Press Release

NMI Holdings, Inc. Reports Record First Quarter 2018 Financial Results
May 01, 2018

EMERYVILLE, Calif., May 01, 2018 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq:NMIH) today reported GAAP net income of $22.4 million, or $0.34 per diluted share, and adjusted net income of $22.0 million, or $0.34 per diluted share, for its first quarter ended March 31, 2018.  Adjusted net income and adjusted net income per diluted share exclude a pre-tax non-cash gain of $0.4 million related to the change in fair value of the company’s warrant liability.  This compares with a net loss of $1.8 million, or ($0.03) per diluted share, and adjusted net income of $14.0 million, or $0.22 per diluted share, after adjusting for the one-time non-cash expense primarily related to the re-measurement of the company’s net deferred tax asset as a result of tax reform and the change in fair value of the warrant liability, in the prior quarter. In the first quarter of 2017, the company reported net income of $5.5 million, or $0.09 per diluted share, and adjusted net income of $5.6 million, or $0.09 per diluted share, after adjusting for the change in fair value of the warrant liability. The non-GAAP financial measures adjusted net income and adjusted net income per share are presented to increase the comparability of financial results between periods.  See "Use of Non-GAAP Financial Measures" below.

Bradley Shuster, Chairman and CEO of National MI, said, "National MI  delivered record first quarter financial results, including new insurance written of $6.5 billion, record net premiums earned of $54.9 million, record net income of $22.4 million, and record return-on-equity of 16.1%. We continued to build our portfolio of high-quality insurance-in-force at a rate that leads our industry.  We also continued to make significant strides in customer development, activating 21 new customers in the first quarter and continuing to increase our volume with existing customers.”

  • As of March 31, 2018, the company had primary insurance-in-force of $53.4 billion, up 10% from $48.5 billion at the prior quarter end and up 54% over $34.8 billion as of March 31, 2017.

  • Net premiums earned for the quarter were $54.9 million, including $2.8 million attributable to cancellation of single premium policies, which compares with $50.1 million, including $4.2 million related to cancellations, in the prior quarter.  Net premiums earned in the first quarter of 2018 were up 65% over net premiums earned of $33.2 million in the same quarter a year ago, which included $2.5 million related to cancellations.

  • NIW mix was 84% monthly premium product, which compares with 83% in the prior quarter and 81% in the first quarter of 2017.

  • During the quarter, the company completed the sale of 4.3 million shares of common stock, raising proceeds of $79.2 million, net of underwriting discounts, commissions and other direct offering expenses.

  • At quarter-end, cash and investments were $826 million, including $123 million at the holding company, and book equity was $602 million, equal to $9.18 per share.

  • At quarter-end, the company had total PMIERs available assets of $555 million, which compares with risk-based required assets under PMIERs of $522 million. Subsequent to the close of the quarter, the company contributed $70 million to National Mortgage Insurance Corporation, its primary mortgage insurance subsidiary.
             
    Quarter Ended Quarter Ended Quarter Ended Change Change
    3/31/2018 12/31/2017 3/31/2017 Q/Q Y/Y
Primary Insurance-in-Force ($billions) 53.43   48.47   34.78   10 % 54 %
New Insurance Written - NIW ($billions)          
  Monthly premium 5.44   5.74   2.89   (5 )% 88 %
  Single premium 1.02   1.14   0.67   (11 )% 52 %
  Total 6.46   6.88   3.56   (6 )% 82 %
           
Premiums Earned ($millions) 54.91   50.08   33.23   10 % 65 %
Underwriting & Operating Expense ($millions) 28.45   28.30   25.99   1 % 9 %
Loss Expense ($millions) 1.57   2.37   0.64   (34 )% 145 %
Loss Ratio 2.9 % 4.7 % 1.9 %    
Cash & Investments ($millions) 826   735   671   12 % 23 %
Book Equity ($millions) 602   509   484   18 % 24 %
Book Value per Share 9.18   8.41   8.09   9 % 13 %
                     

Conference Call and Webcast Details
The company will hold a conference call and live webcast at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time.  The webcast will be available on the company's website, www.nationalmi.com, in the "Investor Relations" section.  The call also can be accessed by dialing (888) 734-0328 in the U.S., or (914) 495-8578 for international callers using Conference ID: 1986684, or by referencing NMI Holdings, Inc.

