Press Release

NMI Holdings, Inc. Reports Third Quarter 2020 Financial Results
Nov 05, 2020

EMERYVILLE, Calif., Nov. 05, 2020 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported GAAP net income of $38.2 million, or $0.45 per diluted share, for the third quarter ended September 30, 2020, which compares to $26.8 million, or $0.36 per diluted share, in the second quarter ended June 30, 2020 and $49.8 million, or $0.69 per diluted share, in the third quarter ended September 30, 2019. Adjusted net income for the quarter was $40.4 million or $0.47 per diluted share, which compares to $29.7 million or $0.40 per diluted share in the second quarter ended June 30, 2020 and $49.9 million or $0.71 per diluted share in the third quarter ended September 30, 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 housing market has proven to be resilient in the wake of the COVID pandemic, with low interest rates allowing more Americans to access homeownership at a time when it’s most critical and robust demand driving sustained house price appreciation. Against this backdrop, our new business opportunity has grown significantly and we have delivered record new insurance written as more borrowers and lenders have turned to us for support than ever before. While still early, we have also begun to see encouraging credit trends in our in-force portfolio, with default activity stabilizing and an increasing number of borrowers exiting forbearance and resuming payment of their mortgages.”

Selected highlights from the third quarter 2020 include:

  • Primary insurance-in-force at quarter end was $104.5 billion, up 16% compared to the third quarter of 2019
  • New insurance written was $18.5 billion, up 31% compared to $14.1 billion in the third quarter of 2019
  • Net premiums earned were $98.8 million, up 7% compared to $92.4 million in the third quarter of 2019
  • Underwriting and operating expenses were $34.0 million, including $2.3 million of capital market transaction costs, compared to $32.3 million in the third quarter of 2019, including $1.7 million of capital market transaction costs
  • Insurance claims and claim expenses were $15.7 million, compared to $2.6 million in the third quarter of 2019, reflecting higher default experience attributable to the COVID-19 pandemic
  • At quarter-end, cash and investments were $1.9 billion and shareholders’ equity was $1.3 billion, equal to $15.42 per share
  • Annualized return-on-equity for the quarter was 11.9% and annualized adjusted return-on-equity was 12.6%
  • At quarter-end, the company reported total PMIERs available assets of $1.7 billion and net risk- based required assets of $991 million

Concurrent with the release of third quarter earnings, the company has filed a Form 8-K that includes selected operating statistics for the month ended October 31, 2020. 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)
  9/30/20206/30/20209/30/2019Q/QY/Y
INSURANCE METRICS ($billions)
Primary Insurance-in-Force $104.5 $98.9 $89.7  %16  %
New Insurance Written - NIW      
 Monthly premium16.5 11.9 13.0 39  %27  %
 Single premium2.0 1.2 1.1 60  %79  %
 Total (2)18.5 13.1 14.1 41  %31  %
      
FINANCIAL HIGHLIGHTS ($millions, except per share amounts)
Net Premiums Earned98.8 98.9 92.4 —  % %
Insurance Claims and Claim Expenses15.7 34.3 2.6 (54)%509  %
Underwriting and Operating Expenses (3)34.0 30.4 32.3 12  % %
Net Income 38.2 26.8 49.8 42  %(23)%
Adjusted Net Income 40.4 29.7 49.9 36  %(19)%
Cash and Investments $1,884 $1,855 $1,119  %68  %
Shareholders' Equity 1,308 1,257 873  %50  %
Book Value per Share$15.42 $14.82 $12.86  %20  %
Loss Ratio15.9%34.7%2.8%  
Expense Ratio (3)34.4%30.7%35.0%  

