NMI Holdings, Inc. Reports First Quarter 2021 Financial Results
EMERYVILLE, Calif., May 04, 2021 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported net income of $52.9 million, or $0.61 per diluted share, for the first quarter ended March 31, 2021, which compares to $48.3 million, or $0.56 per diluted share, in the fourth quarter ended December 31, 2020 and $58.3 million, or $0.74 per diluted share, in the first quarter ended March 31, 2020. Adjusted net income for the quarter was $53.4 million, or $0.62 per diluted share, which compares to $50.8 million, or $0.59 per diluted share, in the fourth quarter ended December 31, 2020 and $52.7 million, or $0.75 per diluted share, in the first quarter ended March 31, 2020. 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, “We achieved record NIW volume, significant growth in our insured portfolio and strong financial performance in the first quarter. We helped more borrowers than ever before gain access to housing and continued to differentiate with our lender customers. Our credit performance remained favorable and we are increasingly optimistic as the stress of the COVID pandemic has begun to recede, the outlook for the economy has improved sharply and the housing market continues to strengthen.”
Selected first quarter 2021 highlights include:
- New insurance written was $26.4 billion, up 33% compared to $19.8 billion in the fourth quarter and 134% compared to $11.3 billion in the first quarter of 2020
- Primary insurance-in-force at quarter end was $123.8 billion, up 11% from $111.3 billion at the end of the fourth quarter and 26% compared to the first quarter of 2020
- Net premiums earned were $105.9 million, up 5% compared to $100.7 million in the fourth quarter and 7% compared to $98.7 million in the first quarter of 2020
- Underwriting and operating expenses were $34.1 million, including $378 thousand of capital market transaction costs, compared to $35.0 million in the fourth quarter and $32.3 million in the first quarter of 2020
- Insurance claims and claim expenses were $5.0 million, compared to $3.5 million in the fourth quarter and $5.7 million in the first quarter of 2020
- At quarter-end, cash and investments were $1.9 billion and shareholders’ equity was $1.4 billion, equal to $16.13 per share
- Annualized return on equity for the quarter was 15.4% and annualized adjusted return on equity was 15.5%
- At quarter-end, the company reported total PMIERs available assets of $1.8 billion and net risk-based required assets of $1.3 billion
Concurrent with the release of first quarter earnings, the company has filed a Form 8-K that includes selected operating statistics for the month ended April 30, 2021. Investors may access the Form 8-K on the company’s website, www.nationalmi.com, in the “Investor Relations” section.
| Quarter Ended | Quarter Ended | Quarter Ended | Change (1) | Change (1) | ||||||||||
| 3/31/2021 | 12/31/2020 | 3/31/2020 | Q/Q | Y/Y | ||||||||||
| INSURANCE METRICS ($billions) | ||||||||||||||
| Primary Insurance-in-Force | $ | 123.8 | $ | 111.3 | $ | 98.5 | 11 | % | 26 | % | ||||
| New Insurance Written - NIW | ||||||||||||||
| Monthly premium | 23.8 | 17.8 | 10.5 | 34 | % | 127 | % | |||||||
| Single premium | 2.6 | 2.0 | 0.8 | 32 | % | 215 | % | |||||||
| Total | 26.4 | 19.8 | 11.3 | 33 | % | 134 | % | |||||||
| FINANCIAL HIGHLIGHTS ($millions, except per share amounts) | ||||||||||||||
| Net Premiums Earned | $ | 105.9 | $ | 100.7 | $ | 98.7 | 5 | % | 7 | % | ||||
| Insurance Claims and Claim Expenses | 5.0 | 3.5 | 5.7 | 40 | % | (13 | )% | |||||||
| Underwriting and Operating Expenses | 34.1 | 35.0 | 32.3 | (3 | )% | 6 | % | |||||||
| Net Income | 52.9 | 48.3 | 58.3 | 10 | % | (9 | )% | |||||||
| Adjusted Net Income | 53.4 | 50.8 | 52.7 | 5 | % | 1 | % | |||||||
| Cash and Investments | 1,947 | 1,931 | 1,180 | 1 | % | 65 | % | |||||||
| Shareholders' Equity | 1,380 | 1,370 | 975 | 1 | % | 42 | % | |||||||
| Book Value per Share | 16.13 | 16.08 | 14.15 | — | % | 14 | % | |||||||
| Loss Ratio | 4.7 | % | 3.5 | % | 5.8 | % | ||||||||
| Expense Ratio | 32.2 | % | 34.7 | % | 32.7 | % | ||||||||
(1) Percentages may not be replicated based on the rounded figures presented in the table.
