Press Release

NMI Holdings, Inc. Reports Fourth Quarter and Full Year 2020 Financial Results
Feb 16, 2021

EMERYVILLE, Calif., Feb. 16, 2021 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported net income of $48.3 million, or $0.56 per diluted share, for the fourth quarter ended December 31, 2020, which compares to $38.2 million, or $0.45 per diluted share, in the third quarter ended September 30, 2020 and $50.2 million, or $0.71 per diluted share, in the fourth quarter ended December 31, 2019. Adjusted net income for the quarter was $50.8 million or $0.59 per diluted share, which compares to $40.4 million or $0.47 per diluted share in the third quarter ended September 30, 2020 and $52.6 million or $0.75 per diluted share in the fourth quarter ended December 31, 2019.

Net income for the full year ended December 31, 2020 was $171.6 million or $2.13 per diluted share, which compares to $172.0 million or $2.47 per diluted share, for the year ended December 31, 2019. Adjusted net income for the year was $173.6 million or $2.19 per diluted share, which compares to $182.4 million or $2.62 per diluted share, for the year ended December 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 fourth quarter capped an unprecedented year of challenge, resiliency and reward for National MI. In 2020, we helped over 250,000 borrowers gain access to housing, allowing them to establish a safe and secure environment in which to shelter through the COVID pandemic. We expanded our customer franchise, delivered record NIW volume, grew our high-quality insured portfolio and balance sheet, and delivered significant profitability, all while absorbing the impact of COVID through the year.”

Selected fourth quarter 2020 highlights include:

  • New insurance written was $19.8 billion, up 7% compared to $18.5 billion in the third quarter and 66% compared to $11.9 billion in the fourth quarter of 2019
  • Primary insurance-in-force at quarter end was $111.3 billion, up 6% from $104.5 billion at the end of the third quarter and 17% compared to the fourth quarter of 2019
  • Net premiums earned were $100.7 million, up 2% compared $98.8 million in the third quarter and 5% compared to $95.5 million in the fourth quarter of 2019
  • Underwriting and operating expenses were $35.0 million, including $1.7 million of capital market transaction costs, compared to $34.0 million in the third quarter and $31.3 million in the fourth quarter of 2019
  • Insurance claims and claim expenses were $3.5 million, compared to $15.7 million in the third quarter and $4.3 million in the fourth quarter of 2019
  • At quarter-end, cash and investments were $1.9 billion and shareholders’ equity was $1.4 billion, equal to $16.08 per share
  • Annualized return on equity for the quarter was 14.4% and annualized adjusted return on equity was 15.2%
  • At quarter-end, the company reported total PMIERs available assets of $1.8 billion and net risk-based required assets of $984 million
  Quarter
Ended
Quarter
Ended
Quarter
Ended
Change (1)Change (1)
  12/31/20209/30/202012/31/2019Q/QY/Y
INSURANCE METRICS ($billions)
Primary Insurance-in-Force $111.3 $104.5 $94.8 %  17 %  
New Insurance Written - NIW      
 Monthly premium17.8 16.5 11.1 %  60 %  
 Single premium2.0 2.0 0.9 %  131 %  
 Total (2)19.8 18.5 11.9 %  66 %  
      
FINANCIAL HIGHLIGHTS ($millions, except per share amounts)
Net Premiums Earned100.7 98.8 95.5 %  %  
Insurance Claims and Claim Expenses3.5 15.7 4.3 (77)%  (17)%  
Underwriting and Operating Expenses35.0 34.0 31.3 %  12 %  
Net Income 48.3 38.2 50.2 26%  (4)%  
Adjusted Net Income 50.8 40.4 52.6 26%  (4)%  
Cash and Investments $1,931 $1,884 $1,182 %  63 %  
Shareholders' Equity 1,370 1,308 930 %  47 %  
Book Value per Share$16.08 $15.42 $13.61 %  18 %  
Loss Ratio3.5%15.9%4.5%  
Expense Ratio34.7%34.4%32.8%  

(1)   Percentages may not be replicated based on the rounded figures presented in the table.
(2)   Total may not foot due to rounding.