About National MI
National Mortgage Insurance Corporation (National MI), a subsidiary of NMI Holdings, Inc. (NASDAQ:NMIH), is a U.S.-based, private mortgage insurance company enabling low down payment borrowers to realize home ownership while protecting lenders and investors against losses related to a borrower's default. To learn more, please visit www.nationalmi.com.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this press release or any other written or oral statements made by or on behalf of the Company in connection therewith may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), and the U.S. Private Securities Litigation Reform Act of 1995 (PSLRA).  The PSLRA provides a "safe harbor" for any forward-looking statements.  All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements, including any statements about our expectations, outlook, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance.  These statements are often, but not always, made through the use of words or phrases such as "anticipate," "believe," "can," "could," "may," "predict," "assume," "potential," "should," "will," "estimate," "plan," "project," "continuing," "ongoing," "expect," "intend" and similar words or phrases.  All forward-looking statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that may turn out to be inaccurate and could cause actual results to differ materially from those expressed in them.  Many risks and uncertainties are inherent in our industry and markets.  Others are more specific to our business and operations.  Important factors that could cause actual events or results to differ materially from those indicated in such statements include, but are not limited to: changes in the business practices of Fannie Mae and Freddie Mac (collectively, the GSEs), including decisions that have the impact of decreasing or discontinuing the use of mortgage insurance as credit enhancement; our ability to remain an eligible mortgage insurer under the current or future versions of their private mortgage insurer eligibility requirements (PMIERs)and other requirements imposed by the GSEs, which they may change at any time; retention of our existing certificates of authority in each state and the District of Columbia (D.C.) and our ability to remain a mortgage insurer in good standing in each state and D.C.; our future profitability, liquidity and capital resources; actions of existing competitors, including other private mortgage insurers and governmental mortgage insurers like the Federal Housing Administration and the Veterans Administration and potential market entry by new competitors or consolidation of existing competitors; developments in the world's financial capital and reinsurance markets and our access to such markets; adoption of new or changes to existing laws and regulations that impact our business or financial condition directly or the mortgage insurance industry generally or their enforcement and implementation by regulators; changes to the GSEs' role in the secondary mortgage market  driven by Congressional or regulatory action or other changes that could affect the residential mortgage industry generally or mortgage insurance industry in particular; potential future lawsuits, investigations or inquiries or resolution of current lawsuits or inquiries; changes in general economic, market and political conditions and policies, interest rates, inflation  or other conditions that affect the housing market or the markets for home mortgages or mortgage insurance; our ability to successfully execute and implement our capital plans, including our ability to access the reinsurance market and to enter into, and receive approval for reinsurance arrangements on terms and conditions that are acceptable to us, the GSEs and our regulators; our ability to implement our business strategy, including our ability to write mortgage insurance on  low down payment residential mortgage loans, implement successfully and on a timely basis, complex infrastructure, systems, procedures, and internal controls to support our business and regulatory and reporting requirements of the insurance industry; our ability to attract and retain a diverse customer base, including the largest mortgage originators; failure of our pricing, risk management  or investment strategies; emergence of unexpected claims and coverage issues, including claims exceeding our reserves or amounts we expected to experience; potential adverse impacts arising from recent natural disasters, including, with respect to the affected areas, a decline in new business, adverse effects on home prices, and an increase in notices of default on insured mortgages;  the inability of our counter-parties, including third party reinsurers, to meet their obligations to us; our ability to utilize our net operating loss carryforwards, which could be limited or eliminated in various ways, including if we experience an ownership change as defined in Section 382 of the Internal Revenue Code; failure to maintain, improve and continue to develop necessary information technology systems or the failure of technology providers to perform as expected; and, our ability to recruit, train and retain key personnel.   These risks and uncertainties also include, but are not limited to, those set forth under the heading "Risk Factors" detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2017, as subsequently updated through other reports we file with the SEC.  All subsequent written and oral forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.  We caution you not to place undue reliance on any forward-looking statement, which speaks only as of the date on which it is made, and we undertake no obligation to publicly update or revise any forward-looking statement to reflect new information, future events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events except as required by law.

