,000 | 155,000 |
Senior notes | 417,983 | 417,406 |
Convertible senior notes | 0 | 349,461 |
Convertible junior subordinated debentures | 256,872 | 256,872 |
Other liabilities | 236,153 | 238,398 |
Total liabilities | 2,605,107 | 3,185,687 |
Contingencies | ||
Shareholders’ equity: | ||
Common stock (one dollar par value, shares authorized 1,000,000; shares issued 2017 - 370,557; 2016 - 359,400; shares outstanding 2017 - 370,557; 2016 - 340,663) | 370,557 | 359,400 |
Paid-in capital | 1,842,601 | 1,782,337 |
Treasury stock at cost (shares 2016 - 18,737) | 0 | (150,359) |
Accumulated other comprehensive loss, net of tax | (37,494) | (75,100) |
Retained earnings | 819,397 | 632,564 |
Total shareholders’ equity | 2,995,061 | 2,548,842 |
Total liabilities and shareholders’ equity | $ 5,600,168 | $ 5,734,529 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Fixed maturities, amortized cost | $ 4,674,965 | $ 4,717,211 |
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) | 370,557,000 | 359,400,000 |
Common stock, shares outstanding (in shares) | 370,557,000 | 340,663,000 |
Treasury stock, shares at cost (in shares) | 0 | 18,737,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Premiums written: | ||||
Direct | $ 275,245,000 | $ 282,113,000 | $ 541,068,000 | $ 547,404,000 |
Assumed | 685,000 | 182,000 | 1,973,000 | 390,000 |
Ceded | (30,096,000) | (32,280,000) | (60,505,000) | (66,498,000) |
Net premiums written | 245,834,000 | 250,015,000 | 482,536,000 | 481,296,000 |
Increase in unearned premiums, net | (14,698,000) | (18,559,000) | (22,297,000) | (28,499,000) |
Net premiums earned | 231,136,000 | 231,456,000 | 460,239,000 | 452,797,000 |
Investment income, net of expenses | 29,716,000 | 27,248,000 | 59,193,000 | 55,057,000 |
Net realized investment (losses) gains | (42,000) | 836,000 | (164,000) | 3,892,000 |
Other revenue | 2,502,000 | 3,994,000 | 4,924,000 | 10,367,000 |
Total revenues | 263,312,000 | 263,534,000 | 524,192,000 | 522,113,000 |
Losses and expenses: | ||||
Losses incurred, net | 27,339,000 | 46,590,000 | 54,958,000 | 131,602,000 |
Amortization of deferred policy acquisition costs | 2,584,000 | 2,245,000 | 4,814,000 | 4,206,000 |
Other underwriting and operating expenses, net | 38,511,000 | 35,348,000 | 79,276,000 | 75,125,000 |
Interest expense | 14,197,000 | 12,244,000 | 30,506,000 | 26,945,000 |
Loss on debt extinguishment | 65,000 | 1,868,000 | 65,000 | 15,308,000 |
Total losses and expenses | 82,696,000 | 98,295,000 | 169,619,000 | 253,186,000 |
Income before tax | 180,616,000 | 165,239,000 | 354,573,000 | 268,927,000 |
Provision for income taxes | 61,994,000 | 56,018,000 | 146,153,000 | 90,515,000 |
Net income | $ 118,622,000 | $ 109,221,000 | $ 208,420,000 | $ 178,412,000 |
Earnings per share: | ||||
Basic (in dollars per share) | $ 0.32 | $ 0.32 | $ 0.59 | $ 0.52 |
Diluted (in dollars per share) | $ 0.31 | $ 0.26 | $ 0.55 | $ 0.43 |
Weighted average common shares outstanding - basic (in shares) | 366,918 | 340,678 | 354,035 | 340,411 |
Weighted average common shares outstanding - diluted (in shares) | 394,470 | 446,139 | 398,302 | 450,354 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 118,622 | $ 109,221 | $ 208,420 | $ 178,412 |
Other comprehensive (loss) income, net of tax: | ||||
Change in unrealized investment gains and losses | 25,749 | 56,338 | 37,870 | 107,165 |
Benefit plan adjustments | (142) | (173) | (295) | (481) |
Foreign currency translation adjustment | 0 | 11 | 31 | (964) |
Other comprehensive income, net of tax | 25,607 | 56,176 | 37,606 | 105,720 |
Comprehensive income | $ 144,229 | $ 165,397 | $ 246,026 | $ 284,132 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Common stock | Paid-in capital | Treasury stock | Accumulated other comprehensive loss | Retained earnings |
Balance, beginning of period at Dec. 31, 2015 | $ 340,097 | $ 1,670,238 | $ (3,362) | $ (60,880) | $ 290,047 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net common stock issued under share-based compensation plans | 979 | (5,954) | ||||
Issuance of common stock | 0 | 0 | ||||
Tax benefit from share-based compensation | 115 | |||||
Equity compensation | 6,017 | |||||
Reacquisition of convertible junior subordinated debentures-equity component | (6,337) | |||||
Reissuance of treasury stock, net | 0 | 0 | ||||
Other comprehensive income, net of tax | $ 105,720 | 105,720 | ||||
Net income | 178,412 | 178,412 | ||||
Balance, end of period at Jun. 30, 2016 | 2,515,092 | 341,076 | 1,664,079 | (3,362) | 44,840 | 468,459 |
Balance, beginning of period at Dec. 31, 2016 | 2,548,842 | 359,400 | 1,782,337 | (150,359) | (75,100) | 632,717 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net common stock issued under share-based compensation plans | 771 | (7,494) | ||||
Issuance of common stock | 10,386 | 60,903 | ||||
Tax benefit from share-based compensation | 0 | |||||
Equity compensation | 6,855 | |||||
Reacquisition of convertible junior subordinated debentures-equity component | 0 | |||||
Reissuance of treasury stock, net | 150,359 | (21,740) | ||||
Other comprehensive income, net of tax | 37,606 | 37,606 | ||||
Net income | 208,420 | 208,420 | ||||
Balance, end of period at Jun. 30, 2017 | $ 2,995,061 | $ 370,557 | $ 1,842,601 | $ 0 | $ (37,494) | $ 819,397 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 208,420,000 | $ 178,412,000 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 33,191,000 | 28,477,000 |
Deferred tax expense | 106,163,000 | 88,157,000 |
Net realized investment losses (gains) | 164,000 | (3,892,000) |
Loss on debt extinguishment | 65,000 | 15,308,000 |
Change in certain assets and liabilities: | ||
Accrued investment income | 43,000 | 515,000 |
Prepaid insurance premium | 25,000 | 48,000 |
Reinsurance recoverable on loss reserves | 5,710,000 | (728,000) |
Reinsurance recoverable on paid losses | (1,187,000) | (1,454,000) |
Premium receivable | 1,048,000 | 1,867,000 |
Deferred insurance policy acquisition costs | (918,000) | (1,439,000) |
Profit commission receivable | (4,603,000) | (2,793,000) |
Loss reserves | (251,724,000) | (261,069,000) |
Unearned premiums | 22,273,000 | 28,451,000 |
Return premium accrual | (11,900,000) | (7,300,000) |
Income taxes payable - current | 32,991,000 | 523,000 |
Other, net | (14,205,000) | (8,090,000) |
Net cash provided by operating activities | 125,556,000 | 54,993,000 |
Purchases of investments: | ||
Fixed income | (545,281,000) | (723,409,000) |
Equity securities | (38,000) | (3,128,000) |
Proceeds from sales of fixed income | 166,606,000 | 649,776,000 |
Proceeds from maturity of fixed income | 390,344,000 | 313,484,000 |
Proceeds from sale of equity securities | 0 | 2,525,000 |
Net increase in payable for securities | 3,447,000 | 24,519,000 |
Additions to property and equipment | (9,659,000) | (2,724,000) |
Net cash provided by investing activities | 5,419,000 | 261,043,000 |
Cash flows from financing activities: | ||
Proceeds from revolving credit facility | 150,000,000 | 0 |
Repayment of revolving credit facility | (150,000,000) | 0 |
Proceeds from issuance of long-term debt | 0 | 155,000,000 |
Purchase or repayment of convertible senior notes | (145,620,000) | (182,846,000) |
Payment of original issue discount - convertible senior notes | (4,504,000) | (5,655,000) |
Purchase of convertible junior subordinated debentures | 0 | (100,860,000) |
Payment of original issue discount - convertible junior subordinated debentures | 0 | (41,540,000) |
Cash portion of loss on debt extinguishment | 0 | (15,308,000) |
Payment of debt issuance costs | (1,630,000) | 0 |
Payment of withholding taxes related to share-based compensation net share settlement | (6,723,000) | (4,973,000) |
Net cash used in financing activities | (158,477,000) | (196,182,000) |
Net (decrease) increase in cash and cash equivalents | (27,502,000) | 119,854,000 |
Cash and cash equivalents at beginning of period | 155,410,000 | 181,120,000 |
Cash and cash equivalents at end of period | $ 127,908,000 | $ 300,974,000 |
Nature of Business and Basis of
Nature of Business and Basis of Presentation | 6 Months Ended |
Jun. 30, 2017 | |
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”) is principally engaged in the mortgage insurance business. We provide mortgage insurance to lenders throughout the United States and to government sponsored entities (“GSEs”) 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, 2016 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 consolidated financial position and consolidated results of operations for the periods indicated. The consolidated results of operations for the interim period may not be indicative of the results that may be expected for the year ending December 31, 2017 . Substantially all of our insurance written since 2008 has been for loans purchased by the GSEs. We operate under the Private Mortgage Insurer Eligibility Requirements ("PMIERs") of the GSEs that became effective December 31, 2015 and have been amended from time to time. The financial requirements of the PMIERs require a mortgage insurer’s "Available Assets" (generally only the most liquid assets of an insurer) to equal or exceed its "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, as of June 30, 2017 , MGIC’s Available Assets are in excess of its Minimum Required Assets; and MGIC is in compliance with the financial requirements of the PMIERs and eligible to insure loans purchased by the GSEs. Reclassifications Certain reclassifications to 2016 amounts have been made in the accompanying financial statements to conform to the 2017 presentation. Subsequent events We have considered subsequent events through the date of this filing. |
New Accounting Pronouncements
New Accounting Pronouncements | 6 Months Ended |
Jun. 30, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements Adopted Accounting Standards Improvements to Employee Share-Based Compensation Accounting In March 2016, the Financial Accounting Standards Board (“FASB”) issued updated guidance that simplifies several aspects of the accounting for employee share-based compensation including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statement of cash flows. The updated guidance requires that, prospectively, all tax effects related to share-based compensation be made through the statement of operations at the time of settlement. In contrast, the previous guidance required excess tax benefits to be recognized in paid-in capital. The updated guidance also removes the requirement to delay recognition of a tax benefit until it reduces current taxes payable. This change is required to be applied on a modified retrospective basis, with a cumulative effect adjustment to opening retained earnings. Additionally, all tax related cash flows resulting from share-based compensation are to be reported as operating activities on the statement of cash flows, a change from the existing requirement to present tax benefits as an inflow from financing activities and an outflow from operating activities. Finally, for tax withholding purposes, entities will be allowed to withhold an amount of shares up to the employee’s maximum individual tax rate (as opposed to the minimum statutory tax rate) in the relevant jurisdiction without resulting in liability classification of the award. The change in tax withholding is to be applied on a modified retrospective approach. This updated guidance became effective January 1, 2017. We adopted this guidance in the first quarter of 2017 and as a result of the adoption: • We recognized discrete tax benefits of $1.5 million in the provision for income taxes on our statement of operations for the six months ended June 30, 2017 related to excess tax benefits upon vesting of share-based awards during the period. • We recognized a cumulative effect adjustment related to the recognition of a deferred tax asset related to suspended tax benefits from vesting transactions occurring in prior years and from the elimination of our forfeiture estimate on share-based awards, which was previously applied only to awards with service conditions. • Prior to adoption, cash flows related to excess tax benefits from share-based compensation were included in financing activities. We have reclassified excess tax benefits related to share-based compensation for the prior year period to operating activities. • Prior to adoption, cash flows related to employee taxes paid for withheld shares were included in operating activities. We have reclassified employee taxes paid for withheld shares for the prior year period to financing activities. Prospective Accounting Standards Stock Compensation - Scope of Modification Accounting In May 2017, the FASB issued updated guidance related to a change in the terms or conditions (modification) of a share-based award. The updated guidance provides that an entity should account for the effects of a modification unless the fair value and vesting conditions of the modified award and the classification of the award (equity or liability instrument) are the same as the original award immediately before the modification. The updated guidance addresses the current diversity in practice on applying modification accounting, as some entities evaluate whether changes to awards are substantive, which is not prescribed within the current accounting guidance. The updated guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted, including adoption in any interim period. We are currently evaluating the impacts the adoption of this guidance will have on our consolidated financial statements, but do not expect it to have a material impact on our consolidated financial statements or disclosures. Premium Amortization on Purchased Callable Debt Securities In March 2017, the FASB issued updated guidance to amend the amortization period for certain purchased callable debt securities held at a premium shortening the amortization period to the earliest call date. Under current GAAP, there is diversity in practice in the amortization period for premiums of callable debt securities and in how the potential for exercise of a call is factored into current impairment assessments. This updated guidance aligns with how callable debt securities, in the United States, are generally quoted, priced, and traded assuming a model that incorporates consideration of calls (also referred to as “yield-to-worst” pricing). The updated guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. We are currently evaluating the impacts the adoption of this guidance will have on our consolidated financial statements, but do not expect it to have a material impact on our consolidated financial statements or disclosures. We currently account for premium amortization on our purchased callable debt securities on a yield-to-worst basis, which generally aligns with the earliest call date. Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost In March 2017, the FASB issued updated guidance that improves the reporting of net benefit cost in the financial statements. The updated guidance requires that an employer report the service cost component in the same financial statement caption as other compensation costs arising from services rendered by employees during the period. The other components of net benefit cost are required to be presented in the statement of operations separately from the service cost component and outside a subtotal of income from operations, if one is presented. Current guidance does not prescribe where the amount of net benefit cost should be presented in an employer’s statement of operations and does not require entities to disclose by line item the amount of net benefit cost that is included in the statement of operations. The updated guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. We are currently evaluating the impacts the adoption of this guidance will have on our consolidated financial statements, but do not expect it to have a material impact on our consolidated financial statements or disclosures. Measurement of Credit Losses on Financial Instruments In June 2016, the FASB issued updated guidance that requires immediate recognition of estimated credit losses expected to occur over the remaining life of many financial instruments. Entities will be required to utilize a current expected credit losses (“CECL”) methodology that incorporates their forecasts of future economic conditions into their loss estimate unless such forecast is not reasonable and supportable, in which case the entity will revert to historical loss experience. Any allowance for CECL reduces the amortized cost basis of the financial instrument to the amount an entity expects to collect. Credit losses relating to available-for-sale fixed maturity securities are to be recorded through an allowance for credit losses, rather than a write-down of the asset, with the amount of the allowance limited to the amount by which fair value is less than amortized cost. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The updated guidance is not prescriptive about certain aspects of estimating expected credit losses, including the specific methodology to use, and therefore will require significant judgment in application. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted for annual and interim periods in fiscal years beginning after December 15, 2018. We are currently evaluating the impacts the adoption of this guidance will have on our consolidated financial statements, but do not expect it to have a material impact on our consolidated financial statements or disclosures. Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, the FASB issued updated guidance to address the recognition, measurement, presentation, and disclosure of certain financial instruments. The updated guidance requires equity investments, except those accounted for under the equity method of accounting, that have a readily determinable fair value to be measured at fair value with changes in fair value recognized in net income. Equity investments that do not have readily determinable fair values may be remeasured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. A qualitative assessment for impairment is required for equity investments without readily determinable fair values. The updated guidance also eliminates the requirement to disclose the method and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost on the balance sheet. Further, the updated guidance clarifies that entities should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entities other deferred tax assets. The updated guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods and will require recognition of a cumulative effect adjustment at adoption. We do not currently expect the adoption of this guidance to impact our consolidated financial position or liquidity. |
