Press Release

NMI Holdings, Inc. Reports Record Third Quarter 2018 Financial Results
Oct 30, 2018

EMERYVILLE, Calif., Oct. 30, 2018 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported GAAP net income of $24.8 million, or $0.36 per diluted share, and adjusted net income of $31.8 million, or $0.46 per diluted share, for its third quarter ended September 30, 2018. This compares with GAAP net income of $25.2 million, or $0.37 per diluted share, and adjusted net income of $27.4 million, or $0.40 per diluted share in the second quarter ended June 30, 2018. In the third quarter of 2017, the company reported GAAP net income of $12.3 million, or $0.20 per diluted share, and adjusted net income of $12.6 million, or $0.20 per diluted share. The non-GAAP financial measures adjusted net income, adjusted net income 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" below.

Bradley Shuster, Chairman and CEO of National MI, said, "National MI delivered record third quarter financial results, including record new insurance written of $7.4 billion, record net premiums earned of $65.4 million, record adjusted net income of $31.8 million, and record adjusted return-on-equity of 19.7%. We continued to grow our high-quality insured portfolio at an industry-leading rate and achieved broad success with Rate GPS, our granular risk selection and pricing engine. Customers have quickly recognized the value that Rate GPS offers them and their borrowers, and we have seen an immediate benefit in the credit quality and volume of new business coming through the platform.   Rate GPS, along with our industry-leading individual risk underwriting approach and our comprehensive reinsurance program, provides us with what we believe is the most robust risk management framework in our industry."

  • As of September 30, 2018, the company had primary insurance-in-force of $63.5 billion, up 9% from $58.1 billion at the prior quarter end and up 47% over $43.3 billion as of September 30, 2017.
     
  • Net premiums earned for the quarter were $65.4 million, including $2.6 million attributable to cancellation of single premium policies, which compares with $61.6 million, including $3.1 million related to cancellations, in the prior quarter.  Net premiums earned in the third quarter of 2018 were up 47% over net premiums earned of $44.5 million in the same quarter a year ago, which included $4.3 million related to cancellations.
     
  • Total underwriting and operating expenses in the third quarter were $30.4 million, including approximately $1.9 million of fees and expenses related to the recently completed Insurance-Linked Notes transaction. This compares with total underwriting and operating expense of $29.0 million in the prior quarter, which included approximately $0.7 million of fees and expenses related to the issuance of the Insurance-Linked Notes, and $24.6 million in the same quarter a year ago.
     
  • At quarter-end, cash and investments were $893 million and shareholders’ equity was $660 million, equal to $9.96 per share. Return on equity for the quarter was 15.4% and adjusted return on equity was 19.7%.
     
  • At quarter-end, the company had total PMIERs available assets of $702 million, which compares with risk-based required assets under PMIERs of $399 million.

Adjusted net income and adjusted net income per diluted share for the quarters presented exclude the impact of periodic capital markets transaction costs, changes in the fair value of our warrant liability and realized gains or losses from our investment portfolio. In the third quarter of 2018, adjusted net income and adjusted net income per diluted share exclude costs of $1.9 million related to the issuance of Insurance-Linked Notes in July 2018, as well as a pre-tax loss of $5.5 million related to the change in fair value of the company’s warrant liability and pre-tax net realized investment losses of $8 thousand.

             
    Quarter Ended Quarter Ended Quarter Ended Change (1) Change (1)
    9/30/2018 6/30/2018 9/30/2017 Q/Q Y/Y
Primary Insurance-in-Force ($billions) $ 63.5   $ 58.1   $ 43.3   9 % 47 %
New Insurance Written - NIW ($billions)          
  Monthly premium 6.7   5.7   4.8   17 % 38 %
  Single premium 0.7   0.8   1.3   (14 )% (46 )%
  Total 7.4   6.5   6.1   13 % 20 %
           
Premiums Earned ($millions) 65.4   61.6   44.5   6 % 47 %
Underwriting & Operating Expense ($millions) 30.4   29.0   24.6   5 % 23 %
Loss Expense ($millions) 1.1   0.6   1.0   71 % 15 %
Loss Ratio 1.7 % 1.0 % 2.1 %    
Cash & Investments ($millions) $ 892.6   $ 854.7   $ 713.4   4 % 25 %
Book Equity ($millions) 660.5   629.6   511.0   5 % 29 %
Book Value per Share 9.96   9.58   8.53   4 % 17 %

(1)  Percentages may not be recalculated based on the rounded figures presented in the table.