Use of Non-GAAP Financial Measures

We believe that use of the non-GAAP measures of adjusted pre-tax income, adjusted net income, adjusted net income per share and adjusted return-on-equity facilitate the evaluation of our fundamental financial performance, thereby providing relevant information to investors. These non-GAAP financial measures align with the way the company's business performance is evaluated by management. These measures are not recognized in accordance with GAAP and should not be viewed as alternatives to GAAP measures of performance.  These measures have been established in order to increase transparency for the purposes of evaluating our fundamental operating trends and enabling more meaningful comparisons with our peers.

Adjusted pre-tax income is defined as GAAP income before tax, excluding the effects of the non-cash loss or gain related to the change in fair value of our warrant liability.

Adjusted net income is defined as GAAP net income (loss) excluding the after-tax impact of the aforementioned change in the fair value of our warrant liability and other discrete tax (benefits) expense which are infrequent and unusual non-operating items, such as the one-time non-cash charge due to a re-measurement of our net deferred tax assets in connection with the enactment of the Tax Cuts and Jobs Act (the "Tax Act") in 2017. The amounts of adjustments to components of pre-tax income are tax effected using the applicable federal statutory tax rate for the respective periods.

Adjusted net income per diluted share is calculated in a manner consistent with the accounting standard regarding earnings per share by dividing (i) adjusted net income by (ii) diluted weighted average common shares outstanding, which reflects share dilution from non-vested restricted stock units and from warrants when dilutive.

Adjusted return-on-equity is calculated by dividing the adjusted income on an annualized basis by the average shareholders’ equity for the period.

Although adjusted pre-tax income and adjusted net income exclude certain items that have occurred in the past and are expected to occur in the future, the excluded items represent items that are: (1) not viewed as part of the operating performance of our primary activities; or (2) impacted by market, economic or regulatory factors and are not necessarily indicative of operating trends, or both. These adjustments, along with the reasons for their treatment, are described below. Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these adjustments. Other companies may calculate these measures differently. Therefore, their measures may not be comparable to those used by us.

(1)  Change in fair value of warrant liability.  Outstanding warrants at the end of each reporting period are revalued, and any change in fair value is reported in the statements of operations in the period in which the change occurred.  The change in the fair value of our warrant liability can vary significantly across periods and is influenced principally by equity market and general economic factors which may not impact or reflect our current period operating results. Trends in our operating performance can be more clearly identified without the fluctuations of the change in fair value of our warrant liability.
   
(2) Infrequent or unusual non-operating items.  Our income tax expense for 2017 reflects a one-time non-cash charge due to a re-measurement of our net deferred tax assets in connection with the enactment of the Tax Act in the fourth quarter of 2017.
   


Investor Contact
John M. Swenson
Vice President, Investor Relations and Treasury
john.swenson@nationalmi.com
(510) 788-8417

Press Contact
Mary McGarity
Strategic Vantage Mortgage Public Relations
(203) 513-2721
MaryMcGarity@StrategicVantage.com


   
Consolidated statements of operations and comprehensive income For the three months ended March 31,
  2018   2017
Revenues (In Thousands, except for per share data)
Net premiums earned $ 54,914     $ 33,225  
Net investment income 4,574     3,807  
Net realized investment  (losses)     (58 )
Other revenues 64     80  
Total revenues 59,552     37,054  
Expenses      
Insurance claims and claim expenses 1,569     635  
Underwriting and operating expenses 28,453     25,989  
Total expenses 30,022     26,624  
Other expense      
Gain (Loss) from change in fair value of warrant liability 420     (196 )
Interest expense (3,419 )   (3,494 )
Total other expense (2,999 )   (3,690 )
       
Income before income taxes 26,531     6,740  
Income tax expense 4,176     1,248  
Net income $ 22,355     $ 5,492  
       
Earnings per share      
Basic $ 0.36     $ 0.09  
Diluted $ 0.34     $ 0.09  
       
Weighted average common shares outstanding      
Basic 62,099     59,184  
Diluted 65,697     62,339  
       