Conference Call and Webcast Details
     
The company will hold a conference call, which will be webcast live today, February 16, 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: 1798854 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 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 the expiration of the "QM Patch" and "Qualified Mortgage" definitions 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 and in Part II, Item 1A of our Quarterly Reports on Form 10-Q for the quarters ended June 30 and September 30, 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 December 31, For the year ended December 31,
 2020 2019 2020 2019
Revenues(In Thousands, except for per share data)
Net premiums earned$100,709   $95,517   $397,172   $345,015  
Net investment income8,386   7,962   31,897   30,856  
Net realized investment gains295   264   930   45  
Other revenues513   1,154   3,284   2,855  
Total revenues109,903   104,897   433,283   378,771  
Expenses       
Insurance claims and claim expenses3,549   4,269   59,247   12,507  
Underwriting and operating expenses34,994   31,296   131,610   126,621  
Service expenses459   937   2,840   2,248  
Interest expense7,906   2,974   24,387   12,085  
Loss (gain) from change in fair value of warrant liability1,379   2,632   (2,907)  8,657  
Total expenses48,287   42,108   215,177   162,118  
        
Income before income taxes61,616   62,789   218,106   216,653  
Income tax expense13,348   12,594   46,540   44,696  
Net income$48,268   $50,195   $171,566   $171,957  
        
Earnings per share       
Basic$0.57   $0.74   $2.20   $2.54  
Diluted$0.56   $0.71   $2.13   $2.47  
        
Weighted average common shares outstanding       
Basic84,956   68,140   78,023   67,573  
Diluted86,250   70,276   79,263   69,721  
        
Loss ratio(1)3.5%   4.5%   14.9%   3.6%  
Expense ratio(2)34.7%   32.8%   33.1%   36.7%  
Combined ratio (3)38.3%   37.2%   48.1%   40.3%  
        
Net income$48,268   $50,195   $171,566   $171,957  
Other comprehensive income (loss), net of tax:       
Unrealized gains (losses) in accumulated other
comprehensive income, net of tax expense
(benefit) of $1,869 and ($444) for the three
months ended December 31, 2020 and 2019,
respectively, and $9,525 and $8,548 for the years
ended December 31, 2020, and 2019,
respectively
7,031   (1,668)  35,829   32,155  
Reclassification adjustment for realized (gains)
losses included in net income, net of tax expense
(benefit) of $62 and $55 for the three months
ended December 31, 2020 and 2019,
respectively, and ($196) and $9 for the years
ended December 31, 2020, and 2019 respectively
(233)  (208)  739   (35) 
Other comprehensive income (loss), net of tax6,798   (1,876)  36,568   32,120  
Comprehensive income$55,066   $48,319   $208,134   $204,077  

(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.
(3)   Combined ratio may not foot due to rounding.

Consolidated balance sheetsDecember 31, 2020 December 31, 2019
Assets(In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $1,730,835 and
$1,113,779 as of December 31, 2020 and December 31, 2019, respectively)
$1,804,286   $1,140,940  
Cash and cash equivalents (including restricted cash of $5,555 and $2,662 as of
December 31, 2020 and December 31, 2019, respectively)
126,937   41,089  
Premiums receivable49,779   46,085  
Accrued investment income9,862   6,831  
Prepaid expenses3,292   3,512  
Deferred policy acquisition costs, net62,225   59,972  
Software and equipment, net29,665   26,096  
Intangible assets and goodwill3,634   3,634  
Prepaid reinsurance premiums6,190   15,488  
Reinsurance recoverable (1)17,608   4,939  
Other assets (1)53,188   16,232  
Total assets$2,166,666   $1,364,818  
    
Liabilities   
Debt$393,301   $145,764  
Unearned premiums118,817   136,642  
Accounts payable and accrued expenses61,716   39,904  
Reserve for insurance claims and claim expenses90,567   23,752  
Reinsurance funds withheld8,653   14,310  
Warrant liability, at fair value4,409   7,641  
Deferred tax liability, net112,586   56,360  
Other liabilities7,026   10,025  
Total liabilities797,075   434,398  
    
Shareholders' equity   
Common stock - class A shares, $0.01 par value; 85,163,039 and 68,358,074 shares
issued and outstanding as of December 31, 2020 and December 31, 2019,
respectively (250,000,000 shares authorized)
852   684  
Additional paid-in capital937,872   707,003  
Accumulated other comprehensive income, net of tax53,856   17,288  
Retained earnings377,011   205,445  
Total shareholders' equity1,369,591   930,420  
Total liabilities and shareholders' equity$2,166,666   $1,364,818  

(1)   Reinsurance recoverable has been reclassified to "Other assets" in the prior periods.