Conference Call and Webcast Details

The company will hold a conference call and live webcast at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time.  The webcast will be available on the company's website, www.nationalmi.com, in the "Investor Relations" section.  The call also can be accessed by dialing (888) 734-0328 in the U.S., or (914) 495-8578 for international callers using Conference ID: 1297249, 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 (Securities Act), Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), and the U.S. Private Securities Litigation Reform Act of 1995 (PSLRA).  The PSLRA provides a "safe harbor" for any forward-looking statements.  All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements, including any statements about our expectations, outlook, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance.  These statements are often, but not always, made through the use of words or phrases such as "anticipate," "believe," "can," "could," "may," "predict," "assume," "potential," "should," "will," "estimate," "plan," "project," "continuing," "ongoing," "expect," "intend" and similar words or phrases.  All forward-looking statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that may turn out to be inaccurate and could cause actual results to differ materially from those expressed in them.  Many risks and uncertainties are inherent in our industry and markets.  Others are more specific to our business and operations.  Important factors that could cause actual events or results to differ materially from those indicated in such statements include, but are not limited to: changes in the business practices of Fannie Mae and Freddie Mac (collectively, the GSEs), including decisions that have the impact of decreasing or discontinuing the use of mortgage insurance as credit enhancement; our ability to remain an eligible mortgage insurer under the 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 public mortgage insurers such as the Federal Housing Administration and the Veterans Administration and potential market entry by new competitors or consolidation of existing competitors; developments in the world's financial and capital markets and our access to such markets, including reinsurance; adoption of new or changes to existing laws and regulations that impact our business or financial condition directly or the mortgage insurance industry generally or their enforcement and implementation by regulators; changes to the GSEs' role in the secondary mortgage market or other changes that could affect the residential mortgage industry generally or mortgage insurance 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 recent natural disasters, including, with respect to the affected areas, a decline in new business, adverse effects on home prices, and an increase in notices of default on insured mortgages; the inability of our counter-parties, including third party reinsurers, to meet their obligations to us; our ability to utilize our net operating loss carryforwards, which could be limited or eliminated in various ways, including if we experience an ownership change as defined in Section 382 of the Internal Revenue Code; failure to maintain, improve and continue to develop necessary information technology systems or the failure of technology providers to perform as expected; and, our ability to recruit, train and retain key personnel.  These risks and uncertainties also include, but are not limited to, those set forth under the heading "Risk Factors" detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2017 and in Item IA of Part II of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, as subsequently updated through other reports we file with the SEC.  All subsequent written and oral forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.  We caution you not to place undue reliance on any forward-looking statement, which speaks only as of the date on which it is made, and we undertake no obligation to publicly update or revise any forward-looking statement to reflect new information, future events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events except as required by law.

Use of Non-GAAP Financial Measures

We believe that use of the non-GAAP measures of adjusted pre-tax income, adjusted net income, adjusted net income per share and adjusted return-on-equity facilitate the evaluation of our fundamental financial performance, thereby providing relevant information to investors. These non-GAAP financial measures align with the way the company's business performance is evaluated by management. These measures are not recognized in accordance with GAAP and should not be viewed as alternatives to GAAP measures of performance.  These measures have been established in order to increase transparency for the purposes of evaluating our fundamental operating trends and enabling more meaningful comparisons with our peers.

