Press Release

NMI Holdings, Inc. Reports First Quarter 2020 Financial Results
May 06, 2020

EMERYVILLE, Calif., May 06, 2020 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported GAAP net income of $58.3 million for the first quarter ended March 31, 2020, which compares to $50.2 million in the fourth quarter ended December 31, 2019 and $32.9 million in the first quarter ended March 31, 2019.  Adjusted net income for the quarter was $52.7 million or $0.75 per diluted share, which compares to $52.6 million or $0.75 per diluted share in the fourth quarter ended December 31, 2019 and $38.5 million or $0.56 per diluted share in the first quarter ended March 31, 2019.  The non-GAAP financial measures adjusted net income, adjusted diluted earnings per share and adjusted return-on-equity are presented in this release to enhance the comparability of financial results between periods. See "Use of Non-GAAP Financial Measures" and our reconciliation of such measures to their most comparable GAAP measures, below.

Claudia Merkle, CEO of National MI, said, "The global dislocation caused by the coronavirus pandemic is unprecedented. Our thoughts at National MI are with all of those who have been affected by the outbreak, particularly those suffering from COVID-19, and the health care workers and first responders who are on the front lines of the crisis.  In response to the pandemic, National MI activated its business continuity program to protect the health and safety of our employees, and ensure our continued ability to seamlessly serve our lender customers and their borrowers."

Merkle continued, "We are well positioned at National MI to navigate the current environment.  Our company was founded in the wake of the 2008 Financial Crisis and our approach in the ensuing years has been directly informed by the lessons of that experience. We are committed to being a credible and sustainable counterparty to our customers and policyholders across all market cycles and, in doing so, aim to help borrowers fully achieve their homeownership goals.  We have focused on building a durable franchise in a risk-responsible manner – engaging with our customers in a consultative fashion, actively targeting a higher-quality mix of business, and broadly executing reinsurance and capital markets solutions to mitigate our tail risk under stress scenarios and bolster our funding position.  Our conservative stance heading into this period gives us confidence about the strength of our business today."

Concurrent with its release of earnings, the company has filed a Form 8-K with the SEC that includes its current assessment of the impact the COVID-19 outbreak will have on the U.S. economy and housing market, and its perspective on the implications for the U.S. mortgage insurance market, and its business performance and financial position. Investors may access the Form 8-K on the company’s website, www.nationalmi.com, in the "Investor Relations" section.

Selected highlights from the first quarter 2020 include:

  • Primary insurance-in-force at quarter end was $98.5 billion, up 4% from $94.8 billion at the end of the fourth quarter and up 34% compared to the first quarter of 2019
     
  • New insurance written was $11.3 billion, down 5% seasonally from $11.9 in the fourth quarter and up 63% compared to $6.9 billion in the first quarter of 2019
     
  • Net premiums earned were $98.7 million, up 3% compared to $95.5 million for the fourth quarter and up 34% compared to $73.9 million for the first quarter of 2019
     
  • Underwriting and operating expenses were $32.3 million, including $0.5 million of capital market transaction costs, compared to $31.3 million in the fourth quarter and $30.8 million in the first quarter of 2019
     
  • At quarter-end, cash and investments were $1.2 billion and shareholders’ equity was $975 million, equal to $14.15 per share
     
  • Annualized return-on-equity for the quarter was 24.5% and annualized adjusted return-on-equity was 22.1%
     
  • At quarter-end, the company reported total PMIERs available assets of $1,070 million and net risk- based required assets of $912 million
    Quarter Ended Quarter Ended Quarter Ended Change (1) Change (1)
    3/31/2020 12/31/2019 3/31/2019 Q/Q Y/Y
INSURANCE METRICS ($billions)
Primary Insurance-in-Force $ 98.5   $ 94.8   $ 73.2   % 34  %
New Insurance Written - NIW          
  Monthly premium 10.5   11.1   6.2   (6 )% 68  %
  Single premium 0.8   0.9   0.7   (3 )% 19  %
  Total (2) 11.3   11.9   6.9   (5 )% 63  %
           
