November 1, 2017

NMI Holdings, Inc. Reports Record Third Quarter 2017 Financial Results

EMERYVILLE, CA -- (Marketwired) -- 11/01/17 --

NMI Holdings, Inc. (NASDAQ: NMIH) today reported net income of $12.3 million, or $0.21 per share, for the third quarter ended September 30, 2017. This compares with net income of $6.0 million, or $0.10 per share, in the prior quarter, and net income of $6.2 million, or $0.10 per share, in the third quarter of 2016.

Bradley Shuster, Chairman and CEO of National MI, said, "In the third quarter, National MI delivered record financial results, including record new insurance written of $6.1 billion, record net premiums earned of $44.5 million, and record pre-tax income of $19.5 million. We were also pleased to deliver annualized return-on-average equity of 9.8%. National MI continued to build its portfolio of high-quality insurance in force at a rate that leads our industry, and we continued to make significant strides in customer development, activating 25 new customers in the third quarter and 98 new customers for the year-to-date."

  • As of September 30, 2017, the company had primary insurance-in-force of $43.3 billion, up 12% from $38.6 billion at the prior quarter end and up 53% over $28.2 billion as of September 30, 2016.
  • Premiums earned for the quarter were $44.5 million, including $4.3 million attributable to cancellation of single premium policies, which compares with $37.9 million, including $3.8 million related to cancellations, in the prior quarter. Premiums earned in the third quarter of 2017 were up 40% over premium revenue of $31.8 million in the same quarter a year ago, which included $5.8 million related to cancellations.
  • NIW mix was 79% monthly premium product, which compares with 81% in the prior quarter and 71% in the third quarter of 2016.
  • Total underwriting and operating expenses in the third quarter were $24.6 million. This compares with total underwriting and operating expenses of $28.0 million, including approximately $3.1 million of fees and expenses associated with the issuance of Insurance-Linked Notes in the prior quarter and $24.0 million in the same quarter a year ago.
  • Claims expense for the quarter was $1.0 million, resulting in a loss ratio of 2.1%.
  • At quarter-end, cash and investments were $713 million, including $62 million at the holding company, and book equity was $511 million, equal to $8.53 per share.
  • At quarter-end, the company had total PMIERs available assets of $495 million, which compares with risk- based required assets under PMIERs of $356 million.
           
  Quarter Quarter Quarter    
  Ended Ended Ended Change Change
  9/30/2017 6/30/2017 9/30/2016 Q/Q Y/Y
Primary Insurance-in-Force ($billions) 43.26 38.63 28.22 12% 53%
New Insurance Written - NIW ($billions)          
    Monthly premium 4.83 4.10 4.16 18% 16%
    Single premium 1.28 0.94 1.70 36% -25%
    Total 6.11 5.04 5.86 21% 4%
 
Premiums Earned ($millions) 44.52 37.92 31.81 17% 40%
Underwriting & Operating Expense ($millions) 24.65 28.05 24.04 -12% 3%
Loss Expense ($millions) 0.96 1.37 0.66 -30% 45%
Loss Ratio 2.1% 3.6% 2.1%    
Cash & Investments ($millions) 713 694 686 3% 4%
Book Equity ($millions) 511 495 430 3% 19%
Book Value per Share 8.53 8.27 7.28 3% 17%
           

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: 1906690, 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 the GSEs that may impact the use of private mortgage insurance as credit enhancement; our ability to remain an eligible mortgage insurer under the PMIERs, including the financial requirements, and other requirements of 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 governmental agencies like the Federal Housing Administration (FHA) and the Veterans Administration (VA), and potential market entry by new competitors or consolidation of existing competitors; developments in the world's financial and capital markets and our access to such markets, including reinsurance; 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 or other changes that could affect the residential mortgage industry generally or mortgage insurance 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 and investment results 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 of, 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 high quality 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 risk management or pricing 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; 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, 2016, 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.