Adjusted pre-tax income is defined as GAAP income before tax, excluding the effects of the 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 net income per diluted share is calculated in a manner consistent with the accounting standard regarding earnings per share by dividing (i) adjusted net income by (ii) diluted weighted average common shares outstanding, which includes shares of common stock outstanding and common stock equivalents that would be issuable upon (i) the vesting of service based RSUs and (ii) exercise of vested and unvested stock options and outstanding warrants.

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

Although adjusted pre-tax income and adjusted net income exclude certain items that have occurred in the past and are expected to occur in the future, the excluded items are: (1) not viewed as part of the operating performance of our primary activities; or (2) impacted by market, economic or regulatory factors and are not necessarily indicative of operating trends, or both. These adjustments, along with the reasons for their treatment, are described below. Trends in the profitability of our fundamental operating activities can be more clearly identified by adjusting for fluctuations in these items. Other companies may calculate these measures differently. Therefore, their measures may not be comparable to those used by us.

  1. Change in fair value of warrant liability.  Outstanding warrants at the end of each reporting period are revalued, and any change in fair value is reported in the statements of operations in the period in which the change occurred.  The change in the fair value of our warrant liability can vary significantly across periods and is influenced principally by equity market and general economic factors which may not impact or reflect our current period operating results. Trends in our operating performance can be more clearly identified without the fluctuations of the change in fair value of our warrant liability.

  2. Capital markets transaction costs. Capital markets transaction costs result from discretionary 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.

  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 of specific securities sold is highly discretionary and is influenced by factors such as market opportunities, tax and capital profile and overall market cycles.

  4. Infrequent or unusual non-operating items. Income Statement items occurring separately from operating earnings that are not expected to recur in the future. They are the result of unforeseen or uncommon events.  Exclusion of these items provides clarity about the impact of special or rare circumstances on current financial performance. An example is income tax expense adjustments due to a re-measurement of the net deferred tax assets in connection with tax reform, which are non-recurring in nature and are not part of our primary operating activities.  We did not adjust for any infrequent or unusual non-operating items to calculate the non-GAAP measures presented in this release.

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 September 30,   For the nine months ended September 30,
  2018   2017   2018   2017
Revenues (In Thousands, except for per share data)
Net premiums earned $ 65,407     $ 44,519     $ 181,936     $ 115,661  
Net investment income 6,277     4,170     16,586     11,885  
Net realized investment (losses) gains (8 )   69     51     198  
Other revenues 85     195     193     461  
Total revenues 71,761     48,953     198,766     128,205  
Expenses              
Insurance claims and claim expenses 1,099     957     3,311     2,965  
Underwriting and operating expenses 30,379     24,645     87,852     78,682  
Total expenses 31,478     25,602     91,163     81,647  
Other expense              
Loss from change in fair value of warrant liability (5,464 )   (502 )   (4,935 )   (679 )
Interest expense (2,972 )   (3,352 )   (11,951 )   (10,146 )
Total other expense (8,436 )   (3,854 )   (16,886 )   (10,825 )
               
Income before income taxes 31,847     19,497     90,717     35,733  
Income tax expense 7,036     7,185     18,310     11,917  
Net income $ 24,811     $ 12,312     $ 72,407     $ 23,816  
               
Earnings per share              
Basic $ 0.38     $ 0.21     $ 1.12     $ 0.40  
Diluted $ 0.36     $ 0.20     $ 1.07     $ 0.38  
               
Weighted average common shares outstanding              
Basic 65,948     59,884     64,584     59,680  
Diluted 68,844     63,089     67,512     62,773  
               
Loss Ratio(1) 1.7 %   2.1 %   1.8 %   2.6 %
Expense Ratio(2) 46.4 %   55.4 %   48.3 %   68.0 %
Combined ratio 48.1 %   57.5 %   50.1 %   70.6 %
               