FINANCIAL HIGHLIGHTS ($millions, except per share amounts)
Net Premiums Earned 98.7   95.5   73.9   % 34  %
Insurance Claims and Claim Expenses 5.7   4.3   2.7   33  % 108  %
Underwriting and Operating Expenses (3) 32.3   31.3   30.8   % %
Net Income 58.3   50.2   32.9   16 % 77 %
Adjusted Net Income 52.7   52.6   38.5   % 37 %
Cash and Investments $ 1,179.9   $ 1,182.0   $ 980.0   % 20  %
Shareholders' Equity 974.9   930.4   751.9   % 30  %
Book Value per Share $ 14.15   $ 13.61   $ 11.14   % 27  %
Loss Ratio 5.8 % 4.5 % 3.7 %    
Expense Ratio (3) 32.7 % 32.8 % 41.7 %    

(1) Percentages may not be replicated based on the rounded figures presented in the table.
(2) Total may not foot due to rounding.
(3) Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.

Conference Call and Webcast Details     
The company will hold a conference call, which will be webcast live, May 6, 2020, 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 conference call can also be accessed by dialing (888) 734-0328 in the U.S., or (914) 495-8578 internationally, and using Conference ID: 1663849 or by referencing NMI Holdings, Inc.

About NMI Holdings, Inc.
NMI Holdings, Inc. (NASDAQ: NMIH), is the parent company of National Mortgage Insurance Corporation (National MI), 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 (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the U.S. Private Securities Litigation Reform Act of 1995 (the "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: uncertainty relating to the coronavirus ("COVID-19") pandemic and the measures taken by governmental authorities and other third parties to combat it, including their impact on the global economy, the U.S. housing, real estate, housing finance and mortgage insurance markets, and the Company’s business, operations and personnel, 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 generally, or with first time homebuyers or on very high loan-to-value mortgages; our ability to remain an eligible mortgage insurer under the 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 government mortgage insurers, such as the Federal Housing Administration, U.S. Department of Agriculture's Rural Housing Service and the Veterans Affairs, 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, including any action by the Consumer Financial Protection Bureau to address the planned expiration of the "QM Patch" under the Dodd-Frank Act Ability to Repay/Qualified Mortgage Rule; legislative or regulatory changes to the GSEs' role in the secondary mortgage market 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 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 capital, credit and reinsurance markets 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 claim and coverage issues, including claims exceeding our reserves or amounts we had expected to experience; potential adverse impacts arising from natural disasters, including, with respect to 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 counterparties, including third party reinsurers, to meet their obligations to us; 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, 2019, 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 the use of the non-GAAP measures of adjusted income before tax, adjusted net income, adjusted diluted EPS, adjusted return-on-equity, adjusted expense ratio and adjusted combined ratio enhances the comparability of our fundamental financial performance between periods, and provides 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 prepared in accordance with GAAP and should not be viewed as alternatives to GAAP measures of performance.  These measures have been presented to increase transparency and enhance the comparability of our fundamental operating trends across periods. Other companies may calculate these measures differently; their measures may not be comparable to those we calculate and present.

Adjusted income before tax is defined as GAAP income before tax, excluding the pre-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains or losses from our investment portfolio, and discrete, non-recurring and non-operating items in the periods in which such items are incurred.

Adjusted net income is defined as GAAP net income, excluding the after-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains or losses from our investment portfolio, and discrete, non-recurring and non-operating items in the periods in which such items are incurred. Adjustments to components of pre-tax income are tax effected using the applicable federal statutory tax rate for the respective periods.

Adjusted diluted EPS is defined as adjusted net income divided by adjusted weighted average diluted shares outstanding. Adjusted weighted average diluted shares outstanding is defined as weighted average diluted shares outstanding, adjusted for changes in the dilutive effect of non-vested shares that would otherwise have occurred had GAAP net income been calculated in accordance with adjusted net income. There will be no adjustment to weighted average diluted shares outstanding in the periods that non-vested shares are anti-dilutive under GAAP.