Debt
Debt | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Debt | Debt 2017 debt transactions 2% Notes On March 21, 2017, we issued an irrevocable notice of redemption in respect of our outstanding 2% Notes, with a redemption date of April 21, 2017. In April, holders of approximately $202.5 million of the outstanding principal exercised their rights to convert their notes into shares of our common stock. The remaining $5.1 million of outstanding principal was redeemed for cash. The conversions of the 2% Notes at a rate of 143.8332 shares per $1,000 principal amount resulted in the issuance of approximately 29.1 million shares of our common stock in April. The conversions and cash redemption eliminated our debt obligation. A loss on debt extinguishment of $0.07 million was recognized on the redemption of the $5.1 million of 2% Notes. No gain or loss was recognized from the conversions as the outstanding debt issuance costs associated with the conversions are included in the debt carrying value, which was credited to shareholders’ equity at the time of conversion. Credit Facility On March 21, 2017, we entered into a Credit Agreement with various lenders which provides for a $175 million unsecured revolving credit facility maturing on March 21, 2020. Revolving credit borrowings bear interest at a floating rate, which will be, at our option, either a eurocurrency rate or a base rate, in each case plus an applicable margin. The applicable margins are subject to adjustment based on our senior unsecured long-term debt rating, or if we do not have such a rating, our corporate or issuer rating. Amounts under the facility may be borrowed, repaid and reborrowed from time to time until the maturity of the revolving credit facility. Voluntary prepayments and commitment reductions are permitted at any time without fee subject to a minimum dollar requirement and, for outstanding eurocurrency loans, customary breakage costs. We are required under the Credit Agreement to pay commitment fees on the average daily amount of the unused revolving commitments of the lenders, and an annual administrative fee to the administrative agent. The Credit Agreement contains affirmative, negative and financial covenants which are customary for financings of this type, including, among other things, limits on the creation of liens, limits on the incurrence of indebtedness, restrictions on dispositions, maximum debt-to-capital ratio, minimum consolidated stockholders' equity, minimum policyholder's position of MGIC, and compliance with the financial requirements of the PMIERs. The Credit Agreement includes customary events of default for facilities of this type (with customary grace periods, as applicable) and provides that, upon the occurrence of an event of default, payments of all outstanding loans may be accelerated and/or the lenders' commitments may be terminated. Upon the occurrence of certain insolvency or bankruptcy related events of default, all amounts payable under the Credit Agreements shall automatically become immediately due and payable, and the lenders' commitments will automatically terminate. In addition, upon the occurrence of certain insolvency or bankruptcy related events of default, or the failure to pay interest, principal or fees, the interest rates on all outstanding obligations will be increased. In March, we borrowed $150 million under the revolving credit facility, to fund a portion of the redemption price of the 2% Notes if holders did not elect to convert their 2% Notes. In April, we repaid the amount borrowed under the revolving credit facility because most holders elected to convert their notes. Costs incurred to enter into the Credit Agreement have been deferred and recorded as Other assets and will be amortized over the term of the Credit Agreement. 5% Notes On May 1, 2017, our 5% Notes due in 2017 (“ 5% Notes”) matured and we repaid the outstanding $145 million in aggregate par value, plus accrued interest with cash at our holding company. First half 2016 debt transactions 5% Notes During the first six months of 2016, we purchased $188.5 million in aggregate par value of our 5% Notes at an aggregate purchase price of $195.5 million for which we recognized losses on debt extinguishment on our consolidated statements of operations for the three and six months ended June 30, 2016. 9% Debentures In February 2016, MGIC purchased $132.7 million in aggregate par value of our 9% Debentures at a purchase price of $150.7 million . The purchase of the 9% Debentures resulted in an $8.3 million loss on debt extinguishment on the consolidated statement of operations for the six months ended June 30, 2016, which represents the difference between the fair value and the carrying value of the liability component on the purchase date. Our shareholders’ equity was separately reduced by $6.3 million related to the reacquisition of the equity component. For GAAP accounting purposes, the 9% Debentures owned by MGIC are considered retired and are eliminated in our consolidated financial statements and the underlying common stock equivalents, approximately 9.8 million shares, are not included in the computation of diluted shares. Debt obligations The par value of our long-term debt obligations and their aggregate carrying values as of June 30, 2017 and December 31, 2016 were as follows. (In millions) June 30, December 31, FHLB Advance $ 155.0 $ 155.0 5% Notes — 145.0 2% Notes — 207.6 5.75% Notes 425.0 425.0 9% Debentures (1) 256.9 256.9 Long-term debt, par value 836.9 1,189.5 Debt issuance costs (7.0 ) (10.8 ) Long-term debt, carrying value $ 829.9 $ 1,178.7 (1) Convertible at any time prior to maturity at the holder’s option, at an initial conversion rate, which is subject to adjustment, of 74.0741 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. The 5.75% Senior Notes due 2023 (“5.75% Notes”) and 9% Convertible Junior Subordinated Debentures due in 2063 (“ 9% Debentures”) are obligations of our holding company, MGIC Investment Corporation, and not of its subsidiaries. The Federal Home Loan Bank Advance (the “FHLB Advance”) is an obligation of MGIC. Interest payments on our debt obligations appear below. Six Months Ended June 30, (In millions) 2017 2016 Revolving credit facility $ 0.5 $ — FHLB Advance 1.5 0.9 5% Notes 3.6 6.9 2% Notes 2.1 5.0 5.75% Notes 12.9 — 9% Debentures 11.6 15.9 Total interest payments $ 32.2 $ 28.7 |
Reinsurance
Reinsurance | 6 Months Ended |
Jun. 30, 2017 | |
Reinsurance Disclosures [Abstract] | |
Reinsurance | Reinsurance The reinsurance agreements we have entered into are discussed below. The effect of all of our reinsurance agreements on premiums earned and losses incurred is as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2017 2016 2017 2016 Premiums earned: Direct $ 261,180 $ 263,566 $ 520,608 $ 518,953 Assumed 62 182 160 390 Ceded (30,106 ) (32,292 ) (60,529 ) (66,546 ) Net premiums earned $ 231,136 $ 231,456 $ 460,239 $ 452,797 Losses incurred: Direct $ 31,396 $ 54,863 $ 63,809 $ 147,295 Assumed 61 339 166 440 Ceded (4,118 ) (8,612 ) (9,017 ) (16,133 ) Losses incurred, net $ 27,339 $ 46,590 $ 54,958 $ 131,602 Quota share reinsurance In March 2017, we entered into a quota share reinsurance agreement (“2017 QSR Transaction”) with an effective date of January 1, 2017 with a group of unaffiliated reinsurers, each with a financial strength rating of A- or better by Standard and Poor’s, A.M. Best or both. We utilize quota share reinsurance to manage our exposure to losses resulting from our mortgage guaranty insurance policies and to provide reinsurance capital credit under the PMIERs. Our 2017 QSR Transaction provides coverage on new business written January 1, 2017 through December 29, 2017 that meets certain eligibility requirements. Under the agreement we cede losses incurred and premiums on or after the effective date through December 31, 2028, at which time the agreement expires. Early termination of the agreement can be elected by us effective December 31, 2021 for a fee, or under specified scenarios for no fee upon prior written notice including if we will receive less than 90% of the full credit amount under the PMIERs for the risk ceded in any required calculation period. Our 2015 quota share reinsurance agreement (“2015 QSR Transaction”), which became effective on July 1, 2015, covers eligible risk in force written before 2017. The group of unaffiliated reinsurers under our 2015 QSR Transaction each 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 cedes losses incurred and premiums through December 31, 2024, at which time the agreement expires. 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, including if we will receive less than 90% of the full credit amount under the PMIERs for the risk ceded in any required calculation period. The structure of both the 2017 QSR Transaction and 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 QSR Transactions, we will receive a profit commission provided that the loss ratio on the loans covered under the agreement remains below 60% . Following is a summary of our quota share reinsurance agreements, excluding captive agreements discussed below, for the three and six months ended June 30, 2017 and 2016 . Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2017 2016 2017 2016 Ceded premiums written and earned, net of profit commission (1) $ 28,917 $ 29,961 $ 57,812 $ 61,627 Ceded losses incurred 4,424 6,070 9,111 14,583 Ceding commissions (2) 12,248 11,946 24,251 23,522 Profit commission 32,325 29,767 63,442 55,982 (1) Under our QSR Transactions, premiums are ceded on an earned and received basis as defined in the agreements. (2) Ceding commissions are reported within Other underwriting and operating expenses, net on the consolidated statements of operations. Under the terms of QSR Transactions, ceded premiums, ceding commission and profit commission are settled net on a quarterly basis. The ceded premium due after deducting the related ceding commission and profit commission is reported within “Other liabilities” on the consolidated balance sheets. The reinsurance recoverable on loss reserves related to our QSR Transactions was $33.1 million as of June 30, 2017 and $31.8 million as of December 31, 2016 . The reinsurance recoverable balance is secured by funds on deposit from the reinsurers which are based on the funding requirements of PMIERs that address ceded risk. Captive reinsurance 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 in 2015, 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, the GSEs will not approve any future reinsurance or risk sharing transaction with a mortgage enterprise or an affiliate of a mortgage enterprise. The reinsurance recoverable on loss reserves related to captive agreements was $12.0 million as of June 30, 2017 , which was supported by $86.0 million of trust assets, while as of December 31, 2016 , the reinsurance recoverable on loss reserves related to captive agreements was $19.0 million , which was supported by $91.0 million of trust assets. 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. |
Litigation and Contingencies
Litigation and Contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Litigation and Contingencies | Litigation and Contingencies Before paying an insurance claim, we review the loan and servicing files to determine the appropriateness of the claim amount. When reviewing the files, 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 addition, 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. We call such reduction of claims “curtailments.” In recent quarters, an immaterial percentage of claims received in a quarter have been resolved by rescissions. In each of 2016 and the first half of 2017, curtailments reduced our average claim paid by approximately 5.5% . Our loss reserving methodology incorporates our estimates of future rescissions, curtailments, and reversals of rescissions and curtailments. A variance between ultimate actual rescission, curtailment and reversal rates and our estimates, as a result of the outcome of litigation, settlements or other factors, could materially affect our losses. When the insured disputes our right to rescind coverage or curtail claims, we generally engage in discussions in an attempt to settle the dispute. If we are unable to reach a settlement, the outcome of a dispute ultimately would be determined by legal proceedings. Under ASC 450-20, until a liability associated with settlement discussions or legal proceedings becomes probable and can be reasonably estimated, we consider our claim payment or rescission resolved for financial reporting purposes and do not accrue an estimated loss. Where we have determined that a loss is probable and can be reasonably estimated, we have recorded our best estimate of our probable loss. If we are not able to implement settlements we consider probable, we intend to defend MGIC vigorously against any related legal proceedings. In addition to matters for which we have recorded a probable loss, we are involved in other discussions and/or proceedings with insureds with respect to our claims paying practices. 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 matters where a loss is reasonably possible to be approximately $291 million , although we believe (but can give no assurance that) we will ultimately resolve these matters for significantly less than this amount. This estimate of our maximum exposure does not include interest or consequential or exemplary damages. Mortgage insurers, including MGIC, have been involved in litigation and regulatory actions related to alleged 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. While these proceedings in the aggregate have not resulted in material liability for MGIC, there can be no assurance that the outcome of future proceedings, if any, under these laws would not have a material adverse affect on us. In addition, various regulators, including the CFPB, state insurance commissioners and state attorneys general may bring other 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. 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. The underwriting remedy expense for 2016 and the first half of 2017 was immaterial to our consolidated financial statements. 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. See Note 11 – “Income Taxes” for a description of federal income tax contingencies. |
Earnings per Share
Earnings per Share | 6 Months Ended |
Jun. 30, 2017 | |
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 shares of common stock outstanding. Diluted EPS includes the components of basic EPS and also gives effect to dilutive common stock equivalents. We calculate diluted EPS using the treasury stock method and if-converted method. Under the if-converted method, diluted EPS reflects the potential dilution that could occur if our convertible debt instruments result in the issuance of common stock. The determination of potentially issuable shares does not consider the 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. During the quarter ended June 30, 2017 , we had several debt issuances that could result in contingently issuable shares and consider each potential issuance of shares separately to reflect the maximum potential dilution. Nonetheless, our dilutive common stock equivalents may not reflect all of the contingently issuable shares that could be required to be issued upon any debt conversion. For purposes of calculating basic and diluted EPS, vested restricted stock and restricted stock units ("RSUs") are considered outstanding. The following table reconciles the numerators and denominators used to calculate basic and diluted EPS. Three Months Ended June 30, Six Months Ended June 30, (In thousands, except per share data) 2017 2016 2017 2016 Basic earnings per share: Net income $ 118,622 $ 109,221 $ 208,420 $ 178,412 Weighted average common shares outstanding - basic 366,918 340,678 354,035 340,411 Basic earnings per share $ 0.32 $ 0.32 $ 0.59 $ 0.52 Diluted earnings per share: Net income $ 118,622 $ 109,221 $ 208,420 $ 178,412 Interest expense, net of tax (1) : 2% Notes 84 1,982 907 3,964 5% Notes 427 1,728 1,709 4,406 9% Debentures 3,757 3,757 7,514 8,379 Diluted income available to common shareholders $ 122,890 $ 116,688 $ 218,550 $ 195,161 Weighted average common shares outstanding - basic 366,918 340,678 354,035 340,411 Effect of dilutive securities: Unvested RSUs 1,140 1,209 1,314 1,444 2% Notes 3,827 71,917 16,771 71,917 5% Notes 3,557 13,307 7,154 15,449 9% Debentures 19,028 19,028 19,028 21,133 Weighted average common shares outstanding - diluted 394,470 446,139 398,302 450,354 Diluted earnings per share $ 0.31 $ 0.26 $ 0.55 $ 0.43 (1) Tax effected at a rate of 35%. |
