UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 2, 2016
NMI Holdings, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 001-36174 | 45-4914248 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
2100 Powell Street, 12th Floor, Emeryville, CA. |
(Address of Principal Executive Offices) |
94608 |
(Zip Code) |
(855) 530-6642
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
On August 2, 2016, NMI Holdings, Inc. (the "Company") issued a news release announcing its financial results for the quarter ended June 30, 2016 and its entry into a quota share reinsurance agreement with a panel of third party reinsurance providers. A copy of the news release is furnished as Exhibit 99.1 to this report. The Company also released a second quarter 2016 information supplement, a copy of which is furnished as Exhibit 99.2 to this report.
Item 7.01 Regulation FD Disclosure
The Company announced today that it has entered into a quota share reinsurance agreement with a panel of third-party reinsurance providers. The news release set forth above in Item 2.02 is hereby incorporated into Item 7.01 by reference.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
99.1* NMI Holdings, Inc. News Release dated August 2, 2016
99.2* Second Quarter 2016 Information Supplement
The information included in, or furnished with, this report has been "furnished" and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor shall it be deemed incorporated by reference in any filing or other document under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing or document.
_____________________
* Furnished herewith.
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NMI Holdings, Inc.
(Registrant)
Date: August 2, 2016 | By: | /s/ Nicole C. Sanchez |
Nicole C. Sanchez | ||
VP, Assistant General Counsel | ||
2
EXHIBIT INDEX
Exhibit No. | Description |
99.1* | NMI Holdings, Inc. News Release dated August 2, 2016 |
99.2* | Second Quarter 2016 Information Supplement |
* Furnished herewith
i
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
NMI Holdings, Inc. Reports Second Quarter Net Income of $2 Million,
Enters Into Reinsurance Treaty to Support Growth
EMERYVILLE, CALIF., Aug. 2, 2016 -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported net income of $2.0 million, or $0.03 per share, for the second quarter ended June 30, 2016. This compares with a net loss of $3.9 million, or $(0.07) per share, in the prior quarter and a net loss of $10.4 million, or $(0.18) per share, in the second quarter of 2015. Total revenue for the quarter was $29.6 million, up 33% from $22.2 million in the prior quarter and up 171% from $10.9 million in the second quarter of 2015.
The company also announced today that it has entered into a quota share reinsurance agreement with a panel of third-party reinsurance providers. The company expects that Fannie Mae and Freddie Mac will allow full credit under the Private Mortgage Insurer Eligibility Requirements (PMIERs) for risk ceded under the agreement.
Bradley Shuster, chairman and CEO of National MI, said, “In the second quarter we achieved GAAP profitability, a significant milestone for this young company just three years after writing our first mortgage insurance policy. It is a reflection of our dedication to customer service, our disciplined approach to account development, and diligent management of both risk and expenses. We are grateful to our customers for their belief in us, our employees for their hard work and loyalty, and our shareholders and other business partners for their support of National MI since its founding. We are at an exciting inflection point in our development as we now have visibility to rapid earnings growth for many years to come. Looking ahead, we now expect to report pre-tax income of $7 to $10 million for the full year 2016, and are reaffirming our guidance for pre-tax income of at least $60 million in 2017.”
