Press Release

NMI Holdings, Inc. Reports Record Fourth Quarter 2017 Financial Results
Feb 15, 2018

EMERYVILLE, Calif., Feb. 15, 2018 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq:NMIH) today reported a GAAP 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 for its fourth quarter ended December 31, 2017. Net income (loss) and net income (loss) per share were adjusted to reflect a one-time non-cash expense of $13.6 million primarily related to the re-measurement of the company’s net deferred tax asset as a result of tax reform, and a pre-tax non-cash expense of $3.4 million related to the change in fair value of the company’s warrant liability as a result of the increase in its stock price. This compares with net income of $12.3 million, or $0.20 per diluted share, and adjusted net income of $12.6 million, or $0.20 per diluted share, after adjusting for the change in fair value of the warrant liability, in the prior quarter. In the fourth quarter of 2016, the company reported net income of $59.7 million, or $0.98 per diluted share, and adjusted net income of $2.3 million, or $0.04 per diluted share, after adjusting for the change in fair value of the warrant liability and release of the valuation allowance on the company’s net deferred tax asset. We present the non-GAAP financial measures adjusted net income and adjusted net income per share to increase the comparability of our financial results between periods.  See "Use of Non-GAAP Financial Measures" below.

Bradley Shuster, Chairman and CEO of National MI, said, "In the fourth quarter, National MI delivered record financial results, including record new insurance written of $6.9 billion, record net premiums earned of $50.1 million, record adjusted net income of $14.0 million, and record adjusted return-on-equity of 11.0%. National MI continued to build its 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 29 new customers in the fourth quarter and continuing to increase our volume with existing customers.”

  • As of December 31, 2017, the company had primary insurance-in-force of $48.5 billion, up 12% from $43.3 billion at the prior quarter end and up 51% over $32.2 billion as of December 31, 2016.
  • Premiums earned for the quarter were $50.1 million, including $4.2 million attributable to cancellation of single premium policies, which compares with $44.5 million, including $4.3 million related to cancellations, in the prior quarter.  Premiums earned in the fourth quarter of 2017 were up 53% over premium revenue of $32.8 million in the same quarter a year ago, which included $5.1 million related to cancellations.
  • NIW mix was 83% monthly premium product, which compares with 79% in the prior quarter and 75% in the fourth quarter of 2016.
  • At quarter-end, cash and investments were $735 million, including $51 million at the holding company, and book equity was $509 million, equal to $8.41 per share.
  • At quarter-end, the company had total PMIERs available assets of $528 million, which compares with risk-based required assets under PMIERs of $446 million.
             
    Quarter
Ended
Quarter
Ended
Quarter
Ended
Change Change
    12/31/2017 9/30/2017 12/31/2016 (1) Q/Q Y/Y
Primary Insurance-in-Force ($billions) 48.47   43.26   32.17   12 % 51 %
New Insurance Written - NIW ($billions)          
  Monthly premium 5.74   4.83   3.90   19 % 47 %
  Single premium 1.14   1.28   1.34   -11 % -15 %
  Total 6.88   6.11   5.24   13 % 31 %
           
Premiums Earned ($millions)   50.08     44.52     32.83   12 % 53 %
Underwriting & Operating Expense ($millions)   28.30     24.65     23.28   15 % 22 %
Loss Expense ($millions)   2.37     0.96     0.80   148 % 197 %
Loss Ratio 4.7 % 2.1 % 2.4 %    
Cash & Investments ($millions)   735     713     677   3 % 9 %
Book Equity ($millions) 509   511   476   0 % 7 %
Book Value per Share 8.41
    8.53     8.04   -1 % 5 %

(1) The 2016 prior period balance sheet has been revised. Please refer to our Form 10-K for the year ended December 31, 2017 for further details.

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 (FHA) and the Veterans Administration (VA) (collectively, public MIs), 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 and the release of the valuation allowance held against certain of our net deferred tax assets in 2016. The amounts of adjustments to components of pre-tax income are tax effected using a federal statutory tax rate of 35%.