Investments
Investments | 6 Months Ended |
Jun. 30, 2017 | |
Investments [Abstract] | |
Investments | Investments The amortized cost, gross unrealized gains and losses and fair value of the investment portfolio at June 30, 2017 and December 31, 2016 are shown below. June 30, 2017 (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) Fair Value U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 64,043 $ 364 $ (478 ) $ 63,929 Obligations of U.S. states and political subdivisions 2,131,471 42,983 (9,165 ) 2,165,289 Corporate debt securities 1,823,823 12,699 (8,897 ) 1,827,625 ABS 21,988 10 (11 ) 21,987 RMBS 209,874 78 (7,612 ) 202,340 CMBS 310,997 1,548 (5,467 ) 307,078 CLOs 112,769 332 (138 ) 112,963 Total debt securities 4,674,965 58,014 (31,768 ) 4,701,211 Equity securities 7,183 41 (15 ) 7,209 Total investment portfolio $ 4,682,148 $ 58,055 $ (31,783 ) $ 4,708,420 December 31, 2016 (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) Fair Value U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 73,847 $ 407 $ (724 ) $ 73,530 Obligations of U.S. states and political subdivisions 2,147,458 20,983 (25,425 ) 2,143,016 Corporate debt securities 1,756,461 6,059 (18,610 ) 1,743,910 ABS 59,519 74 (28 ) 59,565 RMBS 231,733 102 (7,626 ) 224,209 CMBS 327,042 769 (7,994 ) 319,817 CLOs 121,151 226 (202 ) 121,175 Total debt securities 4,717,211 28,620 (60,609 ) 4,685,222 Equity securities 7,144 8 (24 ) 7,128 Total investment portfolio $ 4,724,355 $ 28,628 $ (60,633 ) $ 4,692,350 (1) At June 30, 2017 and December 31, 2016 , there were no other-than-temporary impairment losses recorded in other comprehensive income. The FHLB Advance is secured by eligible collateral whose fair value must be maintained at 102% of the outstanding principal balance. As of June 30, 2017 that collateral is included in our total investment portfolio amount shown above with a total fair value of $165.9 million . The amortized cost and fair values of debt securities at June 30, 2017 , by contractual maturity, are shown in the following table. 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 in separate categories. June 30, 2017 (In thousands) Amortized Cost Fair Value Due in one year or less $ 341,831 $ 342,028 Due after one year through five years 1,356,023 1,362,799 Due after five years through ten years 1,026,851 1,030,223 Due after ten years 1,294,632 1,321,793 $ 4,019,337 $ 4,056,843 ABS 21,988 21,987 RMBS 209,874 202,340 CMBS 310,997 307,078 CLOs 112,769 112,963 Total as of June 30, 2017 $ 4,674,965 $ 4,701,211 At June 30, 2017 and December 31, 2016 , the investment portfolio had gross unrealized losses of $31.8 million and $60.6 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: June 30, 2017 Less Than 12 Months 12 Months or Greater Total (In thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 52,769 $ (471 ) $ 993 $ (7 ) $ 53,762 $ (478 ) Obligations of U.S. states and political subdivisions 622,767 (8,595 ) 17,400 (570 ) 640,167 (9,165 ) Corporate debt securities 649,134 (7,664 ) 27,241 (1,233 ) 676,375 (8,897 ) ABS 3,362 (11 ) — — 3,362 (11 ) RMBS 43,815 (885 ) 155,030 (6,727 ) 198,845 (7,612 ) CMBS 172,505 (5,439 ) 7,237 (28 ) 179,742 (5,467 ) CLOs 7,275 (138 ) — — 7,275 (138 ) Equity securities 455 (7 ) 139 (8 ) 594 (15 ) Total $ 1,552,082 $ (23,210 ) $ 208,040 $ (8,573 ) $ 1,760,122 $ (31,783 ) December 31, 2016 Less Than 12 Months 12 Months or Greater Total (In thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 48,642 $ (724 ) $ — $ — $ 48,642 $ (724 ) Obligations of U.S. states and political subdivisions 1,136,676 (24,918 ) 13,681 (507 ) 1,150,357 (25,425 ) Corporate debt securities 915,777 (16,771 ) 35,769 (1,839 ) 951,546 (18,610 ) ABS 3,366 (28 ) 656 — 4,022 (28 ) RMBS 46,493 (857 ) 171,326 (6,769 ) 217,819 (7,626 ) CMBS 205,545 (7,529 ) 38,587 (465 ) 244,132 (7,994 ) CLOs 13,278 (73 ) 34,760 (129 ) 48,038 (202 ) Equity securities 568 (15 ) 137 (9 ) 705 (24 ) Total $ 2,370,345 $ (50,915 ) $ 294,916 $ (9,718 ) $ 2,665,261 $ (60,633 ) The unrealized losses in all categories of our investments at June 30, 2017 and December 31, 2016 were primarily caused by the difference in interest rates at each respective period, compared to interest rates at the time of purchase. There were 404 and 607 securities in an unrealized loss position at June 30, 2017 and December 31, 2016 , respectively. During each of the three and six months ended June 30, 2017 and 2016 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 Six Months Ended June 30, (In thousands) 2017 2016 2017 2016 Realized investment gains (losses) on investments: Fixed maturities $ (52 ) $ 831 $ (177 ) $ 3,886 Equity securities 10 5 13 6 Net realized investments (losses) gains $ (42 ) $ 836 $ (164 ) $ 3,892 Three Months Ended Six Months Ended June 30, (In thousands) 2017 2016 2017 2016 Realized investment gains (losses) on investments: Gains on sales $ 644 $ 1,404 $ 829 $ 5,509 Losses on sales (686 ) (568 ) (993 ) (1,617 ) Net realized investments (losses) gains $ (42 ) $ 836 $ (164 ) $ 3,892 |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements Under the authoritative guidance, fair value is disclosed using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value and categorizes assets and liabilities into Levels 1, 2, and 3 based on inputs available to determine their fair values. 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. This model combines all inputs to arrive at a value assigned to each security. Quality controls are performed by the independent pricing sources throughout this process, which include reviewing tolerance reports, trading information, data changes, and directional moves compared to market moves. In addition, on a quarterly basis, we perform quality controls over values received from the pricing sources which also includes reviewing tolerance reports, trading information, data changes, and directional moves compared to market moves. We have not made any adjustments to the prices obtained from the independent pricing sources. In accordance with fair value accounting 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 and equity securities. Level 2 - Quoted prices for similar instruments in active markets that we can access; 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 instrument. The observable inputs are used in valuation models to calculate the fair value of the instruments. Financial assets utilizing Level 2 inputs primarily include obligations of U.S. government corporations and agencies, corporate bonds, mortgage-backed securities, asset-backed securities, and most municipal bonds. The independent pricing sources utilize these approaches to determine the fair value of the instruments in Level 2 of the fair value hierarchy based on type of instrument: Corporate Debt & U.S. Government and Agency Bonds are evaluated by surveying the dealer community, obtaining relevant trade data, benchmark quotes and spreads and incorporating this information into the evaluation process. Obligations of U.S. States & Political Subdivisions are evaluated by tracking, capturing, and analyzing quotes for active issues and trades reported via the Municipal Securities Rulemaking Board records. Daily briefings and reviews of current economic conditions, trading levels, spread relationships, and the slope of the yield curve provide further data for evaluation. Residential Mortgage-Backed Securities (“RMBS”) are evaluated by monitoring interest rate movements, and other pertinent data daily. Incoming market data is enriched to derive spread, yield and/or price data as appropriate, enabling known data points to be extrapolated for valuation application across a range of related securities. Commercial Mortgage-Backed Securities (“CMBS”) are evaluated using valuation techniques that reflect market participants’ assumptions and maximize the use of relevant observable inputs including quoted prices for similar assets, benchmark yield curves and market corroborated inputs. The inputs for securities covered, including executed trades, broker quotes, credit information, collateral attributes and/or cash flow waterfall as applicable, are regularly reviewed as part of the evaluation. Asset-Backed Securities (“ABS”) are evaluated using spreads and other information solicited from market buy- and sell-side sources, including primary and secondary dealers, portfolio managers, and research analysts. Cash flows are generated for each tranche, benchmark yields are determined, and deal collateral performance and tranche level attributes including trade activity, bids, and offer are applied, resulting in tranche-specific prices. Collateralized loan obligations ("CLO") are evaluated by manager rating, seniority in the capital structure, assumptions about prepayment, default and recovery and their impact on cash flow generation. Loan level net asset values are determined and aggregated for tranches and as a final step, prices are checked against available recent trade activity. Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or value drivers are unobservable or from par values for equity securities restricted in their ability to be redeemed or sold. The inputs used to derive the fair value of Level 3 securities 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 a state premium tax credit investment. The state premium tax credit investment has a maturity of less than 2 years , a credit rating of AAA , and its balance reflects its remaining scheduled payments discounted at an average annual rate of 7.1% . 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. _________________________________ Fair value measurements for assets measured at fair value included the following as of June 30, 2017 and December 31, 2016 : June 30, 2017 (In thousands) Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 63,929 $ 13,342 $ 50,587 $ — Obligations of U.S. states and political subdivisions 2,165,289 — 2,164,712 577 Corporate debt securities 1,827,625 — 1,827,625 — ABS 21,987 — 21,987 — RMBS 202,340 — 202,340 — CMBS 307,078 — 307,078 — CLOs 112,963 — 112,963 — Total debt securities 4,701,211 13,342 4,687,292 577 Equity securities (1) 7,209 2,941 — 4,268 Total investment portfolio $ 4,708,420 $ 16,283 $ 4,687,292 $ 4,845 Real estate acquired (2) $ 10,271 $ — $ — $ 10,271 (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. December 31, 2016 (In thousands) Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 73,530 $ 30,690 $ 42,840 $ — Obligations of U.S. states and political subdivisions 2,143,016 — 2,142,325 691 Corporate debt securities 1,743,910 — 1,743,910 — ABS 59,565 — 59,565 — RMBS 224,209 — 224,209 — CMBS 319,817 — 319,817 — CLOs 121,175 — 121,175 — Total debt securities 4,685,222 30,690 4,653,841 691 Equity securities (1) 7,128 2,860 — 4,268 Total investment portfolio $ 4,692,350 $ 33,550 $ 4,653,841 $ 4,959 Real estate acquired (2) $ 11,748 $ — $ — $ 11,748 (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. For assets measured at fair value using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances for the three and six months ended June 30, 2017 and 2016 is shown in the following tables. There were no transfers into or out of Level 3 in those periods and there were no losses included in earnings for those periods attributable to the change in unrealized losses on assets still held at the end of the applicable period. Three Months Ended June 30, 2017 (In thousands) Debt Securities Equity Securities Total Investments Real Estate Acquired Balance at March 31, 2017 $ 683 $ 4,268 $ 4,951 $ 10,730 Total realized/unrealized gains (losses): Included in earnings and reported as losses incurred, net — — — (63 ) Purchases — — — 9,421 Sales (106 ) — (106 ) (9,817 ) Balance at June 30, 2017 $ 577 $ 4,268 $ 4,845 $ 10,271 Three Months Ended June 30, 2016 (In thousands) Debt Equity Total Real Estate Balance at March 31, 2016 $ 1,192 $ 3,421 $ 4,613 $ 12,849 Total realized/unrealized gains (losses): Included in other comprehensive income — 3,519 3,519 — Included in earnings and reported as losses incurred, net — — — 651 Purchases — — — 6,748 Sales (136 ) — (136 ) (10,606 ) Balance at June 30, 2016 $ 1,056 $ 6,940 $ 7,996 $ 9,642 Six Months Ended June 30, 2017 (In thousands) Debt Securities Equity Securities Total Investments Real Estate Acquired Balance at December 31, 2016 $ 691 $ 4,268 $ 4,959 $ 11,748 Total realized/unrealized gains (losses): Included in earnings and reported as losses incurred, net — — — (226 ) Purchases — — — 18,104 Sales (114 ) — (114 ) (19,355 ) Balance at June 30, 2017 $ 577 $ 4,268 $ 4,845 $ 10,271 Six Months Ended June 30, 2016 (In thousands) Debt Equity Total Real Estate Balance at December 31, 2015 $ 1,228 $ 2,855 $ 4,083 $ 12,149 Total realized/unrealized gains (losses): Included in other comprehensive income — 3,519 3,519 — Included in earnings and reported as losses incurred, net — — — 358 Purchases — 3,091 3,091 19,015 Sales (172 ) (2,525 ) (2,697 ) (21,880 ) Balance at June 30, 2016 $ 1,056 $ 6,940 $ 7,996 $ 9,642 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.” Financial Liabilities Not Measured at Fair Value We incur financial liabilities in the normal course of our business. The following table presents the carrying value and fair value of our financial liabilities disclosed, but not carried, at fair value at June 30, 2017 and December 31, 2016 . The fair values of our 5% Notes, 2% Notes, 5.75% Notes, and 9% Debentures were based on observable market prices. The fair value of the FHLB Advance was estimated using discounted cash flows on current incremental borrowing rates for similar borrowing arrangements. In all cases the fair values of the financial liabilities below are categorized as Level 2. June 30, 2017 December 31, 2016 (In thousands) Carrying Value Fair Value Carrying Value Fair Value Financial liabilities: FHLB Advance 155,000 154,140 $ 155,000 $ 151,905 5% Notes — — 144,789 147,679 2% Notes — — 204,672 308,605 5.75% Notes 417,983 457,878 417,406 445,987 9% Debentures 256,872 338,190 256,872 323,040 Total financial liabilities $ 829,855 $ 950,208 $ 1,178,739 $ 1,377,216 |
Other Comprehensive Income
Other Comprehensive Income | 6 Months Ended |
Jun. 30, 2017 | |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |
Other Comprehensive Income | Other Comprehensive Income The pretax and related income tax (expense) benefit components of our other comprehensive income (loss) for the three and six months ended June 30, 2017 and 2016 are included in the following table. Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2017 2016 2017 2016 Net unrealized investment gains arising during the period $ 39,614 $ 86,674 $ 58,261 $ 165,058 Income tax expense (13,865 ) (30,336 ) (20,391 ) (57,893 ) Net of taxes 25,749 56,338 37,870 107,165 Net changes in benefit plan assets and obligations (220 ) (266 ) (454 ) (740 ) Income tax benefit 78 93 159 259 Net of taxes (142 ) (173 ) (295 ) (481 ) Net changes in unrealized foreign currency translation adjustment — 16 45 (1,480 ) Income tax (expense) benefit — (5 ) (14 ) 516 Net of taxes — 11 31 (964 ) Total other comprehensive income 39,394 86,424 57,852 162,838 Total income tax expense (13,787 ) (30,248 ) (20,246 ) (57,118 ) Total other comprehensive income, net of tax $ 25,607 $ 56,176 $ 37,606 $ 105,720 The pretax and related income tax (expense) benefit components of the amounts reclassified from our accumulated other comprehensive loss (“AOCL”) to our consolidated statements of operations for the three and six months ended June 30, 2017 and 2016 are included in the following table. Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2017 2016 2017 2016 Reclassification adjustment for net realized (losses) gains (1) $ (1,392 ) $ 98 $ (2,139 ) $ 710 Income tax benefit (expense) 487 (34 ) 748 (126 ) Net of taxes (905 ) 64 (1,391 ) 584 Reclassification adjustment related to benefit plan assets and obligations (2) 220 266 454 740 Income tax expense (78 ) (93 ) (159 ) (259 ) Net of taxes 142 173 295 481 Reclassification adjustment related to foreign currency (3) — — — 1,467 Income tax expense — — — (513 ) Net of taxes — — — 954 Total reclassifications (1,172 ) 364 (1,685 ) 2,917 Total income tax benefit (expense) 409 (127 ) 589 (898 ) Total reclassifications, net of tax $ (763 ) $ 237 $ (1,096 ) $ 2,019 (1) Increases (decreases) Net realized investment (losses) gains on the consolidated statements of operations. (2) Decreases (increases) Other underwriting and operating expenses, net on the consolidated statements of operations. (3) Increases (decreases) Other revenue on the consolidated statements of operations. __________________________ A rollforward of AOCL for the six months ended June 30, 2017 , including amounts reclassified from AOCL, are included in the table below. Six Months Ended June 30, 2017 (In thousands) Net unrealized gains and losses on available-for-sale securities Net benefit plan assets and obligations recognized in shareholders' equity Net unrealized foreign currency translation Total AOCL Balance, December 31, 2016, net of tax $ (20,797 ) $ (54,272 ) $ (31 ) $ (75,100 ) Other comprehensive income before reclassifications 36,479 — 31 36,510 Less: Amounts reclassified from AOCL (1,391 ) 295 — (1,096 ) Balance, June 30, 2017, net of tax $ 17,073 $ (54,567 ) $ — $ (37,494 ) |
Benefit Plans
Benefit Plans | 6 Months Ended |
Jun. 30, 2017 | |
Retirement Benefits [Abstract] | |