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

Conference Call and Webcast Details

The company will hold a conference call, which will be webcast live today, November 5, 2020, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time. The webcast will be available on the company's website, www.nationalmi.com, in the "Investor Relations" section. The conference call can also be accessed by dialing (888) 734-0328 in the U.S., or (914) 495-8578 internationally, and using Conference ID: 5874734 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 any action by the Consumer Financial Protection Bureau to address the planned expiration of the "QM Patch" under the Dodd-Frank Act Ability to Repay/Qualified Mortgage Rule; legislative or regulatory changes to the GSEs' role in the secondary mortgage market or other changes that could affect the residential mortgage industry generally or mortgage insurance industry in particular; potential future lawsuits, investigations or inquiries or resolution of current lawsuits or inquiries; changes in general economic, market and political conditions and policies, interest rates, inflation and investment results or other conditions that affect the housing market or the markets for home mortgages or mortgage insurance; our ability to successfully execute and implement our capital plans, including our ability to access the capital, credit and reinsurance markets and to enter into, and receive approval of, reinsurance arrangements on terms and conditions that are acceptable to us, the GSEs and our regulators; our ability to implement our business strategy, including our ability to write mortgage insurance on high quality low-down payment residential mortgage loans, implement successfully and on a timely basis, complex infrastructure, systems, procedures, and internal controls to support our business and regulatory and reporting requirements of the insurance industry; our ability to attract and retain a diverse customer base, including the largest mortgage originators; failure of risk management or pricing or investment strategies; emergence of unexpected claim and coverage issues, including claims exceeding our reserves or amounts we had expected to experience; potential adverse impacts arising from natural disasters, including, with respect to affected areas, a decline in new business, adverse effects on home prices, and an increase in notices of default on insured mortgages; the inability of our counterparties, including third party reinsurers, to meet their obligations to us; failure to maintain, improve and continue to develop necessary information technology systems or the failure of technology providers to perform; and, our ability to recruit, train and retain key personnel. These risks and uncertainties also include, but are not limited to, those set forth under the heading "Risk Factors" detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2019 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 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 September 30, For the nine months ended September 30,
 2020 2019 2020 2019
Revenues(In Thousands, except for per share data)
Net premiums earned$98,802  $92,381  $296,463  $249,499 
Net investment income8,337  7,882  23,511  22,894 
Net realized investment (losses) gains(4) 81  635  (219)
Other revenues648  1,244  2,771  1,700 
Total revenues107,783  101,588  323,380  273,874 
Expenses       
Insurance claims and claim expenses15,667  2,572  55,698  8,238 
Underwriting and operating expenses(1)33,969  32,335  96,616  95,325 
Service expenses(1)557  909  2,381  1,311 
Interest expense7,796  2,979  16,481  9,111 
Loss (gain) from change in fair value of warrant liability437  (1,139) (4,286) 6,025 
Total expenses58,426  37,656  166,890  120,010 
        
Income before income taxes49,357  63,932  156,490  153,864 
Income tax expense11,178  14,169  33,192  32,102 
Net income$38,179  $49,763  $123,298  $121,762 
        
Earnings per share       
Basic$0.45  $0.73  $1.63  $1.81 
Diluted$0.45  $0.69  $1.55  $1.75 
        
Weighted average common shares outstanding       
Basic84,805  67,849  75,695  67,381 
Diluted85,599  70,137  76,867  69,520 
        
Loss ratio(2)15.9% 2.8% 18.8% 3.3%
Expense ratio(3)34.4% 35.0% 32.6% 38.2%
Combined ratio (4)50.2% 37.8% 51.4% 41.5%
        
Net income$38,179  $49,763  $123,298  $121,762 
Other comprehensive income, net of tax:       
Unrealized gains in accumulated other comprehensive income, net of tax expense of $2,494 and $1,376 for the three months ended September 30, 2020 and 2019, respectively, and $7,655 and $8,991 for the nine months ended September 30, 2020 and 2019, respectively9,381  5,177  28,799  33,824 
Reclassification adjustment for realized losses (gains) included in net income, net of tax (benefit) expense of ($1) and $17 for the three months ended September 30, 2020 and 2019, respectively, and ($258) and ($46) for the nine months ended September 30, 2020 and 2019, respectively3  (64) 972  173 
Other comprehensive income, net of tax9,384  5,113  29,771  33,997 
Comprehensive income$47,563  $54,876  $153,069  $155,759 

(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 other underwriting and operating expenses by net premiums earned.
(4)  Combined ratio may not foot due to rounding.