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 net 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. Our income tax benefit in 2016 reflects a one-time non-cash benefit related to the release of the valuation allowance held against certain of our net deferred tax assets.

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
December 31,
  For the year ended
December 31,
  2017   2016 (3)   2017   2016(3)
Revenues (In Thousands, except for per share data)
Net premiums earned $ 50,079     $ 32,825     $ 165,740     $ 110,481  
Net investment income 4,388     3,634     16,273     13,751  
Net realized investment gains (losses) 9     65     208     (693 )
Other revenues 62     105     522     276  
Total revenues 54,538     36,629     182,743     123,815  
Expenses              
Insurance claims and claims expenses 2,374     800     5,339     2,392  
Underwriting and operating expenses 28,297     23,281     106,979     93,223  
Total expenses 30,671     24,081     112,318     95,615  
Other expense              
(Loss) gain from change in fair value of warrant liability (3,426 )   (1,714 )   (4,105 )   (1,900 )
Interest expense 3,382     3,776     (13,528 )   (14,848 )
Total other expense (6,808 )   (5,490 )   (17,633 )   (16,748 )
               
Income (loss) before income taxes 17,059     7,058     52,792     11,452  
Income tax expense (benefit) 18,825     (52,664 )   30,742     (52,549 )
Net income (loss) $ (1,766 )   $ 59,722     $ 22,050     $ 64,001  
               
Earnings (loss) per share              
Basic $ (0.03 )   $ 1.01     $ 0.37     $ 1.08  
Diluted $ (0.03 )   $ 0.98     $ 0.35     $ 1.05  
               
Weighted average common shares outstanding              
Basic 60,219     59,140     59,816     59,071  
Diluted 60,219     61,229     62,186     60,829  
               
Loss Ratio(1) 4.7 %   2.4 %   3.2 %   2.2 %
Expense Ratio(2) 56.5 %   70.9 %   64.5 %   84.4 %
Combined ratio 61.2 %   73.3 %   67.7 %   86.6 %
               
Net income (loss) $ (1,766 )   $ 59,722     $ 22,050     $ 64,001  
Other comprehensive income, net of tax:              
Net unrealized gains (losses) in accumulated other comprehensive income, net of tax expense of $1,234 and
$1,178 for the years ended December 31, 2017 and 2016, respectively, and $(1,273) and $1,178 for the quarters ended
December 2017 and 2016, respectively
(2,094 )   (16,196 )   2,559     1,429  
Reclassification adjustment for realized losses (gains) included in net income, net of tax expense of $73, and $0
for the years ended December 31, 2017 and 2016, respectively and $73 and $0 for the quarters ended
December 31, 2017 and 2016, respectively
(135 )   (65 )   (131 )   758  
Other comprehensive income, net of tax (2,229 )   (16,261 )   2,428     2,187  
Comprehensive income (loss) $ (3,995 )   $ 43,461     $ 24,478     $ 66,188  
                               

(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.
(3) 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.

       
Consolidated balance sheets December 31, 2017   December 31, 2016 (1)
Assets (In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $713,859
and $630,688 as of December 31, 2017 and December 31, 2016, respectively)
$ 715,875     $ 628,969  
Cash and cash equivalents 19,196     47,746  
Premiums receivable 25,179     13,728  
Accrued investment income 4,212     3,421  
Prepaid expenses 2,151     1,991  
Deferred policy acquisition costs, net 37,925     30,109  
Software and equipment, net 22,802     20,402  
Intangible assets and goodwill 3,634     3,634  
Prepaid reinsurance premiums 40,250     37,921  
Deferred tax asset, net 19,929     51,434  
Other assets 3,695     542  
Total assets $ 894,848     $ 839,897  
       
Liabilities      
Term loan $ 143,882     $ 144,353  
Unearned premiums 163,166     152,906  
Accounts payable and accrued expenses 23,364     25,297  
Reserve for insurance claims and claim expenses 8,761     3,001  
Reinsurance funds withheld 34,102     30,633  
Deferred ceding commission 5,024     4,831  
Warrant liability, at fair value 7,472     3,367  
Total liabilities 385,771     364,388  
Commitments and contingencies      
       