Net income $ 24,811     $ 12,312     $ 72,407     $ 23,816  
Other comprehensive income (loss), net of tax:              
Net unrealized gains (losses) in accumulated other comprehensive income, net of tax (benefit) expense of ($337) and $366 for the three months ended September 30, 2018 and 2017, respectively, and ($3,676) and $2,439 for the nine months ended September 30, 2018 and 2017 (1,267 )   768     (13,828 )   4,786  
Reclassification adjustment for realized losses (gains) included in net income, net of tax expense (benefit) of ($2) and $24 for the three months ended September 30, 2018 and 2017, respectively, and ($27) and $69 for the nine months ended September 30, 2018 and 2017 7     (45 )   102     (129 )
Other comprehensive (loss) income, net of tax (1,260 )   723     (13,726 )   4,657  
Comprehensive income $ 23,551     $ 13,035     $ 58,681     $ 28,473  

(1) Loss ratio is calculated by dividing the provision for insurance claims and claims expenses by net premiums earned.
(2) Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned.

       
Consolidated balance sheets September 30, 2018   December 31, 2017
Assets (In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $889,794 and $713,859 as of September 30, 2018 and December 31, 2017, respectively) $ 874,435     $ 715,875  
Cash and cash equivalents (including restricted cash of $1,406 and $0 as of September 30, 2018 and December 31, 2017, respectively) 18,187     19,196  
Premiums receivable 34,675     25,179  
Accrued investment income 5,881     4,212  
Prepaid expenses 3,131     2,151  
Deferred policy acquisition costs, net 44,437     37,925  
Software and equipment, net 22,887     22,802  
Intangible assets and goodwill 3,634     3,634  
Prepaid reinsurance premiums 33,058     40,250  
Deferred tax asset, net 6,880     19,929  
Other assets 5,276     3,695  
Total assets $ 1,052,481     $ 894,848  
       
Liabilities      
Term loan $ 147,009     $ 143,882  
Unearned premiums 162,893     163,166  
Accounts payable and accrued expenses 27,134     23,364  
Reserve for insurance claims and claim expenses 10,908     8,761  
Reinsurance funds withheld 28,953     34,102  
Deferred ceding commission 4,161     5,024  
Warrant liability, at fair value 10,930     7,472  
Total liabilities 391,988     385,771  
Commitments and contingencies      
       
Shareholders' equity      
Common stock - class A shares, $0.01 par value; 66,285,847 and 60,517,512 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively (250,000,000 shares authorized) 663     605  
Additional paid-in capital 678,165     585,488  
Accumulated other comprehensive loss, net of tax (16,303 )   (2,859 )
Accumulated deficit (2,032 )   (74,157 )
Total shareholders' equity 660,493     509,077  
Total liabilities and shareholders' equity $ 1,052,481     $ 894,848  


 
Non-GAAP Financial Measure Reconciliations
  Quarter ended   Quarter ended   Quarter ended
  9/30/2018   6/30/2018   9/30/2017
 As Reported (In Thousands, except for per share data)
Revenues          
Net premiums earned $ 65,407     $ 61,615     $ 44,519  
Net investment income 6,277     5,735     4,170  
Net realized investment (losses) gains (8 )   59     69  
Other revenues 85     44     195  
Total revenues 71,761     67,453     48,953  
Expenses          
Insurance claims and claims expenses 1,099     643     957  
Underwriting and operating expenses 30,379     29,020     24,645  
Total expenses 31,478     29,663     25,602  
Other Expense          
(Loss) gain from change in fair value of warrant liability (5,464 )   109     (502 )
Interest expense (2,972 )   (5,560 )   (3,352 )
Total other expense (8,436 )   (5,451 )   (3,854 )
           
Income before income taxes 31,847     32,339     19,497  
Income tax expense 7,036     7,098     7,185  
Net income $ 24,811     $ 25,241     $ 12,312  
           
Adjustments:          
Net realized investment losses (gains) 8     (59 )   (69 )
Loss (gain) from change in fair value of warrant liability 5,464     (109 )   502  
Capital markets transaction costs 1,871     2,921      
Adjusted income before income taxes 39,190     35,092     19,930  
           