 
 
Consolidated balance sheets September 30, 2020 December 31, 2019
Assets (In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $1,624,970 and $1,113,779 as of September 30, 2020 and December 31, 2019, respectively) $1,689,815  $1,140,940 
Cash and cash equivalents (including restricted cash of $5,555 and $2,662 as of September 30, 2020 and December 31, 2019, respectively) 194,199  41,089 
Premiums receivable 48,159  46,085 
Accrued investment income 9,766  6,831 
Prepaid expenses 4,579  3,512 
Deferred policy acquisition costs, net 63,194  59,972 
Software and equipment, net 28,131  26,096 
Intangible assets and goodwill 3,634  3,634 
Prepaid reinsurance premiums 8,014  15,488 
Reinsurance recoverable (1) 17,180  4,939 
Other assets (1) 15,149  16,232 
Total assets $2,081,820  $1,364,818 
     
Liabilities    
Debt $392,987  $145,764 
Unearned premiums 116,008  136,642 
Accounts payable and accrued expenses 59,316  39,904 
Reserve for insurance claims and claim expenses 87,230  23,752 
Reinsurance funds withheld 10,364  14,310 
Warrant liability, at fair value 3,135  7,641 
Deferred tax liability, net 97,451  56,360 
Other liabilities 7,773  10,025 
Total liabilities 774,264  434,398 
     
Shareholders' equity    
Common stock - class A shares, $0.01 par value; 84,808,516 and 68,358,074 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively (250,000,000 shares authorized) 848  684 
Additional paid-in capital 930,906  707,003 
Accumulated other comprehensive income, net of tax 47,059  17,288 
Retained earnings 328,743  205,445 
Total shareholders' equity 1,307,556  930,420 
Total liabilities and shareholders' equity $2,081,820  $1,364,818 

(1)  Reinsurance recoverable has been reclassified from "Other assets" in the prior period.

  
  
Non-GAAP Financial Measure Reconciliations 
 Quarter ended Quarter ended Quarter ended 
 9/30/2020 6/30/2020 9/30/2019 
 As Reported(In Thousands, except for per share data) 
Revenues      
Net premiums earned$98,802  $98,944  $92,381  
Net investment income8,337  7,070  7,882  
Net realized investment (losses) gains(4) 711  81  
Other revenues648  1,223  1,244  
Total revenues107,783  107,948  101,588  
Expenses      
Insurance claims and claim expenses15,667  34,334  2,572  
Underwriting and operating expenses(1)33,969  30,370  32,335  
Service expenses(1)557  1,090  909  
Interest expense7,796  5,941  2,979  
Loss (gain) from change in fair value of warrant liability437  1,236  (1,139) 
Total expenses58,426  72,971  37,656  
       
Income before income taxes49,357  34,977  63,932  
Income tax expense11,178  8,129  14,169  
Net income $38,179  $26,848  $49,763  
       
Adjustments:      
Net realized investment losses (gains)4  (711) (81) 
Loss (gain) from change in fair value of warrant liability437  1,236  (1,139) 
Capital markets transaction costs2,254  2,790  1,689  
Adjusted income before taxes52,052  38,292  64,401  
       
Income tax expense on adjustments474  437  338  
Adjusted net income$40,400  $29,726  $49,894  
       
Weighted average diluted shares outstanding85,599  74,174  70,137  
       
Diluted EPS$0.45  $0.36  $0.69 (2)
Adjusted diluted EPS $0.47  $0.40  $0.71  
       
Return-on-equity 11.9% 9.6% 23.6% 
Adjusted return-on-equity12.6% 10.7% 23.7% 
       
       
Expense ratio (3)34.4% 30.7% 35.0% 
Adjusted expense ratio (4)32.1% 30.5% 33.2% 
       
Combined ratio (5)50.2% 65.4% 37.8% 
Adjusted combined ratio (6)48.0% 65.2% 36.0% 

(1)  Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2)  Diluted net income for the quarter ended September 30, 2019 excludes the impact of the warrant fair value change as it was anti-dilutive. For all other periods presented, diluted net income equals reported net income as the impact of the warrant fair value change was dilutive.
(3)  Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
(4)  Adjusted expense ratio is calculated by dividing adjusted underwriting and operating expense (underwriting and operating expenses excluding costs related to capital markets reinsurance transactions) by net premiums earned.
(5)  Combined ratio is calculated by dividing the total of underwriting and operating expenses and insurance claims and claims expense by net premiums earned.
(6)  Adjusted combined ratio is calculated by dividing the total of adjusted underwriting and operating expenses (underwriting and operating expenses excluding costs related to capital market reinsurance transaction) and insurance claims and claims expense by net premiums earned.