Shareholders' equity      
Common stock - class A shares, $0.01 par value;
60,517,512 and 59,145,161 shares issued and outstanding as of December 31, 2017
and December 31, 2016, respectively (250,000,000 shares authorized)
605     591  
Additional paid-in capital 585,488     576,927  
Accumulated other comprehensive loss, net of tax (2,859 )   (5,287 )
Accumulated deficit (74,157 )   (96,722 )
Total shareholders' equity 509,077     475,509  
Total liabilities and shareholders' equity $ 894,848     $ 839,897  
               

(1)  The 2016 prior period consolidated results of operations has been revised. Please refer to our Form 10-K for the year ended December 31, 2017 for further details.

 
Non-GAAP Financial Measure Reconciliations
   Quarter
Ended
   Quarter
Ended
   Quarter
Ended
(In Thousands, except for per share data) 12/31/2017   9/30/2017   12/31/2016
 As Reported          
Revenues          
Net premiums earned $ 50,079     $ 44,519     $ 32,825  
Net investment income 4,388     4,170     3,634  
Net realized investment gains (losses) 9     69     65  
Other revenues 62     195     105  
Total revenues 54,538     48,953     36,629  
Expenses          
Insurance claims and claims expenses 2,374     957     800  
Underwriting and operating expenses 28,297     24,645     23,281  
Total expenses 30,671     25,602     24,081  
Other Expense          
Gain (loss) from change in fair value of warrant liability (3,426 )   (502 )   (1,713 )
Interest expense 3,382     3,352     3,777  
Total other expense (6,808 )   (3,854 )   (5,490 )
           
Income before income taxes 17,059     19,497     7,059  
Income tax expense (benefit) 18,825     7,185     (52,663 )
Net income $ (1,766 )   $ 12,312     $ 59,722  
Adjustments:          
(Gain) loss from change in fair value of warrant liability 3,426     502     1,713  
Adjusted Income before income taxes 20,485     19,999     8,771  
           
After-tax warrant adjustment 2,227     326     1,113  
Deferred tax asset adjustments 13,554         (58,535 )
Adjusted Net income $ 14,015     $ 12,638     $ 2,300  
           
Weighted average diluted shares outstanding - Reported 60,219     63,089     61,229  
Dilutive effect of non-vested shares and warrants 3,449          
Weighted average diluted shares outstanding - Adjusted 63,668     63,089     61,229  
           
Diluted EPS - Reported $ (0.03 )   $ 0.20     $ 0.98  
Diluted EPS - Adjusted $ 0.22     $ 0.20     $ 0.04  
           
Return on Equity - Reported (1.4 )%   9.8 %   52.7 %
Return on Equity - Adjusted 11.0 %   10.0 %   2.0 %
                 


           
Historical Quarterly Data   2017   2016  
  December 31 September 30   June 30   March 31   December 31 (4)   September 30  
Revenues   (In Thousands, except for per share data)
Net premiums earned $ 50,079   $ 44,519     $ 37,917     $ 33,225     $ 32,825     $ 31,808    
Net investment income 4,388   4,170     3,908     3,807     3,634     3,544    
Net realized investment gains (losses) 9   69     188     (58 )   65     66    
Other revenues 62   195     185     80     105     102    
Total revenues 54,538   48,953     42,198     37,054     36,629     35,520    
Expenses                      
Insurance claims and claims expenses 2,374   957     1,373     635     800     664    
Underwriting and operating expenses 28,297   24,645     28,048     25,989     23,281     24,037    
Total expenses 30,671   25,602     29,421     26,624     24,081     24,701    
                       
Other expense (1) (6,808 ) (3,854 )   (3,281 )   (3,690 )   (5,490 )   (4,530 )  
                       
Income (loss) before income taxes 17,059   19,497     9,496     6,740     7,058     6,289    
Income tax expense (benefit) 18,825   7,185     3,484     1,248     (52,664 )   114    
Net income (loss) $ (1,766 ) $ 12,312     $ 6,012     $ 5,492     $ 59,722     $ 6,175    
                       