Income tax expense (benefit) on adjustments 395     578     152  
Adjusted net income $ 31,759     $ 27,416     $ 12,593  
           
Weighted average diluted shares outstanding 68,844     68,616     63,089  
           
Diluted EPS - Reported $ 0.36     $ 0.37     $ 0.20  
Diluted EPS - Adjusted $ 0.46     $ 0.40     $ 0.20  
           
Return on Equity - Reported 15.4 %   16.4 %   9.8 %
Return on Equity - Adjusted 19.7 %   17.8 %   10.0 %


       
Historical Quarterly Data 2018   2017
  September 30   June 30   March 31   December 31   September 30   June 30
Revenues (In Thousands, except for per share data)
Net premiums earned $ 65,407     $ 61,615     $ 54,914     $ 50,079     $ 44,519     $ 37,917  
Net investment income 6,277     5,735     4,574     4,388     4,170     3,908  
Net realized investment (losses) gains (8 )   59         9     69     188  
Other revenues 85     44     64     62     195     185  
Total revenues 71,761     67,453     59,552     54,538     48,953     42,198  
Expenses                      
Insurance claims and claim expenses 1,099     643     1,569     2,374     957     1,373  
Underwriting and operating expenses 30,379     29,020     28,453     28,297     24,645     28,048  
Total expenses 31,478     29,663     30,022     30,671     25,602     29,421  
                       
Other expense (1) (8,436 )   (5,451 )   (2,999 )   (6,808 )   (3,854 )   (3,281 )
                       
Income before income taxes 31,847     32,339     26,531     17,059     19,497     9,496  
Income tax expense 7,036     7,098     4,176     18,825     7,185     3,484  
Net income $ 24,811     $ 25,241     $ 22,355     $ (1,766 )   $ 12,312     $ 6,012  
                       
Earnings per share                      
Basic $ 0.38     $ 0.38     $ 0.36     $ (0.03 )   $ 0.21     $ 0.10  
Diluted $ 0.36     $ 0.37     $ 0.34     $ (0.03 )   $ 0.20     $ 0.10  
                       
Weighted average common shares outstanding                      
Basic 65,948     65,664     62,099     60,219     59,884     59,823  
Diluted 68,844     68,616     65,697     60,219     63,089     63,010  
                       
Other data                      
Loss Ratio  (2) 1.7 %   1.0 %   2.9 %   4.7 %   2.1 %   3.6 %
Expense Ratio (3) 46.4 %   47.1 %   51.8 %   56.5 %   55.4 %   74.0 %
Combined ratio 48.1 %   48.1 %   54.7 %   61.2 %   57.5 %   77.6 %

(1) Other expense includes the gain from change in fair value of warrant liability and interest expense.
(2) Loss ratio is calculated by dividing the provision for insurance claims and claims expenses by net premiums earned.
(3) Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned.

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
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
  (In Millions)
Monthly $ 6,675     $ 5,711     $ 5,441     $ 5,736     $ 4,833     $ 4,099  
Single 686     802     1,019     1,140     1,282     938  
Primary $ 7,361     $ 6,513     $ 6,460     $ 6,876     $ 6,115     $ 5,037  


Primary and pool IIF As of
  September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
    June 30,
2017
 
                                   
Monthly $ 46,967     $ 41,843     $ 37,574     $ 33,268     $ 28,707     $ 24,865  
Single 16,560     16,246     15,860     15,197     14,552     13,764  
Primary 63,527     58,089     53,434     48,465     43,259     38,629  
                       
Pool 2,974     3,064     3,153     3,233     3,330     3,447  
Total $ 66,501     $ 61,153     $ 56,587     $ 51,698     $ 46,589     $ 42,076  
                                               

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) for the periods indicated.