Benefit Plans | Benefit Plans The following tables provide the components of net periodic benefit cost for our pension, supplemental executive retirement and other postretirement benefit plans for three and six months ended June 30, 2017 and 2016 : Three Months Ended June 30, Pension and Supplemental Executive Retirement Plans Other Postretirement Benefit Plans (In thousands) 2017 2016 2017 2016 Service cost $ 2,484 $ 2,402 $ 220 $ 201 Interest cost 3,879 4,024 186 180 Expected return on plan assets (5,013 ) (4,865 ) (1,312 ) (1,221 ) Recognized net actuarial loss 1,549 1,567 — — Amortization of prior service cost (106 ) (171 ) (1,663 ) (1,663 ) Net periodic benefit cost (benefit) $ 2,793 $ 2,957 $ (2,569 ) $ (2,503 ) Six Months Ended June 30, Pension and Supplemental Executive Retirement Plans Other Postretirement Benefit Plans (In thousands) 2017 2016 2017 2016 Service cost $ 4,778 $ 4,565 $ 407 $ 376 Interest cost 7,737 7,953 353 352 Expected return on plan assets (10,049 ) (9,754 ) (2,624 ) (2,443 ) Recognized net actuarial loss 3,084 2,928 — — Amortization of prior service cost (213 ) (343 ) (3,325 ) (3,325 ) Net periodic benefit cost (benefit) $ 5,337 $ 5,349 $ (5,189 ) $ (5,040 ) We currently intend to make contributions totaling $9.4 million to our qualified pension plan and supplemental executive retirement plan in 2017. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We have approximately $1.2 billion of net operating loss (“NOL”) carryforwards on a regular tax basis and $0.3 billion of NOL carryforwards for computing the alternative minimum tax as of June 30, 2017 . Any unutilized carryforwards are scheduled to expire at the end of tax years 2031 through 2033. We evaluate the realizability of our deferred tax assets including our NOL carryforwards on a quarterly basis. Based on our analysis, we have concluded that all of our deferred tax assets are fully realizable and therefore no valuation allowance existed at June 30, 2017 and December 31, 2016. 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. In 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 June 30, 2017 , there would also be interest related to these matters of approximately $195.7 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. 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 June 30, 2017 , those state taxes and interest would approximate $82.4 million . In addition, there could also be state tax penalties. Our total amount of unrecognized tax benefits as of June 30, 2017 is $140.8 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 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 filed an answer to our petition which continued to assert their claim. The case has twice been scheduled for trial and in each instance, the parties jointly filed, and the U.S. Tax Court approved (most recently in February 2016), motions for continuance to postpone the trial date. Also in February 2016, the U.S. Tax Court approved a joint motion to consolidate for trial, briefing and opinion, our case with similar cases of Radian Group, Inc., as successor to Enhance Financial Services Group, Inc., et al. The parties informed the Tax Court in January 2017 that they had reached a basis for settlement of the major issues in the case and in June 2017 that there was only one remaining unresolved secondary issue (a factual determination arising from the 2002-2004 audit that is unrelated to the REMIC matter which the parties continue to work toward resolving). Any agreed settlement terms will ultimately be subject to review by the Joint Committee on Taxation ("JCT") before a settlement can be completed and there is no assurance that a settlement will be completed. Based on information that we currently have regarding the status of our ongoing dispute, we recorded a provision for additional taxes and interest of $27.8 million in the first half of 2017. Should a settlement not be completed, ongoing litigation to resolve our dispute with the IRS could be lengthy and costly in terms of legal fees and related expenses. We would need to make further 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 15 - “Statutory Information.” The total amount of the unrecognized tax benefits, related to our aforementioned REMIC issue that would affect our effective tax rate is $119.1 million . We recognize interest accrued and penalties related to unrecognized tax benefits in income taxes. As of June 30, 2017 and December 31, 2016 , we had accrued $49.9 million and $28.9 million , respectively, for the payment of interest. |
Loss Reserves
Loss Reserves | 6 Months Ended |
Jun. 30, 2017 | |
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; exposure on insured loans; the amount of time between default and claim filing; and curtailments and rescissions. 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 borrowers’ 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 “Losses incurred” section of the table below shows losses incurred on defaults that occurred in the current year and in prior years. The amount of losses incurred relating to defaults that occurred in the current year represents the estimated amount to be ultimately paid on such defaults. The amount of losses incurred relating to defaults that occurred in prior years represents the actual claim rate and severity associated with those defaults 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 continuing from the end of the prior year. This re-estimation of the claim rate and 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 relative to the average loan exposure, changes in the relative level of defaults by geography and changes in average loan exposure. Losses incurred on defaults that occurred in the current year decreased in the first six months of 2017 compared to the same period in 2016 , primarily due to a decrease in the estimated claim rate on recently reported defaults and a decrease in the number of new defaults, net of related cures. For the six months ended June 30, 2017 and 2016 we experienced favorable prior year loss reserve development. This development was, in part, due to the resolution of approximately 48% and 43% of the prior year default inventory during the six months ended June 30, 2017 and 2016 , respectively. During the first six months of 2017 and 2016 , we experienced improved cure rates on prior year defaults, which were offset in part by an increase in severity on the prior year defaults in both periods. The “Losses paid” section of the table below shows the breakdown between claims paid on new default notices in the current year and claims paid on defaults from 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. During the first six months of 2017 and 2016, our losses paid included amounts paid in connection with disputes concerning our claims paying practices and settlements of coverage on pools of non-performing loans (“NPLs”). The impacts of the settlements were as follows: • 2017 - Items removed from inventory totaled 1,128 notices with an amount paid of $45 million . • 2016 - Items removed from inventory totaled 1,273 notices with an amount paid of $51 million . The liability associated with our estimate of premiums to be refunded on expected claim payments is accrued for separately at June 30, 2017 and December 31, 2016 and approximated $74 million and $85 million , respectively. This liability was included in “Other liabilities” on our consolidated balance sheets. The following table provides a reconciliation of beginning and ending loss reserves as of and for the six months ended June 30, 2017 and 2016 : Six months ended June 30, (In thousands) 2017 2016 Reserve at beginning of period $ 1,438,813 $ 1,893,402 Less reinsurance recoverable 50,493 44,487 Net reserve at beginning of period 1,388,320 1,848,915 Losses incurred: Losses and LAE incurred in respect of default notices received in: Current year 158,906 196,543 Prior years (1) (103,948 ) (64,941 ) Total losses incurred 54,958 131,602 Losses paid: Losses and LAE paid in respect of default notices received in: Current year 2,125 1,396 Prior years 298,847 392,007 Reinsurance terminations — (4 ) Total losses paid 300,972 393,399 Net reserve at end of period 1,142,306 1,587,118 Plus reinsurance recoverables 44,783 45,215 Reserve at end of period $ 1,187,089 $ 1,632,333 (1) A negative number for prior year losses incurred indicates a redundancy of prior year loss reserves. See the following table for more information about prior year loss development. The prior year development of the reserves in the first six months of 2017 and 2016 is reflected in the following table. Six months ended June 30, (In millions) 2017 2016 Decrease in estimated claim rate on primary defaults $ (104 ) $ (76 ) Increase in estimated severity on primary defaults 2 17 Change in estimates related to pool reserves, LAE reserves and reinsurance (2 ) (6 ) Total prior year loss development (1) $ (104 ) $ (65 ) (1) A negative number for prior year loss development indicates a redundancy of prior year loss reserves. Default inventory A rollforward of our primary default inventory for the three and six months ended June 30, 2017 and 2016 appears in the following table. 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 accuracy of the data provided by servicers, the number of business days in a month, transfers of servicing between loan servicers and whether all servicers have provided the reports in a given month. Three months ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Default inventory at beginning of period 45,349 55,590 50,282 62,633 New notices 14,463 16,080 29,402 32,811 Cures (14,708 ) (15,640 ) (31,836 ) (34,693 ) Paids (including those charged to a deductible or captive) (2,573 ) (3,195 ) (5,208 ) (6,568 ) Rescissions and denials (100 ) (142 ) (195 ) (352 ) Other items removed from inventory (1,114 ) (135 ) (1,128 ) (1,273 ) Default inventory at end of period 41,317 52,558 41,317 52,558 The decrease in the primary default inventory experienced during 2017 and 2016 was generally across all markets and primarily in book years 2008 and prior. Historically as a default ages it becomes more likely to result in a claim. Consecutive months in default June 30, 2017 December 31, 2016 June 30, 2016 3 months or less 10,299 25 % 12,194 24 % 11,547 22 % 4 - 11 months 11,018 27 % 13,450 27 % 12,680 24 % 12 months or more (1) (2) 20,000 48 % 24,638 49 % 28,331 54 % Total primary default inventory 41,317 100 % 50,282 100 % 52,558 100 % Primary claims received inventory included in ending default inventory: 1,258 3 % 1,385 3 % 1,829 3 % (1) Approximately 46% , 47% , and 49% of the primary default inventory in default for 12 consecutive months or more has been in default for at least 36 consecutive months as of June 30, 2017 , December 31, 2016 , and June 30, 2016 , respectively. (2) The majority of items removed from our default inventory under NPL settlements during the six months ended June 30, 2017 were in default for 12 consecutive months or more as of December 31, 2016. 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. Number of payments delinquent June 30, 2017 December 31, 2016 June 30, 2016 3 payments or less 15,858 38 % 18,419 36 % 17,299 33 % 4 - 11 payments 10,560 26 % 12,892 26 % 12,746 24 % 12 payments or more (1) 14,899 36 % 18,971 38 % 22,513 43 % Total primary default inventory 41,317 100 % 50,282 100 % 52,558 100 % (1) The majority of items removed from our default inventory under NPL settlements during the six months ended June 30, 2017 had 12 or more payments delinquent as of December 31, 2016. Pool insurance default inventory decreased to 1,511 at June 30, 2017 from 1,883 at December 31, 2016 , and 2,024 at June 30, 2016 . 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 and is included in “Other liabilities” on our consolidated balance sheets. For information about discussions and legal proceedings with customers with respect to our claims paying practices see Note 5 – “Litigation and Contingencies.” |
Shareholders' Equity
Shareholders' Equity | 6 Months Ended |
Jun. 30, 2017 | |
Stockholders' Equity Note [Abstract] | |
Shareholders' Equity | Shareholders’ Equity Change in accounting principle As described in Note 2 - “New Accounting Pronouncements,” during the first quarter of 2017 we adopted the updated guidance of “ Improvements to Employee Share-Based Compensation Accounting .” The adoption of this guidance resulted in an immaterial cumulative effect adjustment to our 2017 beginning retained earnings. 2% Notes As described in Note 3 - “Debt,” on March 21, 2017, we issued an irrevocable notice of redemption in respect of our outstanding 2% Notes, with a redemption date of April 21, 2017. Subsequent to our notice of redemption, in April, holders of approximately $202.5 million of the outstanding principal amount exercised their rights to convert their notes into shares of our common stock. As a result, we issued approximately 29.1 million shares of our common stock, of which 18.7 million shares were reissued from our treasury stock and 10.4 million were newly issued shares. The conversions of the notes increased our shareholders’ equity by the carrying value of the notes, which included outstanding debt issuance costs, at the time of conversion. Shareholders Rights Agreement Our Amended and Restated Rights Agreement dated July 23, 2015 seeks to diminish the risk that our ability to use our 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. |
Share-Based Compensation
Share-Based Compensation | 6 Months Ended |
Jun. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | Share-Based Compensation We have certain share-based compensation plans. 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 plans 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): Six months ended June 30, 2017 2016 Shares Granted Weighted Average Share Fair Value Shares Granted Weighted Average Share Fair Value RSUs subject to performance conditions 1,237 $ 10.41 1,257 $ 5.66 RSUs subject only to service conditions 395 10.41 433 5.67 |
Statutory Information
Statutory Information | 6 Months Ended |
Jun. 30, 2017 | |
Statutory Capital [Abstract] | |
Statutory Information | Statutory Information 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.” 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 June 30, 2017 , MGIC’s risk-to-capital ratio was 10.2 to 1 , below the maximum allowed by the jurisdictions with State Capital Requirements, and its policyholder position was $1.8 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 transactions 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 financial requirements of the PMIERs, MGIC may terminate the reinsurance transactions, 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 June 30, 2017 , the risk-to-capital ratio of our combined insurance operations (which includes a reinsurance affiliate) was 11.3 to 1 . Reinsurance agreements with an affiliate 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 affiliate, additional capital contributions to the reinsurance affiliate could be needed. We ask the Commissioner of Insurance of the State of Wisconsin (the “OCI”) not to object before MGIC pays dividends. In the second quarter of 2017, MGIC paid a $30 million dividend to our holding company. MGIC is subject to statutory regulations as to payment of dividends. The maximum amount of dividends that MGIC may pay in any twelve-month period without regulatory approval by the OCI is the lesser of adjusted statutory net income or 10% of statutory policyholders’ surplus as of the preceding calendar year end. Adjusted statutory net income is defined for this purpose to be the greater of statutory net income, net of realized investment gains, for the calendar year preceding the date of the dividend or statutory net income, net of realized investment gains, for the three calendar years preceding the date of the dividend less dividends paid within the first two of the preceding three calendar years. The OCI recognizes only statutory accounting practices prescribed or permitted by the State of Wisconsin for determining and reporting the financial condition and results of operations of an insurance company. The OCI has adopted certain prescribed accounting practices that differ from those found in other states. Specifically, Wisconsin domiciled companies record changes in the contingency reserves through the income statement as changes in underwriting deductions. As a result, in periods in which MGIC is increasing contingency reserves, statutory net income is lowered. For the year ended December 31, 2016 , MGIC’s statutory net income was reduced by $490 million to account for the increase in contingency reserves. 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. In May 2016, a working group of state regulators released an exposure draft of a risk-based capital framework to establish capital requirements for mortgage insurers, although no date has been established by which the NAIC must propose revisions to the capital requirements. We are currently evaluating the impact of the framework contained in the exposure draft, including the potential impact of certain items that have not yet been completely addressed by the framework which include: the treatment of ceded risk, minimum capital floors, and action level triggers. While MGIC currently meets the State Capital Requirements of Wisconsin and all other jurisdictions, it could be prevented from writing new business in the future in all jurisdictions if it fails to meet the State Capital Requirements of Wisconsin, or it could be prevented from writing new business in another jurisdiction if it fails to meet the State Capital Requirements of that jurisdiction, and in each case MGIC does not obtain a waiver of such requirements. 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 State Capital Requirements or the PMIERs may affect its willingness to procure insurance from us. A possible future failure by MGIC to meet the State Capital Requirements or the PMIERs 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. |