Loss Ratio(1) 2.9 %   1.9 %
Expense Ratio(2) 51.8 %   78.2 %
Combined ratio 54.7 %   80.1 %
       
Net income $ 22,355     $ 5,492  
Other comprehensive income (loss), net of tax:      
Net unrealized (losses) gains in accumulated other comprehensive income, net of tax benefit of $423 and tax expense $664 for the quarters ended March 31, 2018 and 2017, respectively (10,956 )   1,175  
Reclassification adjustment for realized losses included in net income, net of tax expenses of $0 for the quarters ended March 31, 2018 and 2017, respectively     58  
Other comprehensive income (loss), net of tax (10,956 )   1,233  
Comprehensive income $ 11,399     $ 6,725  
               
(1) Loss ratio is calculated by dividing the provision for insurance claims and claims expenses by net premiums earned.
(2) Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned.
 


       
Consolidated balance sheets March 31, 2018   December 31, 2017
Assets (In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $733,153 and $713,859 as of March 31, 2018 and December 31, 2017, respectively) $ 723,790     $ 715,875  
Cash and cash equivalents 101,890     19,196  
Premiums receivable 28,164     25,179  
Accrued investment income 4,765     4,212  
Prepaid expenses 3,602     2,151  
Deferred policy acquisition costs, net 40,026     37,925  
Software and equipment, net 22,857     22,802  
Intangible assets and goodwill 3,634     3,634  
Prepaid reinsurance premiums 38,557     40,250  
Deferred tax asset, net 16,343     19,929  
Other assets 3,963     3,695  
Total assets $ 987,591     $ 894,848  
       
Liabilities      
Term loan $ 143,868     $ 143,882  
Unearned premiums 165,590     163,166  
Accounts payable and accrued expenses 21,218     23,364  
Reserve for insurance claims and claim expenses 10,391     8,761  
Reinsurance funds withheld 33,179     34,102  
Deferred ceding commission 4,838     5,024  
Warrant liability, at fair value 6,563     7,472  
Total liabilities 385,647     385,771  
Commitments and contingencies      
       
Shareholders' equity      
Common stock - class A shares, $0.01 par value;
65,569,342 and 60,517,512 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively (250,000,000 shares authorized)
656     605  
Additional paid-in capital 666,905     585,488  
Accumulated other comprehensive loss, net of tax (13,533 )   (2,859 )
Accumulated deficit (52,084 )   (74,157 )
Total shareholders' equity 601,944     509,077  
Total liabilities and shareholders' equity $ 987,591     $ 894,848  
               


 
Non-GAAP Financial Measure Reconciliations
  Quarter ended   Quarter ended   Quarter ended
  3/31/2018   12/31/2017   3/31/2017
 As Reported (In Thousands, except for per share data)
Revenues          
Net premiums earned $ 54,914     $ 50,079     $ 33,225  
Net investment income 4,574     4,388     3,807  
Net realized investment gains (losses)     9     (58 )
Other revenues 64     62     80  
Total revenues 59,552     54,538     37,054  
Expenses          
Insurance claims and claims expenses 1,569     2,374     635  
Underwriting and operating expenses 28,453     28,297     25,989  
Total expenses 30,022     30,671     26,624  
Other Expense          
Gain (loss) from change in fair value of warrant liability 420     (3,426 )   (196 )
Interest expense (3,419 )   (3,382 )   (3,494 )
Total other expense (2,999 )   (6,808 )   (3,690 )
Income before income taxes 26,531     17,059     6,740  
Income tax expense 4,176     18,825     1,248  
Net income $ 22,355     $ (1,766 )   $ 5,492  
           
Adjustments:          
(Gain) loss from change in fair value of warrant liability (420 )   3,426     196  
Adjusted Income before income taxes 26,111     20,485     6,936  
           
After-tax warrant adjustment (332 )   2,227     127  
Deferred tax asset adjustments     13,554      
Adjusted Net income $ 22,023     $ 14,015     $ 5,619  
           
Weighted average diluted shares outstanding - Reported 65,697     60,219     62,339  
Dilutive effect of non-vested shares and warrants     3,449      
Weighted average diluted shares outstanding - Adjusted 65,697     63,668     62,339  
           