 
 
Historical Quarterly Data2020 2019
 September 30 June 30 March 31 December 31 September 30 June 30
Revenues(In Thousands, except for per share data)
Net premiums earned$98,802  $98,944  $98,717  $95,517  $92,381  $83,249 
Net investment income8,337  7,070  8,104  7,962  7,882  7,629 
Net realized investment (losses) gains(4) 711  (72) 264  81  (113)
Other revenues648  1,223  900  1,154  1,244  415 
Total revenues107,783  107,948  107,649  104,897  101,588  91,180 
Expenses           
Insurance claims and claim expenses15,667  34,334  5,697  4,269  2,572  2,923 
Underwriting and operating expenses(1)33,969  30,370  32,277  31,296  32,335  32,190 
Service expenses(1)557  1,090  734  937  909  353 
Interest expense7,796  5,941  2,744  2,974  2,979  3,071 
Loss (gain) from change in fair value of warrant liability437  1,236  (5,959) 2,632  (1,139) 1,685 
Total expenses58,426  72,971  35,493  42,108  37,656  40,222 
            
Income before income taxes49,357  34,977  72,156  62,789  63,932  50,958 
Income tax expense11,178  8,129  13,885  12,594  14,169  11,858 
Net income$38,179  $26,848  $58,271  $50,195  $49,763  $39,100 
            
Earnings per share           
Basic$0.45  $0.36  $0.85  $0.74  $0.73  $0.58 
Diluted$0.45  $0.36  $0.74  $0.71  $0.69  $0.56 
            
Weighted average common shares outstanding           
Basic84,805  73,617  68,563  68,140  67,849  67,590 
Diluted85,599  74,174  70,401  70,276  70,137  69,590 
            
Other data           
Loss Ratio(2)15.9% 34.7% 5.8% 4.5% 2.8% 3.5%
Expense Ratio(3)34.4% 30.7% 32.7% 32.8% 35.0% 38.7%
Combined ratio (4)50.2% 65.4% 38.5% 37.2% 37.8% 42.2%

(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.


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 NIWThree months ended
 September 30,
2020
 June 30, 2020 March 31, 2020 December 31,
2019
 September 30,
2019
 June 30, 2019
 (In Millions)
Monthly$16,516  $11,885  $10,461  $11,085  $12,994  $11,067 
Single1,983  1,239  836  864  1,106  1,112 
Primary$18,499  $13,124  $11,297  $11,949  $14,100  $12,179 
                        


Primary and pool IIFAs of
 September 30,
2020
 June 30, 2020 March 31, 2020 December 31,
2019
 September 30,
2019
 June 30, 2019
 (In Millions)
Monthly$88,584  $82,848  $81,347  $77,097  $71,814  $63,922 
Single15,910  16,057  17,147  17,657  17,899  17,786 
Primary104,494  98,905  98,494  94,754  89,713  81,708 
            
Pool2,115  2,340  2,487  2,570  2,668  2,758 
Total$106,609  $101,245  $100,981  $97,324  $92,381  $84,466 
 

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 and 2020-1 ILN Transaction, and collectively, the ILN Transactions) for the periods indicated.

 For the three months ended
 September 30,
2020
 June 30, 2020 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30, 2019
 (In Thousands)
The QSR Transactions           
Ceded risk-in-force$5,159,061   $4,563,676   $4,843,715   $5,137,249   $4,901,809   $4,558,862  
Ceded premiums earned(24,517)  (23,210)  (23,011)  (23,673)  (23,151)  (20,919) 
Ceded claims and claim expenses3,200   8,669   1,532   1,030   766   770  
Ceding commission earned4,798   4,428   4,513   4,691   4,584   4,171  
Profit commission11,034   5,271   12,413   13,314   13,254   11,884  
            
The ILN Transactions           
Ceded premiums$(6,268)  $(3,267)  $(3,872)  $(4,263)  $(4,409)  $(2,895) 
                              

