Our reserve for losses and LAE consists of the following as of the dates indicated.


Reserve for losses and LAE

	June 30,		December 31,
(In thousands)	2026		2025
Mortgage reserve for losses and LAE	$	418,388	$	399,946
Specialty
Reserve for losses and LAE		1,460,632	N/A
VOBA liability – reserves		32,760	N/A
Total Specialty reserve for losses and LAE		1,493,392	N/A
Total reserve for losses and LAE	$	1,911,780	$	399,946

Our provision for losses consists of the following for the periods indicated.


Provision for losses

	Three Months Ended June 30,					Six Months Ended June 30,
(In thousands)	2026			2025		2026 (1)			2025
Mortgage provision for losses	$	29,418		$	11,954	$	53,694		$	27,294
Specialty provision for losses		169,239		N/A			255,507		N/A
Amortization of VOBA liability – reserves (2)		(3,712	)	N/A			(6,323	)	N/A
Total provision for losses	$	194,945		$	11,954	$	302,878		$	27,294

N/A – Not applicable

(1)

Includes Inigo results from the Closing Date of the acquisition through June 30, 2026.

(2)

Represents positive amortization of the VOBA intangible asset attributable to reserves.

Mortgage

For the periods indicated, the following table presents information relating to our mortgage insurance reserve for losses, including IBNR reserves and LAE.


Rollforward of reserve for losses

	Six Months Ended June 30,
(In thousands)	2026			2025
Balance at beginning of period	$	399,946		$	354,431
Less: Reinsurance recoverables (1)		47,019			34,144
Balance at beginning of period, net of reinsurance recoverables		352,927			320,287
Add: Losses and LAE incurred in respect of default notices reported and unreported in:
Current year (2)		115,294			103,750
Prior years		(61,600	)		(76,456	)
Total incurred		53,694			27,294
Deduct: Paid claims and LAE related to:
Current year (2)		168			220
Prior years		41,006			11,001
Total paid		41,174			11,221
Balance at end of period, net of reinsurance recoverables		365,447			336,360
Add: Reinsurance recoverables (1)		52,941			40,872
Balance at end of period	$	418,388		$	377,232

(1)

Related to ceded losses recoverable, if any, on ceded reinsurance transactions. See Note 8 for additional information.

(2)

Related to underlying defaulted loans with a most recent default notice dated in the year indicated. For example, if a loan had defaulted in a prior year, but then subsequently cured and later re-defaulted in the current year, that default would be considered a current year default.

Total incurred losses in our Mortgage segment are driven by: (i) case reserves established for new default notices, which are primarily impacted by both the number of new primary default notices received in the period and our related gross Default to Claim Rate and Claim Severity assumptions applied to those new defaults and (ii) reserve developments on prior period defaults, which are primarily impacted by changes to our prior Default to Claim Rate and Claim Severity assumptions applied to these loans.

New primary default notices totaled 25,957 for the six months ended June 30, 2026, compared to 23,972 for the six months ended June 30, 2025, representing an increase of 8%.

Our gross Default to Claim Rate assumption applied to new defaults was 7.5% as of both June 30, 2026, and June 30, 2025, based on our review of trends in Cures and claims paid for our default inventory and taking into consideration the risks and uncertainties associated with the current economic environment.

Our provision for losses during the first six months of both 2026 and 2025 was positively impacted by favorable reserve development on prior year defaults, primarily as a result of Cure trends that were more favorable than originally estimated, and which resulted in reductions in certain of our prior year Default to Claim Rate assumptions in the first six months of both 2026 and 2025.

Total claims paid increased for the six months ended June 30, 2026, compared to the same period in 2025, consistent with both the growth and seasoning of our IIF and our reserving expectations.

For additional information about our Reserve for Losses and LAE, including our accounting policies, see Notes 2 and 11 of Notes to Consolidated Financial Statements in our 2025 Form 10-K.

Specialty

For the period indicated, the following table presents information relating to our specialty insurance reserve for losses, including IBNR reserves and LAE.