Diluted EPS - Reported $ 0.34     $ (0.03 )   $ 0.09  
Diluted EPS - Adjusted $ 0.34     $ 0.22     $ 0.09  
           
Return on Equity - Reported 16.1 %   (1.4 )%   4.6 %
Return on Equity - Adjusted 15.9 %   11.0 %   4.7 %
                 


           
Historical Quarterly Data 2018   2017   2016
                       
  March 31   December 31   September 30   June 30   March 31   December 31 (4)
Revenues (In Thousands, except for per share data)
Net premiums earned $ 54,914     $ 50,079     $ 44,519     $ 37,917     $ 33,225     $ 32,825  
Net investment income 4,574     4,388     4,170     3,908     3,807     3,634  
Net realized investment gains (losses)     9     69     188     (58 )   65  
Other revenues 64     62     195     185     80     105  
Total revenues 59,552     54,538     48,953     42,198     37,054     36,629  
Expenses                      
Insurance claims and claim expenses 1,569     2,374     957     1,373     635     800  
Underwriting and operating expenses 28,453     28,297     24,645     28,048     25,989     23,281  
Total expenses 30,022     30,671     25,602     29,421     26,624     24,081  
                       
Other expense (1) (2,999 )   (6,808 )   (3,854 )   (3,281 )   (3,690 )   (5,490 )
                       
Income before income taxes 26,531     17,059     19,497     9,496     6,740     7,058  
Income tax expense (benefit) 4,176     18,825     7,185     3,484     1,248     (52,664 )
Net income $ 22,355     $ (1,766 )   $ 12,312     $ 6,012     $ 5,492     $ 59,722  
                       
Earnings per share                      
Basic $ 0.36     $ (0.03 )   $ 0.21     $ 0.10     $ 0.09     $ 1.01  
Diluted $ 0.34     $ (0.03 )   $ 0.20     $ 0.10     $ 0.09     $ 0.98  
                       
Weighted average common shares outstanding                      
Basic 62,099     60,219     59,884     59,823     59,184     59,140  
Diluted 65,697     60,219     63,089     63,010     62,339     61,229  
                       
Other data                      
Loss Ratio  (2) 2.9 %   4.7 %   2.1 %   3.6 %   1.9 %   2.4 %
Expense Ratio (3) 51.8 %   56.5 %   55.4 %   74.0 %   78.2 %   70.9 %
Combined ratio 54.7 %   61.2 %   57.5 %   77.6 %   80.1 %   73.3 %
                                   
(1) Other expense includes the gain from change in fair value of warrant liability and interest expense.
(2) Loss ratio is calculated by dividing the provision for insurance claims and claims expenses by net premiums earned.
(3) Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned.
(4)  The 2016 prior period consolidated results of operations have been revised. Please refer to our Form 10-K for the year ended December 31, 2017 for further details.
 


New Insurance Written (NIW), Insurance in Force (IIF) and Premiums

The tables below present primary and pool NIW and IIF, as of the dates and for the periods indicated.

   
Primary NIW Three months ended
  March 31, 2018   December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016
  (In Millions)
Monthly $ 5,441     $ 5,736     $ 4,833     $ 4,099     $ 2,892     $ 3,904  
Single 1,019     1,140     1,282     938     667     1,336  
Primary $ 6,460     $ 6,876     $ 6,115     $ 5,037     $ 3,559     $ 5,240  
                                               


   
Primary and pool IIF As of
  March 31, 2018   December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016
  (In Millions)
Monthly $ 37,574     $ 33,268     $ 28,707     $ 24,865     $ 21,511     $ 19,205  
Single 15,860     15,197     14,552     13,764     13,268     12,963  
Primary 53,434     48,465     43,259     38,629     34,779     32,168  
                       
Pool 3,153     3,233     3,330     3,447     3,545     3,650  
Total $ 56,587     $ 51,698     $ 46,589     $ 42,076     $ 38,324     $ 35,818  
                                               

The following table presents the amounts related to the company's quota-share reinsurance transactions (the 2016 QSR Transaction and 2018 QSR Transaction, and collectively, the QSR Transactions) for the periods indicated.