New Accounting Pronouncements (
New Accounting Pronouncements (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Adopted Accounting Standards and Prospective Accounting Standards | Adopted Accounting Standards Improvements to Employee Share-Based Compensation Accounting In March 2016, the Financial Accounting Standards Board (“FASB”) issued updated guidance that simplifies several aspects of the accounting for employee share-based compensation including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statement of cash flows. The updated guidance requires that, prospectively, all tax effects related to share-based compensation be made through the statement of operations at the time of settlement. In contrast, the previous guidance required excess tax benefits to be recognized in paid-in capital. The updated guidance also removes the requirement to delay recognition of a tax benefit until it reduces current taxes payable. This change is required to be applied on a modified retrospective basis, with a cumulative effect adjustment to opening retained earnings. Additionally, all tax related cash flows resulting from share-based compensation are to be reported as operating activities on the statement of cash flows, a change from the existing requirement to present tax benefits as an inflow from financing activities and an outflow from operating activities. Finally, for tax withholding purposes, entities will be allowed to withhold an amount of shares up to the employee’s maximum individual tax rate (as opposed to the minimum statutory tax rate) in the relevant jurisdiction without resulting in liability classification of the award. The change in tax withholding is to be applied on a modified retrospective approach. This updated guidance became effective January 1, 2017. We adopted this guidance in the first quarter of 2017 and as a result of the adoption: • We recognized discrete tax benefits of $1.5 million in the provision for income taxes on our statement of operations for the six months ended June 30, 2017 related to excess tax benefits upon vesting of share-based awards during the period. • We recognized a cumulative effect adjustment related to the recognition of a deferred tax asset related to suspended tax benefits from vesting transactions occurring in prior years and from the elimination of our forfeiture estimate on share-based awards, which was previously applied only to awards with service conditions. • Prior to adoption, cash flows related to excess tax benefits from share-based compensation were included in financing activities. We have reclassified excess tax benefits related to share-based compensation for the prior year period to operating activities. • Prior to adoption, cash flows related to employee taxes paid for withheld shares were included in operating activities. We have reclassified employee taxes paid for withheld shares for the prior year period to financing activities. Prospective Accounting Standards Stock Compensation - Scope of Modification Accounting In May 2017, the FASB issued updated guidance related to a change in the terms or conditions (modification) of a share-based award. The updated guidance provides that an entity should account for the effects of a modification unless the fair value and vesting conditions of the modified award and the classification of the award (equity or liability instrument) are the same as the original award immediately before the modification. The updated guidance addresses the current diversity in practice on applying modification accounting, as some entities evaluate whether changes to awards are substantive, which is not prescribed within the current accounting guidance. The updated guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted, including adoption in any interim period. We are currently evaluating the impacts the adoption of this guidance will have on our consolidated financial statements, but do not expect it to have a material impact on our consolidated financial statements or disclosures. Premium Amortization on Purchased Callable Debt Securities In March 2017, the FASB issued updated guidance to amend the amortization period for certain purchased callable debt securities held at a premium shortening the amortization period to the earliest call date. Under current GAAP, there is diversity in practice in the amortization period for premiums of callable debt securities and in how the potential for exercise of a call is factored into current impairment assessments. This updated guidance aligns with how callable debt securities, in the United States, are generally quoted, priced, and traded assuming a model that incorporates consideration of calls (also referred to as “yield-to-worst” pricing). The updated guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. We are currently evaluating the impacts the adoption of this guidance will have on our consolidated financial statements, but do not expect it to have a material impact on our consolidated financial statements or disclosures. We currently account for premium amortization on our purchased callable debt securities on a yield-to-worst basis, which generally aligns with the earliest call date. Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost In March 2017, the FASB issued updated guidance that improves the reporting of net benefit cost in the financial statements. The updated guidance requires that an employer report the service cost component in the same financial statement caption as other compensation costs arising from services rendered by employees during the period. The other components of net benefit cost are required to be presented in the statement of operations separately from the service cost component and outside a subtotal of income from operations, if one is presented. Current guidance does not prescribe where the amount of net benefit cost should be presented in an employer’s statement of operations and does not require entities to disclose by line item the amount of net benefit cost that is included in the statement of operations. The updated guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. We are currently evaluating the impacts the adoption of this guidance will have on our consolidated financial statements, but do not expect it to have a material impact on our consolidated financial statements or disclosures. Measurement of Credit Losses on Financial Instruments In June 2016, the FASB issued updated guidance that requires immediate recognition of estimated credit losses expected to occur over the remaining life of many financial instruments. Entities will be required to utilize a current expected credit losses (“CECL”) methodology that incorporates their forecasts of future economic conditions into their loss estimate unless such forecast is not reasonable and supportable, in which case the entity will revert to historical loss experience. Any allowance for CECL reduces the amortized cost basis of the financial instrument to the amount an entity expects to collect. Credit losses relating to available-for-sale fixed maturity securities are to be recorded through an allowance for credit losses, rather than a write-down of the asset, with the amount of the allowance limited to the amount by which fair value is less than amortized cost. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The updated guidance is not prescriptive about certain aspects of estimating expected credit losses, including the specific methodology to use, and therefore will require significant judgment in application. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted for annual and interim periods in fiscal years beginning after December 15, 2018. We are currently evaluating the impacts the adoption of this guidance will have on our consolidated financial statements, but do not expect it to have a material impact on our consolidated financial statements or disclosures. Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, the FASB issued updated guidance to address the recognition, measurement, presentation, and disclosure of certain financial instruments. The updated guidance requires equity investments, except those accounted for under the equity method of accounting, that have a readily determinable fair value to be measured at fair value with changes in fair value recognized in net income. Equity investments that do not have readily determinable fair values may be remeasured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. A qualitative assessment for impairment is required for equity investments without readily determinable fair values. The updated guidance also eliminates the requirement to disclose the method and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost on the balance sheet. Further, the updated guidance clarifies that entities should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entities other deferred tax assets. The updated guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods and will require recognition of a cumulative effect adjustment at adoption. We do not currently expect the adoption of this guidance to impact our consolidated financial position or liquidity. |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Long-term debt | The par value of our long-term debt obligations and their aggregate carrying values as of June 30, 2017 and December 31, 2016 were as follows. (In millions) June 30, December 31, FHLB Advance $ 155.0 $ 155.0 5% Notes — 145.0 2% Notes — 207.6 5.75% Notes 425.0 425.0 9% Debentures (1) 256.9 256.9 Long-term debt, par value 836.9 1,189.5 Debt issuance costs (7.0 ) (10.8 ) Long-term debt, carrying value $ 829.9 $ 1,178.7 (1) Convertible at any time prior to maturity at the holder’s option, at an initial conversion rate, which is subject to adjustment, of 74.0741 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 debt obligations appear below. Six Months Ended June 30, (In millions) 2017 2016 Revolving credit facility $ 0.5 $ — FHLB Advance 1.5 0.9 5% Notes 3.6 6.9 2% Notes 2.1 5.0 5.75% Notes 12.9 — 9% Debentures 11.6 15.9 Total interest payments $ 32.2 $ 28.7 |
Reinsurance (Tables)
Reinsurance (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Reinsurance Disclosures [Abstract] | |
Effect of reinsurance agreement | The effect of all of our reinsurance agreements on premiums earned and losses incurred is as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2017 2016 2017 2016 Premiums earned: Direct $ 261,180 $ 263,566 $ 520,608 $ 518,953 Assumed 62 182 160 390 Ceded (30,106 ) (32,292 ) (60,529 ) (66,546 ) Net premiums earned $ 231,136 $ 231,456 $ 460,239 $ 452,797 Losses incurred: Direct $ 31,396 $ 54,863 $ 63,809 $ 147,295 Assumed 61 339 166 440 Ceded (4,118 ) (8,612 ) (9,017 ) (16,133 ) Losses incurred, net $ 27,339 $ 46,590 $ 54,958 $ 131,602 |
Effect of quota share reinsurance agreements on premiums earned and losses incurred | Following is a summary of our quota share reinsurance agreements, excluding captive agreements discussed below, for the three and six months ended June 30, 2017 and 2016 . Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2017 2016 2017 2016 Ceded premiums written and earned, net of profit commission (1) $ 28,917 $ 29,961 $ 57,812 $ 61,627 Ceded losses incurred 4,424 6,070 9,111 14,583 Ceding commissions (2) 12,248 11,946 24,251 23,522 Profit commission 32,325 29,767 63,442 55,982 (1) Under our QSR Transactions, premiums are ceded on an earned and received basis as defined in the agreements. (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) | 6 Months Ended |
Jun. 30, 2017 | |
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. Three Months Ended June 30, Six Months Ended June 30, (In thousands, except per share data) 2017 2016 2017 2016 Basic earnings per share: Net income $ 118,622 $ 109,221 $ 208,420 $ 178,412 Weighted average common shares outstanding - basic 366,918 340,678 354,035 340,411 Basic earnings per share $ 0.32 $ 0.32 $ 0.59 $ 0.52 Diluted earnings per share: Net income $ 118,622 $ 109,221 $ 208,420 $ 178,412 Interest expense, net of tax (1) : 2% Notes 84 1,982 907 3,964 5% Notes 427 1,728 1,709 4,406 9% Debentures 3,757 3,757 7,514 8,379 Diluted income available to common shareholders $ 122,890 $ 116,688 $ 218,550 $ 195,161 Weighted average common shares outstanding - basic 366,918 340,678 354,035 340,411 Effect of dilutive securities: Unvested RSUs 1,140 1,209 1,314 1,444 2% Notes 3,827 71,917 16,771 71,917 5% Notes 3,557 13,307 7,154 15,449 9% Debentures 19,028 19,028 19,028 21,133 Weighted average common shares outstanding - diluted 394,470 446,139 398,302 450,354 Diluted earnings per share $ 0.31 $ 0.26 $ 0.55 $ 0.43 (1) Tax effected at a rate of 35%. |
Investments (Tables)
Investments (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
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 June 30, 2017 and December 31, 2016 are shown below. June 30, 2017 (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) Fair Value U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 64,043 $ 364 $ (478 ) $ 63,929 Obligations of U.S. states and political subdivisions 2,131,471 42,983 (9,165 ) 2,165,289 Corporate debt securities 1,823,823 12,699 (8,897 ) 1,827,625 ABS 21,988 10 (11 ) 21,987 RMBS 209,874 78 (7,612 ) 202,340 CMBS 310,997 1,548 (5,467 ) 307,078 CLOs 112,769 332 (138 ) 112,963 Total debt securities 4,674,965 58,014 (31,768 ) 4,701,211 Equity securities 7,183 41 (15 ) 7,209 Total investment portfolio $ 4,682,148 $ 58,055 $ (31,783 ) $ 4,708,420 December 31, 2016 (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) Fair Value U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 73,847 $ 407 $ (724 ) $ 73,530 Obligations of U.S. states and political subdivisions 2,147,458 20,983 (25,425 ) 2,143,016 Corporate debt securities 1,756,461 6,059 (18,610 ) 1,743,910 ABS 59,519 74 (28 ) 59,565 RMBS 231,733 102 (7,626 ) 224,209 CMBS 327,042 769 (7,994 ) 319,817 CLOs 121,151 226 (202 ) 121,175 Total debt securities 4,717,211 28,620 (60,609 ) 4,685,222 Equity securities 7,144 8 (24 ) 7,128 Total investment portfolio $ 4,724,355 $ 28,628 $ (60,633 ) $ 4,692,350 (1) At June 30, 2017 and December 31, 2016 , 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 June 30, 2017 , by contractual maturity, are shown in the following table. 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 in separate categories. June 30, 2017 (In thousands) Amortized Cost Fair Value Due in one year or less $ 341,831 $ 342,028 Due after one year through five years 1,356,023 1,362,799 Due after five years through ten years 1,026,851 1,030,223 Due after ten years 1,294,632 1,321,793 $ 4,019,337 $ 4,056,843 ABS 21,988 21,987 RMBS 209,874 202,340 CMBS 310,997 307,078 CLOs 112,769 112,963 Total as of June 30, 2017 $ 4,674,965 $ 4,701,211 |
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: June 30, 2017 Less Than 12 Months 12 Months or Greater Total (In thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 52,769 $ (471 ) $ 993 $ (7 ) $ 53,762 $ (478 ) Obligations of U.S. states and political subdivisions 622,767 (8,595 ) 17,400 (570 ) 640,167 (9,165 ) Corporate debt securities 649,134 (7,664 ) 27,241 (1,233 ) 676,375 (8,897 ) ABS 3,362 (11 ) — — 3,362 (11 ) RMBS 43,815 (885 ) 155,030 (6,727 ) 198,845 (7,612 ) CMBS 172,505 (5,439 ) 7,237 (28 ) 179,742 (5,467 ) CLOs 7,275 (138 ) — — 7,275 (138 ) Equity securities 455 (7 ) 139 (8 ) 594 (15 ) Total $ 1,552,082 $ (23,210 ) $ 208,040 $ (8,573 ) $ 1,760,122 $ (31,783 ) December 31, 2016 Less Than 12 Months 12 Months or Greater Total (In thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 48,642 $ (724 ) $ — $ — $ 48,642 $ (724 ) Obligations of U.S. states and political subdivisions 1,136,676 (24,918 ) 13,681 (507 ) 1,150,357 (25,425 ) Corporate debt securities 915,777 (16,771 ) 35,769 (1,839 ) 951,546 (18,610 ) ABS 3,366 (28 ) 656 — 4,022 (28 ) RMBS 46,493 (857 ) 171,326 (6,769 ) 217,819 (7,626 ) CMBS 205,545 (7,529 ) 38,587 (465 ) 244,132 (7,994 ) CLOs 13,278 (73 ) 34,760 (129 ) 48,038 (202 ) Equity securities 568 (15 ) 137 (9 ) 705 (24 ) Total $ 2,370,345 $ (50,915 ) $ 294,916 $ (9,718 ) $ 2,665,261 $ (60,633 ) |
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 Six Months Ended June 30, (In thousands) 2017 2016 2017 2016 Realized investment gains (losses) on investments: Fixed maturities $ (52 ) $ 831 $ (177 ) $ 3,886 Equity securities 10 5 13 6 Net realized investments (losses) gains $ (42 ) $ 836 $ (164 ) $ 3,892 Three Months Ended Six Months Ended June 30, (In thousands) 2017 2016 2017 2016 Realized investment gains (losses) on investments: Gains on sales $ 644 $ 1,404 $ 829 $ 5,509 Losses on sales (686 ) (568 ) (993 ) (1,617 ) Net realized investments (losses) gains $ (42 ) $ 836 $ (164 ) $ 3,892 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