Earnings (loss) per share                      
Basic $ (0.03 ) $ 0.21     $ 0.10     $ 0.09     $ 1.01     $ 0.10    
Diluted $ (0.03 ) $ 0.20     $ 0.10     $ 0.09     $ 0.98     $ 0.10    
                       
Weighted average common shares outstanding                      
Basic 60,219   59,884     59,823     59,184     59,140     59,130    
Diluted 60,219   63,089     63,010     62,339     61,229     60,285    
                       
Other data                      
Loss Ratio (2) 4.7 % 2.1 %   3.6 %   1.9 %   2.4 %   2.1 %  
Expense Ratio (3) 56.5 55.4 %   74.0 %   78.2 %   70.9 %   75.6 %  
Combined ratio 61.2 % 57.5 %   77.6 %   80.1 %   73.3 %   77.7 %  
                                   

(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
  December 31,
2017
  September 30,
2017
June 30,
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
  (In Millions)
Monthly $ 5,736     $ 4,833   $ 4,099     $ 2,892     $ 3,904     $ 4,162  
Single 1,140     1,282   938     667     1,336     1,695  
Primary $ 6,876     $ 6,115   $ 5,037     $ 3,559     $ 5,240     $ 5,857  
                                             


Primary and pool IIF As of
  December 31,
2017
  September 30,
2017
June 30,
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
 
  (In Millions)
Monthly $ 33,268     $ 28,707   $ 24,865     $ 21,511     $ 19,205     $ 16,038    
Single 15,197     14,552   13,764     13,268     12,963     12,190    
Primary 48,465     43,259   38,629     34,779     32,168     28,228    
                       
Pool 3,233     3,330   3,447     3,545     3,650     3,826    
Total $ 51,698     $ 46,589   $ 42,076     $ 38,324     $ 35,818     $ 32,054    
                                               

                The following table presents the amounts related to the 2016 QSR transaction for the periods indicated.

     
  December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
    (In Thousands)
Ceded risk-in-force $ 2,983,353   $ 2,682,982   $ 2,403,027   $ 2,167,745   $ 2,008,385   $ 1,778,235  
Ceded premiums written (15,233 ) (14,389 ) (12,034 ) (10,292 ) (11,576 ) (38,977 )
Ceded premiums earned (14,898 ) (13,393 ) (11,463 ) (9,865 ) (9,746 ) (2,885 )
Ceded claims and claims expenses 800   277   342   268   206   90  
Ceding commission written 3,047   2,878   2,407   2,058   2,316   7,795  
Ceding commission earned 2,885   2,581   2,275   2,065   1,752   551  
Profit commission 8,139   7,758   6,536   5,651   5,642   1,641  
                         

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
  December 31,
2017
  September 30,
2017
June 30,
2017
March 31,
2017
  December 31,
2016
  September 30,
2016
 
  ($ Values In Millions)
New insurance written $ 6,876     $ 6,115   $ 5,037   $ 3,559     $ 5,240     $ 5,857    
New risk written 1,665     1,496   1,242   868     1,244     1,415    
Insurance in force (IIF) (1) 48,465     43,259   38,629   34,779     32,168     28,228    
Risk in force (1) 11,843     10,572   9,417   8,444     7,790     6,847    
Policies in force (count) (1) 202,351     180,089   161,195   145,632     134,662     119,002    
Average loan size (1) $ 0.240     $ 0.240   $ 0.240   $ 0.239     $ 0.239     $ 0.237    
Average coverage (2) 24.4 %   24.4 % 24.4 % 24.3 %   24.2 %   24.3 %  
Loans in default (count) 928     350   249     207       179     115    
Percentage of loans in default 0.5 %   0.2 % 0.2 % 0.1 %   0.1 %   0.1 %  
Risk in force on defaulted loans $ 53     $ 19   $ 14   $ 12     $ 10     $ 6    
Average premium yield (3) 0.44 %   0.43 % 0.41 % 0.40 %   0.43 %   0.49 %  
Earnings from cancellations $ 4.2     $ 4.3   $ 3.8   $ 2.5     $ 5.1     $ 5.8    
Annual persistency (4) 86.1 %   85.1 % 83.1 % 81.3 %   80.7 %   81.8 %  
Quarterly run-off (5) 3.9 %   3.8 % 3.4 % 2.9 %   4.6 %   5.3 %  
                                 