• | As of June 30, 2016, the company had primary insurance-in-force of $23.6 billion, up 27% from $18.6 billion at the prior quarter end and up 229% over $7.2 billion as of June 30, 2015. |
• | Premiums earned for the quarter were $26.0 million, up 31% from $19.8 million in the prior quarter and up 194% over $8.9 million in the same quarter a year ago. |
• | Total NIW of $5.8 billion in the second quarter was up 37% over $4.3 billion in the prior quarter and up 129% over $2.5 billion in the second quarter of 2015. |
• | Monthly premium NIW was $3.7 billion, an increase of 49% over $2.5 billion in the prior quarter and an increase of 153% over the second quarter of 2015. Single premium NIW of $2.1 billion was up 21% from the prior quarter and up 96% compared with the same quarter a year ago. |
• | Total underwriting and operating expenses in the second quarter were $23.2 million, including share-based compensation expense of $1.8 million. This compares with total underwriting and operating expenses of $22.7 million, including $1.4 million of share-based compensation, in the prior quarter, and $20.9 million, including $2.1 million of share-based compensation, in the same quarter a year ago. |
• | Loss expense for the quarter was $0.4 million, resulting in a loss ratio of 1.8%. |
• | As of the end of the second quarter, the company had approved master policies in place with 1,061 customers, up from 1,023 as of the end of the prior quarter, and up from 842 as of the end of the second quarter of 2015. Customers delivering NIW in the quarter grew to a new high of 518, which compares with 469 in the prior quarter and 340 in the same quarter a year ago. On an ever-to-date basis, customers delivering NIW grew to 649. |
• | At quarter-end, cash and investments were $654 million, including $78 million at the holding company, and book equity was $422 million, equal to $7.14 per share. This book value excludes any benefit attributable to the company’s deferred tax asset of approximately $66 million as of Dec. 31, 2015. |
• | At quarter-end, the company had total PMIERs available assets of $432 million, which compares with risk-based required assets under PMIERs of $377 million. |
1
EXHIBIT 99.1
Quarter Ended 6/30/2016 | Quarter Ended 3/31/2016 | Quarter Ended 6/30/2015 | Growth Q/Q | Growth Y/Y | |||||||||
Primary Insurance-in-Force ($billions) | 23.62 | 18.56 | 7.19 | 27% | 228% | ||||||||
New Insurance Written - NIW ($billions) | |||||||||||||
Monthly premium | 3.70 | 2.49 | 1.46 | 49% | 153% | ||||||||
Single premium | 2.14 | 1.76 | 1.09 | 21% | 96% | ||||||||
Total | 5.84 | 4.25 | 2.55 | 37% | 129% | ||||||||
Premiums Earned ($millions) | 26.04 | 19.81 | 8.86 | 31% | 194% | ||||||||
Underwriting & Operating Expense ($millions) | 23.23 | 22.67 | 20.91 | 2% | 11% | ||||||||
Loss Expense ($millions) | 0.47 | 0.46 | — | 3% | — | ||||||||
Loss Ratio | 1.8% | 2.3% | — | ||||||||||
Cash & Investments ($millions) | 654 | 630 | 434 | 4% | 51% | ||||||||
Book Equity ($millions) | 422 | 410 | 412 | 3% | 2% | ||||||||
Book Value per Share | $ 7.14 | $ 6.94 | $ 7.01 | 3% | 2% | ||||||||
Approved Master Policies | 1061 | 1023 | 842 | 4% | 26% | ||||||||
Customers Generating NIW | 518 | 469 | 340 | 10% | 52% | ||||||||
Reinsurance Agreement
Effective Sept. 1, 2016, the company’s quota share reinsurance agreement covers the following components of its portfolio, subject to certain limitations and conditions:
• | Approximately 23% of existing policies written as of Aug. 31, 2016. |
• | Approximately 95% of the company’s pool agreement with Fannie Mae. |
• | Approximately 23% of policies written from Sept. 1, 2016 through Dec. 31, 2017. |
National MI will receive a 20% ceding commission for ceded premiums related to this transaction, as well as a profit commission provided that the loss ratio on the loans covered under the agreement generally remains below 60%. For risk ceded under the agreement, the implied after-tax cost of capital over the term of the transaction is expected to be approximately 3%.
Conference Call and Webcast Details
The company will hold a conference call and live webcast today at 1:30 p.m. Pacific Time / 4:30 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: 40158937, or by referencing NMI Holdings, Inc.
About National MI
National Mortgage Insurance Corporation (National MI), a subsidiary of NMI Holdings, Inc. (NASDAQ: NMIH), is 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: our ability to implement our business
2
EXHIBIT 99.1
strategy, including our ability to attract and retain a diverse customer base and to achieve a diversified mix of business across the spectrum of our product offerings; changes in the business practices of the GSEs that may impact the use of private mortgage insurance; our ongoing ability to comply with the financial requirements of the PMIERs; our ability to maintain sufficient holding company liquidity to meet our short- and long-term liquidity needs; our ability to successfully execute and implement our capital plans, including our ability to enter into, and receive approval of, reinsurance arrangements on terms and conditions that are acceptable to us and to the GSEs; heightened competition for our mortgage insurance business from other private mortgage insurers and the FHA; adoption of new or changes to existing laws and regulations 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 in particular; potential future lawsuits, investigations or inquiries or resolution of current lawsuits or inquiries; emergence of unexpected claims and coverage issues, including claims exceeding our reserves or amounts we expected to experience; 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; and general economic downturns and volatility. 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, 2015, 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.