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 June 30, 2017 and December 31, 2016 : June 30, 2017 (In thousands) Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 63,929 $ 13,342 $ 50,587 $ — Obligations of U.S. states and political subdivisions 2,165,289 — 2,164,712 577 Corporate debt securities 1,827,625 — 1,827,625 — ABS 21,987 — 21,987 — RMBS 202,340 — 202,340 — CMBS 307,078 — 307,078 — CLOs 112,963 — 112,963 — Total debt securities 4,701,211 13,342 4,687,292 577 Equity securities (1) 7,209 2,941 — 4,268 Total investment portfolio $ 4,708,420 $ 16,283 $ 4,687,292 $ 4,845 Real estate acquired (2) $ 10,271 $ — $ — $ 10,271 (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. December 31, 2016 (In thousands) Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 73,530 $ 30,690 $ 42,840 $ — Obligations of U.S. states and political subdivisions 2,143,016 — 2,142,325 691 Corporate debt securities 1,743,910 — 1,743,910 — ABS 59,565 — 59,565 — RMBS 224,209 — 224,209 — CMBS 319,817 — 319,817 — CLOs 121,175 — 121,175 — Total debt securities 4,685,222 30,690 4,653,841 691 Equity securities (1) 7,128 2,860 — 4,268 Total investment portfolio $ 4,692,350 $ 33,550 $ 4,653,841 $ 4,959 Real estate acquired (2) $ 11,748 $ — $ — $ 11,748 (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 six months ended June 30, 2017 and 2016 is shown in the following tables. There were no transfers into or out of Level 3 in those periods and there were no losses included in earnings for those periods attributable to the change in unrealized losses on assets still held at the end of the applicable period. Three Months Ended June 30, 2017 (In thousands) Debt Securities Equity Securities Total Investments Real Estate Acquired Balance at March 31, 2017 $ 683 $ 4,268 $ 4,951 $ 10,730 Total realized/unrealized gains (losses): Included in earnings and reported as losses incurred, net — — — (63 ) Purchases — — — 9,421 Sales (106 ) — (106 ) (9,817 ) Balance at June 30, 2017 $ 577 $ 4,268 $ 4,845 $ 10,271 Three Months Ended June 30, 2016 (In thousands) Debt Equity Total Real Estate Balance at March 31, 2016 $ 1,192 $ 3,421 $ 4,613 $ 12,849 Total realized/unrealized gains (losses): Included in other comprehensive income — 3,519 3,519 — Included in earnings and reported as losses incurred, net — — — 651 Purchases — — — 6,748 Sales (136 ) — (136 ) (10,606 ) Balance at June 30, 2016 $ 1,056 $ 6,940 $ 7,996 $ 9,642 Six Months Ended June 30, 2017 (In thousands) Debt Securities Equity Securities Total Investments Real Estate Acquired Balance at December 31, 2016 $ 691 $ 4,268 $ 4,959 $ 11,748 Total realized/unrealized gains (losses): Included in earnings and reported as losses incurred, net — — — (226 ) Purchases — — — 18,104 Sales (114 ) — (114 ) (19,355 ) Balance at June 30, 2017 $ 577 $ 4,268 $ 4,845 $ 10,271 Six Months Ended June 30, 2016 (In thousands) Debt Equity Total Real Estate Balance at December 31, 2015 $ 1,228 $ 2,855 $ 4,083 $ 12,149 Total realized/unrealized gains (losses): Included in other comprehensive income — 3,519 3,519 — Included in earnings and reported as losses incurred, net — — — 358 Purchases — 3,091 3,091 19,015 Sales (172 ) (2,525 ) (2,697 ) (21,880 ) Balance at June 30, 2016 $ 1,056 $ 6,940 $ 7,996 $ 9,642 |
Carrying value and fair value of debt | The following table presents the carrying value and fair value of our financial liabilities disclosed, but not carried, at fair value at June 30, 2017 and December 31, 2016 . The fair values of our 5% Notes, 2% Notes, 5.75% Notes, and 9% Debentures were based on observable market prices. The fair value of the FHLB Advance was estimated using discounted cash flows on current incremental borrowing rates for similar borrowing arrangements. In all cases the fair values of the financial liabilities below are categorized as Level 2. June 30, 2017 December 31, 2016 (In thousands) Carrying Value Fair Value Carrying Value Fair Value Financial liabilities: FHLB Advance 155,000 154,140 $ 155,000 $ 151,905 5% Notes — — 144,789 147,679 2% Notes — — 204,672 308,605 5.75% Notes 417,983 457,878 417,406 445,987 9% Debentures 256,872 338,190 256,872 323,040 Total financial liabilities $ 829,855 $ 950,208 $ 1,178,739 $ 1,377,216 |
Other Comprehensive Income (Tab
Other Comprehensive Income (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |
Other comprehensive income | The pretax and related income tax (expense) benefit components of our other comprehensive income (loss) for the three and six months ended June 30, 2017 and 2016 are included in the following table. Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2017 2016 2017 2016 Net unrealized investment gains arising during the period $ 39,614 $ 86,674 $ 58,261 $ 165,058 Income tax expense (13,865 ) (30,336 ) (20,391 ) (57,893 ) Net of taxes 25,749 56,338 37,870 107,165 Net changes in benefit plan assets and obligations (220 ) (266 ) (454 ) (740 ) Income tax benefit 78 93 159 259 Net of taxes (142 ) (173 ) (295 ) (481 ) Net changes in unrealized foreign currency translation adjustment — 16 45 (1,480 ) Income tax (expense) benefit — (5 ) (14 ) 516 Net of taxes — 11 31 (964 ) Total other comprehensive income 39,394 86,424 57,852 162,838 Total income tax expense (13,787 ) (30,248 ) (20,246 ) (57,118 ) Total other comprehensive income, net of tax $ 25,607 $ 56,176 $ 37,606 $ 105,720 |
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 (“AOCL”) to our consolidated statements of operations for the three and six months ended June 30, 2017 and 2016 are included in the following table. Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2017 2016 2017 2016 Reclassification adjustment for net realized (losses) gains (1) $ (1,392 ) $ 98 $ (2,139 ) $ 710 Income tax benefit (expense) 487 (34 ) 748 (126 ) Net of taxes (905 ) 64 (1,391 ) 584 Reclassification adjustment related to benefit plan assets and obligations (2) 220 266 454 740 Income tax expense (78 ) (93 ) (159 ) (259 ) Net of taxes 142 173 295 481 Reclassification adjustment related to foreign currency (3) — — — 1,467 Income tax expense — — — (513 ) Net of taxes — — — 954 Total reclassifications (1,172 ) 364 (1,685 ) 2,917 Total income tax benefit (expense) 409 (127 ) 589 (898 ) Total reclassifications, net of tax $ (763 ) $ 237 $ (1,096 ) $ 2,019 (1) Increases (decreases) Net realized investment (losses) gains on the consolidated statements of operations. (2) Decreases (increases) Other underwriting and operating expenses, net on the consolidated statements of operations. (3) Increases (decreases) Other revenue on the consolidated statements of operations. |
Accumulated other comprehensive income (loss) | A rollforward of AOCL for the six months ended June 30, 2017 , including amounts reclassified from AOCL, are included in the table below. Six Months Ended June 30, 2017 (In thousands) Net unrealized gains and losses on available-for-sale securities Net benefit plan assets and obligations recognized in shareholders' equity Net unrealized foreign currency translation Total AOCL Balance, December 31, 2016, net of tax $ (20,797 ) $ (54,272 ) $ (31 ) $ (75,100 ) Other comprehensive income before reclassifications 36,479 — 31 36,510 Less: Amounts reclassified from AOCL (1,391 ) 295 — (1,096 ) Balance, June 30, 2017, net of tax $ 17,073 $ (54,567 ) $ — $ (37,494 ) |
Benefit Plans (Tables)
Benefit Plans (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Retirement Benefits [Abstract] | |
Components of net periodic benefit cost | The following tables provide the components of net periodic benefit cost for our pension, supplemental executive retirement and other postretirement benefit plans for three and six months ended June 30, 2017 and 2016 : Three Months Ended June 30, Pension and Supplemental Executive Retirement Plans Other Postretirement Benefit Plans (In thousands) 2017 2016 2017 2016 Service cost $ 2,484 $ 2,402 $ 220 $ 201 Interest cost 3,879 4,024 186 180 Expected return on plan assets (5,013 ) (4,865 ) (1,312 ) (1,221 ) Recognized net actuarial loss 1,549 1,567 — — Amortization of prior service cost (106 ) (171 ) (1,663 ) (1,663 ) Net periodic benefit cost (benefit) $ 2,793 $ 2,957 $ (2,569 ) $ (2,503 ) Six Months Ended June 30, Pension and Supplemental Executive Retirement Plans Other Postretirement Benefit Plans (In thousands) 2017 2016 2017 2016 Service cost $ 4,778 $ 4,565 $ 407 $ 376 Interest cost 7,737 7,953 353 352 Expected return on plan assets (10,049 ) (9,754 ) (2,624 ) (2,443 ) Recognized net actuarial loss 3,084 2,928 — — Amortization of prior service cost (213 ) (343 ) (3,325 ) (3,325 ) Net periodic benefit cost (benefit) $ 5,337 $ 5,349 $ (5,189 ) $ (5,040 ) |
Loss Reserves (Tables)
Loss Reserves (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Insurance Loss Reserves [Abstract] | |
Reconciliation of beginning and ending loss reserves | The following table provides a reconciliation of beginning and ending loss reserves as of and for the six months ended June 30, 2017 and 2016 : Six months ended June 30, (In thousands) 2017 2016 Reserve at beginning of period $ 1,438,813 $ 1,893,402 Less reinsurance recoverable 50,493 44,487 Net reserve at beginning of period 1,388,320 1,848,915 Losses incurred: Losses and LAE incurred in respect of default notices received in: Current year 158,906 196,543 Prior years (1) (103,948 ) (64,941 ) Total losses incurred 54,958 131,602 Losses paid: Losses and LAE paid in respect of default notices received in: Current year 2,125 1,396 Prior years 298,847 392,007 Reinsurance terminations — (4 ) Total losses paid 300,972 393,399 Net reserve at end of period 1,142,306 1,587,118 Plus reinsurance recoverables 44,783 45,215 Reserve at end of period $ 1,187,089 $ 1,632,333 (1) A negative number for prior year losses incurred indicates a redundancy of prior year loss reserves. See the following table for more information about prior year loss development. |
Prior year development of the reserves | The prior year development of the reserves in the first six months of 2017 and 2016 is reflected in the following table. Six months ended June 30, (In millions) 2017 2016 Decrease in estimated claim rate on primary defaults $ (104 ) $ (76 ) Increase in estimated severity on primary defaults 2 17 Change in estimates related to pool reserves, LAE reserves and reinsurance (2 ) (6 ) Total prior year loss development (1) $ (104 ) $ (65 ) (1) A negative number for prior year loss development indicates a redundancy of prior year loss reserves. |
Rollforward of primary default inventory | A rollforward of our primary default inventory for the three and six months ended June 30, 2017 and 2016 appears in the following table. 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 accuracy of the data provided by servicers, the number of business days in a month, transfers of servicing between loan servicers and whether all servicers have provided the reports in a given month. Three months ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Default inventory at beginning of period 45,349 55,590 50,282 62,633 New notices 14,463 16,080 29,402 32,811 Cures (14,708 ) (15,640 ) (31,836 ) (34,693 ) Paids (including those charged to a deductible or captive) (2,573 ) (3,195 ) (5,208 ) (6,568 ) Rescissions and denials (100 ) (142 ) (195 ) (352 ) Other items removed from inventory (1,114 ) (135 ) (1,128 ) (1,273 ) Default inventory at end of period 41,317 52,558 41,317 52,558 |
Aging of the primary default inventory | Historically as a default ages it becomes more likely to result in a claim. Consecutive months in default June 30, 2017 December 31, 2016 June 30, 2016 3 months or less 10,299 25 % 12,194 24 % 11,547 22 % 4 - 11 months 11,018 27 % 13,450 27 % 12,680 24 % 12 months or more (1) (2) 20,000 48 % 24,638 49 % 28,331 54 % Total primary default inventory 41,317 100 % 50,282 100 % 52,558 100 % Primary claims received inventory included in ending default inventory: 1,258 3 % 1,385 3 % 1,829 3 % (1) Approximately 46% , 47% , and 49% of the primary default inventory in default for 12 consecutive months or more has been in default for at least 36 consecutive months as of June 30, 2017 , December 31, 2016 , and June 30, 2016 , respectively. (2) The majority of items removed from our default inventory under NPL settlements during the six months ended June 30, 2017 were in default for 12 consecutive months or more as of December 31, 2016. |
Number of payments delinquent | The number of payments that a borrower is delinquent is shown in the table below. Number of payments delinquent June 30, 2017 December 31, 2016 June 30, 2016 3 payments or less 15,858 38 % 18,419 36 % 17,299 33 % 4 - 11 payments 10,560 26 % 12,892 26 % 12,746 24 % 12 payments or more (1) 14,899 36 % 18,971 38 % 22,513 43 % Total primary default inventory 41,317 100 % 50,282 100 % 52,558 100 % (1) The majority of items removed from our default inventory under NPL settlements during the six months ended June 30, 2017 had 12 or more payments delinquent as of December 31, 2016. |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
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): Six months ended June 30, 2017 2016 Shares Granted Weighted Average Share Fair Value Shares Granted Weighted Average Share Fair Value RSUs subject to performance conditions 1,237 $ 10.41 1,257 $ 5.66 RSUs subject only to service conditions 395 10.41 433 5.67 |
New Accounting Pronouncements33
New Accounting Pronouncements (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2017USD ($) | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Discrete tax benefits realized upon adoption of ASU | $ 1.5 |
Debt - Narrative (Details)
Debt - Narrative (Details) shares in Millions | May 01, 2017USD ($) | Apr. 30, 2017USD ($)shares | Feb. 29, 2016USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($)shares | Mar. 31, 2017USD ($) | Mar. 21, 2017USD ($) |
Debt Instrument [Line Items] | |||||||||
Loss on debt extinguishment | $ 65,000 | $ 1,868,000 | $ 65,000 | $ 15,308,000 | |||||
Repayments of convertible debt | $ 145,620,000 | 182,846,000 | |||||||
2% Notes | |||||||||
Debt Instrument [Line Items] | |||||||||
Stated interest rate (in hundredths) | 2.00% | 2.00% | |||||||
Principal amount of notes converted into shares | $ 202,500,000 | ||||||||
Principal amount of notes redeemed for cash | $ 5,100,000 | ||||||||
Conversion rate (in shares per $1,000 note) | 0.1438332 | ||||||||
Loss on debt extinguishment | $ 70,000 | ||||||||
Convertible Senior Notes | |||||||||
Debt Instrument [Line Items] | |||||||||
Stated interest rate (in hundredths) | 5.00% | 5.00% | |||||||
Repayments of convertible debt | $ 145,000,000 | 195,500,000 | |||||||
Extinguishment of debt, amount | 188,500,000 | ||||||||
Convertible Senior Notes | 2% Convertible Senior Notes | |||||||||
Debt Instrument [Line Items] | |||||||||
Shares issued during period upon conversion of convertible debt (in shares) | shares | 29.1 | ||||||||
Line of Credit | Revolving Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Maximum borrowing capacity | $ 175,000,000 | ||||||||
Revolving credit facility | $ 150,000,000 | ||||||||
9% Debentures | |||||||||
Debt Instrument [Line Items] | |||||||||
Stated interest rate (in hundredths) | 9.00% | 9.00% | |||||||
Conversion rate (in shares per $1,000 note) | 0.0740741 | ||||||||
Loss on debt extinguishment | $ 8,300,000 | ||||||||
Repayments of convertible debt | 150,700,000 | ||||||||
Extinguishment of debt, amount | $ 132,700,000 | ||||||||
Reacquisition of convertible junior subordinated debentures-equity component | $ 6,300,000 | ||||||||
Reduction in shares for computation of earnings per share | shares | 9.8 |
Debt - Summary of Debt Obligati
Debt - Summary of Debt Obligations (Details) $ / shares in Units, $ in Millions | 1 Months Ended | 6 Months Ended | |
Apr. 30, 2017 | Jun. 30, 2017USD ($)$ / shares | Dec. 31, 2016USD ($) | |
Debt Instrument [Line Items] | |||
Long-term debt, par value | $ 836.9 | $ 1,189.5 | |
Debt issuance costs | (7) | (10.8) | |
Long-term debt, carrying value | 829.9 | 1,178.7 | |
FHLB Advance | |||
Debt Instrument [Line Items] | |||
Long-term debt, par value | 155 | 155 | |
5% Convertible Senior Notes due 2017 | |||
Debt Instrument [Line Items] | |||
Long-term debt, par value | $ 0 | 145 | |
Stated interest rate (in hundredths) | 5.00% | ||
2% Notes | |||
Debt Instrument [Line Items] | |||
Long-term debt, par value | $ 0 | 207.6 | |
Stated interest rate (in hundredths) | 2.00% | ||
Conversion rate (in shares per $1,000 note) | 0.1438332 | ||
5.75% Notes | 5.75% Notes | |||
Debt Instrument [Line Items] | |||
Long-term debt, par value | $ 425 | 425 | |
Stated interest rate (in hundredths) | 5.75% | ||
9% Debentures | |||
Debt Instrument [Line Items] | |||
Long-term debt, par value | $ 256.9 | $ 256.9 | |
Stated interest rate (in hundredths) | 9.00% | ||
Conversion rate (in shares per $1,000 note) | 0.0740741 | ||
Convertible debt, conversion price (in dollars per share) | $ / shares | $ 13.50 | ||
Period preceding election to convert (in days) | 5 days |
Debt - Summary of Interest Paid
Debt - Summary of Interest Paid (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Debt Instrument [Line Items] | ||
Total interest payments | $ 32.2 | $ 28.7 |
Line of Credit | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Total interest payments | 0.5 | 0 |
FHLB Advance | ||
Debt Instrument [Line Items] | ||
Total interest payments | 1.5 | 0.9 |
5% Convertible Senior Notes due 2017 | ||
Debt Instrument [Line Items] | ||
Total interest payments | $ 3.6 | 6.9 |
Stated interest rate (in hundredths) | 5.00% | |
2% Notes | ||
Debt Instrument [Line Items] | ||
Total interest payments | $ 2.1 | 5 |
Stated interest rate (in hundredths) | 2.00% | |
5.75% Notes | 5.75% Notes | ||
Debt Instrument [Line Items] | ||
Total interest payments | $ 12.9 | 0 |
Stated interest rate (in hundredths) | 5.75% | |
9% Debentures | ||
Debt Instrument [Line Items] | ||
Total interest payments | $ 11.6 | $ 15.9 |
Stated interest rate (in hundredths) | 9.00% |
Reinsurance - Summary of Premiu
Reinsurance - Summary of Premiums Earned and Losses Incurred (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Premiums earned: | ||||
Direct | $ 261,180 | $ 263,566 | $ 520,608 | $ 518,953 |
Assumed | 62 | 182 | 160 | 390 |
Ceded | (30,106) | (32,292) | (60,529) | (66,546) |
Net premiums earned | 231,136 | 231,456 | 460,239 | 452,797 |
Losses incurred: | ||||
Direct | 31,396 | 54,863 | 63,809 | 147,295 |
Assumed | 61 | 339 | 166 | 440 |