(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
  December 31, 2017   September 30, 2017   December 31, 2016
  ($ In Millions)
>= 760 $ 2,847     $ 2,806     $ 2,566  
740-759 1,055     934     846  
720-739 943     807     647  
700-719 877     697     560  
680-699 611     456     375  
<=679 543     415     246  
Total $ 6,876     $ 6,115     $ 5,240  
Weighted average FICO 743     747     764  
                 


   
Primary NIW by LTV For the three months ended
  December 31, 2017   September 30, 2017   December 31, 2016
  (In Millions)
95.01% and above $ 988     $ 722     $ 355  
90.01% to 95.00% 2,889     2,714     2,224  
85.01% to 90.00% 1,870     1,765     1,580  
85.00% and below 1,129     914     1,081  
Total $ 6,876     $ 6,115     $ 5,240  
Weighted average LTV 92.3 %   92.3 %   91.6 %
                 


   
Primary NIW by purchase/refinance mix For the three months ended
  December 31, 2017   September 30, 2017   December 31, 2016
  (In Millions)
Purchase $ 5,738     $ 5,387     $ 3,776  
Refinance 1,137     728     1,464  
Total $ 6,876     $ 6,115     $ 5,240  
                       

                 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 December 31, 2017
  IIF   RIF
  (In Millions)
December 31, 2017 $ 20,739     $ 5,059  
2016 18,066     4,383  
2015 8,256     2,051  
2014 1,368     341  
2013 36     9  
Total $ 48,465     $ 11,843  
               

                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
  December 31, 2017   September 30, 2017   December 31, 2016
  (In Millions)
>= 760 $ 23,438     $ 21,329     $ 16,166  
740-759 7,781     6,983     5,248  
720-739 6,259     5,547     4,130  
700-719 5,179     4,505     3,245  
680-699 3,408     2,942     2,151  
<=679 2,400     1,953     1,228  
Total $ 48,465     $ 43,259     $ 32,168  
                       


   
Primary RIF by FICO As of
  December 31, 2017   September 30, 2017   December 31, 2016
  (In Millions)
>= 760 $ 5,764     $ 5,251     $ 3,934  
740-759 1,909     1,713     1,281  
720-739 1,527     1,349     1,000  
700-719 1,256     1,092     782  
680-699 821     707     511  
<=679 566     460     282  
Total $ 11,843     $ 10,572     $ 7,790  
                       


   
Primary IIF by LTV As of
  December 31, 2017   September 30, 2017   December 31, 2016
  (In Millions)
95.01% and above $ 3,946     $ 3,038     $ 1,686  
90.01% to 95.00% 21,763     19,562     14,358  
85.01% to 90.00% 14,766     13,437     10,282  
85.00% and below 7,990     7,222     5,842  
Total $ 48,465     $ 43,259     $ 32,168  
                       


   
Primary RIF by LTV As of
  December 31, 2017   September 30, 2017   December 31, 2016
  (In Millions)
95.01% and above $ 1,054     $ 822     $ 467  
90.01% to 95.00% 6,354     5,722     4,226  
85.01% to 90.00% 3,523     3,205     2,439  
85.00% and below 912     823     658  
Total $ 11,843     $ 10,572     $ 7,790  
                       


   
Primary RIF by Loan Type As of
  December 31, 2017   September 30, 2017   December 31, 2016
           
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
  December 31, 2017     September 30, 2017     December 31, 2016
  (In Millions)
IIF, beginning of period $ 43,259     $ 38,629     $ 28,228  
NIW 6,876     6,115     5,240  
Cancellations and other reductions (1,670 )   (1,485 )   (1,300 )
IIF, end of period $ 48,465     $ 43,259     $ 32,168  
                       