Non-GAAP Financial Measure Reconciliations
 For the three months ended For the year ended
 12/31/2020 9/30/2020 12/31/2019 12/31/2020 12/31/2019
As Reported(In Thousands, except for per share data)
Revenues         
Net premiums earned$100,709   $98,802   $95,517   $397,172   $345,015  
Net investment income8,386   8,337   7,962   31,897   30,856  
Net realized investment gains (losses)295   (4)  264   930   45  
Other revenues513   648   1,154   3,284   2,855  
Total revenues109,903   107,783   104,897   433,283   378,771  
Expenses         
Insurance claims and claim expenses3,549   15,667   4,269   59,247   12,507  
Underwriting and operating expenses34,994   33,969   31,296   131,610   126,621  
Service expenses459   557   937   2,840   2,248  
Interest expense7,906   7,796   2,974   24,387   12,085  
Loss (gain) from change in fair value of warrant liability1,379   437   2,632   (2,907)  8,657  
Total expenses48,287   58,426   42,108   215,177   162,118  
          
Income before income taxes61,616   49,357   62,789   218,106   216,653  
Income tax expense13,348   11,178   12,594   46,540   44,696  
Net income $48,268   $38,179   $50,195   $171,566   171,957  
          
Adjustments:         
Net realized investment (gains) losses(295)  4   (264)  (930)  (45) 
Loss (gain) from change in fair value of warrant liability1,379   437   2,632   (2,907)  8,657  
Capital markets transaction costs1,719   2,254      7,237   2,353  
Adjusted income before taxes64,419   52,052   65,157   221,506   227,618  
          
Income tax expense on adjustments299   474   (55)  1,324   485  
Adjusted net income$50,772   $40,400   $52,618   $173,642   $182,437  
          
Weighted average diluted shares outstanding86,250   85,599   70,276   79,263   69,721  
          
Diluted EPS$0.56   $0.45   $0.71   $2.13  (1) $2.47  
Adjusted diluted EPS $0.59   $0.47   $0.75   $2.19   $2.62  
          
Return on equity (2)14.4%   11.9%   22.3%   14.9%   21.1%  
Adjusted return on equity (3)15.2%   12.6%   23.3%   15.1%   22.4%  
          
Expense ratio (4)34.7%   34.4%   32.8%   33.1%   36.7%  
Adjusted expense ratio (5)33.0%   32.1%   32.8%   32.0%   36.0%  
          
Combined ratio (6)38.3%   50.2%   37.2%   48.1%   40.3%  
Adjusted combined ratio (7)36.6%   48.0%   37.2%   46.9%   39.6%  

(1)   Diluted net income for the year ended December 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.
(2)   Return on equity is calculated by dividing net income on an annualized basis by the average shareholders' equity for the period
(3)   Adjusted return on equity is calculated by dividing adjusted net income on an annualized basis by the average shareholders' equity for the period.
(4)   Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
(5)   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.
(6)  Combined ratio is calculated by dividing the total of underwriting and operating expenses and insurance claims and claims expense by net premiums earned.
(7)  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 Data2020 2019
 December 31 September 30 June 30 March 31 December 31 September 30
            
Revenues(In Thousands, except for per share data)
Net premiums earned$100,709  $98,802   $98,944  $98,717   $95,517  $92,381  
Net investment income8,386  8,337   7,070  8,104   7,962  7,882  
Net realized investment gains (losses)295  (4)  711  (72)  264  81  
Other revenues513  648   1,223  900   1,154  1,244  
Total revenues109,903  107,783   107,948  107,649   104,897  101,588  
Expenses           
Insurance claims and claim expenses3,549  15,667   34,334  5,697   4,269  2,572  
Underwriting and operating expenses34,994  33,969   30,370  32,277   31,296  32,335  
Service expenses459  557   1,090  734   937  909  
Interest expense7,906  7,796   5,941  2,744   2,974  2,979  
Loss (gain) from change in fair value of warrant liability1,379  437   1,236  (5,959)  2,632  (1,139) 
Total expenses48,287  58,426   72,971  35,493   42,108  37,656  
            