Conference Call and Webcast Details
The company will hold a conference call, which will be webcast live today, May 4, 2021, 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: 1887668 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 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 U.S. Department of 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 the timing and eventual implementation of the final rules concerning "Qualified Mortgage" and “Qualified Residential Mortgage” definitions and the 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, 2020, 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, | ||||||
| 2021 | 2020 | ||||||
| Revenues | (In Thousands, except for per share data) | ||||||
| Net premiums earned | $ | 105,879 | $ | 98,717 | |||
| Net investment income | 8,814 | 8,104 | |||||
| Net realized investment losses | — | (72 | ) | ||||
| Other revenues | 501 | 900 | |||||
| Total revenues | 115,194 | 107,649 | |||||
| Expenses | |||||||
| Insurance claims and claim expenses | 4,962 | 5,697 | |||||
| Underwriting and operating expenses | 34,065 | 32,277 | |||||
| Service expenses | 591 | 734 | |||||
| Interest expense | 7,915 | 2,744 | |||||
| Loss (gain) from change in fair value of warrant liability | 205 | (5,959 | ) | ||||
| Total expenses | 47,738 | 35,493 | |||||
| Income before income taxes | 67,456 | 72,156 | |||||
| Income tax expense | 14,565 | 13,885 | |||||
| Net income | $ | 52,891 | $ | 58,271 | |||
| Earnings per share | |||||||
| Basic | $ | 0.62 | $ | 0.85 | |||
| Diluted | $ | 0.61 | $ | 0.74 | |||
| Weighted average common shares outstanding | |||||||
| Basic | 85,317 | 68,563 | |||||
| Diluted | 86,487 | 70,401 | |||||
| Loss ratio(1) | 4.7 | % | 5.8 | % | |||
| Expense ratio(2) | 32.2 | % | 32.7 | % | |||
| Combined ratio | 36.9 | % | 38.5 | % | |||
| Net income | $ | 52,891 | $ | 58,271 | |||
| Other comprehensive loss, net of tax: | |||||||
| Unrealized losses in accumulated other comprehensive loss, net of tax benefit of $11,997 and $3,424 for the quarters ended March 31, 2021 and 2020, respectively | (45,133 | ) | (12,881 | ) | |||
| Reclassification adjustment for realized losses included in net income, net of tax benefit of $15 for the quarter ended March 31, 2020 | — | 57 | |||||
| Other comprehensive loss, net of tax | (45,133 | ) | (12,824 | ) | |||
| Comprehensive income | $ | 7,758 | $ | 45,447 | |||
(1) Loss ratio is calculated by dividing insurance claims and claim expenses by net premiums earned.
(2) Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned.
| Consolidated balance sheets | March 31, 2021 | December 31, 2020 | |||||
| Assets | (In Thousands, except for share data) | ||||||
| Fixed maturities, available-for-sale, at fair value (amortized cost of $1,815,190 and $1,730,835 as of March 31, 2021 and December 31, 2020, respectively) | $ | 1,831,511 | $ | 1,804,286 | |||
| Cash and cash equivalents (including restricted cash of $4,868 and $5,555 as of March 31, 2021 and December 31, 2020, respectively) | 115,517 | 126,937 | |||||
| Premiums receivable | 52,206 | 49,779 | |||||
| Accrued investment income | 10,495 | 9,862 | |||||
| Prepaid expenses | 4,999 | 3,292 | |||||
| Deferred policy acquisition costs, net | 62,294 | 62,225 | |||||
| Software and equipment, net | 31,298 | 29,665 | |||||
| Intangible assets and goodwill | 3,634 | 3,634 | |||||
| Prepaid reinsurance premiums | 4,842 | 6,190 | |||||
| Reinsurance recoverable | 18,686 | 17,608 | |||||
| Other assets | 52,349 | 53,188 | |||||
| Total assets | $ | 2,187,831 | $ | 2,166,666 | |||
| Liabilities | |||||||
| Debt | $ | 393,622 | $ | 393,301 | |||
| Unearned premiums | 127,407 | 118,817 | |||||