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

Adjusted expense ratio is defined as GAAP underwriting and operating expenses, excluding the pre-tax effects of periodic costs incurred in connection with capital markets transactions, divided by net premiums earned.

Adjusted combined ratio is defined as the total of GAAP underwriting and operating expenses, excluding the pre-tax effects of periodic costs incurred in connection with capital markets transactions and insurance claims and claims expenses, divided by net premiums earned.

Although adjusted income before tax, adjusted net income, adjusted diluted EPS, adjusted return-on-equity, adjusted expense ratio and adjusted combined ratio exclude certain items that have occurred in the past and are expected to occur in the future, the excluded items: (1) are not viewed as part of the operating performance of our primary activities; or (2) are impacted by market, economic or regulatory factors and are not necessarily indicative of operating trends, or both. These adjustments, and the reasons for their treatment, are described below.

  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 statement of operations in the period in which the change occurred. The change in fair value of our warrant liability can vary significantly across periods and is influenced principally by equity market and general economic factors that do not impact or reflect our current period operating results. We believe trends in our operating performance can be more clearly identified by excluding fluctuations related to the change in fair value of our warrant liability.
     
  2. Capital markets transaction costs. Capital markets transaction costs result from activities that are undertaken to improve our debt profile or enhance our capital position through activities such as debt refinancing and capital markets reinsurance transactions that may vary in their size and timing due to factors such as market opportunities, tax and capital profile, and overall market cycles.
     
  3. Net realized investment gains and losses.  The recognition of the net realized investment gains or losses can vary significantly across periods as the timing is highly discretionary and is influenced by factors such as market opportunities, tax and capital profile, and overall market cycles that do not reflect our current period operating results.
     
  4. Infrequent or unusual non-operating items. Items that are the result of unforeseen or uncommon events, which occur separately from operating earnings and are not expected to recur in the future.  Identification and exclusion of these items provides clarity about the impact special or rare occurrences may have on our current financial performance. Past adjustments under this category include the effects of the release of the valuation allowance recorded against our net federal and certain state net deferred tax assets in 2016 and the re-measurement of our net deferred tax assets in connection with tax reform in 2017. We believe such items are non-recurring in nature, are not part of our primary operating activities and do not reflect our current period operating results.

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,
  2020   2019
Revenues (In Thousands, except for per share data)
Net premiums earned $ 98,717     $ 73,868  
Net investment income 8,104     7,383  
Net realized investment losses (72 )   (187 )
Other revenues 900     42  
Total revenues 107,649     81,106  
Expenses      
Insurance claims and claim expenses 5,697     2,743  
Underwriting and operating expenses(1) 32,277     30,800  
Service expenses(1) 734     49  
Interest expense 2,744     3,061  
(Gain) loss from change in fair value of warrant liability (5,959 )   5,479  
Total expenses 35,493     42,132  
       
Income before income taxes 72,156     38,974  
Income tax expense 13,885     6,075  
Net income $ 58,271     $ 32,899  
       
Earnings per share      
Basic $ 0.85     $ 0.49  
Diluted $ 0.74     $ 0.48  
       
Weighted average common shares outstanding      
Basic 68,563     66,692  
Diluted 70,401     68,996  
       
Loss ratio(2) 5.8 %   3.7 %
Expense ratio(3) 32.7 %   41.7 %
Combined ratio 38.5 %   45.4 %
       
Net income $ 58,271     $ 32,899  
Other comprehensive (loss) income, net of tax:      
Unrealized (losses) gains in accumulated other comprehensive income, net of tax (benefit) expense of ($3,424) and $3,953 for the quarters ended March 31, 2020 and 2019, respectively (12,881 )   14,868  
Reclassification adjustment for realized losses included in net income, net of tax (benefit) of ($15) and ($39) for the quarters ended March 31, 2020 and 2019, respectively 57     148  
Other comprehensive (loss) income, net of tax (12,824 )   15,016  
Comprehensive income $ 45,447     $ 47,915  

(1) Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2) Loss ratio is calculated by dividing the provision for insurance claims and claim expenses by net premiums earned.
(3) Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned.