   
  As of and for the three months ended
                           
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
    September 30,
2017
    June 30,
2017
                                               
  (In Thousands)
                                               
Ceded risk-in-force $ 3,960,461     $ 3,606,928     $ 3,304,335     $ 2,983,353     $ 2,682,982     $ 2,403,027  
Ceded premiums written (16,546 )   (15,318 )   (14,525 )   (15,233 )   (14,389 )   (12,034 )
Ceded premiums earned (19,286 )   (18,077 )   (16,218 )   (14,898 )   (13,393 )   (11,463 )
Ceded claims and claims expenses 337     173     543     800     277     342  
Ceding commission written 3,320     3,064     2,905     3,047     2,878     2,407  
Ceding commission earned 3,814     3,536     3,151     2,885     2,581     2,275  
Profit commission 11,272     10,707     9,201     8,139     7,758     6,536  
                                   

Portfolio Statistics

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

   
Primary portfolio trends As of and for the three months ended
 
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
 
  ($ Values In Millions)
 
 New insurance written $
7,361   $   6,513   $   6,460   $   6,876   $   6,115
New risk written 1,883     1,647     1,580     1,665     1,496  
Insurance in force (IIF) (1) 63,527     58,089     53,434     48,465     43,259  
Risk in force (1) 15,744     14,308     13,085     11,843     10,572  
Policies in force (count) (1) 262,485     241,993     223,263     202,351     180,089  
Average loan size (1) $ 0.242     $ 0.240     $ 0.239     $ 0.240     $ 0.240  
Average coverage (2) 24.8 %   24.6 %   24.5 %   24.4 %   24.4 %
Loans in default (count) 746     768     1,000     928     350  
Percentage of loans in default 0.3 %   0.3 %   0.5 %   0.5 %   0.2 %
Risk in force on defaulted loans $ 42     $ 43     $ 57     $ 53     $ 19  
Average premium yield (3) 0.43 %   0.44 %   0.43 %   0.44 %   0.43 %
Earnings from cancellations $ 2.6     $ 3.1     $ 2.8     $ 4.2     $ 4.3  
Annual persistency (4) 86.1 %   85.5 %   85.7 %   86.1 %   85.1 %
Quarterly run-off (5) 3.3 %   3.5 %   3.1 %   3.9 %   3.8 %

(1)  Reported as of the end of the period.
(2)  Calculated as end of period risk in force (RIF) divided by IIF.
(3) Calculated as net primary and pool premiums earned, net of reinsurance, divided by average gross primary IIF for the period, annualized.
(4)  Defined as the percentage of IIF that remains on our books after any 12-month period.
(5)  Defined as the percentage of IIF that are no longer on our books after any 3-month period

The tables below present our total primary NIW by FICO, loan-to-value (LTV) ratio, and purchase/refinance mix for the periods indicated.

   
Primary NIW by FICO For the three months ended
    September 30, 2018   June 30, 2018   September 30, 2017
 
        ($ In Millions)       
 
>= 760 $  3,191     $    2,807     $  2,806
740-759 1,228     1,129     934  
720-739 1,095     964     807  
700-719 878     747     697  
680-699 632     469     456  
<=679 337     397     415  
Total $ 7,361     $ 6,513     $ 6,115  
Weighted average FICO 747     747     747  


Primary NIW by LTV For the three months ended
   September 30, 2018
  June 30, 2018   September 30, 2017
 
      (In Millions)      
 
95.01% and above $    676     $    971     $    722
90.01% to 95.00% 3,553     2,932     2,714  
85.01% to 90.00% 2,373     1,888     1,765  
85.00% and below 759     722     914  
Total $ 7,361     $ 6,513     $ 6,115  
Weighted average LTV 92.5 %   92.7 %   92.3 %


Primary NIW by purchase/refinance mix For the three months ended
   September 30, 2018
  June 30, 2018   September 30, 2017
 
   (In Millions)
 
Purchase $    7,022         $    6,137     $    5,387
Refinance 339     376     728  
Total $ 7,361     $ 6,513     $ 6,115  
                       

The table below presents a summary of our primary IIF and RIF by book year as of the dates indicated.