| Accounts payable and accrued expenses | 57,139 | 61,716 | |||||
| Reserve for insurance claims and claim expenses | 96,103 | 90,567 | |||||
| Reinsurance funds withheld | 7,569 | 8,653 | |||||
| Warrant liability, at fair value | 4,239 | 4,409 | |||||
| Deferred tax liability, net | 115,150 | 112,586 | |||||
| Other liabilities | 6,294 | 7,026 | |||||
| Total liabilities | 807,523 | 797,075 | |||||
| Shareholders' equity | |||||||
| Common stock - class A shares, $0.01 par value; 85,599,908 and 85,163,039 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively (250,000,000 shares authorized) | 856 | 852 | |||||
| Additional paid-in capital | 940,827 | 937,872 | |||||
| Accumulated other comprehensive income, net of tax | 8,723 | 53,856 | |||||
| Retained earnings | 429,902 | 377,011 | |||||
| Total shareholders' equity | 1,380,308 | 1,369,591 | |||||
| Total liabilities and shareholders' equity | $ | 2,187,831 | $ | 2,166,666 | |||
| Non-GAAP Financial Measure Reconciliations | |||||||||||
| Quarter ended | Quarter ended | Quarter ended | |||||||||
| 3/31/2021 | 12/31/2020 | 3/31/2020 | |||||||||
| As Reported | (In Thousands, except for per share data) | ||||||||||
| Revenues | |||||||||||
| Net premiums earned | $ | 105,879 | $ | 100,709 | $ | 98,717 | |||||
| Net investment income | 8,814 | 8,386 | 8,104 | ||||||||
| Net realized investment gains (losses) | — | 295 | (72 | ) | |||||||
| Other revenues | 501 | 513 | 900 | ||||||||
| Total revenues | 115,194 | 109,903 | 107,649 | ||||||||
| Expenses | |||||||||||
| Insurance claims and claim expenses | 4,962 | 3,549 | 5,697 | ||||||||
| Underwriting and operating expenses | 34,065 | 34,994 | 32,277 | ||||||||
| Service expenses | 591 | 459 | 734 | ||||||||
| Interest expense | 7,915 | 7,906 | 2,744 | ||||||||
| Loss (gain) from change in fair value of warrant liability | 205 | 1,379 | (5,959 | ) | |||||||
| Total expenses | 47,738 | 48,287 | 35,493 | ||||||||
| Income before income taxes | 67,456 | 61,616 | 72,156 | ||||||||
| Income tax expense | 14,565 | 13,348 | 13,885 | ||||||||
| Net income | $ | 52,891 | $ | 48,268 | $ | 58,271 | |||||
| Adjustments: | |||||||||||
| Net realized investment (gains) losses | — | (295 | ) | 72 | |||||||
| Loss (gain) from change in fair value of warrant liability | 205 | 1,379 | (5,959 | ) | |||||||
| Capital markets transaction costs | 378 | 1,719 | 474 | ||||||||
| Adjusted income before taxes | 68,039 | 64,419 | 66,743 | ||||||||
| Income tax expense on adjustments | 79 | 299 | 115 | ||||||||
| Adjusted net income | $ | 53,395 | $ | 50,772 | $ | 52,743 | |||||
| Weighted average diluted shares outstanding | 86,487 | 86,250 | 70,401 | ||||||||
| Diluted EPS (1) | $ | 0.61 | $ | 0.56 | $ | 0.74 | |||||
| Adjusted diluted EPS | $ | 0.62 | $ | 0.59 | $ | 0.75 | |||||
| Return-on-equity | 15.4 | % | 14.4 | % | 24.5 | % | |||||
| Adjusted return-on-equity | 15.5 | % | 15.2 | % | 22.1 | % | |||||
| Expense ratio (2) | 32.2 | % | 34.7 | % | 32.7 | % | |||||
| Adjusted expense ratio (3) | 31.8 | % | 33.0 | % | 32.2 | % | |||||
| Combined ratio (4) | 36.9 | % | 38.3 | % | 38.5 | % | |||||
| Adjusted combined ratio (5) | 36.5 | % | 36.6 | % | 38.0 | % | |||||
(1) Diluted net income for the quarter ended March 30, 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.
(2) Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
(3) Adjusted expense ratio is calculated by dividing adjusted underwriting and operating expense (underwriting and operating expenses excluding costs related to capital markets reinsurance transactions) by net premiums earned.
(4) Combined ratio is calculated by dividing the total of underwriting and operating expenses and insurance claims and claims expense by net premiums earned.