   
  March 31, 2018   December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016
  (In Thousands)
Ceded risk-in-force $ 3,304,335     $ 2,983,353     $ 2,682,982     $ 2,403,027     $ 2,167,745     $ 2,008,385  
Ceded premiums written (14,525 )   (15,233 )   (14,389 )   (12,034 )   (10,292 )   (11,576 )
Ceded premiums earned (16,218 )   (14,898 )   (13,393 )   (11,463 )   (9,865 )   (9,746 )
Ceded claims and claims expenses 543     800     277     342     268     206  
Ceding commission written 2,905     3,047     2,878     2,407     2,058     2,316  
Ceding commission earned 3,151     2,885     2,581     2,275     2,065     1,752  
Profit commission 9,201     8,139     7,758     6,536     5,651     5,642  
                                   

Portfolio Statistics

The table below highlights trends in our primary portfolio as of the date and for the periods indicated.

   
Primary portfolio trends As of and for the three months ended
  March 31, 2018   December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016
  ($ Values In Millions)
New insurance written $ 6,460     $ 6,876     $ 6,115     $ 5,037     $ 3,559     $ 5,240  
New risk written 1,580     1,665     1,496     1,242     868     1,244  
Insurance in force (IIF) (1) 53,434     48,465     43,259     38,629     34,779     32,168  
Risk in force (1) 13,085     11,843     10,572     9,417     8,444     7,790  
Policies in force (count) (1) 223,263     202,351     180,089     161,195     145,632     134,662  
Average loan size (1) $ 0.239     $ 0.240     $ 0.240     $ 0.240     $ 0.239     $ 0.239  
Average coverage (2) 24.5 %   24.4 %   24.4 %   24.4 %   24.3 %   24.2 %
Loans in default (count) 1,000     928     350     249       207       179  
Percentage of loans in default 0.5 %   0.5 %   0.2 %   0.2 %   0.1 %   0.1 %
Risk in force on defaulted loans $ 57     $ 53     $ 19     $ 14     $ 12     $ 10  
Average premium yield (3) 0.43 %   0.44 %   0.43 %   0.41 %   0.40 %   0.43 %
Earnings from cancellations $ 2.8     $ 4.2     $ 4.3     $ 3.8     $ 2.5     $ 5.1  
Annual persistency (4) 85.7 %   86.1 %   85.1 %   83.1 %   81.3 %   80.7 %
Quarterly run-off (5) 3.1 %   3.9 %   3.8 %   3.4 %   2.9 %   4.6 %
                                   
(1)  Reported as of the end of the period.
(2)  Calculated as end of period risk in force (RIF) divided by IIF.
(3)  Calculated as net primary and pool premiums earned, net of reinsurance, divided by average gross IIF for the period, annualized.
(4)  Defined as the percentage of IIF that remains on our books after any 12-month period.
(5)  Defined as the percentage of IIF that are no longer on our books after any 3-month period
 

The tables below present our total primary NIW by FICO, loan-to-value (LTV) ratio, and purchase/refinance mix for the periods indicated.

   
Primary NIW by FICO For the three months ended
  March 31, 2018   December 31, 2017   March 31, 2017
  ($ In Millions)
>= 760 $ 2,619     $ 2,847     $ 1,683  
740-759 1,073     1,055     551  
720-739 914     943     456  
700-719 811     877     396  
680-699 567     611     264  
<=679 476     543     209  
Total $ 6,460     $ 6,876     $ 3,559  
Weighted average FICO 743     743     749  
                 


   
Primary NIW by LTV For the three months ended
  March 31, 2018   December 31, 2017   March 31, 2017
  (In Millions)
95.01% and above $ 997     $ 988     $ 274  
90.01% to 95.00% 2,765     2,889     1,612  
85.01% to 90.00% 1,755     1,870     1,101  
85.00% and below 943     1,129     572  
Total $ 6,460     $ 6,876     $ 3,559  
Weighted average LTV 92.5 %   92.3 %   92.0 %
                 


   
Primary NIW by purchase/refinance mix For the three months ended
  March 31, 2018   December 31, 2017
  March 31, 2017
  (In Millions)
Purchase $ 5,425     $ 5,738     $ 2,984  
Refinance 1,035     1,137     575  
Total $ 6,460     $ 6,875     $ 3,559  
                       

The table below presents a summary of our primary IIF and RIF by book year as of the dates indicated.