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
3
EXHIBIT 99.1
Consolidated statements of operations and comprehensive income | For the three months ended June 30, | For the six months ended June 30, | |||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | (In Thousands, except for share data) | ||||||||||||||
Net premiums written | $ | 48,862 | $ | 20,347 | $ | 86,991 | $ | 33,268 | |||||||
Increase in unearned premiums | (22,821 | ) | (11,491 | ) | (41,143 | ) | (17,476 | ) | |||||||
Net premiums earned | 26,041 | 8,856 | 45,848 | 15,792 | |||||||||||
Net investment income | 3,342 | 1,688 | 6,573 | 3,283 | |||||||||||
Net realized investment gains (losses) | 61 | 354 | (824 | ) | 967 | ||||||||||
Other revenues | 37 | — | 69 | — | |||||||||||
Total revenues | 29,481 | 10,898 | 51,666 | 20,042 | |||||||||||
Expenses | |||||||||||||||
Insurance claims and claims expenses | 470 | (6 | ) | 928 | 98 | ||||||||||
Underwriting and operating expenses | 23,234 | 20,910 | 45,906 | 39,259 | |||||||||||
Total expenses | 23,704 | 20,904 | 46,834 | 39,357 | |||||||||||
Other (expense) income | |||||||||||||||
(Loss) gain from change in fair value of warrant liability | (59 | ) | (106 | ) | 611 | 1,142 | |||||||||
Interest expense | (3,707 | ) | — | (7,339 | ) | — | |||||||||
Total other (expense) income | (3,766 | ) | (106 | ) | (6,728 | ) | 1,142 | ||||||||
Income (loss) before income taxes | 2,011 | (10,112 | ) | (1,896 | ) | (18,173 | ) | ||||||||
Income tax expense | — | 241 | — | — | |||||||||||
Net income (loss) | $ | 2,011 | $ | (10,353 | ) | $ | (1,896 | ) | $ | (18,173 | ) | ||||
Earnings (loss) per share | |||||||||||||||
Basic | $ | 0.03 | $ | (0.18 | ) | $ | (0.03 | ) | $ | (0.31 | ) | ||||
Diluted | $ | 0.03 | $ | (0.18 | ) | $ | (0.03 | ) | $ | (0.31 | ) | ||||
Weighted average common shares outstanding | |||||||||||||||
Basic | 59,105,613 | 58,720,095 | 59,005,983 | 58,603,644 | |||||||||||
Diluted | 59,830,899 | 58,720,095 | 59,005,983 | 58,603,644 | |||||||||||
Loss Ratio(1) | 2 | % | — | % | 2 | % | 1 | % | |||||||
Expense Ratio(2) | 89 | 236 | 100 | 249 | |||||||||||
Combined ratio | 91 | % | 236 | % | 102 | % | 249 | % | |||||||
Net income (loss) | $ | 2,011 | $ | (10,353 | ) | $ | (1,896 | ) | $ | (18,173 | ) | ||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Net unrealized gains (losses) in accumulated other comprehensive gain (loss), net of tax (benefit) expense of $0 and ($1,431) for the three months ended June 30, 2016 and 2015, respectively, and $0 for both the six months ended June 30, 2016 and 2015 | 8,670 | (2,205 | ) | 17,771 | 467 | ||||||||||
Reclassification adjustment for losses (gains) included in net loss, net of tax expense of $0 for all periods presented | (61 | ) | (354 | ) | 824 | (967 | ) | ||||||||
Other comprehensive income (loss), net of tax | 8,609 | (2,559 | ) | 18,595 | (500 | ) | |||||||||
Comprehensive income (loss) | $ | 10,620 | $ | (12,912 | ) | $ | 16,699 | $ | (18,673 | ) | |||||
(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.