(5) Adjusted combined ratio is calculated by dividing the total of adjusted underwriting and operating expenses (underwriting and operating expenses excluding costs related to capital market reinsurance transaction) and insurance claims and claims expense by net premiums earned.
| Historical Quarterly Data | 2021 | 2020 | 2019 | ||||||||||||||||||||
| March 31 | December 31 | September 30 | June 30 | March 31 | December 31 | ||||||||||||||||||
| Revenues | (In Thousands, except for per share data) | ||||||||||||||||||||||
| Net premiums earned | $ | 105,879 | $ | 100,709 | $ | 98,802 | $ | 98,944 | $ | 98,717 | $ | 95,517 | |||||||||||
| Net investment income | 8,814 | 8,386 | 8,337 | 7,070 | 8,104 | 7,962 | |||||||||||||||||
| Net realized investment gains (losses) | — | 295 | (4 | ) | 711 | (72 | ) | 264 | |||||||||||||||
| Other revenues | 501 | 513 | 648 | 1,223 | 900 | 1,154 | |||||||||||||||||
| Total revenues | 115,194 | 109,903 | 107,783 | 107,948 | 107,649 | 104,897 | |||||||||||||||||
| Expenses | |||||||||||||||||||||||
| Insurance claims and claim expenses | 4,962 | 3,549 | 15,667 | 34,334 | 5,697 | 4,269 | |||||||||||||||||
| Underwriting and operating expenses | 34,065 | 34,994 | 33,969 | 30,370 | 32,277 | 31,296 | |||||||||||||||||
| Service expenses | 591 | 459 | 557 | 1,090 | 734 | 937 | |||||||||||||||||
| Interest expense | 7,915 | 7,906 | 7,796 | 5,941 | 2,744 | 2,974 | |||||||||||||||||
| Loss (gain) from change in fair value of warrant liability | 205 | 1,379 | 437 | 1,236 | (5,959 | ) | 2,632 | ||||||||||||||||
| Total expenses | 47,738 | 48,287 | 58,426 | 72,971 | 35,493 | 42,108 | |||||||||||||||||
| Income before income taxes | 67,456 | 61,616 | 49,357 | 34,977 | 72,156 | 62,789 | |||||||||||||||||
| Income tax expense | 14,565 | 13,348 | 11,178 | 8,129 | 13,885 | 12,594 | |||||||||||||||||
| Net income | $ | 52,891 | $ | 48,268 | $ | 38,179 | $ | 26,848 | $ | 58,271 | $ | 50,195 | |||||||||||
| Earnings per share | |||||||||||||||||||||||
| Basic | $ | 0.62 | $ | 0.57 | $ | 0.45 | $ | 0.36 | $ | 0.85 | $ | 0.74 | |||||||||||
| Diluted | $ | 0.61 | $ | 0.56 | $ | 0.45 | $ | 0.36 | $ | 0.74 | $ | 0.71 | |||||||||||
| Weighted average common shares outstanding | |||||||||||||||||||||||
| Basic | 85,317 | 84,956 | 84,805 | 73,617 | 68,563 | 68,140 | |||||||||||||||||
| Diluted | 86,487 | 86,250 | 85,599 | 74,174 | 70,401 | 70,276 | |||||||||||||||||
| Other data | |||||||||||||||||||||||
| Loss Ratio(1) | 4.7 | % | 3.5 | % | 15.9 | % | 34.7 | % | 5.8 | % | 4.5 | % | |||||||||||
| Expense Ratio(2) | 32.2 | % | 34.7 | % | 34.4 | % | 30.7 | % | 32.7 | % | 32.8 | % | |||||||||||
| Combined ratio (3) | 36.9 | % | 38.3 | % | 50.2 | % | 65.4 | % | 38.5 | % | 37.2 | % | |||||||||||
(1) Loss ratio is calculated by dividing insurance claims and claim expenses by net premiums earned.
(2) Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
(3) Combined ratio may not foot due to rounding.