Income before income taxes61,616  49,357   34,977  72,156   62,789  63,932  
Income tax expense13,348  11,178   8,129  13,885   12,594  14,169  
Net income$48,268  $38,179   $26,848  $58,271   $50,195  $49,763  
            
Earnings per share           
Basic$0.57  $0.45   $0.36  $0.85   $0.74  $0.73  
Diluted$0.56  $0.45   $0.36  $0.74   $0.71  $0.69  
            
Weighted average common shares outstanding           
Basic84,956  84,805   73,617  68,563   68,140  67,849  
Diluted86,250  85,599   74,174  70,401   70,276  70,137  
            
Other data           
Loss Ratio(2)3.5%  15.9%   34.7%  5.8%   4.5%  2.8%  
Expense Ratio(3)34.7%  34.4%   30.7%  32.7%   32.8%  35.0%  
Combined ratio (4)38.3%  50.2%   65.4%  38.5%   37.2%  37.8%  

(1)   Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2)   Loss ratio is calculated by dividing 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.

Portfolio Statistics

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

Primary portfolio trendsAs of and for the three months ended
 December 31,
2020
 September 30,
2020
 June 30, 2020 March 31,
2020
 December 31,
2019
 September 30,
2019
 ($ Values In Millions)
New insurance written$19,782  $18,499  $13,124  $11,297  $11,949  $14,100 
New risk written4,868  4,577  3,260  2,897  3,082  3,651 
Insurance in force (IIF) (1)111,252  104,494  98,905  98,494  94,754  89,713 
Risk in force (1)28,164  26,568  25,238  25,192  24,173  22,810 
Policies in force (count) (1)399,429  381,899  372,934  376,852  366,039  350,395 
Average loan size ($ value in thousands) (1)$279  $274  $265  $261  $259  $256 
Coverage percentage (2)25.3% 25.4% 25.5% 25.6% 25.5% 25.4%
Loans in default (count) (1)12,209  13,765  10,816  1,449  1,448  1,230 
Default rate (1)3.06% 3.60% 2.90% 0.38% 0.40% 0.35%
Risk in force on defaulted loans (1)$874  $1,008  $799  $84  $84  $70 
Net premium yield (3)0.37% 0.39% 0.40% 0.41% 0.41% 0.43%
Earnings from cancellations$11.7  $12.6  $15.5  $8.6  $8.0  $7.4 
Annual persistency (4)55.9% 60.0% 64.1% 71.7% 76.8% 82.4%
Quarterly run-off (5)12.5% 13.1% 12.9% 8.0% 7.7% 7.5%

(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.

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 NIWFor the three months ended
 December 31,
2020
 September 30,
2020
 June 30, 2020 March 31, 2020 December 31,
2019
 September 30,
2019
 (In Millions)
Monthly$17,789   $16,516   $11,885   $10,461   $11,085   $12,994  
Single1,993   1,983   1,239   836   864   1,106  
Primary$19,782   $18,499   $13,124   $11,297   $11,949   $14,100  


Primary and pool IIFAs of
 December 31,
2020
 September 30,
2020
 June 30, 2020 March 31, 2020 December 31,
2019
 September 30,
2019
 (In Millions)
Monthly$95,336   $88,584   $82,848   $81,347   $77,097   $71,814  
Single15,916   15,910   16,057   17,147   17,657   17,899  
Primary111,252   104,494   98,905   98,494   94,754   89,713  
            
Pool1,855   2,115   2,340   2,487   2,570   2,668  
Total$113,107   $106,609   $101,245   $100,981   $97,324   $92,381  

        The following table presents the amounts related to the company's quota-share reinsurance transactions (the 2016 QSR Transaction, 2018 QSR Transaction and 2020 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
 December 31,
2020
 September 30,
2020
 June 30, 2020 March 31,
2020
 December 31,
2019
September 30,
2019
 (In Thousands)
The QSR Transactions          
Ceded risk-in-force$5,543,969   $5,159,061   $4,563,676   $4,843,715   $5,137,249  $4,901,809  
Ceded premiums earned(24,161)  (24,517)  (23,210)  (23,011)  (23,673) (23,151) 
Ceded claims and claim expenses601   3,200   8,669   1,532   1,030  766  
Ceding commission earned4,787   4,798   4,428   4,513   4,691  4,584  
Profit commission13,184   11,034   5,271   12,413   13,314  13,254  
           