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     For the nine months ended  
  September 30,     September 30,  
    2017     2016     2017     2016  
Revenues   (In Thousands, except for share data)  
  Net premiums earned   $ 44,519     $ 31,808     $ 115,661     $ 77,656  
  Net investment income     4,170       3,544       11,885       10,117  
  Net realized investment gains (losses)     69       66       198       (758 )
  Other revenues     195       102       461       172  
Total revenues     48,953       35,520       128,205       87,187  
Expenses                                
  Insurance claims and claims expenses     957       664       2,965       1,592  
  Underwriting and operating expenses     24,645       24,037       78,682       69,943  
Total expenses     25,602       24,701       81,647       71,535  
Other expense                                
                                 
  Loss from change in fair value of warrant liability     (502 )     (797 )     (679 )     (187 )
  Interest expense     (3,352 )     (3,733 )     (10,146 )     (11,072 )
Total other expense     (3,854 )     (4,530 )     (10,825 )     (11,259 )
                                 
Income before income taxes     19,497       6,289       35,733       4,393  
  Income tax expense     7,185       114       11,917       114  
Net income   $ 12,312     $ 6,175     $ 23,816     $ 4,279  
                                 
Earnings per share                                
  Basic   $ 0.21     $ 0.10     $ 0.40     $ 0.07  
  Diluted   $ 0.20     $ 0.10     $ 0.38     $ 0.07  
                                 
Weighted average common shares outstanding                                
Basic     59,883,629       59,130,401       59,680,166       59,047,758  
Diluted     63,088,958       60,284,746       62,773,333       59,861,916  
                                 
Loss Ratio(1)     2.1 %     2.1 %     2.6 %     2.1 %
Expense Ratio(2)     55.4       75.6       68.0       90.1  
Combined ratio     57.5 %     77.7 %     70.6 %     92.2 %
                                 
Net income   $ 12,312     $ 6,175     $ 23,816     $ 4,279  
Other comprehensive income, net of tax:                                
  Net unrealized gain (loss) in accumulated other comprehensive income, net of tax expense of $366 and $0 for the three months ended September 30, 2017 and 2016, respectively, and $2,439 and $0 for the nine months ended September 30, 2017 and 2016  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
768
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(82
 
 
 
 
 
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,786
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,690
 
 
 
 
 
 
  Reclassification adjustment for realized losses (gains) included in net income, net of tax expense of $24 and $0 for the three months ended September 30, 2017 and 2016, respectively, and $69 and $0 for the nine months ended September 30, 2017 and 2016  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(45
 
 
 
 
 
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(66
 
 
 
 
 
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(129
 
 
 
 
 
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
758
 
 
 
 
 
 
Other comprehensive income, net of tax     723       (148 )     4,657       18,448  
Comprehensive income   $ 13,035     $ 6,027     $ 28,473     $ 22,727  
(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   September 30, 2017     December 31, 2016 (1)  
Assets   (In Thousands, except for share data)  
  Fixed maturities, available-for-sale, at fair value (amortized cost of $687,284 and $630,688 as of September 30, 2017 and December 31, 2016, respectively)   $
692,729
    $
628,969
 
  Cash and cash equivalents     20,698       47,746  
  Premiums receivable     21,056       13,728  
  Accrued investment income     4,598       3,421  
  Prepaid expenses     2,651       1,991  
  Deferred policy acquisition costs, net     36,101       30,109  
  Software and equipment, net     21,767       20,402  
  Intangible assets and goodwill     3,634       3,634  
  Prepaid reinsurance premiums     39,915       37,921  
  Deferred tax asset, net     38,490       51,434  
  Other assets     4,973       542  
Total assets   $ 886,612     $ 839,897  
                 
Liabilities                
  Term loan   $ 143,969     $ 144,353  
  Unearned premiums     161,345       152,906  
  Accounts payable and accrued expenses     22,028       25,297  
  Reserve for insurance claims and claim expenses     6,123       3,001  
  Reinsurance funds withheld     33,105       30,633  
  Deferred ceding commission     4,971       4,831  
  Warrant liability, at fair value     4,046       3,367  
Total liabilities     375,587       364,388  
Commitments and contingencies                
                 
Shareholders' equity                
  Common stock - class A shares, $0.01 par value;59,928,092 and 59,145,161 shares issued and outstanding as of September 30,2017 and December 31, 2016, respectively (250,000,000 shares authorized)    

599
     

591
 
  Additional paid-in capital     583,447       576,927  
  Accumulated other comprehensive loss, net of tax     (630 )     (5,287 )
  Accumulated deficit     (72,391 )     (96,722 )
Total shareholders' equity     511,025       475,509  
Total liabilities and shareholders' equity   $ 886,612     $ 839,897  
(1) The 2016 prior period balance sheet has been revised. Please refer to our Form 10-Q for the quarter ended September 30, 2017 for further details.
 