4
EXHIBIT 99.1
Consolidated balance sheets | June 30, 2016 | December 31, 2015 | |||||
Assets | (In Thousands, except for share data) | ||||||
Fixed maturities, available-for-sale, at fair value (amortized cost of $593,807 and $564,319 as of June 30, 2016 and December 31, 2015, respectively) | $ | 607,318 | $ | 559,235 | |||
Cash and cash equivalents | 46,827 | 57,317 | |||||
Premiums receivable | 8,868 | 5,143 | |||||
Accrued investment income | 3,068 | 2,873 | |||||
Prepaid expenses | 1,810 | 1,428 | |||||
Deferred policy acquisition costs, net | 25,128 | 17,530 | |||||
Software and equipment, net | 19,690 | 15,201 | |||||
Intangible assets and goodwill | 3,634 | 3,634 | |||||
Other assets | 85 | 90 | |||||
Total assets | $ | 716,428 | $ | 662,451 | |||
Liabilities | |||||||
Term loan | $ | 144,107 | $ | 143,939 | |||
Unearned premiums | 131,916 | 90,773 | |||||
Accounts payable and accrued expenses | 15,502 | 22,725 | |||||
Reserve for insurance claims and claim expenses | 1,475 | 679 | |||||
Warrant liability, at fair value | 856 | 1,467 | |||||
Deferred tax | 137 | 137 | |||||
Total liabilities | 293,993 | 259,720 | |||||
Commitments and contingencies | |||||||
Shareholders' equity | |||||||
Common stock - class A shares, $0.01 par value; 59,128,011 and 58,807,825 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively (250,000,000 shares authorized) | 591 | 588 | |||||
Additional paid-in capital | 573,342 | 570,340 | |||||
Accumulated other comprehensive income (loss), net of tax | 11,121 | (7,474 | ) | ||||
Accumulated deficit | (162,619 | ) | (160,723 | ) | |||
Total shareholders' equity | 422,435 | 402,731 | |||||
Total liabilities and shareholders' equity | $ | 716,428 | $ | 662,451 | |||
5
EXHIBIT 99.1
Historical Quarterly Data | 2016 | 2015 | |||||||||||||||||||||
June 30 | March 31 | December 31 | September 30 | June 30 | March 31 | ||||||||||||||||||
Revenues | (In Thousands, except for share data) | ||||||||||||||||||||||
Net premiums written | $ | 48,862 | $ | 38,129 | $ | 45,582 | $ | 35,360 | $ | 20,347 | $ | 12,921 | |||||||||||
Increase in unearned premiums | (22,821 | ) | (18,322 | ) | (28,702 | ) | (22,526 | ) | (11,491 | ) | (5,985 | ) | |||||||||||
Net premiums earned | 26,041 | 19,807 | 16,880 | 12,834 | 8,856 | 6,936 | |||||||||||||||||
Net investment income | 3,342 | 3,231 | 2,078 | 1,884 | 1,688 | 1,596 | |||||||||||||||||
Net realized investment gains (losses) | 61 | (885 | ) | (121 | ) | (15 | ) | 354 | 613 | ||||||||||||||
Other revenues | 37 | 32 | 25 | — | — | — | |||||||||||||||||
Total revenues | 29,481 | 22,185 | 18,862 | 14,703 | 10,898 | 9,145 | |||||||||||||||||
Expenses | |||||||||||||||||||||||
Insurance claims and claims expenses | 470 | 458 | 371 | 181 | (6 | ) | 104 | ||||||||||||||||
Underwriting and operating expenses | 23,234 | 22,672 | 21,686 | 19,653 | 20,910 | 18,350 | |||||||||||||||||