Consolidated balance sheets      
  March 31, 2020   December 31, 2019
Assets (In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $1,059,143 and $1,113,779 as of March 31, 2020 and December 31, 2019, respectively) $ 1,070,072     $ 1,140,940  
Cash and cash equivalents (including restricted cash of $2,505 and $2,662 as of March 31, 2020 and December 31, 2019, respectively) 109,821     41,089  
Premiums receivable 46,872     46,085  
Accrued investment income 7,192     6,831  
Prepaid expenses 4,750     3,512  
Deferred policy acquisition costs, net 62,634     59,972  
Software and equipment, net 25,667     26,096  
Intangible assets and goodwill 3,634     3,634  
Prepaid reinsurance premiums 13,100     15,488  
Other assets 44,085     21,171  
Total assets $ 1,387,827     $ 1,364,818  
       
Liabilities      
Term loan $ 145,521     $ 145,764  
Unearned premiums 126,908     136,642  
Accounts payable and accrued expenses 20,745     39,904  
Reserve for insurance claims and claim expenses 29,479     23,752  
Reinsurance funds withheld 12,735     14,310  
Warrant liability, at fair value 1,461     7,641  
Deferred tax liability, net 66,831     56,360  
Other liabilities 9,257     10,025  
Total liabilities 412,937     434,398  
       
Shareholders' equity      
Common stock - class A shares, $0.01 par value; 68,873,540 and 68,358,074 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively (250,000,000 shares authorized) 689     684  
Additional paid-in capital 706,021     707,003  
Accumulated other comprehensive income, net of tax 4,464     17,288  
Retained earnings 263,716     205,445  
Total shareholders' equity 974,890     930,420  
Total liabilities and shareholders' equity $ 1,387,827     $ 1,364,818  


Non-GAAP Financial Measure Reconciliations
  Quarter ended   Quarter ended   Quarter ended
  3/31/2020   12/31/2019   3/31/2019
 As Reported (In Thousands, except for per share data)
Revenues          
Net premiums earned $ 98,717     $ 95,517     $ 73,868  
Net investment income 8,104     7,962     7,383  
Net realized investment (losses) gains (72 )   264     (187 )
Other revenues 900     1,154     42  
Total revenues 107,649     104,897     81,106  
Expenses          
Insurance claims and claim expenses 5,697     4,269     2,743  
Underwriting and operating expenses(1) 32,277     31,296     30,800  
Service expenses(1) 734     937     49  
Interest expense 2,744     2,974     3,061  
(Gain) loss from change in fair value of warrant liability (5,959 )   2,632     5,479  
Total expenses 35,493     42,108     42,132  
           
Income before income taxes 72,156     62,789     38,974  
Income tax expense 13,885     12,594     6,075  
Net income $ 58,271     $ 50,195     $ 32,899  
           
Adjustments:          
Net realized investment losses (gains) 72     (264 )   187  
(Gain) loss from change in fair value of warrant liability (5,959 )   2,632     5,479  
Capital markets transaction costs 474          
Adjusted income before taxes 66,743     65,157     44,640  
           
Income tax expense (benefit) on adjustments 115     (55 )   39  
Adjusted net income $ 52,743     $ 52,618     $ 38,526  
           
Weighted average diluted shares outstanding 70,401     70,276     68,996  
           
Diluted EPS $ 0.74   (2 ) $ 0.71     $ 0.48  
Adjusted diluted EPS $ 0.75     $ 0.75     $ 0.56  
           
Return-on-equity 24.5 %   22.3 %   18.1 %
Adjusted return-on-equity 22.1 %   23.3 %   21.2 %
           
           
Expense ratio (3) 32.7 %   32.8 %   41.7 %
Adjusted expense ratio (4) 32.2 %   32.8 %   41.7 %
           
Combined ratio (5) 38.5 %   37.2 %   45.4 %
Adjusted combined ratio (6) 38.0 %   37.2 %   45.4 %

(1) Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2) Diluted net income for the quarter ended March 31, 2020 excludes the impact of the warrant fair value change as it was anti-dilutive. For all other periods presented, diluted net income equals reported net income as the impact of the warrant fair value change was dilutive.
(3) Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
(4) Adjusted expense ratio is calculated by dividing adjusted underwriting and operating expense (underwriting and operating expenses excluding market transaction costs) by net premiums earned.
(5) Combined ratio is calculated by dividing the total of underwriting and operating expenses and provision for insurance claims and claims expense by net premiums earned.
(6) Adjusted combined ratio is calculated by dividing the total of adjusted underwriting and operating expenses (underwriting and operating expenses excluding market transaction costs) and provision for insurance claims and claims expense by net premiums earned.