   
Historical Quarterly Data   2017     2016  
    September
30
   
June 30
   
March 31
    December
31 (4)
    September
30
   
June 30
 
Revenues     (In Thousands, except for share data)    
  Net premiums earned   $ 44,519     $ 37,917     $ 33,225     $ 32,825     $ 31,808     $ 26,041  
  Net investment income     4,170       3,908       3,807       3,634       3,544       3,342  
  Net realized investment gains (losses)     69       188       (58 )     65       66       61  
  Other revenues     195       185       80       105       102       37  
Total revenues     48,953       42,198       37,054       36,629       35,520       29,481  
Expenses                                                
  Insurance claims and claims expenses     957       1,373       635       800       664       470  
  Underwriting and operating expenses     24,645       28,048       25,989       23,281       24,037       23,234  
Total expenses     25,602       29,421       26,624       24,081       24,701       23,704  
                                                 
Other expense (1)     (3,854 )     (3,281 )     (3,690 )     (5,490 )     (4,530 )     (3,766 )
                                                 
Income before income taxes     19,497       9,496       6,740       7,058       6,289       2,011  
  Income tax expense (benefit)     7,185       3,484       1,248       (52,664 )     114       -  
Net income   $ 12,312     $ 6,012     $ 5,492     $ 59,722     $ 6,175     $ 2,011  
                                                 
Earnings per share                                                
  Basic   $ 0.21     $ 0.10     $ 0.09     $ 1.01     $ 0.10     $ 0.03  
  Diluted   $ 0.20     $ 0.10     $ 0.09     $ 0.98     $ 0.10     $ 0.03  
                                                 
Weighted average common shares outstanding                                                
Basic     59,883,629       59,823,396       59,183,973       59,140,011       59,130,401       59,105,613  
Diluted     63,088,958       63,010,362       62,338,856       61,229,338       60,284,746       59,830,899  
                                                 
Other data                                                
Loss Ratio (2)     2.1 %     3.6 %     1.9 %     2.4 %     2.1 %     1.8 %
Expense Ratio (3)     55.4 %     74.0 %     78.2 %     70.9 %     75.6 %     89.2 %
Combined ratio     57.5 %     77.6 %     80.1 %     73.3 %     77.7 %     91.0 %
(1) Other expense includes the gain from change in fair value of warrant liability, gain from settlement of warrants, 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 Q4 2016 quarterly data has been revised. Please refer to our Form 10-Q for the quarter ended September 30, 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  
    September 30,
2017
 
June 30, 2017
  March 31,
2017
    December 31,
2016
    September 30,
2016
   
June 30, 2016
 
      (In Millions )
Monthly   $ 4,833   $ 4,099   $ 2,892     $ 3,904     $ 4,162     $ 3,700  
Single     1,282     938     667       1,336       1,695       2,138  
Primary   $ 6,115   $ 5,037   $ 3,559     $ 5,240     $ 5,857     $ 5,838  
   
Primary and pool IIF     As of  
      September 30,
2017
   
June 30, 2017
    March 31,
2017
      December 31,
2016
      September 30,
2016
     
June 30, 2016
 
      (In Millions )
Monthly   $ 28,707   $ 24,865   $ 21,511     $ 19,205     $ 16,038     $ 12,529  
Single     14,552     13,764     13,268       12,963       12,190       11,095  
Primary     43,259     38,629     34,779       32,168       28,228       23,624  
                                             
Pool     3,330     3,447     3,545       3,650       3,826       3,999  
Total   $ 46,589   $ 42,076   $ 38,324     $ 35,818     $ 32,054     $ 27,623  
   
The following table presents the amounts related to the 2016 QSR transaction, for the last five quarters.  
   