Total expenses | 23,704 | 23,130 | 22,057 | 19,834 | 20,904 | 18,454 | |||||||||||||||||
Other (expense) income (1) | (3,766 | ) | (2,962 | ) | (1,626 | ) | 332 | (106 | ) | 1,248 | |||||||||||||
Income (loss) before income taxes | 2,011 | (3,907 | ) | (4,821 | ) | (4,799 | ) | (10,112 | ) | (8,061 | ) | ||||||||||||
Income tax expense (benefit) | — | — | — | — | 241 | (241 | ) | ||||||||||||||||
Net income (loss) | $ | 2,011 | $ | (3,907 | ) | $ | (4,821 | ) | $ | (4,799 | ) | $ | (10,353 | ) | $ | (7,820 | ) | ||||||
Earnings (loss) per share | |||||||||||||||||||||||
Basic | $ | 0.03 | $ | (0.07 | ) | $ | (0.08 | ) | $ | (0.08 | ) | $ | (0.18 | ) | $ | (0.13 | ) | ||||||
Diluted | 0.03 | (0.07 | ) | (0.08 | ) | (0.08 | ) | (0.18 | ) | (0.13 | ) | ||||||||||||
Weighted average common shares outstanding | |||||||||||||||||||||||
Basic | 59,105,613 | 58,936,694 | 58,781,566 | 58,741,328 | 58,720,095 | 58,485,899 | |||||||||||||||||
Diluted | 59,830,899 | 58,936,694 | 58,781,566 | 58,741,328 | 58,720,095 | 58,485,899 | |||||||||||||||||
Other data | |||||||||||||||||||||||
Loss Ratio (2) | 2 | % | 2 | % | 2 | % | 1 | % | — | % | 1 | % | |||||||||||
Expense Ratio (3) | 89 | % | 114 | % | 128 | % | 153 | % | 236 | % | 265 | % | |||||||||||
Combined ratio | 91 | % | 117 | % | 131 | % | 155 | % | 236 | % | 266 | % | |||||||||||
(1) Other (expense) income includes the gain from change in fair value of warrant liability, gain from settlement of warrants, 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.
6
EXHIBIT 99.1
New Insurance Written (NIW), Insurance in Force (IIF) and Premiums
The tables below show primary and pool NIW and IIF, by quarter, for the last six quarters.
Primary NIW | Three months ended | ||||||||||||||||||||||
June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | ||||||||||||||||||
(In Millions) | |||||||||||||||||||||||
Monthly | $ | 3,700 | $ | 2,492 | $ | 2,029 | $ | 1,582 | $ | 1,460 | $ | 919 | |||||||||||
Single | 2,138 | 1,762 | 2,518 | 2,051 | 1,089 | 777 | |||||||||||||||||
Primary | $ | 5,838 | $ | 4,254 | $ | 4,547 | $ | 3,633 | $ | 2,549 | $ | 1,696 | |||||||||||
Primary and pool IIF | As of | ||||||||||||||||||||||
June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | ||||||||||||||||||
(In Millions) | |||||||||||||||||||||||
Monthly | $ | 12,529 | $ | 9,210 | $ | 6,958 | $ | 5,087 | $ | 3,617 | $ | 2,259 | |||||||||||
Single | 11,095 | 9,354 | 7,866 | 5,514 | 3,573 | 2,576 | |||||||||||||||||
Primary | 23,624 | 18,564 | 14,824 | 10,601 | 7,190 | 4,835 | |||||||||||||||||
Pool | 3,999 | 4,136 | 4,238 | 4,340 | 4,476 | 4,621 | |||||||||||||||||
Total | $ | 27,623 | $ | 22,700 | $ | 19,062 | $ | 14,941 | $ | 11,666 | $ | 9,457 | |||||||||||
Portfolio Statistics
The table below shows primary portfolio trends, by quarter, for the last six quarters.