   
Primary IIF and RIF As of September 30, 2018
  IIF
  RIF
 
  (In Millions)
 
September 30, 2018 $    19,804     $      4,980
2017 19,317     4,731  
2016 16,086     3,948  
2015 7,144     1,790  
2014 1,145     288  
2013 31     7  
Total $ 63,527     $ 15,744  
               

The tables below present our total primary IIF and RIF by FICO and LTV and total primary RIF by loan type as of the dates indicated.

   
Primary IIF by FICO As of
    September 30, 2018   June 30, 2018   September 30, 2017
 
  (In Millions)
 
>= 760 $    29,627     $    27,311     $    21,329
740-759 10,386     9,460     6,983  
720-739 8,566     7,722     5,547  
700-719 7,008     6,355     4,505  
680-699 4,655     4,174     2,942  
<=679 3,285     3,067     1,953  
Total $ 63,527     $ 58,089     $ 43,259  


Primary RIF by FICO As of
    September 30, 2018   June 30, 2018   September 30, 2017
 
  (In Millions)
 
>= 760 $    7,361     $    6,758     $    5,251
740-759 2,592     2,344     1,713  
720-739 2,131     1,905     1,349  
700-719 1,732     1,558     1,092  
680-699 1,145     1,016     707  
<=679 783     727     460  
Total $ 15,744     $ 14,308     $ 10,572  


Primary IIF by LTV As of
  September 30, 2018   June 30, 2018   September 30, 2017
 
  (In Millions)
 
95.01% and above $    6,309     $    5,747     $    3,038
90.01% to 95.00% 28,879     26,119     19,562  
85.01% to 90.00% 19,074     17,319     13,437  
85.00% and below 9,265     8,904     7,222  
Total $ 63,527     $ 58,089     $ 43,259  


Primary RIF by LTV As of
  September 30, 2018   June 30, 2018   September 30, 2017
 
  (In Millions)
 
95.01% and above $    1,670     $    1,522     $    822
90.01% to 95.00% 8,416     7,610     5,722  
85.01% to 90.00% 4,590     4,154     3,205  
85.00% and below 1,068     1,022     823  
Total $ 15,744     $ 14,308     $ 10,572  


Primary RIF by Loan Type As of
  September 30, 2018   June 30, 2018   September 30, 2017
           
Fixed 98 %   98 %   98 %
Adjustable rate mortgages:          
Less than five years          
Five years and longer 2     2     2  
Total 100 %   100 %   100 %
                 

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

   
Primary IIF For the three months ended
    September 30, 2018   June 30, 2018   September 30, 2017
 
  (In Millions)
 
IIF, beginning of period $    58,089     $    53,434     $    38,629
NIW 7,361     6,513     6,115  
Cancellations and other reductions (1,923 )   (1,858 )   (1,485 )
IIF, end of period $ 63,527     $ 58,089     $ 43,259  
                       

Geographic Dispersion

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

   
Top 10 primary RIF by state As of
  September 30, 2018   June 30, 2018   September 30, 2017
California 13.3 %   13.4 %   13.6 %
Texas 8.1     8.0     7.6  
Arizona 5.0     5.0     4.4  
Florida 4.9     4.7     4.3  
Virginia 4.9     5.0     5.6  
Michigan 3.7     3.7     3.7  
Pennsylvania 3.6     3.6     3.6  
Colorado 3.4     3.5     3.8  
Illinois 3.3     3.3     3.4  
Utah 3.2     3.3     3.6  
Total 53.4 %   53.5 %   53.6 %
                 

The following table shows portfolio data by book year, as of September 30, 2018.