The ILN Transactions          
Ceded premiums$(9,422)  $(6,268)  $(3,267)  $(3,872)  $(4,263) $(4,409) 

        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 FICOFor the three months ended For the year ended
 December 31,
2020
 September 30,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
          
 ($ In Millions)
>= 760$11,495   $11,600   $6,253   $37,437   $21,931  
740-7593,387   2,575   1,864   9,443   7,541  
720-7392,447   2,187   1,712   7,820   6,643  
700-7191,430   1,217   1,204   4,644   4,783  
680-699820   793   662   2,692   3,021  
<=679203   127   254   666   1,222  
Total$19,782   $18,499   $11,949   $62,702   $45,141  
Weighted average FICO761   764   756   761   753  


Primary NIW by LTVFor the three months ended  For the year ended
 December 31,
2020
 September 30,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
          
 (In Millions)
95.01% and above$1,877  $587  $663  $3,732  $3,192 
90.01% to 95.00%7,839  7,767  5,528  26,000  21,475 
85.01% to 90.00%6,239  6,968  4,296  22,356  15,555 
85.00% and below3,827  3,177  1,462  10,614  4,919 
Total$19,782  $18,499  $11,949  $62,702  $45,141 
Weighted average LTV90.9% 90.7% 91.4% 90.9% 91.8%


Primary NIW by purchase/refinance mixFor the three months ended For the year ended
 December 31,
2020
 September 30,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
          
 (In Millions)
Purchase$13,085   $12,764   $9,041   $41,616   $37,405  
Refinance6,697   5,735   2,908   21,086   7,736  
Total$19,782   $18,499   $11,949   $62,702   $45,141  

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

Primary IIF and RIFAs of December 31, 2020
 IIF RIF
 (In Millions)
December 31, 2020$58,232   $14,510  
201925,038   6,548  
20189,788   2,494  
20178,009   2,002  
20166,756   1,732  
2015 and before3,429   878  
Total$111,252   $28,164  

        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 FICOAs of
 December 31, 2020 September 30, 2020 December 31, 2019
 (In Millions)
>= 760$58,368   $53,742   $44,793  
740-75917,442   16,193   15,728  
720-73915,091   14,352   13,417  
700-71910,442   10,235   10,284  
680-6996,777   6,713   6,774  
<=6793,132   3,259   3,758  
Total$111,252   $104,494   $94,754  


Primary RIF by FICOAs of
 December 31, 2020 September 30, 2020 December 31, 2019
 (In Millions)
>= 760$14,634   $13,563   $11,388  
740-7594,449   4,141   4,034  
720-7393,868   3,694   3,465  
700-7192,692   2,635   2,632  
680-6991,748   1,730   1,728  
<=679773   805   926  
Total$28,164   $26,568   $24,173  


Primary IIF by LTVAs of
 December 31, 2020 September 30, 2020 December 31, 2019
 (In Millions)
95.01% and above$9,129   $8,130   $8,640  
90.01% to 95.00%49,898   47,828   44,668  
85.01% to 90.00%36,972   35,224   30,163  
85.00% and below15,253   13,312   11,283  
Total$111,252   $104,494   $94,754  


Primary RIF by LTVAs of
 December 31, 2020 September 30, 2020 December 31, 2019
 (In Millions)
95.01% and above$2,637   $2,310   $2,390  
90.01% to 95.00%14,673   14,056   13,086  
85.01% to 90.00%9,067   8,642   7,376  
85.00% and below1,787   1,560   1,321  
Total$28,164   $26,568   $24,173  


Primary RIF by Loan TypeAs of
 December 31, 2020 September 30, 2020 December 31, 2019
      
Fixed99% 99% 98%
Adjustable rate mortgages:     
Less than five years     
Five years and longer1  1  2 
Total100% 100% 100%

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

Primary IIFFor the three months ended
 December 31, 2020 September 30, 2020 December 31, 2019
 (In Millions)
IIF, beginning of period$104,494   $98,905   $89,713  
NIW19,782   18,499   11,949  
Cancellations, principal repayments and other reductions(13,024)  (12,910)  (6,908) 
IIF, end of period$111,252   $104,494   $94,754  