Ceded | (4,118) | (8,612) | (9,017) | (16,133) |
Losses incurred, net | $ 27,339 | $ 46,590 | $ 54,958 | $ 131,602 |
Reinsurance - Narrative (Detail
Reinsurance - Narrative (Details) - USD ($) | 6 Months Ended | |||
Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Dec. 31, 2015 | |
Effects of Reinsurance [Line Items] | ||||
Reinsurance recoverable on loss reserves | $ 44,783,000 | $ 50,493,000 | $ 45,215,000 | $ 44,487,000 |
Period of existing captive reinsurance agreement | 10 years | |||
Fair value of trust fund assets under captive agreements | $ 86,000,000 | 91,000,000 | ||
Quota Share Reinsurance Agreement, 2017 | ||||
Effects of Reinsurance [Line Items] | ||||
Contingent termination fee | $ 0 | |||
Threshold for private mortgage insurer eligibility requirements for termination election (less than) (as a percent) | 90.00% | |||
Quota share for all policies covered (as a percent) | 30.00% | |||
Ceding commission, percentage (as a percent) | 20.00% | |||
Loss ratio threshold for profit commissions (as a percent) | 60.00% | |||
Quota Share Reinsurance Agreement, 2015 | ||||
Effects of Reinsurance [Line Items] | ||||
Contingent termination fee | $ 0 | |||
Threshold for private mortgage insurer eligibility requirements for termination election (less than) (as a percent) | 90.00% | |||
Quota share for all policies covered (as a percent) | 30.00% | |||
Ceding commission, percentage (as a percent) | 20.00% | |||
Loss ratio threshold for profit commissions (as a percent) | 60.00% | |||
Quota Share Reinsurance Agreements, Excluding Captive Agreements | ||||
Effects of Reinsurance [Line Items] | ||||
Reinsurance recoverable on loss reserves | $ 33,100,000 | 31,800,000 | ||
Reinsurance Agreements, Captive Agreements | ||||
Effects of Reinsurance [Line Items] | ||||
Reinsurance recoverable on loss reserves related to captive agreements | $ 12,000,000 | $ 19,000,000 |
Reinsurance - Summary of Quota
Reinsurance - Summary of Quota Reinsurance Arrangements (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Effects of Reinsurance [Line Items] | ||||
Ceded losses incurred | $ 4,118 | $ 8,612 | $ 9,017 | $ 16,133 |
Quota Share Reinsurance Agreements, Excluding Captive Agreements | ||||
Effects of Reinsurance [Line Items] | ||||
Ceded premiums written and earned, net of profit commission | 28,917 | 29,961 | 57,812 | 61,627 |
Ceded losses incurred | 4,424 | 6,070 | 9,111 | 14,583 |
Ceding commissions | 12,248 | 11,946 | 24,251 | 23,522 |
Profit commission | $ 32,325 | $ 29,767 | $ 63,442 | $ 55,982 |
Litigation and Contingencies (D
Litigation and Contingencies (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Average paid claim reduction due to curtailments (as a percent) | 5.50% | 5.50% |
Maximum exposure associated with other discussions and legal proceedings | $ 291 |
Earnings per Share (Details)
Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Basic earnings per share: | ||||
Net income | $ 118,622 | $ 109,221 | $ 208,420 | $ 178,412 |
Weighted average common shares outstanding - basic (in shares) | 366,918 | 340,678 | 354,035 | 340,411 |
Basic earnings per share (in dollars per share) | $ 0.32 | $ 0.32 | $ 0.59 | $ 0.52 |
Diluted earnings per share: | ||||
Net income | $ 118,622 | $ 109,221 | $ 208,420 | $ 178,412 |
Diluted income available to common shareholders | $ 122,890 | $ 116,688 | $ 218,550 | $ 195,161 |
Weighted average common shares outstanding - basic (in shares) | 366,918 | 340,678 | 354,035 | 340,411 |
Effect of dilutive securities: | ||||
Weighted average common shares outstanding - diluted (in shares) | 394,470 | 446,139 | 398,302 | 450,354 |
Diluted earnings per share (in dollars per share) | $ 0.31 | $ 0.26 | $ 0.55 | $ 0.43 |
Effective income tax rate (in hundredths) | 35.00% | 35.00% | 35.00% | 35.00% |
Unvested RSUs | ||||
Effect of dilutive securities: | ||||
Unvested RSUs (in shares) | 1,140 | 1,209 | 1,314 | 1,444 |
2% Notes | ||||
Diluted earnings per share: | ||||
Dilutive securities | $ 84 | $ 1,982 | $ 907 | $ 3,964 |
Effect of dilutive securities: | ||||
Dilutive securities (in shares) | 3,827 | 71,917 | 16,771 | 71,917 |
Stated interest rate (in hundredths) | 2.00% | 2.00% | ||
5% Notes | ||||
Diluted earnings per share: | ||||
Dilutive securities | $ 427 | $ 1,728 | $ 1,709 | $ 4,406 |
Effect of dilutive securities: | ||||
Dilutive securities (in shares) | 3,557 | 13,307 | 7,154 | 15,449 |
Stated interest rate (in hundredths) | 5.00% | 5.00% | ||
9% Debentures | ||||
Diluted earnings per share: | ||||
Dilutive securities | $ 3,757 | $ 3,757 | $ 7,514 | $ 8,379 |
Effect of dilutive securities: | ||||
Dilutive securities (in shares) | 19,028 | 19,028 | 19,028 | 21,133 |
Stated interest rate (in hundredths) | 9.00% | 9.00% |
Investments (Details)
Investments (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2017USD ($)security | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($)security | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($)security | |
Schedule of Available-for-sale Securities [Line Items] | |||||
Amortized Cost | $ 4,682,148,000 | $ 4,682,148,000 | $ 4,724,355,000 | ||
Gross Unrealized Gains | 58,055,000 | 58,055,000 | 28,628,000 | ||
Gross Unrealized Losses | (31,783,000) | (31,783,000) | (60,633,000) | ||
Fair Value | 4,708,420,000 | 4,708,420,000 | 4,692,350,000 | ||
Other than Temporary Impairment Losses, Portion in Other Comprehensive Income | $ 0 | 0 | |||
Federal Home Loan Bank advances, collateral, value of principal, percent (as a percent) | 102.00% | ||||
FHLB advance collateral | 165,900,000 | $ 165,900,000 | |||
Gross accumulated unrealized gain (losses) on available-for-sale securities | $ (31,800,000) | $ (31,800,000) | $ (60,600,000) | ||
Number of securities in unrealized loss position (in securities) | security | 404 | 404 | 607 | ||
Net impairment losses recognized in earnings | $ 0 | $ 0 | $ 0 | $ 0 | |
Total debt securities | |||||
Schedule of Available-for-sale Securities [Line Items] | |||||
Amortized Cost | 4,674,965,000 | 4,674,965,000 | $ 4,717,211,000 | ||
Gross Unrealized Gains | 58,014,000 | 58,014,000 | 28,620,000 | ||
Gross Unrealized Losses | (31,768,000) | (31,768,000) | (60,609,000) | ||
Fair Value | 4,701,211,000 | 4,701,211,000 | 4,685,222,000 | ||
U.S. Treasury securities and obligations of U.S. government corporations and agencies | |||||
Schedule of Available-for-sale Securities [Line Items] | |||||
Amortized Cost | 64,043,000 | 64,043,000 | 73,847,000 | ||
Gross Unrealized Gains | 364,000 | 364,000 | 407,000 | ||
Gross Unrealized Losses | (478,000) | (478,000) | (724,000) | ||
Fair Value | 63,929,000 | 63,929,000 | 73,530,000 | ||
Obligations of U.S. states and political subdivisions | |||||
Schedule of Available-for-sale Securities [Line Items] | |||||
Amortized Cost | 2,131,471,000 | 2,131,471,000 | 2,147,458,000 | ||
Gross Unrealized Gains | 42,983,000 | 42,983,000 | 20,983,000 | ||
Gross Unrealized Losses | (9,165,000) | (9,165,000) | (25,425,000) | ||
Fair Value | 2,165,289,000 | 2,165,289,000 | 2,143,016,000 | ||
Corporate debt securities | |||||
Schedule of Available-for-sale Securities [Line Items] | |||||
Amortized Cost | 1,823,823,000 | 1,823,823,000 | 1,756,461,000 | ||
Gross Unrealized Gains | 12,699,000 | 12,699,000 | 6,059,000 | ||
Gross Unrealized Losses | (8,897,000) | (8,897,000) | (18,610,000) | ||
Fair Value | 1,827,625,000 | 1,827,625,000 | 1,743,910,000 | ||
ABS | |||||
Schedule of Available-for-sale Securities [Line Items] | |||||
Amortized Cost | 21,988,000 | 21,988,000 | 59,519,000 | ||
Gross Unrealized Gains | 10,000 | 10,000 | 74,000 | ||
Gross Unrealized Losses | (11,000) | (11,000) | (28,000) | ||
Fair Value | 21,987,000 | 21,987,000 | 59,565,000 | ||
RMBS | |||||
Schedule of Available-for-sale Securities [Line Items] | |||||
Amortized Cost | 209,874,000 | 209,874,000 | 231,733,000 | ||
Gross Unrealized Gains | 78,000 | 78,000 | 102,000 | ||
Gross Unrealized Losses | (7,612,000) | (7,612,000) | (7,626,000) | ||
Fair Value | 202,340,000 | 202,340,000 | 224,209,000 | ||
CMBS | |||||
Schedule of Available-for-sale Securities [Line Items] | |||||
Amortized Cost | 310,997,000 | 310,997,000 | 327,042,000 | ||
Gross Unrealized Gains | 1,548,000 | 1,548,000 | 769,000 | ||
Gross Unrealized Losses | (5,467,000) | (5,467,000) | (7,994,000) | ||
Fair Value | 307,078,000 | 307,078,000 | 319,817,000 | ||
CLOs | |||||
Schedule of Available-for-sale Securities [Line Items] | |||||
Amortized Cost | 112,769,000 | 112,769,000 | 121,151,000 | ||
Gross Unrealized Gains | 332,000 | 332,000 | 226,000 | ||
Gross Unrealized Losses | (138,000) | (138,000) | (202,000) | ||
Fair Value | 112,963,000 | 112,963,000 | 121,175,000 | ||
Equity securities | |||||
Schedule of Available-for-sale Securities [Line Items] | |||||
Amortized Cost | 7,183,000 | 7,183,000 | 7,144,000 | ||
Gross Unrealized Gains | 41,000 | 41,000 | 8,000 | ||
Gross Unrealized Losses | (15,000) | (15,000) | (24,000) | ||
Fair Value | $ 7,209,000 | $ 7,209,000 | $ 7,128,000 |
Investments - Amortized Cost an
Investments - Amortized Cost and Fair Values of Debt Securities (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Amortized Cost | ||
Due in one year or less | $ 341,831 | |
Due after one year through five years | 1,356,023 | |
Due after five years through ten years | 1,026,851 | |
Due after ten years | 1,294,632 | |
Total debt securities with single maturity date, amortized cost | 4,019,337 | |
Total at end of period | 4,674,965 | $ 4,717,211 |
Fair Value | ||
Due in one year or less | 342,028 | |
Due after one year through five years | 1,362,799 | |
Due after five years through ten years | 1,030,223 | |
Due after ten years | 1,321,793 | |
Total debt securities with single maturity date, fair value | 4,056,843 | |
Total at end of period | 4,701,211 | $ 4,685,222 |
ABS | ||
Amortized Cost | ||
Total debt securities without single maturity date, amortized cost | 21,988 | |
Fair Value | ||
Total debt securities without single maturity date, fair value | 21,987 | |
RMBS | ||
Amortized Cost | ||
Total debt securities without single maturity date, amortized cost | 209,874 | |
Fair Value | ||
Total debt securities without single maturity date, fair value | 202,340 | |
CMBS | ||
Amortized Cost | ||
Total debt securities without single maturity date, amortized cost | 310,997 | |
Fair Value | ||
Total debt securities without single maturity date, fair value | 307,078 | |
CLOs | ||
Amortized Cost | ||
Total debt securities without single maturity date, amortized cost | 112,769 | |
Fair Value | ||
Total debt securities without single maturity date, fair value | $ 112,963 |
Investments - Securities In Unr
Investments - Securities In Unrealized Loss Position (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Continuous Unrealized Loss Portion, Fair Value [Abstract] | ||
Less than 12 months | $ 1,552,082 | $ 2,370,345 |
12 months or greater | 208,040 | 294,916 |
Total investment portfolio | 1,760,122 | 2,665,261 |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | ||
Less than 12 months | (23,210) | (50,915) |
12 months or greater | (8,573) | (9,718) |
Total investment portfolio | (31,783) | (60,633) |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | ||
Continuous Unrealized Loss Portion, Fair Value [Abstract] | ||
Less than 12 months | 52,769 | 48,642 |
12 months or greater | 993 | 0 |
Total investment portfolio | 53,762 | 48,642 |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | ||
Less than 12 months | (471) | (724) |
12 months or greater | (7) | 0 |
Total investment portfolio | (478) | (724) |
Obligations of U.S. states and political subdivisions | ||
Continuous Unrealized Loss Portion, Fair Value [Abstract] | ||
Less than 12 months | 622,767 | 1,136,676 |
12 months or greater | 17,400 | 13,681 |
Total investment portfolio | 640,167 | 1,150,357 |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | ||
Less than 12 months | (8,595) | (24,918) |
12 months or greater | (570) | (507) |
Total investment portfolio | (9,165) | (25,425) |
Corporate debt securities | ||
Continuous Unrealized Loss Portion, Fair Value [Abstract] | ||
Less than 12 months | 649,134 | 915,777 |
12 months or greater | 27,241 | 35,769 |
Total investment portfolio | 676,375 | 951,546 |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | ||
Less than 12 months | (7,664) | (16,771) |
12 months or greater | (1,233) | (1,839) |
Total investment portfolio | (8,897) | (18,610) |
ABS | ||
Continuous Unrealized Loss Portion, Fair Value [Abstract] | ||
Less than 12 months | 3,362 | 3,366 |
12 months or greater | 0 | 656 |
Total investment portfolio | 3,362 | 4,022 |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | ||
Less than 12 months | (11) | (28) |
12 months or greater | 0 | 0 |
Total investment portfolio | (11) | (28) |
RMBS | ||
Continuous Unrealized Loss Portion, Fair Value [Abstract] | ||
Less than 12 months | 43,815 | 46,493 |
12 months or greater | 155,030 | 171,326 |
Total investment portfolio | 198,845 | 217,819 |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | ||
Less than 12 months | (885) | (857) |
12 months or greater | (6,727) | (6,769) |
Total investment portfolio | (7,612) | (7,626) |
CMBS | ||
Continuous Unrealized Loss Portion, Fair Value [Abstract] | ||
Less than 12 months | 172,505 | 205,545 |
12 months or greater | 7,237 | 38,587 |
Total investment portfolio | 179,742 | 244,132 |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | ||
Less than 12 months | (5,439) | (7,529) |
12 months or greater | (28) | (465) |
Total investment portfolio | (5,467) | (7,994) |
CLOs | ||
Continuous Unrealized Loss Portion, Fair Value [Abstract] | ||
Less than 12 months | 7,275 | 13,278 |
12 months or greater | 0 | 34,760 |
Total investment portfolio | 7,275 | 48,038 |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | ||
Less than 12 months | (138) | (73) |
12 months or greater | 0 | (129) |
Total investment portfolio | (138) | (202) |
Equity securities | ||
Continuous Unrealized Loss Portion, Fair Value [Abstract] | ||
Less than 12 months | 455 | 568 |
12 months or greater | 139 | 137 |
Total investment portfolio | 594 | 705 |
Continuous Unrealized Loss Portion, Unrealized Loses [Abstract] | ||
Less than 12 months | (7) | (15) |
12 months or greater | (8) | (9) |
Total investment portfolio | $ (15) | $ (24) |
Investments - Gain (Loss) on In
Investments - Gain (Loss) on Investments (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Gain (Loss) on Investments [Line Items] | ||||
Realized investment gains (losses) on investments: | $ (42) | $ 836 | $ (164) | $ 3,892 |
Realized investment gains (losses) on investments: | ||||
Gains on sales | 644 | 1,404 | 829 | 5,509 |
Losses on sales | (686) | (568) | (993) | (1,617) |
Net realized investment (losses) gains | (42) | 836 | (164) | 3,892 |
Fixed maturities | ||||
Gain (Loss) on Investments [Line Items] | ||||
Realized investment gains (losses) on investments: | (52) | 831 | (177) | 3,886 |
Realized investment gains (losses) on investments: | ||||
Net realized investment (losses) gains | (52) | 831 | (177) | 3,886 |
Equity securities | ||||
Gain (Loss) on Investments [Line Items] | ||||
Realized investment gains (losses) on investments: | 10 | 5 | 13 | 6 |
Realized investment gains (losses) on investments: | ||||
Net realized investment (losses) gains | $ 10 | $ 5 | $ 13 | $ 6 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
Fair Value Disclosures [Abstract] | ||
State premium tax credit investments, maturity (in years) | 2 years | |
Annual average discount rate (as a percent) | 7.10% | |
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 | $ 63,929 | $ 73,530 |
Obligations of U.S. states and political subdivisions | 2,165,289 | 2,143,016 |
Corporate debt securities | 1,827,625 | 1,743,910 |
ABS | 21,987 | 59,565 |
RMBS | 202,340 | 224,209 |
CMBS | 307,078 | 319,817 |
CLOs | 112,963 | 121,175 |
Total debt securities | 4,701,211 | 4,685,222 |
Equity securities | 7,209 | 7,128 |
Total investment portfolio | 4,708,420 | 4,692,350 |
Real estate acquired | 10,271 | 11,748 |
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 | 13,342 | 30,690 |
Obligations of U.S. states and political subdivisions | 0 | 0 |
Corporate debt securities | 0 | 0 |
ABS | 0 | 0 |
RMBS | 0 | 0 |
CMBS | 0 | 0 |
CLOs | 0 | 0 |
Total debt securities | 13,342 | 30,690 |
Equity securities | 2,941 | 2,860 |
Total investment portfolio | 16,283 | 33,550 |
Real estate acquired | 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 | 50,587 | 42,840 |
Obligations of U.S. states and political subdivisions | 2,164,712 | 2,142,325 |
Corporate debt securities | 1,827,625 | 1,743,910 |
ABS | 21,987 | 59,565 |
RMBS | 202,340 | 224,209 |
CMBS | 307,078 | 319,817 |
CLOs | 112,963 | 121,175 |
Total debt securities | 4,687,292 | 4,653,841 |
Equity securities | 0 | 0 |
Total investment portfolio | 4,687,292 | 4,653,841 |
Real estate acquired | 0 | 0 |
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 | 577 | 691 |
Corporate debt securities | 0 | 0 |
ABS | 0 | 0 |
RMBS | 0 | 0 |
CMBS | 0 | 0 |
CLOs | 0 | 0 |
Total debt securities | 577 | 691 |
Equity securities | 4,268 | 4,268 |
Total investment portfolio | 4,845 | 4,959 |
Real estate acquired | $ 10,271 | $ 11,748 |
Fair Value Measurements - Unobs
Fair Value Measurements - Unobservable Input Reconciliation (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Total Investments | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Balance at beginning of period | $ 4,951 | $ 4,613 | $ 4,959 | $ 4,083 |
Total realized/unrealized gains (losses): | ||||
Included in other comprehensive income | 3,519 | 3,519 | ||
Included in earnings and reported as losses incurred, net | 0 | 0 | 0 | 0 |
Purchases | 0 | 0 | 0 | 3,091 |
Sales | (106) | (136) | (114) | (2,697) |