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
 September 30,
2020
 June 30, 2020 March 31, 2020 December 31,
2019
 September 30,
2019
 June 30, 2019
 ($ Values In Millions, except as noted below)
New insurance written$18,499  $13,124  $11,297  $11,949  $14,100  $12,179 
New risk written4,577  3,260  2,897  3,082  3,651  3,183 
Insurance in force (IIF) (1)104,494  98,905  98,494  94,754  89,713  81,708 
Risk in force (1)26,568  25,238  25,192  24,173  22,810  20,661 
Policies in force (count) (1)381,899  372,934  376,852  366,039  350,395  324,876 
Average loan size ($ value in thousands) (1)$274  $265  $261  $259  $256  $252 
Coverage percentage (2)25.4% 25.5% 25.6% 25.5% 25.4% 25.3%
Loans in default (count) (1)13,765  10,816  1,449  1,448  1,230  1,028 
Default rate (1)3.60% 2.90% 0.38% 0.40% 0.35% 0.32%
Risk in force on defaulted loans (1)$1,008  $799  $84  $84  $70  $58 
Net premium yield (3)0.39% 0.40% 0.41% 0.41% 0.43% 0.43%
Earnings from cancellations$12.6  $15.5  $8.6  $8.0  $7.4  $4.5 
Annual persistency (4)60.0% 64.1% 71.7% 76.8% 82.4% 86.0%
Quarterly run-off (5)13.1% 12.9% 8.0% 7.7% 7.5% 5.1%

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

 

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

Primary NIW by FICOFor the three months ended
 September 30, 2020 June 30, 2020 September 30, 2019
 ($ In Millions)
>= 760$11,600  $8,052  $6,994 
740-7592,575  1,866  2,288 
720-7392,187  1,607  2,102 
700-7191,217  959  1,450 
680-699793  514  915 
<=679127  126  351 
Total$18,499  $13,124  $14,100 
Weighted average FICO764  762  754 


 
Primary NIW by LTVFor the three months ended
 September 30, 2020 June 30, 2020 September 30, 2019
 (In Millions)
95.01% and above$587  $547  $989 
90.01% to 95.00%7,767  5,385  6,592 
85.01% to 90.00%6,968  5,067  4,933 
85.00% and below3,177  2,125  1,586 
Total$18,499  $13,124  $14,100 
Weighted average LTV90.7% 90.7% 91.7%


 
Primary NIW by purchase/refinance mixFor the three months ended
 September 30, 2020 June 30, 2020 September 30, 2019
 (In Millions)
Purchase$12,764  $7,776  $11,284 
Refinance5,735  5,348  2,816 
Total$18,499  $13,124  $14,100 
 

The table below presents a summary of our primary IIF and RIF by book year as of September 30, 2020.

Primary IIF and RIFAs of September 30, 2020
 IIF RIF
 (In Millions)
September 30, 2020$40,969 $10,255
201929,865 7,791
201811,859 3,019
20179,671 2,413
20168,050 2,047
2015 and before4,080 1,043
Total$104,494 $26,568
 

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
 September 30, 2020 June 30, 2020 September 30, 2019
 (In Millions)
>= 760$53,742 $48,898 $41,855
740-75916,193 15,764 15,028
720-73914,352 13,882 12,666
700-71910,235 10,228 9,822
680-6996,713 6,657 6,559
<=6793,259 3,476 3,783
Total$104,494 $98,905 $89,713
 


Primary RIF by FICOAs of
 September 30, 2020 June 30, 2020 September 30, 2019
 (In Millions)
>= 760$13,563 $12,433 $10,611
740-7594,141 4,031 3,847
720-7393,694 3,585 3,257
700-7192,635 2,625 2,501
680-6991,730 1,706 1,665
<=679805 858 929
Total$26,568 $25,238 $22,810
 


Primary IIF by LTVAs of
 September 30, 2020 June 30, 2020 September 30, 2019
 (In Millions)
95.01% and above$8,130 $8,453 $8,500
90.01% to 95.00%47,828 45,862 42,255
85.01% to 90.00%35,224 32,603 28,083
85.00% and below13,312 11,987 10,875
Total$104,494 $98,905 $89,713
 


Primary RIF by LTVAs of
 September 30, 2020 June 30, 2020 September 30, 2019
 (In Millions)
95.01% and above$2,310 $2,387 $2,326
90.01% to 95.00%14,056 13,463 12,358
85.01% to 90.00%8,642 7,985 6,854
85.00% and below1,560 1,403 1,272
Total$26,568 $25,238 $22,810
 


Primary RIF by Loan TypeAs of
 September 30, 2020 June 30, 2020 September 30, 2019
      