Geographic Dispersion

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

Top 10 primary RIF by stateAs of
 December 31, 2020 September 30, 2020 December 31, 2019
California11.2% 11.3% 11.8%
Texas8.8  8.3  8.2 
Florida7.3  6.7  5.7 
Virginia5.1  5.4  5.3 
Colorado4.1  4.0  3.4 
Illinois3.8  4.0  3.8 
Maryland3.7  3.6  3.4 
Washington3.5  3.5  3.3 
Pennsylvania3.4  3.5  3.6 
Massachusetts3.3  3.5  3.3 
Total54.2% 53.8% 51.8%

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

 As of December 31, 2020
Book yearOriginal
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  $12  7% 655  74  1  1  0.2% 0.3% 1.4%
20143,451  478  14% 14,786  2,783  128  48  4.2% 1.2% 4.6%
201512,422  2,939  24% 52,548  15,201  597  111  3.2% 1.3% 3.9%
201621,187  6,756  32% 83,626  31,635  1,417  118  2.9% 1.8% 4.5%
201721,582  8,009  37% 85,897  37,919  2,219  82  4.6% 2.7% 5.9%
201827,295  9,788  36% 104,043  44,969  2,962  57  8.4% 2.9% 6.6%
201945,141  25,038  55% 148,423  91,657  3,724  8  14.7% 2.5% 4.1%
202062,702  58,232  93% 186,174  175,191  1,161    9.4% 0.6% 0.7%
Total$193,942  $111,252    676,152  399,429  12,209  425       

(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  For the year ended
 December 31,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
 (In Thousands)
Beginning balance$87,230   $20,505   $23,752   $12,811  
Less reinsurance recoverables (1)(17,180)  (4,309)  (4,939)  (3,001) 
Beginning balance, net of reinsurance recoverables70,050   16,196   18,813   9,810  
        
Add claims incurred:       
Claims and claim expenses incurred:       
Current year (2)5,745   3,789   66,943   14,737  
Prior years (3)(2,196)  480   (7,696)  (2,230) 
Total claims and claim expenses incurred3,549   4,269   59,247   12,507  
        
Less claims paid:       
Claims and claim expenses paid:       
Current year (2)434   204   586   204  
Prior years (3)206   1,448   4,515   3,849  
Reinsurance terminations (4)         (549) 
Total claims and claim expenses paid640   1,652   5,101   3,504  
        
Reserve at end of period, net of reinsurance recoverables72,959   18,813   72,959   18,813  
Add reinsurance recoverables (1)17,608   4,939   17,608   4,939  
Ending balance$90,567   $23,752   $90,567   $23,752  

(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.
(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.
(4)   Represents the settlement of reinsurance recoverables in conjunction with the termination of one reinsurer under the 2016 QSR Transaction on a cut-off basis.  

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

 For the three months ended  For the year ended
 December 31,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
Beginning default inventory13,765   1,230   1,448   877  
Plus: new defaults2,589   591   19,459   2,429  
Less: cures(4,122)  (319)  (8,548)  (1,702) 
Less: claims paid(20)  (54)  (143)  (152) 
Less: claims denied(3)     (7)  (4) 
Ending default inventory12,209   1,448   12,209   1,448  

        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 For the year ended
 December 31,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
 (In Thousands)
Number of claims paid (1)20  54  143  152 
Total amount paid for claims$813  $2,051  $6,434  $5,030 
Average amount paid per claim$41  $38  $45  $33 
Severity(2)75% 80% 80% 74%

(1)   Count includes one and nine claims settled without payment for the three months and year ended December 31, 2020, respectively, and five and 19 claims settled without payment for the three months and year ended December 31, 2019, respectively.
(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 December 31,
2020
 As of December 31,
2019
 (In Thousands)
Case (1)$6.8  $15.0 
IBNR (2)$0.6  $1.4 
Total$7.4  $16.4 

(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
 December 31, 2020 September 30, 2020 December 31, 2019
 (In Thousands)
Available Assets$1,750,668   $1,671,990   $1,016,387  
Risk-Based Required Assets984,372   990,678   773,474