For purposes of reserve modeling, loans are aggregated into groups using a variety of factors.  The attributes used to  define the groups include, but are not limited to, the default status of the loans (i.e., number of days in default), product type  (i.e., Prime, Alt-A or Subprime), type of insurance (i.e., primary or pool), policy origination year , loss position (i.e., with or  without a deductible) and the state where the property is located (segregated into three state groups in order to adjust for  differences in foreclosure timing).  We use an actuarial projection methodology referred to as a “roll rate” analysis that uses  historical claim frequency information to determine the projected ultimate default to claim rates for each product and default  status. The default to claim rate also includes our estimates with respect to expected insurance rescissions and claim denials,  which have the effect of reducing our default to claim rates. In recent years, we have experienced an elevated level of insurance  rescissions and claim denials for various reasons, including, without limitation, underwriting negligence, fraudulent  applications and appraisals, breach of representations and warranties and inadequate documentation, reflecting the poor  underwriting periods of 2005 through 2008.  After estimating the default to claim rate, we estimate the severity of each product  type, type of insurance and state grouping based on the average of recently observed severity rates.  These average severity  estimates are then applied to individual loan coverage amounts to determine reserves. Senior management regularly reviews the  modeled frequency, rescission, denial and severity estimates, which are based on historical trends as described. If recent  emerging or projected trends differ significantly from the historical trends used to develop the modeled estimates, management  may take such items into consideration in setting reserve levels. Our aggregate weighted average default to claim rate assumption (net of denials and rescissions) used in estimating our  reserve for losses was 47% at December 31, 2012, compared to 43% at December 31, 2011. The increase from December 31,  2011 to December 31, 2012 was primarily attributable to an increase in the weighted average age of underlying defaulted loans  and a decrease in our estimate of rescissions and denials for our default inventory as of  December 31, 2012. Our default to  claim rate estimate varies depending on the age of the underlying defaulted loans, as measured by the number of monthly  payments missed. As of December 31, 2012, our aggregate weighted average default to claim rate estimate excluding pending  claims, net of our estimate for insurance rescissions and claim denials, was  39% and ranged from 20% for insured loans that  had missed two to three monthly payments to 46% for such loans that had missed 12 or more monthly payments.  A key  assumption affecting our reserving methodology is that our default to claim rates and severities will be consistent with our  recent experience. Our estimate of expected insurance rescissions and claim denials embedded in our default to claim rate is  generally based on our experience over the past year , with consideration given for dif ferences in characteristics between those  rescinded policies and denied claims and the remaining default inventory . We expect our rescission and denial rates to remain at elevated levels as long as defaults related to the poor underwriting  periods of 2005 through 2008 represent a significant percentage of our total default portfolio.  The percentage of defaults  associated with our defaulted loans originated in 2005 through 2008 as a percentage of total defaults was  75.0% and 76.2% at  December 31, 2012 and 2011, respectively. The elevated levels in the rate of rescissions and denials since 2009 have led to an  increased risk of litigation by lenders and policyholders challenging our right to rescind coverage or deny claims. Under our  master insurance policy, any suit or action arising from any right of the insured under the policy must be commenced within  two years after such right first arose and within  three years for certain other policies, including certain pool insurance policies.  Recently, we have faced an increasing number of challenges from certain lender customers regarding our insurance rescissions  and claim denials, which have resulted in some reversals of our decisions regarding rescissions and denials.  Although we  believe that our rescissions and denials are justified under our policies, if we are not successful in defending the rescissions and  denials in any potential legal or other actions, including negotiated settlements, we may need to reassume the risk on, and  increase loss reserves for, those policies or pay additional claims. The assumptions embedded in our estimated default to claim  rate on our in-force default inventory include an adjustment to our estimated rescission and denial rate, to account for the fact  that we expect a certain number of policies to be reinstated and ultimately to be paid, as a result of valid challenges by such  policy holders. As discussed above, we also establish reserves for IBNR defaults related to previously rescinded policies and  denied claims, which we believe are likely to be reinstated (in the case of previously rescinded policies) or resubmitted (in the  case of previously denied claims. We considered the sensitivity of first-lien loss reserve estimates at  December 31, 2012 by assessing the potential changes  resulting from a parallel shift in severity and default to claim rate. For example, assuming all other factors remain constant, for  every one percentage point change in primary claim severity (which we estimate to be  27% of unpaid principal balance at  December 31, 2012), we estimated that our loss reserves would change by approximately  $87 million at December 31, 2012.  For every one percentage point change in pool claim severity (which we estimate to be  45% of unpaid principal balance at  December 31, 2012), we estimated that our loss reserves would change by approximately  $5 million at December 31, 2012. For  every one percentage point change in our overall default to claim rate (which we estimate to be  47% at December 31, 2012,  including our assumptions related to rescissions and denials), we estimated a  $55 million change in our loss reserves at  December 31, 2012. 145