Rollforward of reserve for losses

(In thousands)	From Closing Date to June 30, 2026
Balance at beginning of period	$	—
Acquired balance at Closing Date		1,325,171
Add: Acquisition-date fair value adjustment (1)		39,083
Less: Reinsurance recoverables (2)		269,418
Balance at Closing Date, net of reinsurance recoverables		1,094,836
Add: Net incurred losses and LAE relating to losses occurring in:
Current year		292,256
Prior years		(36,749	)
Total incurred		255,507
Deduct: Net paid losses and LAE relating to losses occurring in:
Current year		12,962
Prior years		105,384
Total claims paid		118,346
Add: Amortization of VOBA liability – reserves		(6,323	)
Add: Net foreign exchange (gains) / losses (3)		(3,898	)
Balance at end of period, net of reinsurance recoverables		1,221,776
Add: Reinsurance recoverables (2)		271,616
Balance at end of period	$	1,493,392

(1)

Acquisition-date fair value adjustment includes the VOBA reserves intangible asset related to Inigo’s acquired net reserve for losses.

(2)

Related to ceded losses recoverable, if any, on ceded reinsurance transactions. See Note 8 for additional information.

(3)

Foreign exchange (gains) losses are related to foreign currency denominated loss reserves associated with international insurance exposures in the Specialty segment. Foreign exchange (gains) losses on foreign currency denominated loss reserves are reflected through net income (loss) as a component of net gains (losses) on financial instruments and foreign exchange in the condensed consolidated statements of operations.

Our specialty insurance loss reserves represent management’s estimate of the ultimate cost of settling all claims incurred but unpaid at the balance sheet date, whether reported or not. Estimating loss reserves is a complex and inherently judgmental process due to the uncertainty in the amount and timing of claim payments, particularly for claims that have been incurred but not yet reported to Inigo.

Case reserves are established on an individual claim basis for reported claims not yet settled as of the balance sheet date, taking into consideration available information regarding claim circumstances, handling costs and observed settlement trends.

The estimated cost of unpaid claims is calculated using a variety of actuarial and statistical estimation techniques based primarily on historical loss experience, which assume that future claims development patterns will be consistent with past experience. Adjustments are made, as necessary, to reflect factors that may not be fully captured in the historical data, including changes in claims handling procedures, legal or regulatory environments, inflationary pressures, the impact of large losses and relevant industry trends.

IBNR reserves are determined using actuarial techniques that project the development of claims over time based on historical experience, taking into consideration recent underwriting activity, changes in the mix of business and underlying policy terms and conditions. For more recent accident periods, where claims development may be more volatile, estimates may incorporate additional reliance on actuarial judgment, rating models and assessments of current underwriting conditions.

Large losses are analyzed separately, when appropriate, to mitigate potential distortions in underlying reserve development patterns.

Loss reserves are based on information available as of the balance sheet date and are intended to represent management’s best estimate of ultimate claims settlement costs within a reasonable range of possible outcomes.

Anticipated salvage and subrogation recoveries are estimated on an individual claim basis based on currently available information, including claims experience and applicable legal considerations, and are reported as reductions to loss reserves.

LAE reserves represent the estimated internal and external costs of investigating, managing and settling claims incurred by the Company, whether reported or not. These costs include allocated expenses directly attributable to individual claims, such as legal, loss adjuster, expert and other professional fees and unallocated claims handling costs, including the relevant costs of the claims function and related administration. LAE reserves are included within reserve for losses and LAE on our condensed consolidated balance sheets and are estimated consistently with the underlying provisions for notified claims and IBNR.

Loss and LAE reserves, net of reinsurance recoverables, increased $127 million from the Closing Date to June 30, 2026, driven primarily by current year incurred losses and the acquisition-date fair value reserves adjustment for VOBA, partly offset by paid claims and favorable prior year development.

Net incurred losses for the period from the Closing Date to June 30, 2026, were $256 million excluding the amortization of the VOBA intangible asset attributable to reserves of $6 million, comprising $292 million of current accident year losses, partially offset by favorable prior year development of $37 million. Prior year development was favorable in aggregate across most lines of business driven primarily by claims emergence that was better than previously expected. These favorable developments were partly offset by adverse development on certain large losses, primarily within general liability lines.

The current accident year loss experience benefited from relatively benign catastrophe activity during the period. This benefit was partially offset by losses arising from the Middle East conflict.

Net paid losses and LAE of $118 million during the period from the Closing Date to June 30, 2026 primarily reflect settlement activity on prior accident year claims, including catastrophe and large loss settlements.