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, 2021 | December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | ||||||||||||||||||
| ($ Values In Millions, except as noted below) | |||||||||||||||||||||||
| New insurance written | $ | 26,397 | $ | 19,782 | $ | 18,499 | $ | 13,124 | $ | 11,297 | $ | 11,949 | |||||||||||
| New risk written | 6,531 | 4,868 | 4,577 | 3,260 | 2,897 | 3,082 | |||||||||||||||||
| Insurance in force (IIF) (1) | 123,777 | 111,252 | 104,494 | 98,905 | 98,494 | 94,754 | |||||||||||||||||
| Risk in force (1) | 31,206 | 28,164 | 26,568 | 25,238 | 25,192 | 24,173 | |||||||||||||||||
| Policies in force (count) (1) | 436,652 | 399,429 | 381,899 | 372,934 | 376,852 | 366,039 | |||||||||||||||||
| Average loan size ($ value in thousands) (1) | $ | 283 | $ | 279 | $ | 274 | $ | 265 | $ | 261 | $ | 259 | |||||||||||
| Coverage percentage (2) | 25.2 | % | 25.3 | % | 25.4 | % | 25.5 | % | 25.6 | % | 25.5 | % | |||||||||||
| Loans in default (count) (1) | 11,090 | 12,209 | 13,765 | 10,816 | 1,449 | 1,448 | |||||||||||||||||
| Default rate (1) | 2.54 | % | 3.06 | % | 3.60 | % | 2.90 | % | 0.38 | % | 0.40 | % | |||||||||||
| Risk in force on defaulted loans (1) | $ | 785 | $ | 874 | $ | 1,008 | $ | 799 | $ | 84 | $ | 84 | |||||||||||
| Net premium yield (3) | 0.36 | % | 0.37 | % | 0.39 | % | 0.40 | % | 0.41 | % | 0.41 | % | |||||||||||
| Earnings from cancellations | $ | 9.9 | $ | 11.7 | $ | 12.6 | $ | 15.5 | $ | 8.6 | $ | 8.0 | |||||||||||
| Annual persistency (4) | 51.9 | % | 55.9 | % | 60.0 | % | 64.1 | % | 71.7 | % | 76.8 | % | |||||||||||
| Quarterly run-off (5) | 12.5 | % | 12.5 | % | 13.1 | % | 12.9 | % | 8.0 | % | 7.7 | % | |||||||||||
(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 twelve-month period.
(5) Defined as the percentage of IIF that is no longer on our books after a given three month period.
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, 2021 | December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | ||||||||||||||||||
| (In Millions) | |||||||||||||||||||||||
| Monthly | $ | 23,764 | $ | 17,789 | $ | 16,516 | $ | 11,885 | $ | 10,461 | $ | 11,085 | |||||||||||
| Single | 2,633 | 1,993 | 1,983 | 1,239 | 836 | 864 | |||||||||||||||||
| Primary | $ | 26,397 | $ | 19,782 | $ | 18,499 | $ | 13,124 | $ | 11,297 | $ | 11,949 | |||||||||||
| Primary and pool IIF | As of | ||||||||||||||||||||||
| March 31, 2021 | December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | ||||||||||||||||||
| (In Millions) | |||||||||||||||||||||||
| Monthly | $ | 106,920 | $ | 95,336 | $ | 88,584 | $ | 82,848 | $ | 81,347 | $ | 77,097 | |||||||||||
| Single | 16,857 | 15,916 | 15,910 | 16,057 | 17,147 | 17,657 | |||||||||||||||||
| Primary | 123,777 | 111,252 | 104,494 | 98,905 | 98,494 | 94,754 | |||||||||||||||||
| Pool | 1,642 | 1,855 | 2,115 | 2,340 | 2,487 | 2,570 | |||||||||||||||||
| Total | $ | 125,419 | $ | 113,107 | $ | 106,609 | $ | 101,245 | $ | 100,981 | $ | 97,324 | |||||||||||
The following table presents the amounts related to the company's quota-share reinsurance transactions (the 2016 QSR Transaction, 2018 QSR Transaction, 2020 QSR Transaction and 2021 QSR Transaction, and collectively, the QSR Transactions), and Insurance-Linked Note transactions (the 2017 ILN Transaction, 2018 ILN Transaction, 2019 ILN Transaction, 2020-1 ILN Transaction and 2020-2 ILN Transaction, and collectively, the ILN Transactions) for the periods indicated.