Primary portfolio trends | As of and for the quarter ended | ||||||||||||||||||||||
June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | ||||||||||||||||||
($ Values In Millions) | |||||||||||||||||||||||
New insurance written | $ | 5,838 | $ | 4,254 | $ | 4,547 | $ | 3,633 | $ | 2,549 | $ | 1,696 | |||||||||||
New risk written | 1,411 | 1,016 | 1,105 | 887 | 615 | 396 | |||||||||||||||||
Insurance in force (1) | 23,624 | 18,564 | 14,824 | 10,601 | 7,190 | 4,835 | |||||||||||||||||
Risk in force (1) | 5,721 | 4,487 | 3,586 | 2,553 | 1,715 | 1,146 | |||||||||||||||||
Policies in force (count) (1) | 100,547 | 79,700 | 63,948 | 46,175 | 31,682 | 21,225 | |||||||||||||||||
Weighted-average coverage (2) | 24.2 | % | 24.2 | % | 24.2 | % | 24.1 | % | 23.9 | % | 23.7 | % | |||||||||||
Loans in default (count) | 79 | 55 | 36 | 20 | 9 | 6 | |||||||||||||||||
Percentage of loans in default | 0.1 | % | 0.1 | % | 0.1 | % | — | % | — | % | — | % | |||||||||||
Risk in force on defaulted loans | $ | 4 | $ | 3 | $ | 2 | $ | 1 | $ | 1 | $ | — | |||||||||||
Average premium yield (3) | 0.47 | % | 0.45 | % | 0.49 | % | 0.52 | % | 0.51 | % | 0.55 | % | |||||||||||
Annual persistency (4) | 83.3% | 82.7 | % | 79.6 | % | 71.6 | % | 65.5 | % | 59.2 | % | ||||||||||||
(1) | Reported as of the end of the period. |
(2) | End of period risk in force (RIF) divided by IIF. |
(3) | Average premium yield is calculated by dividing primary net premiums earned by average IIF for the period, annualized. |
(4) | Defined as the percentage of IIF that remains on our books after any 12-month period. |
7
EXHIBIT 99.1
The tables below reflect our total primary NIW by FICO, LTV, and purchase/refinance mix.
Primary NIW by FICO | Three months ended | ||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | |||||||||
(In Millions) | |||||||||||
>= 760 | $ | 3,160 | $ | 2,283 | $ | 1,182 | |||||
740-759 | 961 | 712 | 377 | ||||||||
720-739 | 672 | 473 | 422 | ||||||||
700-719 | 541 | 411 | 242 | ||||||||
680-699 | 308 | 245 | 203 | ||||||||
<=679 | 196 | 130 | 123 | ||||||||
Total | $ | 5,838 | $ | 4,254 | $ | 2,549 | |||||
Primary NIW by LTV | Three months ended | ||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | |||||||||
(In Millions) | |||||||||||
95.01% and above | $ | 362 | $ | 209 | $ | 84 | |||||
90.01% to 95.00% | 2,633 | 1,816 | 1,149 | ||||||||
85.01% to 90.00% | 1,732 | 1,420 | 842 | ||||||||
85.00% and below | 1,111 | 809 | 474 | ||||||||
Total | $ | 5,838 | $ | 4,254 | $ | 2,549 | |||||
Primary NIW by purchase/refinance mix | Three months ended | ||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | |||||||||
(In Millions) | |||||||||||
Purchase | $ | 4,199 | $ | 2,919 | $ | 1,619 | |||||
Refinance | 1,639 | 1,335 | 930 | ||||||||
Total | $ | 5,838 | $ | 4,254 | $ | 2,549 | |||||
The tables below show the primary weighted average FICO and the weighted average loan-to-value ratio (LTV), by policy type, for NIW in the quarters presented.
Weighted Average FICO | ||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | ||||||
Monthly | 752 | 753 | 742 | |||||
Single | 762 | 759 | 760 | |||||
Weighted Average LTV | ||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | ||||||
Monthly | 92 | % | 92 | % | 92 | % | ||
Single | 91 | 91 | 91 | |||||
8
EXHIBIT 99.1
The table below reflects a summary of our primary IIF and RIF by book year.
Primary IIF and RIF | As of June 30, 2016 | ||||||
IIF | RIF | ||||||
(In Millions) | |||||||
June 30, 2016 | $ | 9,951 | $ | 2,393 | |||
2015 | 11,348 | 2,762 | |||||
2014 | 2,266 | 552 | |||||
2013 | 59 | 14 | |||||
Total | $ | 23,624 | $ | 5,721 | |||
The tables below reflect our total primary IIF and RIF by FICO, average loan size, LTV, and loan type.
