Reserving For Mortgage Insurance and Title Insurance

in a Stressed Real Estate Market

Joseph L. Petrelli, ACAS, MAAA, FCA

President

Demotech, Inc.

Average Commitment Rate On 30-Year Fixed-Rate Mortgages

Source: freddiemac.com – through June 2008

Year Rate Year Rate Year Rate

1973 8.04 1985 12.43 1997 7.60

1974 9.19 1986 10.19 1998 6.94

1975 9.05 1987 10.21 1999 7.44

1976 8.87 1988 10.34 2000 8.05

1977 8.85 1989 10.32 2001 6.97

1978 9.64 1990 10.13 2002 6.54

1979 11.20 1991 9.25 2003 5.83

1980 13.74 1992 8.39 2004 5.84

1981 16.63 1993 7.31 2005 5.87

1982 16.04 1994 8.38 2006 6.41

1983 13.24 1995 7.93 2007 6.34

1984 13.88 1996 7.81 2008* 5.99

Source: freddiemac.com - through June 2008

Average Commitment Rate On 30-Year Fixed-Rate Mortgages

Refinance Percentage of Mortgage Applications

Source: freddiemac.com - through May 2008

Year Percent Year Percent1987 31 1998 521988 21 1999 291989 24 2000 241990 26 2001 571991 45 2002 591992 52 2003 651993 58 2004 461994 27 2005 441995 22 2006 431996 30 2007 411997 31 2008* 50

Source: freddiemac.com - through May 2008

Refinance Percentage of Mortgage Applications

Median Sales Price of Existing Single-Family Homes

Source: realestateabc.com & realtor.org - through May 2008

Year Price Year Price Year Price

1968 $20,100 1982 $67,800 1996 $115,800

1969 $21,300 1983 $70,300 1997 $121,800

1970 $23,000 1984 $72,400 1998 $128,400

1971 $24,800 1985 $75,500 1999 $133,300

1972 $26,700 1986 $80,300 2000 $139,000

1973 $28,900 1987 $85,600 2001 $147,800

1974 $32,000 1988 $89,300 2002 $156,200

1975 $35,300 1989 $89,500 2003 $169,500

1976 $38,100 1990 $92,000 2004 $195,200

1977 $42,900 1991 $97,100 2005 $219,000

1978 $48,700 1992 $99,700 2006 $221,900

1979 $55,700 1993 $103,100 2007 $217,900

1980 $62,200 1994 $107,200 2008Q1 $196,300

1981 $66,400 1995 $110,500 2008Q2* $208,600

Source: realestateabc.com & realtor.org - through May 2008

Median Sales Price of Existing Single-Family Homes

Delinquency and Foreclosure Rates

Source: allcountries.org & mortgagebankers.org

Year Delinquency Foreclosure Year Delinquency Foreclosure Year Delinquency Foreclosure

1970 3.1 0.3 1983 5.6 0.8 1996 4.3 1.0

1971 3.5 0.5 1984 5.7 0.9 1997 4.3 1.1

1972 3.7 0.5 1985 5.8 1.0 1998 4.4 1.1

1973 4.1 N/A 1986 5.6 1.2 1999 4.1 1.1

1974 4.2 0.5 1987 5.0 1.3 2000 4.4 1.2

1975 4.4 0.4 1988 4.8 1.2 2001 5.1 1.5

1976 4.6 0.4 1989 4.8 1.0 2002 5.1 1.5

1977 4.5 0.4 1990 4.7 0.9 2003 4.7 1.3

1978 4.6 0.4 1991 5.0 1.0 2004 4.5 1.2

1979 4.6 0.4 1992 4.6 1.0 2005 4.5 1.0

1980 5.0 0.5 1993 4.2 1.0 2006 5.0 1.2

1981 5.3 0.5 1994 4.1 0.9 2007 5.8 2.0

1982 5.5 0.8 1995 4.3 0.9 2008Q1 6.4 2.5

Delinquency and Foreclosure Rates

Source: allcountries.org & mortgagebankers.org

Title Insurance Direct Premiums Written

Source: Demotech, Inc. Form 9 Database

Year Direct Premiums Written

1993 $5,318,073,1651994 $5,352,518,2361995 $4,285,437,4951996 $5,047,272,2101997 $5,529,108,7551998 $7,532,339,6391999 $8,109,007,9592000 $7,280,711,3762001 $9,120,633,3862002 $11,981,083,8662003 $15,695,909,5592004 $15,534,839,9502005 $16,835,154,2822006 $16,435,636,9042007 $14,061,278,822

Title Insurance Direct Premiums Written ($Billions)

Source: Demotech, Inc. Form 9 Database

Source: The National Association of Insurance Commissioners. Information derived from a Highline Data product (Companies as of 7/16/08).

Private Mortgage Insurance Direct Premiums Written

Year Direct Premiums Written

2001 $4,129,925,000

2002 $4,528,933,000

2003 $4,979,164,000

2004 $5,030,963,000

2005 $5,190,562,000

2006 $5,413,845,000

2007 $6,152,079,536

Private Mortgage Insurance Direct Premiums Written ($Billions)

Source: The National Association of Insurance Commissioners. Information derived from a Highline Data product (Companies as of 7/16/08).