| For the three months ended | |||||||||||||||||||||||||||||
| March 31, 2021 | December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||
| (In Thousands) | |||||||||||||||||||||||||||||
| The QSR Transactions | |||||||||||||||||||||||||||||
| Ceded risk-in-force | $ | 6,330,409 | $ | 5,543,969 | $ | 5,159,061 | $ | 4,563,676 | $ | 4,843,715 | $ | 5,137,249 | |||||||||||||||||
| Ceded premiums earned | (25,747 | ) | (24,161 | ) | (24,517 | ) | (23,210 | ) | (23,011 | ) | (23,673 | ) | |||||||||||||||||
| Ceded claims and claim expenses | 1,180 | 601 | 3,200 | 8,669 | 1,532 | 1,030 | |||||||||||||||||||||||
| Ceding commission earned | 5,162 | 4,787 | 4,798 | 4,428 | 4,513 | 4,691 | |||||||||||||||||||||||
| Profit commission | 13,380 | 13,184 | 11,034 | 5,271 | 12,413 | 13,314 | |||||||||||||||||||||||
| The ILN Transactions | |||||||||||||||||||||||||||||
| Ceded premiums | $ | (9,397 | ) | $ | (9,422 | ) | $ | (6,268 | ) | $ | (3,267 | ) | $ | (3,872 | ) | $ | (4,263 | ) | |||||||||||
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, 2021 | December 31, 2020 | March 31, 2020 | ||||||||||
| ($ In Millions) | ||||||||||||
| >= 760 | $ | 12,914 | $ | 11,495 | $ | 6,290 | ||||||
| 740-759 | 5,312 | 3,387 | 1,615 | |||||||||
| 720-739 | 3,963 | 2,447 | 1,579 | |||||||||
| 700-719 | 2,358 | 1,430 | 1,038 | |||||||||
| 680-699 | 1,360 | 820 | 565 | |||||||||
| <=679 | 490 | 203 | 210 | |||||||||
| Total | $ | 26,397 | $ | 19,782 | $ | 11,297 | ||||||
| Weighted average FICO | 755 | 761 | 757 | |||||||||
| Primary NIW by LTV | For the three months ended | ||||||||||
| March 31, 2021 | December 31, 2020 | March 31, 2020 | |||||||||
| (In Millions) | |||||||||||
| 95.01% and above | $ | 2,451 | $ | 1,877 | $ | 721 | |||||
| 90.01% to 95.00% | 11,051 | 7,839 | 5,009 | ||||||||
| 85.01% to 90.00% | 7,848 | 6,239 | 4,082 | ||||||||
| 85.00% and below | 5,047 | 3,827 | 1,485 | ||||||||
| Total | $ | 26,397 | $ | 19,782 | $ | 11,297 | |||||
| Weighted average LTV | 91.0 | % | 90.9 | % | 91.3 | % | |||||
| Primary NIW by purchase/refinance mix | For the three months ended | ||||||||||
| March 31, 2021 | December 31, 2020 | March 31, 2020 | |||||||||
| (In Millions) | |||||||||||
| Purchase | $ | 17,909 | $ | 13,085 | $ | 7,991 | |||||
| Refinance | 8,488 | 6,697 | 3,306 | ||||||||
| Total | $ | 26,397 | $ | 19,782 | $ | 11,297 | |||||
The table below presents a summary of our primary IIF and RIF by book year as of March 31, 2021.
| Primary IIF and RIF | As of March 31, 2021 | ||||||
| IIF | RIF | ||||||
| (In Millions) | |||||||
| March 31, 2021 | $ | 26,296 | $ | 6,508 | |||
| 2020 | 53,650 | 13,397 | |||||
| 2019 | 20,402 | 5,342 | |||||
| 2018 | 8,074 | 2,057 | |||||
| 2017 | 6,700 | 1,678 | |||||
| 2016 and before | 8,655 | 2,224 | |||||
| Total | $ | 123,777 | $ | 31,206 | |||
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, 2021 | December 31, 2020 | March 31, 2020 | |||||||||
| (In Millions) | |||||||||||
| >= 760 | $ | 63,919 | $ | 58,368 | $ | 47,340 | |||||