Fixed99% 98% 98%
Adjustable rate mortgages     
Less than five years     
Five years and longer1  2  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
 September 30, 2020 June 30, 2020 September 30, 2019
 (In Millions)
IIF, beginning of period$98,905   $98,494   $81,708  
NIW18,499   13,124   14,100  
Cancellations, principal repayments and other reductions(12,910) (12,713) (6,095)
IIF, end of period$104,494   $98,905   $89,713  
 

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
 September 30, 2020 June 30, 2020 September 30, 2019
California11.3% 11.3% 11.9%
Texas8.3  8.1  8.1 
Florida6.7  6.2  5.6 
Virginia5.4  5.4  5.3 
Colorado4.0  3.8  3.4 
Illinois4.0  4.0  3.8 
Maryland3.6  3.5  3.3 
Washington3.5  3.4  3.2 
Pennsylvania3.5  3.6  3.6 
Massachusetts3.5  3.4  3.1 
Total53.8% 52.7% 51.3%
 

The table below presents selected primary portfolio statistics, by book year, as of September 30, 2020.

 As of September 30, 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  $13  8% 655  82  4  1  0.8% 0.8% 4.9%
20143,451  556  16% 14,786  3,172  139  48  4.2% 1.3% 4.4%
201512,422  3,511  28% 52,548  17,706  674  108  3.3% 1.5% 3.8%
201621,187  8,050  38% 83,626  36,731  1,609  116  3.0% 2.1% 4.4%
201721,582  9,671  45% 85,897  44,498  2,584  79  5.0% 3.1% 5.8%
201827,295  11,859  43% 104,043  52,967  3,246  49  8.8% 3.2% 6.1%
201945,141  29,865  66% 148,423  105,991  4,327  4  15.4% 2.9% 4.1%
202042,920  40,969  95% 125,639  120,752  1,182    12.7% 0.9% 1.0%
Total$174,160  $104,494    615,617  381,899  13,765  405       

(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 nine months ended
 September 30,
2020
 September 30,
2019
 September 30,
2020
 September 30,
2019
 (In Thousands)
Beginning balance$69,903  $18,432  $23,752  $12,811 
Less reinsurance recoverables (1)(14,307) (3,775) (4,939) (3,001)
Beginning balance, net of reinsurance recoverables55,596  14,657  18,813  9,810 
        
Add claims incurred:       
Claims and claim expenses incurred:       
Current year (2)18,682  3,547  61,198  10,948 
Prior years (3)(3,015) (975) (5,500) (2,710)
Total claims and claim expenses incurred15,667  2,572  55,698  8,238 
        
Less claims paid:       
Claims and claim expenses paid:       
Current year (2)113    152   
Prior years (3)1,100  1,033  4,309  2,401 
Reinsurance terminations (4)      (549)
Total claims and claim expenses paid1,213  1,033  4,461  1,852 
        
Reserve at end of period, net of reinsurance recoverables70,050  16,196  70,050  16,196 
Add reinsurance recoverables (1)17,180  4,309  17,180  4,309 
Ending balance$87,230  $20,505  $87,230  $20,505 

(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 nine months ended
 September 30,
2020
 September 30,
2019
 September 30,
2020
 September 30,
2019
Beginning default inventory10,816  1,028  1,448  877 
Plus: new defaults6,588  718  16,870  1,838 
Less: cures(3,598) (476) (4,426) (1,383)
Less: claims paid(40) (37) (123) (98)
Less: claims denied(1) (3) (4) (4)
Ending default inventory13,765  1,230  13,765  1,230 
 

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 nine months ended
 September 30,
2020
 September 30,
2019
 September 30,
2020
 September 30,
2019
 (In Thousands)
Number of claims paid (1)40  37  123  98 
Total amount paid for claims$1,540  $1,265  $5,621  $2,979 
Average amount paid per claim$39  $34  $46  $30 
Severity(2)67% 70% 80% 70%

(1)  Count includes six and eight claims settled without payment for the three and nine months ended September 30, 2020, respectively, and eight and fourteen claims settled without payment for the three and nine months ended September 30, 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 September 30,
2020
 As of September 30,
2019
 (In Thousands)
Case (1)$5.8 $15.3
IBNR (1)(2)0.5 1.4
Total$6.3 $16.7

(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
 September 30, 2020 June 30, 2020 September 30, 2019
 (In Thousands)
Available Assets$1,671,990  $1,656,426  $955,554 
Risk-Based Required Assets990,678  1,047,619  637,914