      September 30,
2017
   
June 30, 2017
     
March 31, 2017
      December 31,
2016
      September 30,
2016
 
      (In Thousands )
Ceded risk-in-force   $ 2,682,982   $ 2,403,027     $ 2,167,745     $ 2,008,385     $ 1,778,235  
Ceded premiums written     (14,389)     (12,034 )     (10,292 )     (11,576 )     (38,977 )
Ceded premiums earned     (13,393)     (11,463 )     (9,865 )     (9,746 )     (2,885 )
Ceded claims and claims expenses     277     342       268       206       90  
Ceding commission written     2,878     2,407       2,058       2,316       7,795  
Ceding commission earned     2,581     2,275       2,065       1,752       551  
Profit commission     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  
    September 30,
2017
    June 30, 2017     March 31,
2017
    December 31,
2016
    September 30,
2016
    June 30, 2016  
    ($ Values In Millions)  
  New insurance written   $ 6,115     $ 5,037     $ 3,559     $ 5,240     $ 5,857     $ 5,838  
  New risk written     1,496       1,242       868       1,244       1,415       1,411  
  Insurance in force (1)     43,259       38,629       34,779       32,168       28,228       23,624  
  Risk in force (1)     10,572       9,417       8,444       7,790       6,847       5,721  
  Policies in force (count) (1)     180,089       161,195       145,632       134,662       119,002       100,547  
  Average loan size (1)   $ 0.240       0.240       0.239       0.239       0.237       0.235  
  Weighted-average coverage (2)     24.4 %     24.4 %     24.3 %     24.2 %     24.3 %     24.2 %
  Loans in default (count)     350       249       207       179       115       79  
  Percentage of loans in default     0.2 %     0.2 %     0.1 %     0.1 %     0.1 %     0.1 %
  Risk in force on defaulted loans   $ 19     $ 14     $ 12     $ 10     $ 6     $ 4  
  Average premium yield (3)     0.43 %     0.41 %     0.40 %     0.44 %     0.48 %     0.47 %
  Earnings from cancellations   $ 4.3     $ 3.8     $ 2.5     $ 5.1     $ 5.8     $ 3.5  
  Annual persistency (4)     85.1 %     83.1 %     81.3 %     80.7 %     81.8 %     83.3 %
  Quarterly run-off (5)     3.8 %     3.4 %     2.9 %     4.6 %     5.3 %     4.2 %
(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
 
     
Primary NIW by FICO   For the three months ended
    September 30, 2017   June 30, 2017   September 30, 2016
    ($ In Millions)
  > = 760   $ 2,806   $ 2,376   $ 2,975
  740-759     934     793     934
  720-739     807     626     725
  700-719     697     568     588
  680-699     456     368     387
  < =679     415     306     248
Total   $ 6,115   $ 5,037   $ 5,857
Weighted average FICO     747     749     753
                   
       
Primary NIW by LTV   For the three months ended  
    September 30, 2017     June 20, 2017     September 30, 2016  
    (In Millions)  
  95.01% and above   $ 722     $ 474     $ 347  
  90.01% to 95.00%     2,714       2,297       2,557  
  85.01% to 90.00%     1,765       1,506       1,844  
  85.00% and below     914       760       1,109  
Total   $ 6,115     $ 5,037     $ 5,857  
Weighted average LTV     92.3 %     92.2 %     91.7 %
   
   
Primary NIW by purchase/refinance mix   For the three months ended  
    September 30, 2017     June 30, 2017     September 30, 2016  
    (In Millions)  
  Purchase   $ 5,387     $ 4,518     $ 4,400  
  Refinance     728       519       1,457  
Total   $ 6,115     $ 5,037     $ 5,857  
   
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 September 30, 2017  
          IIF     RIF  
          (In Millions)  
September 30, 2017           $ 14,315     $ 3,508  
2016             18,684       4,520  
2015             8,742       2,167  
2014             1,479       368  
2013             39       9  
Total           $ 43,259     $ 10,572  
   
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  
    September 30, 2017     June 30, 2017     September 30, 2016  
    (In Millions)  
  > = 760   $ 21,329     $ 19,224     $ 14,258  
  740-759     6,983       6,269       4,612  
  720-739     5,547       4,927       3,648  
  700-719     4,505       3,973       2,813  
  680-699     2,942       2,615       1,863  
  < =679     1,953       1,621       1,034  
Total   $ 43,259     $ 38,629     $ 28,228  
                         
   
Primary RIF by FICO   As of  
    September 30, 2017     June 30, 2017     September 30, 2016  
    (In Millions)  
  > = 760   $ 5,251     $ 4,720       3,470  
  740-759     1,713       1,535       1,130  
  720-739     1,349       1,198       887  
  700-719     1,092       960       680  
  680-699     707       627       443  
  < =679     460       377       237  
Total   $ 10,572     $ 9,417     $ 6,847  
   
   
Primary IIF by LTV   As of  
    September 30, 2017     June 30, 2017     September 30, 2016  
    (In Millions)  
  95.01% and above   $ 3,038     $ 2,367     $ 1,363  
  90.01% to 95.00%     19,562       17,441       12,644  
  85.01% to 90.00%     13,437       12,157       9,157  
  85.00% and below     7,222       6,664       5,064  
Total   $ 43,259     $ 38,629     $ 28,228  
   
   
Primary RIF by LTV   As of  
    September 30, 2017     June 30, 2017     September 30, 2016  
    (In Millions)  
  95.01% and above   $ 822     $ 648     $ 380  
  90.01% to 95.00%     5,722       5,120       3,725  
  85.01% to 90.00%     3,205       2,893       2,174  
  85.00% and below     823       756       568  
Total   $ 10,572     $ 9,417     $ 6,847  
   