Historical Quarterly Data 2020   2019   2018
  March 31   December 31   September 30   June 30   March 31   December 31
Revenues (In Thousands, except for per share data)
Net premiums earned $ 98,717     $ 95,517     $ 92,381     $ 83,249     $ 73,868     $ 69,261  
Net investment income 8,104     7,962     7,882     7,629     7,383     6,952  
Net realized investment (losses) gains  (72 )   264     81     (113 )   (187 )   6  
Other revenues 900     1,154     1,244     415     42     40  
Total revenues 107,649     104,897     101,588     91,180     81,106     76,259  
Expenses                      
Insurance claims and claim expenses 5,697     4,269     2,572     2,923     2,743     2,141  
Underwriting and operating expenses(1) 32,277     31,296     32,335     32,190     30,800     29,339  
Service expenses(1) 734     937     909     353     49     45  
Interest expense 2,744     2,974     2,979     3,071     3,061     3,028  
(Gain) loss from change in fair value of warrant liability (5,959 )   2,632     (1,139 )   1,685     5,479     (3,538 )
Total expenses 35,493     42,108     37,656     40,222     42,132     31,015  
                       
Income before income taxes 72,156     62,789     63,932     50,958     38,974     45,244  
Income tax expense 13,885     12,594     14,169     11,858     6,075     9,724  
Net income $ 58,271     $ 50,195     $ 49,763     $ 39,100     $ 32,899     $ 35,520  
                       
Earnings per share                      
Basic $ 0.85     $ 0.74     $ 0.73     $ 0.58     $ 0.49     $ 0.54  
Diluted $ 0.74     $ 0.71     $ 0.69     $ 0.56     $ 0.48     $ 0.46  
                       
Weighted average common shares outstanding                      
Basic 68,563     68,140     67,849     67,590     66,692     66,308  
Diluted 70,401     70,276     70,137     69,590     68,996     69,013  
                       
Other data                      
Loss Ratio(2) 5.8 %   4.5 %   2.8 %   3.5 %   3.7 %   3.1 %
Expense Ratio(3) 32.7 %   32.8 %   35.0 %   38.7 %   41.7 %   42.4 %
Combined ratio (4) 38.5 %   37.2 %   37.8 %   42.2 %   45.4 %   45.5 %

(1) Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2) Loss ratio is calculated by dividing the provision for insurance claims and claim expenses by net premiums earned.
(3) Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
(4) Combined ratio may not foot due to rounding.

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

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

Primary NIW Three months ended
  March 31, 2020   December 31, 2019   September 30, 2019   June 30, 2019   March 31, 2019   December 31, 2018
  (In Millions)
Monthly $ 10,461   $ 11,085   $ 12,994   $ 11,067   $ 6,211   $ 6,296
Single 836   864   1,106   1,112   702   666
Primary $ 11,297   $ 11,949   $ 14,100   $ 12,179   $ 6,913   $ 6,962


Primary and pool IIF As of
  March 31, 2020   December 31, 2019   September 30, 2019   June 30, 2019   March 31, 2019   December 31, 2018
  (In Millions)
Monthly $ 81,347   $ 77,097   $ 71,814   $ 63,922   $ 55,995   $ 51,655
Single 17,147   17,657   17,899   17,786   17,239   16,896
Primary 98,494   94,754   89,713   81,708   73,234   68,551
                       
Pool 2,487   2,570   2,668   2,758   2,838   2,901
Total $ 100,981   $ 97,324   $ 92,381   $ 84,466   $ 76,072   $ 71,452

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), and Insurance-Linked Note transactions (the 2017 ILN Transaction, 2018 ILN Transaction and 2019 ILN Transaction, and collectively, the ILN Transactions) for the periods indicated.