   
Primary IIF and RIF As of March 31, 2018
  IIF   RIF
  (In Millions)
March 31, 2018 $ 6,427     $ 1,573  
2017 20,272     4,948  
2016 17,497     4,262  
2015 7,913     1,971  
2014 1,292     323  
2013 33     8  
Total $ 53,434     $ 13,085  
               

The tables below present our total primary IIF and RIF by FICO and LTV and total primary RIF by loan type as of the dates indicated.

   
Primary IIF by FICO As of
  March 31, 2018   December 31, 2017   March 31, 2017
  (In Millions)
>= 760 $ 25,371     $ 23,438     $ 17,408  
740-759 8,635     7,781     5,658  
720-739 6,981     6,259     4,460  
700-719 5,814     5,179     3,533  
680-699 3,852     3,408     2,336  
<=679 2,781     2,400     1,384  
Total $ 53,434     $ 48,465     $ 34,779  
                       


   
Primary RIF by FICO As of
  March 31, 2018   December 31, 2017   March 31, 2017
  (In Millions)
>= 760 $ 6,246     $ 5,764     $ 4,253  
740-759 2,125     1,909     1,383  
720-739 1,710     1,527     1,081  
700-719 1,416     1,256     851  
680-699 932     821     556  
<=679 656     566     320  
Total $ 13,085     $ 11,843     $ 8,444  
                       


   
Primary IIF by LTV As of
  March 31, 2018   December 31, 2017   March 31, 2017
  (In Millions)
95.01% and above $ 4,872     $ 3,946     $ 1,931  
90.01% to 95.00% 23,937     21,763     15,601  
85.01% to 90.00% 16,034     14,766     11,058  
85.00% and below 8,591     7,990     6,189  
Total $ 53,434     $ 48,465     $ 34,779  
                       


Primary RIF by LTV As of
  March 31, 2018   December 31, 2017   March 31, 2017
  (In Millions)
95.01% and above $ 1,294     $ 1,054     $ 533  
90.01% to 95.00% 6,978     6,354     4,585  
85.01% to 90.00% 3,831     3,523     2,626  
85.00% and below 982     912     700  
Total $ 13,085     $ 11,843     $ 8,444  
                       


   
Primary RIF by Loan Type As of
  March 31, 2018   December 31, 2017   March 31, 2017
           
Fixed 98 %   98 %   99 %
Adjustable rate mortgages:          
Less than five years          
Five years and longer 2     2     1  
Total 100 %   100 %   100 %
                 

The table below presents a summary of the change in total primary IIF during the periods indicated.

   
Primary IIF For the three months ended
  March 31, 2018   December 31, 2017   March 31, 2017
  (In Millions)
IIF, beginning of period $ 48,465     $ 43,259     $ 32,168  
NIW 6,460     6,876     3,559  
Cancellations and other reductions (1,491 )   (1,670 )   (948 )
IIF, end of period $ 53,434     $ 48,465     $ 34,779  
                       

Geographic Dispersion

The following table shows the distribution by state of our primary RIF as of the periods indicated.

   
Top 10 primary RIF by state As of
  March 31, 2018   December 31, 2017   March 31, 2017
California 13.5 %   13.5 %   13.8 %
Texas 8.0     7.8     7.2  
Virginia 5.1     5.3     6.3  
Arizona 4.8     4.6     4.1  
Florida 4.7     4.5     4.4  
Michigan 3.7     3.7     3.7  
Pennsylvania 3.6     3.6     3.6  
Colorado 3.5     3.6     3.9  
Maryland 3.4     3.5     3.7  
Utah 3.4     3.5     3.6  
Total 53.7 %   53.6 %   54.3 %
                 

The following table shows portfolio data by book year, as of December 31, 2017.

