We hold gross reserves in an amount equal to the estimated liability for insurance claims and claim expenses related to defaults on insured mortgage loans. A loan is considered to be in “default” as of the payment date at which a borrower has missed the preceding two or more consecutive monthly payments. We establish reserves for loans that have been reported to us in default by servicers, referred to as case reserves, and additional loans that we estimate (based on actuarial review and other factors) to be in default that have not yet been reported to us by servicers, referred to as incurred but not reported (IBNR) reserves. We also establish reserves for claim expenses, which represent the estimated cost of the claim administration process, including legal and other fees, as well as other general expenses of administering the claim settlement process. As of June 30, 2026, we held gross reserves for insurance claims and claim expenses of $214.6 million. During the six months ended June 30, 2026, we paid 353 claims totaling $23.7 million, including 340 claims covered under the QSR Transactions representing $4.5 million of ceded claims and claim expenses.

We had 8,020 loans in default in our primary insured portfolio as of June 30, 2026, which represented a 1.16% default rate against 694,273 total policies in-force, and 7,661 loans in default in our primary insured portfolio as of December 31, 2025, which represented a 1.12% default rate against 684,058 total policies in-force. The size of the reserve we establish for each defaulted loan (and by extension our aggregate reserve for claims and claim expenses) reflects our best estimate of the future claim payment to be made for each individual loan in default. Our future claims exposure is a function of the number of defaulted loans that progress to claim payment (which we refer to as frequency) and the amount to be paid to settle such claims (which we refer to as severity). Our estimates of claims frequency and severity are not formulaic, rather they are broadly synthesized based on historical observed experience for similarly situated loans and assumptions about future macroeconomic factors.


	For the six months ended June 30,
	2026		2025
	(In Thousands)
Beginning balance	$	196,429	$	152,071
Less reinsurance recoverables (1)	(38,577)		(32,260)
Beginning balance, net of reinsurance recoverables	157,852		119,811

Add claims incurred:
Claims and claim expenses incurred:
Current year (2)	74,453		61,356
Prior years (3)	(40,645)		(43,766)
Total claims and claim expenses incurred (4)	33,808		17,590

Less claims paid:
Claims and claim expenses paid:
Current year (2)	39		110
Prior years (3)	19,142		8,469
Reinsurance terminations (5)	(1,670)		(1,506)
Total claims and claim expenses paid	17,511		7,073

Reserve at end of period, net of reinsurance recoverables	174,149		130,328
Add reinsurance recoverables (1)	40,434		32,705
Ending balance	$	214,583	$	163,033

(2) Related to insured loans with their most recent defaults occurring in the current year. For example, if a loan defaulted in a prior year and subsequently cured and later re-defaulted in the current year, the default would be included in the current year. Amounts are presented net of reinsurance and included $61.4 million attributed to net case reserves and $11.8 million attributed to net IBNR reserves for the six months ended June 30, 2026 and $51.5 million attributed to net case reserves and $8.8 million attributed to net IBNR reserves for the six months ended June 30, 2025.

(3) Related to insured loans with defaults occurring in prior years, which have been continuously in default before the start of the current year. Amounts are presented net of reinsurance and included $28.8 million attributed to net case reserves and $10.8 million attributed to net IBNR reserves for the six months ended June 30, 2026 and $34.9 million attributed to net case reserves and $8.1 million attributed to net IBNR reserves for the six months ended June 30, 2025.

The “claims incurred” section of the table above shows claims and claim expenses incurred on defaults occurring in current and prior years, including IBNR reserves, and is presented net of reinsurance. The amount of claims incurred relating to current year defaults increased during the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily due to an increase in the total number of new delinquencies emerging during the period tied to the growth and natural seasoning of our portfolio. Our provision for claims and claim expenses during both the six months ended June 30, 2026 and 2025 benefited from favorable development on prior year defaults. We recognized $40.6 million and $43.8 million of favorable prior year development during the six months ended June 30, 2026 and 2025, respectively, primarily due to cure activity and ongoing analysis of recent loss development trends. We may increase or decrease our claim estimates and reserves as we learn additional information about individual defaulted loans, and continue to observe and analyze loss development trends in our portfolio. Gross reserves of $122.6 million related to prior year defaults remained as of June 30, 2026.