  For the three months ended
  March 31, 2020   December 31, 2019   September 30, 2019   June 30, 2019   March 31, 2019 December 31, 2018
   
The QSR Transactions                    
Ceded risk-in-force $ 4,843,715     $ 5,137,249     $ 4,901,809     $ 4,558,862     $ 4,534,353     $ 4,292,450  
Ceded premiums earned (23,011 )   (23,673 )   (23,151 )   (20,919 )   (21,468 )   (20,487 )
Ceded claims and claim expenses 1,532     1,030     766     770     899     710  
Ceding commission earned 4,513     4,691     4,584     4,171     4,206     4,084  
Profit commission 12,413     13,314     13,254     11,884     12,061     11,666  
                     
The ILN Transactions                    
Ceded premiums $ (3,872 )   $ (4,263 )   $ (4,409 )   $ (2,895 )   $ (3,023 )   $ (3,257 )

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, 2020   December 31, 2019   September 30, 2019   June 30, 2019   March 31, 2019   December 31, 2018
  ($ Values In Millions)
New insurance written $ 11,297     $ 11,949     $ 14,100     $ 12,179     $ 6,913     $ 6,962  
New risk written 2,897     3,082     3,651     3,183     1,799     1,799  
Insurance in force (IIF) (1) 98,494     94,754     89,713     81,708     73,234     68,551  
Risk in force (1) 25,192     24,173     22,810     20,661     18,373     17,091  
Policies in force (count) (1) 376,852     366,039     350,395     324,876     297,232     280,825  
Average loan size (1) $ 0.261     $ 0.259     $ 0.256     $ 0.252     $ 0.246     $ 0.244  
Coverage percentage (2) 25.6 %   25.5 %   25.4 %   25.3 %   25.1 %   24.9 %
Loans in default (count) (1) 1,449     1,448     1,230     1,028     940     877  
Percentage of loans in default (1) 0.38 %   0.40 %   0.35 %   0.32 %   0.32 %   0.31 %
Risk in force on defaulted loans (1) $ 84     $ 84     $ 70     $ 58     $ 53     $ 48  
Average premium yield (3) 0.41 %   0.41 %   0.43 %   0.43 %   0.42 %   0.42 %
Earnings from cancellations $ 8.6     $ 8.0     $ 7.4     $ 4.5     $ 2.3     $ 2.1  
Annual persistency (4) 71.7 %   76.8 %   82.4 %   86.0 %   87.2 %   87.1 %
Quarterly run-off (5) 8.0 %   7.7 %   7.5 %   5.1 %   3.3 %   3.1 %

(1) Reported as of the end of the period.
(2) Calculated as end of period risk-in-force (RIF) divided by end of period IIF.
(3) Calculated as net premiums earned, divided by average primary IIF for the period, annualized.
(4) Defined as the percentage of IIF that remains on our books after a given 12-month period.
(5) Defined as the percentage of IIF that is no longer on our books after a given three 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, 2020   December 31, 2019   March 31, 2019
  ($ In Millions)
>= 760 $ 6,290   $ 6,253   $ 3,057
740-759 1,615   1,864   1,224
720-739 1,579   1,712   1,044
700-719 1,038   1,204   792
680-699 565   662   553
<=679 210   254   243
Total $ 11,297   $ 11,949   $ 6,913
Weighted average FICO 757   756   749


Primary NIW by LTV For the three months ended
  March 31, 2020   December 31, 2019   March 31, 2019
  (In Millions)
95.01% and above $ 721     $ 663     $ 569  
90.01% to 95.00% 5,009     5,528     3,424  
85.01% to 90.00% 4,082     4,296     2,241  
85.00% and below 1,485     1,462     679  
Total $ 11,297     $ 11,949     $ 6,913  
Weighted average LTV 91.3 %   91.4 %   92.2 %


Primary NIW by purchase/refinance mix For the three months ended
  March 31, 2020   December 31, 2019   March 31, 2019
  (In Millions)
Purchase $ 7,991   $ 9,041   $ 6,383
Refinance (1) 3,306   2,908   530
Total $ 11,297   $ 11,949   $ 6,913

(1) The amount of cash-out refinance loans insured in our portfolio was de minimis for the periods presented.