   
Primary RIF by Loan Type   As of  
    September 30, 2017     June 30, 2017     September 30, 2016  
                         
  Fixed     98 %     98 %     98 %
  Adjustable rate mortgages:                        
    Five years and longer     2       2       2  
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  
    September 30, 2017     June 30, 2017     September 30, 2016  
          (In Millions)        
IIF, beginning of period   $ 38,629     $ 34,779     $ 23,624  
  NIW     6,115       5,037       5,857  
  Cancellations and other reductions     (1,485 )     (1,187 )     (1,253 )
IIF, end of period   $ 43,259     $ 38,629     $ 28,228  
                         
   
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  
    September 30, 2017     June 30, 2017     September 30, 2016  
California   13.6 %   13.8 %   13.2 %
Texas   7.6     7.5     6.8  
Virginia   5.6     6.0     6.6  
Arizona   4.4     4.2     3.8  
Florida   4.3     4.4     4.7  
Colorado   3.8     3.9     4.0  
Michigan   3.7     3.6     3.9  
Pennsylvania   3.6     3.6     3.6  
Utah   3.6     3.7     3.6  
Maryland   3.6     3.7     3.6  
Total   53.8 %   54.4 %   53.8 %
                   

The following table shows portfolio data by book year, as of September 30, 2017.

 
As of September 30, 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   $ 39   24%   655   201   -   1   0.2%   0.2%
2014     3,451     1,479   43%   14,786   7,451   54   9   3.8%   0.4%
2015     12,422     8,742   70%   52,548   39,727   164   14   2.9%   0.3%
2016     21,187     18,684   88%   83,626   76,095   119   3   1.6%   0.1%
2017   $ 14,711   $ 14,315   97%   57,800   56,615   13   -   0.5%   -
Total   $ 51,933   $ 43,259       209,415   180,089   350   27        
(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 nine months ended  
    September 30,
2017
    September 30,
2016
    September 30,
2017
    September 30,
2016
 
                         
    (In Thousands)  
Beginning balance   $ 5,048     $ 1,475     $ 3,001     $ 679  
Less reinsurance recoverables (1)     (899 )     -       (297 )     -  
Beginning balance, net of reinsurance recoverables     4,149       1,475       2,704       679  
                                 
Add claims incurred:                                
  Claims and claim expenses incurred:                                
    Current year (2)     1,215       690       3,546       1,803  
    Prior years (3)     (258 )     (29 )     (581 )     (214 )
Total claims and claims expenses incurred     957       661       2,965       1,589  
                                 
Less claims paid:                                
  Claims and claim expenses paid:                                
    Current year (2)     -       -       -       -  
    Prior years (3)     157       93       720       225  
Total claims and claim expenses paid     157       93       720       225  
                                 
Reserve at end of period, net of reinsurance recoverables    
4,949
     
2,043
     
4,949
     
2,043
 
Add reinsurance recoverables (1)     1,174       90       1,174       90  
Ending balance   $ 6,123     $ 2,133     $ 6,123     $ 2,133  
(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 nine months ended  
    September 30,     September 30,     September 30,     September 30,  
    2017     2016     2017     2016  
Beginning default inventory   249     79     179     36  
Plus: new defaults   208     69     479     158  
Less: cures   (103 )   (30 )   (292 )   (73 )
Less: claims paid   (4 )   (3 )   (16 )   (6 )
Ending default inventory   350     115     350     115  
                         

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 nine months ended  
      September 30,   September 30,     September 30,   September 30,  
      2017   2016     2017   2016  
      ($ Values In Thousands)  
Number of claims paid       4     3       16     6  
Total amount paid for claims     $ 160   $ 93     $ 731   $ 225  
Average amount paid per claim     $ 40   $ 31     $ 46   $ 32  
Severity(1)       73%     53 %     83%     62 %
   
(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 September 30, 2017   As of September 30, 2016
    (In Thousands)
Case (1)   $ 16   $ 17
IBNR     1     1
Total   $ 17   $ 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 National MI as of the dates indicated.

     
    As of
    September 30, 2017   June 30, 2017   September 30, 2016
    (In thousands)
Available assets   $ 495,182   $ 485,019   $ 488,635
Risk-based required assets     356,207     298,091     320,609
                   

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

Source: NMI Holdings, Inc.

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