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
  December 31, 2017   September 30, 2017   December 31, 2016
California 13.5 %   13.6 %   13.6 %
Texas 7.8     7.6     7.0  
Virginia 5.3     5.6     6.5  
Arizona 4.6     4.4     3.9  
Florida 4.5     4.3     4.5  
Michigan 3.7     3.7     3.7  
Pennsylvania 3.6     3.6     3.6  
Colorado 3.6     3.8     3.9  
Maryland 3.5     3.6     3.7  
Utah 3.5     3.6     3.7  
Total 53.6 %   53.8 %   54.1 %
                 


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

   
  As of December 31, 2017
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     $ 36     22 %   655     187     1     1     0.2 %   0.3 %
2014 3,451     1,368     40 %   14,786     6,970     80     14     4.0 %   0.6 %
2015 12,422     8,256     66 %   52,548     37,771     316     17     2.8 %   0.6 %
2016 21,187     18,066     85 %   83,626     73,986     363     6     2.3 %   0.4 %
2017 21,587     20,739     96 %   85,912     83,437     168         2.4 %   0.2 %
Total $ 58,809     $ 48,465         237,527     202,351     928     38          
                                                   

(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   For the year ended
  December 31,
2017
  December 31,
2016
  December 31,
2017
  December 31,
2016
               
  (In Thousands)
Beginning balance $ 6,123     $ 2,133     $ 3,001     $ 679  
Less reinsurance recoverables (1) (1,174 )   (90 )   (297 )    
Beginning balance, net of reinsurance recoverables 4,949     2,043     2,704     679  
               
Add claims incurred:              
Claims and claim expenses incurred:              
Current year (2) 2,594     654     6,140     2,457  
Prior years (3) (220 )   149     (801 )   (65 )
Total claims and claims expenses incurred 2,374     803     5,339     2,392  
               
Less claims paid:              
Claims and claim expenses paid:              
Current year (2) 27     171     27     171  
Prior years (3) 437     (29 )   1,157     196  
Total claims and claim expenses paid 464     142     1,184     367  
               
Reserve at end of period, net of reinsurance recoverables 6,859     2,704     6,859     2,704  
Add reinsurance recoverables (1) 1,902     297     1,902     297  
Ending balance $ 8,761     $ 3,001     $ 8,761     $ 3,001  
                               

(1) Related to ceded losses recoverable on our 2016 quota-share reinsurance transaction, included in "Other Assets" on the Condensed Consolidated Balance Sheet.
(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   For the year ended
  December 31,
2017
  December 31,
2016
  December 31,
2017
  December 31,
2016
Beginning default inventory 350     115     179     36  
Plus: new defaults 783     126     1,262     284  
Less: cures (194 )   (59 )   (486 )   (132 )
Less: claims paid (11 )   (3 )   (27 )   (9 )
Ending default inventory 928     179     928     179  
                       

                The following tables provide details of our claims and reserves for the periods indicated, before claims paid covered under the 2016 QSR Transaction.

       
  For the three months ended   For the year ended
  December 31,
2017
  December 31,
2016
  December 31,
2017
  December 31,
2016
  ($ Values In Thousands)
Number of claims paid 11     3     27     9  
Total amount paid for claims $ 535     $ 136     $ 1,266     $ 367  
Average amount paid per claim $ 49     $ 45     $ 47     $ 41  
Severity(1) 90 %   65 %   86 %   64 %
                       

(1) Severity represents the total amount of claims paid divided by the related RIF on the loan at the time the claim is perfected.

       
Average reserve per default: As of December 31, 2017   As of December 31, 2016
  (In Thousands)
Case (1) $ 8     $ 15  
IBNR 1     2  
Total $ 9     $ 17  
               

(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 National MI as of the dates indicated.

   
  As of
  December 31, 2017   September 30, 3017   December 31, 2016
  (In thousands)
Available assets $ 527,897     $ 495,182     $ 453,523  
Risk-based required assets 446,226     356,207     366,584  
           

Source: NMI Holdings Inc