The table below presents a summary of our primary IIF and RIF by book year as of March 31, 2020.

Primary IIF and RIF As of March 31, 2020
  IIF   RIF
  (In Millions)
March 31, 2020 $ 11,236     $ 2,882  
2019 39,485     10,259  
2018 17,545     4,464  
2017 13,656     3,398  
2016 10,962     2,763  
2015 and before 5,610     1,426  
Total $ 98,494     $ 25,192  

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, 2020   December 31, 2019   March 31, 2019
  (In Millions)
>= 760 $ 47,340   $ 44,793   $ 33,902
740-759 16,060   15,728   12,160
720-739 14,002   13,417   10,096
700-719 10,518   10,284   8,122
680-699 6,879   6,774   5,435
<=679 3,695   3,758   3,519
Total $ 98,494   $ 94,754   $ 73,234
Weighted average FICO 751   751   749


Primary RIF by FICO As of
  March 31, 2020   December 31, 2019   March 31, 2019
  (In Millions)
>= 760 $ 12,076   $ 11,388   $ 8,506
740-759 4,121   4,034   3,076
720-739 3,626   3,465   2,550
700-719 2,696   2,632   2,036
680-699 1,760   1,728   1,357
<=679 (1) 913   926   848
Total $ 25,192   $ 24,173   $ 18,373
Weighted average FICO 751   751   749

(1) There were no loans with a FICO  <=620 insured in our portfolio for the periods presented.

Primary IIF by LTV As of
  March 31, 2020   December 31, 2019   March 31, 2019
  (In Millions)
95.01% and above $ 8,838     $ 8,640     $ 7,204  
90.01% to 95.00% 46,318     44,668     34,024  
85.01% to 90.00% 31,729     30,163     22,208  
85.00% and below 11,609     11,283     9,798  
Total $ 98,494     $ 94,754     $ 73,234  
Weighted average LTV 91.9 %   91.9 %   91.9 %


Primary RIF by LTV As of
  March 31, 2020   December 31, 2019   March 31, 2019
  (In Millions)
95.01% and above $ 2,478     $ 2,390     $ 1,928  
90.01% to 95.00% 13,587     13,086     9,923  
85.01% to 90.00% 7,767     7,376     5,384  
85.00% and below 1,360     1,321     1,138  
Total $ 25,192     $ 24,173     $ 18,373  
Weighted average LTV 92.7 %   92.7 %   92.7 %


Primary RIF by Loan Type As of
  March 31, 2020   December 31, 2019   March 31, 2019
           
Fixed 98 %   98 %   98 %
Adjustable rate mortgages          
Less than five years          
Five years and longer 2     2     2  
Total (1) 100 %   100 %   100 %

(1) There were no interest-only mortgages insured in our portfolio for the periods presented.

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, 2020   December 31, 2019   March 31, 2019
  (In Millions)
IIF, beginning of period $ 94,754     $ 89,713     $ 68,551  
NIW 11,297     11,949     6,913  
Cancellations, principal repayments and other reductions (7,557 )   (6,908 )   (2,230 )
IIF, end of period $ 98,494     $ 94,754     $ 73,234  

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, 2020   December 31, 2019   March 31, 2019
California 11.5 %   11.8 %   12.7 %
Texas 8.2     8.2     8.3  
Florida 5.9     5.7     5.2  
Virginia 5.3     5.3     5.0  
Illinois 3.8     3.8     3.4  
Arizona 3.7     3.9     4.8  
Pennsylvania 3.7     3.6     3.6  
Colorado 3.6     3.4     3.4  
Michigan 3.4     3.5     3.6  
Maryland 3.4     3.4     3.2  
Total 52.5 %   52.6 %   53.2 %

The table below presents selected primary portfolio statistics, by book year, as of March 31, 2020.