| 740-759 | 20,537 | 17,442 | 16,060 | ||||||||
| 720-739 | 17,167 | 15,091 | 14,002 | ||||||||
| 700-719 | 11,536 | 10,442 | 10,518 | ||||||||
| 680-699 | 7,329 | 6,777 | 6,879 | ||||||||
| <=679 | 3,289 | 3,132 | 3,695 | ||||||||
| Total | $ | 123,777 | $ | 111,252 | $ | 98,494 | |||||
| Primary RIF by FICO | As of | ||||||||||
| March 31, 2021 | December 31, 2020 | March 31, 2020 | |||||||||
| (In Millions) | |||||||||||
| >= 760 | $ | 15,920 | $ | 14,634 | $ | 12,076 | |||||
| 740-759 | 5,214 | 4,449 | 4,121 | ||||||||
| 720-739 | 4,378 | 3,868 | 3,626 | ||||||||
| 700-719 | 2,981 | 2,692 | 2,696 | ||||||||
| 680-699 | 1,896 | 1,748 | 1,760 | ||||||||
| <=679 | 817 | 773 | 913 | ||||||||
| Total | $ | 31,206 | $ | 28,164 | $ | 25,192 | |||||
| Primary IIF by LTV | As of | ||||||||||
| March 31, 2021 | December 31, 2020 | March 31, 2020 | |||||||||
| (In Millions) | |||||||||||
| 95.01% and above | $ | 10,616 | $ | 9,129 | $ | 8,838 | |||||
| 90.01% to 95.00% | 54,832 | 49,898 | 46,318 | ||||||||
| 85.01% to 90.00% | 40,057 | 36,972 | 31,729 | ||||||||
| 85.00% and below | 18,272 | 15,253 | 11,609 | ||||||||
| Total | $ | 123,777 | $ | 111,252 | $ | 98,494 | |||||
| Primary RIF by LTV | As of | ||||||||||
| March 31, 2021 | December 31, 2020 | March 31, 2020 | |||||||||
| (In Millions) | |||||||||||
| 95.01% and above | $ | 3,106 | $ | 2,637 | $ | 2,478 | |||||
| 90.01% to 95.00% | 16,139 | 14,673 | 13,587 | ||||||||
| 85.01% to 90.00% | 9,818 | 9,067 | 7,767 | ||||||||
| 85.00% and below | 2,143 | 1,787 | 1,360 | ||||||||
| Total | $ | 31,206 | $ | 28,164 | $ | 25,192 | |||||
| Primary RIF by Loan Type | As of | |||||||
| March 31, 2021 | December 31, 2020 | March 31, 2020 | ||||||
| Fixed | 99 | % | 99 | % | 98 | % | ||
| Adjustable rate mortgages | ||||||||
| Less than five years | — | — | — | |||||
| Five years and longer | 1 | 1 | 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 | |||||||||||||
| March 31, 2021 | December 31, 2020 | March 31, 2020 | ||||||||||||
| (In Millions) | ||||||||||||||
| IIF, beginning of period | $ | 111,252 | $ | 104,494 | $ | 94,754 | ||||||||
| NIW | 26,397 | 19,782 | 11,297 | |||||||||||
| Cancellations, principal repayments and other reductions | (13,872 | ) | (13,024 | ) | (7,557 | ) | ||||||||
| IIF, end of period | $ | 123,777 | $ | 111,252 | $ | 98,494 | ||||||||
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, 2021 | December 31, 2020 | March 31, 2020 | ||||||
| California | 10.8 | % | 11.2 | % | 11.5 | % | ||
| Texas | 9.5 | 8.8 | 8.2 | |||||
| Florida | 7.9 | 7.3 | 5.9 | |||||
| Virginia | 5.0 | 5.1 | 5.3 | |||||
| Colorado | 4.1 | 4.1 | 3.6 | |||||
| Maryland | 3.8 | 3.7 | 3.4 | |||||
| Illinois | 3.7 | 3.8 | 3.8 | |||||
| Washington | 3.5 | 3.5 | 3.3 | |||||
| Georgia | 3.3 | 3.2 | 2.7 | |||||
| Pennsylvania | 3.3 | 3.4 | 3.7 | |||||
| Total | 54.9 | % | 54.1 | % | 51.4 | % | ||
The table below presents selected primary portfolio statistics, by book year, as of March 31, 2021.