Balance at end of period | 4,845 | 7,996 | 4,845 | 7,996 |
Debt Securities | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Balance at beginning of period | 683 | 1,192 | 691 | 1,228 |
Total realized/unrealized gains (losses): | ||||
Included in other comprehensive income | 0 | 0 | ||
Included in earnings and reported as losses incurred, net | 0 | 0 | 0 | 0 |
Purchases | 0 | 0 | 0 | 0 |
Sales | (106) | (136) | (114) | (172) |
Balance at end of period | 577 | 1,056 | 577 | 1,056 |
Equity securities | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Balance at beginning of period | 4,268 | 3,421 | 4,268 | 2,855 |
Total realized/unrealized gains (losses): | ||||
Included in other comprehensive income | 3,519 | 3,519 | ||
Included in earnings and reported as losses incurred, net | 0 | 0 | 0 | 0 |
Purchases | 0 | 0 | 0 | 3,091 |
Sales | 0 | 0 | 0 | (2,525) |
Balance at end of period | 4,268 | 6,940 | 4,268 | 6,940 |
Real Estate Acquired | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Balance at beginning of period | 10,730 | 12,849 | 11,748 | 12,149 |
Total realized/unrealized gains (losses): | ||||
Included in other comprehensive income | 0 | 0 | ||
Included in earnings and reported as losses incurred, net | (63) | 651 | (226) | 358 |
Purchases | 9,421 | 6,748 | 18,104 | 19,015 |
Sales | (9,817) | (10,606) | (19,355) | (21,880) |
Balance at end of period | $ 10,271 | $ 9,642 | $ 10,271 | $ 9,642 |
Fair Value Measurements - Liabi
Fair Value Measurements - Liabilities Not Measured at Fair Value (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
5% Convertible Senior Notes due 2017 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Stated interest rate (in hundredths) | 5.00% | |
2% Notes | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Stated interest rate (in hundredths) | 2.00% | |
Senior Notes | 5.75% Notes | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Stated interest rate (in hundredths) | 5.75% | |
9% Debentures | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Stated interest rate (in hundredths) | 9.00% | |
Carrying Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
FHLB Advance | $ 155,000 | $ 155,000 |
5% Notes | 0 | 144,789 |
2% Notes | 0 | 204,672 |
5.75% Notes | 417,983 | 417,406 |
9% Debentures | 256,872 | 256,872 |
Total financial liabilities | 829,855 | 1,178,739 |
Fair Value | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
FHLB Advance | 154,140 | 151,905 |
5% Notes | 0 | 147,679 |
2% Notes | 0 | 308,605 |
5.75% Notes | 457,878 | 445,987 |
9% Debentures | 338,190 | 323,040 |
Total financial liabilities | $ 950,208 | $ 1,377,216 |
Other Comprehensive Income (Det
Other Comprehensive Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Total other comprehensive income | $ 39,394 | $ 86,424 | $ 57,852 | $ 162,838 |
Income tax (benefit) | (13,787) | (30,248) | (20,246) | (57,118) |
Other comprehensive income, net of tax | 25,607 | 56,176 | 37,606 | 105,720 |
Amounts Reclassified From Accumulated Other Comprehensive Income [Abstract] | ||||
Net realized investment (losses) gains | (42) | 836 | (164) | 3,892 |
Other underwriting and operating expenses, net | (38,511) | (35,348) | (79,276) | (75,125) |
Other revenue | 2,502 | 3,994 | 4,924 | 10,367 |
Income before tax | 180,616 | 165,239 | 354,573 | 268,927 |
Income tax benefit (expense) | (61,994) | (56,018) | (146,153) | (90,515) |
Net income | 118,622 | 109,221 | 208,420 | 178,412 |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance, beginning of period | 2,548,842 | |||
Other comprehensive income before reclassifications | 36,510 | |||
Less: Amounts reclassified from AOCL | (1,096) | |||
Balance, end of period | 2,995,061 | 2,515,092 | 2,995,061 | 2,515,092 |
Reclassification from Accumulated Other Comprehensive Income | ||||
Amounts Reclassified From Accumulated Other Comprehensive Income [Abstract] | ||||
Income before tax | (1,172) | 364 | (1,685) | 2,917 |
Income tax benefit (expense) | 409 | (127) | 589 | (898) |
Net income | (763) | 237 | (1,096) | 2,019 |
Accumulated other comprehensive loss | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Other comprehensive income, net of tax | 37,606 | 105,720 | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance, beginning of period | (75,100) | (60,880) | ||
Balance, end of period | (37,494) | 44,840 | (37,494) | 44,840 |
Net unrealized gains and losses on available-for-sale securities | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Total other comprehensive income | 39,614 | 86,674 | 58,261 | 165,058 |
Income tax (benefit) | (13,865) | (30,336) | (20,391) | (57,893) |
Other comprehensive income, net of tax | 25,749 | 56,338 | 37,870 | 107,165 |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance, beginning of period | (20,797) | |||
Other comprehensive income before reclassifications | 36,479 | |||
Less: Amounts reclassified from AOCL | (1,391) | |||
Balance, end of period | 17,073 | 17,073 | ||
Net unrealized gains and losses on available-for-sale securities | Reclassification from Accumulated Other Comprehensive Income | ||||
Amounts Reclassified From Accumulated Other Comprehensive Income [Abstract] | ||||
Net realized investment (losses) gains | (1,392) | 98 | (2,139) | 710 |
Income tax benefit (expense) | 487 | (34) | 748 | (126) |
Net income | (905) | 64 | (1,391) | 584 |
Net benefit plan assets and obligations recognized in shareholders' equity | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Total other comprehensive income | (220) | (266) | (454) | (740) |
Income tax (benefit) | 78 | 93 | 159 | 259 |
Other comprehensive income, net of tax | (142) | (173) | (295) | (481) |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance, beginning of period | (54,272) | |||
Other comprehensive income before reclassifications | 0 | |||
Less: Amounts reclassified from AOCL | 295 | |||
Balance, end of period | (54,567) | (54,567) | ||
Net benefit plan assets and obligations recognized in shareholders' equity | Reclassification from Accumulated Other Comprehensive Income | ||||
Amounts Reclassified From Accumulated Other Comprehensive Income [Abstract] | ||||
Other underwriting and operating expenses, net | 220 | 266 | 454 | 740 |
Income tax benefit (expense) | (78) | (93) | (159) | (259) |
Net income | 142 | 173 | 295 | 481 |
Net unrealized foreign currency translation | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Total other comprehensive income | 0 | 16 | 45 | (1,480) |
Income tax (benefit) | 0 | (5) | (14) | 516 |
Other comprehensive income, net of tax | 0 | 11 | 31 | (964) |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance, beginning of period | (31) | |||
Other comprehensive income before reclassifications | 31 | |||
Less: Amounts reclassified from AOCL | 0 | |||
Balance, end of period | 0 | 0 | ||
Net unrealized foreign currency translation | Reclassification from Accumulated Other Comprehensive Income | ||||
Amounts Reclassified From Accumulated Other Comprehensive Income [Abstract] | ||||
Other revenue | 0 | 0 | 0 | 1,467 |
Income tax benefit (expense) | 0 | 0 | 0 | (513) |
Net income | $ 0 | $ 0 | $ 0 | $ 954 |
Benefit Plans (Details)
Benefit Plans (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Pension and Supplemental Executive Retirement Plans | ||||
Components of Net Periodic Benefit Cost [Abstract] | ||||
Service cost | $ 2,484 | $ 2,402 | $ 4,778 | $ 4,565 |
Interest cost | 3,879 | 4,024 | 7,737 | 7,953 |
Expected return on plan assets | (5,013) | (4,865) | (10,049) | (9,754) |
Recognized net actuarial loss | 1,549 | 1,567 | 3,084 | 2,928 |
Amortization of prior service cost | (106) | (171) | (213) | (343) |
Net periodic benefit cost (benefit) | 2,793 | 2,957 | 5,337 | 5,349 |
Estimated future employer contributions in current fiscal year | 9,400 | 9,400 | ||
Other Postretirement Benefit Plans | ||||
Components of Net Periodic Benefit Cost [Abstract] | ||||
Service cost | 220 | 201 | 407 | 376 |
Interest cost | 186 | 180 | 353 | 352 |
Expected return on plan assets | (1,312) | (1,221) | (2,624) | (2,443) |
Recognized net actuarial loss | 0 | 0 | 0 | 0 |
Amortization of prior service cost | (1,663) | (1,663) | (3,325) | (3,325) |
Net periodic benefit cost (benefit) | $ (2,569) | $ (2,503) | $ (5,189) | $ (5,040) |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2017 | Dec. 31, 2007 | Dec. 31, 2016 | Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | ||||
Net operating loss carryforwards, regular tax basis | $ 1,200,000,000 | |||
Net operating loss carryforwards for computing the alternative minimum tax | 300,000,000 | |||
Valuation allowance | 0 | $ 0 | ||
Information regarding income tax examinations [Abstract] | ||||
Amount of IRS assessment for unpaid taxes and penalties related to REMIC issue | $ 197,500,000 | |||
Estimate of federal interest that may be due | 195,700,000 | |||
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 | |||
Estimate of additional state income taxes and interest that may be due | 82,400,000 | |||
Total amount of unrecognized tax benefits | 140,800,000 | |||
Provision for additional taxes and interest recorded | 27,800,000 | |||
Total amount of the unrecognized tax benefits that would affect our effective tax rate | 119,100,000 | |||
Unrecognized tax benefits, accrued interest | $ 49,900,000 | $ 28,900,000 |
Loss Reserves - Reconciliation
Loss Reserves - Reconciliation of Beginning and Ending Balances (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Loss Reserve [Roll Forward] | ||
Reserve at beginning of period | $ 1,438,813 | $ 1,893,402 |
Less reinsurance recoverable | 50,493 | 44,487 |
Net reserve at beginning of period | 1,388,320 | 1,848,915 |
Losses and LAE incurred in respect of default notices received in: | ||
Current year | 158,906 | 196,543 |
Prior years | (103,948) | (64,941) |
Total losses incurred | 54,958 | 131,602 |
Losses and LAE paid in respect of default notices received in: | ||
Current year | 2,125 | 1,396 |
Prior years | 298,847 | 392,007 |
Reinsurance terminations | 0 | (4) |
Total losses paid | 300,972 | 393,399 |
Net reserve at end of period | 1,142,306 | 1,587,118 |
Plus reinsurance recoverables | 44,783 | 45,215 |
Reserve at end of period | $ 1,187,089 | $ 1,632,333 |
Loss Reserves (Details)
Loss Reserves (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017USD ($)loan | Jun. 30, 2016loan | Jun. 30, 2017USD ($)loan | Jun. 30, 2016USD ($)loan | Dec. 31, 2016USD ($) | |
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | |||||
Other items removed from inventory (in loans) | (1,114) | (135) | (1,128) | (1,273) | |
Prior years | $ | $ 298,847 | $ 392,007 | |||
Premium refund liability, expected claim payments | $ | $ 74,000 | 74,000 | $ 85,000 | ||
Prior years | $ | $ (103,948) | $ (64,941) | |||
Primary Default Inventory [Roll Forward] | |||||
Default inventory at the beginning of period (in loans) | 45,349 | 55,590 | 50,282 | 62,633 | |
New notices (in loans) | 14,463 | 16,080 | 29,402 | 32,811 | |
Cures (in loans) | (14,708) | (15,640) | (31,836) | (34,693) | |
Paids (including those charged to a deductible or captive) (in loans) | (2,573) | (3,195) | (5,208) | (6,568) | |
Rescissions and denials (in loans) | (100) | (142) | (195) | (352) | |
Other items removed from inventory (in loans) | (1,114) | (135) | (1,128) | (1,273) | |
Default inventory at end of period (in loans) | 41,317 | 52,558 | 41,317 | 52,558 | |
Decrease in estimated claim rate on primary defaults | |||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | |||||
Percentage of prior year default inventory resolved (as a percent) | 48.00% | 43.00% | |||
Prior years | $ | $ (104,000) | $ (76,000) | |||
Increase in estimated severity on primary defaults | |||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | |||||
Prior years | $ | 2,000 | 17,000 | |||
Change in estimates related to pool reserves, LAE reserves and reinsurance | |||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | |||||
Prior years | $ | (2,000) | (6,000) | |||
Settlements for claims paying practices and nonperforming loan sale | |||||
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items] | |||||
Prior years | $ | $ 45,000 | $ 51,000 |
Loss Reserves - Delinquent Item
Loss Reserves - Delinquent Items (Details) - loan | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 |
Aging of the Primary Default Inventory [Abstract] | ||||||
3 months or less (in loans) | 10,299 | 12,194 | 11,547 | |||
3 months or less (as a percent) | 25.00% | 24.00% | 22.00% | |||
4 - 11 months (in loans) | 11,018 | 13,450 | 12,680 | |||
4 - 11 months (as a percent) | 27.00% | 27.00% | 24.00% | |||
12 months or more (in loans) | 20,000 | 24,638 | 28,331 | |||
12 months or more (as a percent) | 48.00% | 49.00% | 54.00% | |||
Total primary default inventory (in loans) | 41,317 | 45,349 | 50,282 | 52,558 | 55,590 | 62,633 |
Total primary default inventory (as a percent) | 100.00% | 100.00% | 100.00% | |||
Primary claims received inventory included in ending default inventory (in loans) | 1,258 | 1,385 | 1,829 | |||
Primary claims received inventory included in ending default inventory (as a percent) | 3.00% | 3.00% | 3.00% | |||
Percent of default inventory in default for more than 36 months (as a percent) | 46.00% | 47.00% | 49.00% | |||
Number of payments delinquent [Abstract] | ||||||
3 payments or less (in loans) | 15,858 | 18,419 | 17,299 | |||
3 payments or less (as a percent) | 38.00% | 36.00% | 33.00% | |||
4 - 11 payments (in loans) | 10,560 | 12,892 | 12,746 | |||
4 - 11 payments (as a percent) | 26.00% | 26.00% | 24.00% | |||
12 payments or more (in loans) | 14,899 | 18,971 | 22,513 | |||
12 payments or more (as a percent) | 36.00% | 38.00% | 43.00% | |||
Total primary default inventory (in loans) | 41,317 | 45,349 | 50,282 | 52,558 | 55,590 | 62,633 |
Total primary default inventory (as a percent) | 100.00% | 100.00% | 100.00% | |||
Pool insurance notice inventory (in number of loans) | 1,511 | 1,883 | 2,024 |
Shareholders' Equity (Details)
Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Millions | Jul. 23, 2015 | Apr. 30, 2017 | Jun. 30, 2017 |
Class of Warrant or Right [Line Items] | |||
Common stock, beneficial ownership threshold to be considered an Acquiring Person (as a percent) | 5.00% | ||
Common shares purchasable per Right (in shares) | 0.1 | ||
Shareholder rights accompanying each outstanding share of the company's common stock (in number of Rights) | 1 | ||
Purchase price (in dollars per share) | $ 45 | ||
Purchase price (in dollars per share) | 4.50 | ||
Redemption price (in dollars per Right) | $ 0.001 | ||
Rights | |||
Class of Warrant or Right [Line Items] | |||
Number of rights per outstanding share of common stock (in shares) | 1 | ||
Period after public announcement that a person has become an acquirer (in days) | 10 days | ||
Period after a person announces a tender offer which would make them an acquirer (in days) | 10 days | ||
2% Notes | |||
Class of Warrant or Right [Line Items] | |||
Stated interest rate (in hundredths) | 2.00% | ||
Principal amount of notes converted into shares | $ 202.5 | ||
Convertible Senior Notes | |||
Class of Warrant or Right [Line Items] | |||
Stated interest rate (in hundredths) | 5.00% | ||
Convertible Senior Notes | 2% Convertible Senior Notes | |||
Class of Warrant or Right [Line Items] | |||
Shares issued during period upon conversion of convertible debt (in shares) | 29,100,000 | ||
Treasury stock reissued during period upon conversion of notes (in shares) | 18,700,000 | ||
Stock issued during period upon conversion of notes (in shares) | 10,400,000 |
Share-Based Compensation (Detai
Share-Based Compensation (Details) - $ / shares shares in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
RSUs subject to performance conditions | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted (in shares) | 1,237 | 1,257 |
Weighted Average Share Fair Value (in dollars per share) | $ 10.41 | $ 5.66 |
RSUs subject only to service conditions | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted (in shares) | 395 | 433 |
Weighted Average Share Fair Value (in dollars per share) | $ 10.41 | $ 5.67 |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Award vesting period (in years) | 1 year | |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Award vesting period (in years) | 3 years |
Statutory Information (Details)
Statutory Information (Details) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended |
Jun. 30, 2017USD ($)jurisdiction | Jun. 30, 2017USD ($)jurisdiction | Dec. 31, 2016USD ($) | |
Statutory capital requirements [Abstract] | |||
Number of jurisdictions with risk-to-capital requirements (in jurisdictions) | jurisdiction | 16 | 16 | |
Maximum permitted risk-to-capital ratio commonly applied | 25 to 1 | ||
Risk to capital ratio of combined insurance operations, including reinsurance affiliates, at end of period | 11.3 to 1 | ||
Risk-to-capital ratio for combined insurance operations | 11.3 | 11.3 | |
Percentage of statutory policyholders surplus used to determine maximum allowable dividends (as a percent) | 10.00% | 10.00% | |
Mortgage Guaranty Insurance Corporation | |||
Statutory capital requirements [Abstract] | |||
Maximum risk-to-capital ratio | 25 | ||
Risk to capital ratio at end of period | 10.2 to 1 | ||
Risk-to-capital ratio | 10.2 | 10.2 | |
Amount of policyholders position above or below required MPP | $ 1,800 | $ 1,800 | |
Amount of required MPP | 1,100 | $ 1,100 | |
Cash dividends paid | $ 30 | ||
Adjusted statutory net income measurement period (in years) | 3 years | ||
Adjusted statutory net income dividend payment measurement period (in years) | 2 years | ||
Reduction in statutory net income due to increase in contingency reserve | $ 490 |