  As of March 31, 2020
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)   Current default rate  (3)
  ($ Values in Millions)    
2013 $ 162     $ 20     12 %   655     115         1     0.2 %   0.2 %   %
2014 3,451     747     22 %   14,786     4,081     40     44     4.1 %   0.6 %   1.0 %
2015 12,422     4,843     39 %   52,548     23,277     158     97     3.0 %   0.5 %   0.7 %
2016 21,187     10,962     52 %   83,626     47,687     254     97     2.4 %   0.4 %   0.5 %
2017 21,582     13,656     63 %   85,897     59,356     441     53     3.4 %   0.6 %   0.7 %
2018 27,295     17,545     64 %   104,043     73,620     429     24     4.6 %   0.4 %   0.6 %
2019 45,141     39,485     87 %   148,423     133,291     127         2.3 %   0.1 %   0.1 %
2020 11,297     11,236     99 %   35,581     35,425             %   %   %
Total $ 142,537     $ 98,494         525,559     376,852     1,449     316              

(1) Calculated as total claims incurred (paid and reserved) divided by cumulative premiums earned, net of reinsurance.
(2) Calculated as the sum of the number of claims paid ever to date and number of loans in default divided by policies ever in force.
(3) Calculated as the number of loans in default divided by number of policies in force.

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

  For the three months ended
  March 31, 2020   March 31, 2019
  (In Thousands)
Beginning balance $ 23,752     $ 12,811  
Less reinsurance recoverables (1) (4,939 )   (3,001 )
Beginning balance, net of reinsurance recoverables 18,813     9,810  
       
Add claims incurred:      
Claims and claim expenses incurred:      
Current year (2) 7,558     3,909  
Prior years (3) (1,861 )   (1,166 )
Total claims and claim expenses incurred 5,697     2,743  
       
Less claims paid:      
Claims and claim expenses paid:      
Current year (2)      
Prior years (3) 1,224     694  
Total claims and claim expenses paid 1,224     694  
       
Reserve at end of period, net of reinsurance recoverables 23,286     11,859  
Add reinsurance recoverables (1) 6,193     3,678  
Ending balance $ 29,479     $ 15,537  

(1) Related to ceded losses recoverable under the QSR Transactions, included in "Other assets" on the 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, the default would be included in the current year. Amounts are presented net of reinsurance.
(3) Related to insured loans with defaults occurring in prior years, which have been continuously in default before the start of the current year.  Amounts are presented net of reinsurance.

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, 2020   March 31, 2019
Beginning default inventory 1,448     877  
Plus: new defaults 512     574  
Less: cures (475 )   (474 )
Less: claims paid (34 )   (37 )
Less: claims denied (2 )    
Ending default inventory 1,449     940  

The following table provides details of our claims paid, before giving effect to claims ceded under the QSR Transactions, for the periods indicated.

  For the three months ended
  March 31, 2020   March 31, 2019
  (In Thousands)
Number of claims paid (1) 34     37  
Total amount paid for claims $ 1,503     $ 926  
Average amount paid per claim $ 44     $ 25  
Severity(2) 83 %   64 %

(1) Count includes one claims settled without payment for the three months ended March 31, 2020, and three claims settled without payment for the three months ended March 31, 2019.
(2) Severity represents the total amount of claims paid including claim expenses divided by the related RIF on the loan at the time the claim is perfected, and is calculated including claims settled without payment.

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, 2020   As of March 31, 2019
  (In Thousands)
Case (1) $ 18     $ 15  
IBNR (2) 2     2  
Total $ 20     $ 17  

(1) Defined as the gross reserve per insured loan in default.
(2) Amount includes claims adjustment expenses.

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

  As of
  March 31, 2020   December 31, 2019   March 31, 2019
  (In Thousands)
Available Assets $ 1,069,695     $ 955,554     $ 817,758  
Risk-Based Required Assets 912,321     637,914     607,325  

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Source: NMI Holdings Inc