   
  As of March 31, 2018
Book year Original Insurance Written   Remaining Insurance in Force   % Remaining of Original Insurance   Policies Ever in Force   Number of Policies in Force   Number of Loans in Default   # of Claims Paid   Incurred Loss Ratio (Inception to Date) (1)   Cumulative default rate (2)
  ($ Values in Millions)
2013 $ 162     $ 33     20 %   655     177     1     1     0.3 %   0.3 %
2014 3,451     1,292     37 %   14,786     6,627     79     17     3.8 %   0.6 %
2015 12,422     7,913     64 %   52,548     36,383     338     27     3.1 %   0.7 %
2016 21,187     17,497     83 %   83,626     72,004     374     11     2.4 %   0.5 %
2017 21,583     20,272     94 %   85,900     82,145     207         2.3 %   0.2 %
2018 6,460     6,427     99 %   26,026     25,927     1         0.5 %   %
Total $ 65,265     $ 53,434         263,541     223,263     1,000     56          
                                                   
(1)  The ratio of claims incurred (paid and reserved) divided by cumulative premiums earned, net of reinsurance.
(2)  The sum of claims paid ever to date and notices of default as of the end of the period divided by policies ever in force.
 

The following table provides a reconciliation of the beginning and ending reserve balances for primary insurance claims and claims expenses:

   
  For the three months ended
       
  March 31, 2018   March 31, 2017
       
  (In Thousands)
Beginning balance $ 8,761     $ 3,001  
Less reinsurance recoverables (1) (1,902 )   (297 )
Beginning balance, net of reinsurance recoverables 6,859     2,704  
       
Add claims incurred:      
Claims and claim expenses incurred:      
Current year (2) 1,940     955  
Prior years (3) (371 )   (320 )
Total claims and claims expenses incurred 1,569     635  
       
Less claims paid:      
Claims and claim expenses paid:      
Current year (2)      
Prior years (3) 371     142  
Total claims and claim expenses paid 371     142  
       
Reserve at end of period, net of reinsurance recoverables 8,057     3,197  
Add reinsurance recoverables (1) 2,334     564  
Ending balance $ 10,391     $ 3,761  
               
(1) Related to ceded losses recoverable under the QSR Transactions, included in "Other Assets" on the Condensed Consolidated Balance Sheets.
(2) Related to insured loans with their most recent defaults occurring in the current year. For example, if a loan had defaulted in a prior year and subsequently  cured and later re-defaulted in the current year, that default would be included in the current year.
(3) Related to insured loans with defaults occurring in prior years, which have been continuously in default since that time.
 

The following table provides a reconciliation of the beginning and ending count of loans in default for the periods indicated.

   
  For the three months ended
  March 31, 2018   March 31, 2017
Beginning default inventory 928     179  
Plus: new defaults 413     124  
Less: cures (324 )   (92 )
Less: claims paid (17 )   (4 )
Ending default inventory 1,000     207  
           

The following table provides details of our claims paid, before giving effect to claims ceded under the 2016 QSR Transaction, for the periods indicated. No claims were ceded under the 2018 QSR Transaction during the periods indicated.

   
  For the three months ended
  March 31, 2018   March 31, 2017
  (In Thousands)
Number of claims paid (1) 17     4  
Total amount paid for claims $ 482     $ 142  
Average amount paid per claim (2) $ 34     $ 35  
Severity(3) 74 %   88 %
           
(1)  Count includes claims settled without payment.
(2)  Calculation is net of claims settled without payment.
(3)  Severity represents the total amount of claims paid divided by the related RIF on the loan at the time the claim is perfected.
           

The following table shows our average reserve per default, before giving effect to reserves ceded under the QSR Transactions, as of the periods indicated.

       
Average reserve per default: As of March 31, 2018   As of March 31, 2017
  (In Thousands)
Case (1) $ 9     $ 16  
IBNR 1     2  
Total $ 10     $ 18  
               
(1) Defined as the gross reserve per insured loan in default.
 

The following table provides a comparison of the PMIERs financial requirements as reported by NMIC as of the dates indicated.

   
  As of
  March 31, 2018   December 31, 2017   March 31, 2017
  (In Thousands)
Available assets $ 555,336     $ 527,897     $ 466,982  
Risk-based required assets 522,260     446,226     398,859  
           

Primary Logo

Source: NMI Holdings Inc