                                                         
  As of September 30, 2018
Book year  Original
Insurance
Written
  Remaining
Insurance
in Force
  %
Remaining of
Original
Insurance
  Policies
Ever in
Force
  Number of
Policies in
Force
  Number of Loans in Default   # of Claims Paid   Incurred
Loss Ratio
(Inception to
Date) (1)
  Cumulative
default rate (2)
  ($ Values in Millions)
2013 $ 162     $ 31     19 %   655     166         1     0.2 %   0.2 %
2014 3,451     1,145     33 %   14,786     5,944     53     23     3.6 %   0.5 %
2015 12,422     7,144     58 %   52,548     33,093     197     47     2.9 %   0.5 %
2016 21,187     16,086     76 %   83,626     66,849     248     25     2.0 %   0.3 %
2017 21,582     19,317     90 %   85,897     79,147     215     2     2.3 %   0.3 %
2018 20,334     19,804     97 %   78,829     77,286     33         0.8 %   %
Total $ 79,138     $ 63,527         316,341     262,485     746     98          

(1) The ratio of claims incurred (paid and reserved) divided by cumulative premiums earned, net of reinsurance.
(2) The sum of claims paid ever to date and notices of default as of the end of the period divided by policies ever in force.

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

  For the three months ended   For the nine months ended
  September 30, 2018   September 30, 2017   September 30, 2018   September 30, 2017
 
               
  (In Thousands)
Beginning balance
$ $
 10,601     $    5,048     $    8,76     $    3,001
Less reinsurance recoverables (1) (2,382 )   (899 )   (1,902 )   (297 )
Beginning balance, net of reinsurance recoverables 8,219     4,149     6,859     2,704  
               
Add claims incurred:              
Claims and claim expenses incurred:              
Current year (2) 1,938     1,215     5,090     3,546  
Prior years (3) (839 )   (258 )   (1,779 )   (581 )
Total claims and claims expenses incurred 1,099     957     3,311     2,965  
               
Less claims paid:              
Claims and claim expenses paid:              
Current year (2) 37         37      
Prior years (3) 890     157     1,742     720  
Total claims and claim expenses paid 927     157     1,779     720  
               
Reserve at end of period, net of reinsurance recoverables 8,391     4,949     8,391     4,949  
Add reinsurance recoverables (1) 2,517     1,174     2,517     1,174  
Ending balance $ 10,908     $ 6,123     $ 10,908     $ 6,123  

(1) Related to ceded losses recoverable under the QSR Transactions, included in "Other Assets" on the Condensed 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, that default would be included in the current year.
(3) Related to insured loans with defaults occurring in prior years, which have been continuously in default since that time.

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

       
  For the three months ended   For the nine months ended
  September 30, 2018   September 30, 2017   September 30, 2018   September 30, 2017
Beginning default inventory 768     249     928     179  
Plus: new defaults 380     208     1,080     479  
Less: cures (378 )   (103 )   (1,203 )   (292 )
Less: claims paid (24 )   (4 )   (59 )   (16 )
Ending default inventory 746     350     746     350  
                       

The following table provides details of our claims paid, before giving effect to claims ceded under the 2016 QSR Transaction, for the periods indicated. No claims paid were ceded under the 2018 QSR Transaction during the periods indicated.

  For the three months ended   For the nine months ended
 
  September 30, 2018   September 30, 2017   September 30, 2018   September 30, 2017
 
  (In Thousands)
 
Number of claims paid (1)    24      4      59      16
Total amount paid for claims $ 1,128     $ 160     $ 2,217     $ 731  
Average amount paid per claim (2) $ 49     $ 40     $ 41     $ 46  
Severity(3) 80 %   73 %   76 %   83 %

(1)  Count includes claims settled without payment.
(2)  Calculation is net of claims settled without payment.
(3)  Severity represents the total amount of claims paid divided by the related RIF on the loan at the time the claim is perfected.

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 September 30, 2018   As of September 30, 2017
 
  (In Thousands)
 
Case (1) $
 14     $
 16
IBNR 1     1  
Total $ 15     $ 17  

(1) Defined as the gross reserve per insured loan in default.

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

   
  As of
  September 30, 2018
  June 30, 2018   September 30, 2017
  (In Thousands)
Available assets   $  702,020     $ 653,080    
 495,182
Risk-based required assets   398,975     587,235       356,207  
                   

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Source: NMI Holdings Inc