| As of March 31, 2021 | |||||||||||||||||||||||||||||||
| 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 | $ | 10 | 6 | % | 655 | 66 | 2 | 1 | 0.4 | % | 0.5 | % | 3.0 | % | |||||||||||||||
| 2014 | 3,451 | 414 | 12 | % | 14,786 | 2,452 | 114 | 48 | 4.2 | % | 1.1 | % | 4.6 | % | |||||||||||||||||
| 2015 | 12,422 | 2,529 | 20 | % | 52,548 | 13,334 | 541 | 113 | 3.2 | % | 1.2 | % | 4.1 | % | |||||||||||||||||
| 2016 | 21,187 | 5,702 | 27 | % | 83,626 | 27,332 | 1,256 | 122 | 2.8 | % | 1.6 | % | 4.6 | % | |||||||||||||||||
| 2017 | 21,582 | 6,700 | 31 | % | 85,897 | 32,499 | 1,972 | 84 | 4.4 | % | 2.4 | % | 6.1 | % | |||||||||||||||||
| 2018 | 27,295 | 8,074 | 30 | % | 104,043 | 38,090 | 2,679 | 64 | 8.5 | % | 2.6 | % | 7.0 | % | |||||||||||||||||
| 2019 | 45,141 | 20,402 | 45 | % | 148,423 | 77,278 | 3,276 | 9 | 14.1 | % | 2.2 | % | 4.2 | % | |||||||||||||||||
| 2020 | 62,702 | 53,650 | 86 | % | 186,174 | 163,626 | 1,247 | — | 8.3 | % | 0.7 | % | 0.8 | % | |||||||||||||||||
| 2021 | 26,397 | 26,296 | 100 | % | 82,232 | 81,975 | 3 | — | — | % | — | % | — | % | |||||||||||||||||
| Total | $ | 220,339 | $ | 123,777 | 758,384 | 436,652 | 11,090 | 441 | |||||||||||||||||||||||
(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, 2021 | March 31, 2020 | ||||||
| (In Thousands) | |||||||
| Beginning balance | $ | 90,567 | $ | 23,752 | |||
| Less reinsurance recoverables (1) | (17,608 | ) | (4,939 | ) | |||
| Beginning balance, net of reinsurance recoverables | 72,959 | 18,813 | |||||
| Add claims incurred: | |||||||
| Claims and claim expenses incurred: | |||||||
| Current year (2) | 10,557 | 7,558 | |||||
| Prior years (3) | (5,595 | ) | (1,861 | ) | |||
| Total claims and claim expenses incurred | 4,962 | 5,697 | |||||
| Less claims paid: | |||||||
| Claims and claim expenses paid: | |||||||
| Current year (2) | 12 | — | |||||
| Prior years (3) | 492 | 1,224 | |||||
| Total claims and claim expenses paid | 504 | 1,224 | |||||
| Reserve at end of period, net of reinsurance recoverables | 77,417 | 23,286 | |||||
| Add reinsurance recoverables (1) | 18,686 | 6,193 | |||||
| Ending balance | $ | 96,103 | $ | 29,479 | |||
(1) Related to ceded losses recoverable under the QSR Transactions.
(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 and included $5.3 million attributed to net case reserves and $5.3 million attributed to net IBNR reserves for the three months ended March 31, 2021 and $6.0 million attributed to net case reserves and $1.6 million attributed to net IBNR reserves for the three months ended March 31, 2020.
(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 and included $0.6 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the three months ended March 31, 2021 and $0.6 million attributed to net case reserves and $1.3 million attributed to net IBNR reserves for the three months ended March 31, 2020.
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, 2021 | March 31, 2020 | ||||
| Beginning default inventory | 12,209 | 1,448 | |||
| Plus: new defaults | 1,767 | 512 | |||
| Less: cures | (2,868 | ) | (475 | ) | |
| Less: claims paid | (16 | ) | (34 | ) | |
| Less: claims denied | (2 | ) | (2 | ) | |
| Ending default inventory | 11,090 | 1,449 | |||
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, 2021 | March 31, 2020 | ||||||
| (In Thousands) | |||||||
| Number of claims paid (1) | 16 | 34 | |||||
| Total amount paid for claims | $ | 606 | $ | 1,503 | |||
| Average amount paid per claim | $ | 38 | $ | 44 | |||
| Severity(2) | 61 | % | 83 | % | |||
(1) Count includes one claim settled without payment for the three months ended March 31, 2021 and 2020.
(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, 2021 | As of March 31, 2020 | |||||
| (In Thousands) | |||||||
| Case (1) | $ | 7.9 | $ | 18.6 | |||
| IBNR (1)(2) | 0.8 | 1.7 | |||||
| Total | $ | 8.7 | $ | 21.3 | |||
(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, 2021 | December 31, 2020 | March 31, 2020 | |||||||||
| (In Thousands) | |||||||||||
| Available Assets | $ | 1,809,589 | $ | 1,750,668 | $ | 1,069,695 | |||||
| Risk-Based Required Assets | 1,261,015 | 984,372 | 912,321 | ||||||||