Primary IIF by FICO | As of | ||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | |||||||||
(In Millions) | |||||||||||
>= 760 | $ | 11,929 | $ | 9,146 | $ | 3,323 | |||||
740-759 | 3,876 | 3,045 | 1,153 | ||||||||
720-739 | 3,082 | 2,515 | 1,109 | ||||||||
700-719 | 2,341 | 1,877 | 706 | ||||||||
680-699 | 1,561 | 1,305 | 595 | ||||||||
<=679 | 835 | 676 | 304 | ||||||||
Total | $ | 23,624 | $ | 18,564 | $ | 7,190 | |||||
Primary RIF by FICO | As of | ||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | |||||||||
(In Millions) | |||||||||||
>= 760 | $ | 2,895 | $ | 2,206 | $ | 772 | |||||
740-759 | 951 | 747 | 276 | ||||||||
720-739 | 750 | 614 | 273 | ||||||||
700-719 | 566 | 453 | 173 | ||||||||
680-699 | 369 | 312 | 147 | ||||||||
<=679 | 190 | 155 | 74 | ||||||||
Total | $ | 5,721 | $ | 4,487 | $ | 1,715 | |||||
Primary Average Loan Size by FICO | As of | ||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | |||||||||
(In Millions) | |||||||||||
>= 760 | $ | 249 | $ | 247 | $ | 241 | |||||
740-759 | 239 | 237 | 233 | ||||||||
720-739 | 234 | 232 | 227 | ||||||||
700-719 | 232 | 229 | 221 | ||||||||
680-699 | 223 | 220 | 217 | ||||||||
<=679 | 209 | 206 | 205 | ||||||||
9
EXHIBIT 99.1
Primary IIF by LTV | As of | ||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | |||||||||
(In Millions) | |||||||||||
95.01% and above | $ | 1,049 | $ | 699 | $ | 122 | |||||
90.01% to 95.00% | 10,574 | 8,220 | 3,132 | ||||||||
85.01% to 90.00% | 7,754 | 6,326 | 2,534 | ||||||||
85.00% and below | 4,247 | 3,319 | 1,402 | ||||||||
Total | $ | 23,624 | $ | 18,564 | $ | 7,190 | |||||
Primary RIF by LTV | As of | ||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | |||||||||
(In Millions) | |||||||||||
95.01% and above | $ | 293 | $ | 196 | $ | 36 | |||||
90.01% to 95.00% | 3,116 | 2,423 | 927 | ||||||||
85.01% to 90.00% | 1,838 | 1,498 | 598 | ||||||||
85.00% and below | 474 | 370 | 154 | ||||||||
Total | $ | 5,721 | $ | 4,487 | $ | 1,715 | |||||
Primary RIF by Loan Type | As of | |||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | ||||||
Fixed | 98 | % | 98 | % | 97 | % | ||
Adjustable rate mortgages: | ||||||||
Less than five years | — | — | — | |||||
Five years and longer | 2 | 2 | 3 | |||||
Total | 100 | % | 100 | % | 100 | % | ||
As of June 30, 2016 and June 30, 2015, 100% of our pool IIF and RIF was comprised of insurance on fixed rate mortgages.
The table below reflects a summary of the change in total primary IIF for the following periods.
Primary IIF | Three months ended | ||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | |||||||||
(In Millions) | |||||||||||
IIF, beginning of period | $ | 18,564 | $ | 14,824 | $ | 4,835 | |||||
NIW | 5,838 | 4,254 | 2,548 | ||||||||
Cancellations and other reductions | (778 | ) | (514 | ) | (193 | ) | |||||
IIF, end of period | $ | 23,624 | $ | 18,564 | $ | 7,190 | |||||
10
EXHIBIT 99.1
Geographic Dispersion
The following table shows the distribution by state of our primary RIF.
Top 10 primary RIF by state | As of | |||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | ||||||
California | 13.0 | % | 13.2 | % | 13.6 | % | ||
Texas | 6.8 | 6.8 | 7.4 | |||||
Virginia | 6.4 | 5.8 | 5.3 | |||||
Florida | 5.0 | 5.3 | 4.8 | |||||
Colorado | 4.1 | 4.3 | 4.2 | |||||
Michigan | 4.1 | 4.1 | 3.6 | |||||
Arizona | 3.8 | 3.8 | 3.7 | |||||
Pennsylvania | 3.5 | 3.5 | 3.3 | |||||
Maryland | 3.4 | 3.6 | 3.5 | |||||
North Carolina | 3.4 | 3.1 | 2.1 | |||||
Total | 53.5 | % | 53.5 | % | 51.5 | % | ||
11
EXHIBIT 99.1
The following table shows portfolio data by origination year.
Origination year | As of June 30, 2016 | |||||||||||||||||||||||||||
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 | $ | 59 | 36 | % | 655 | 289 | — | 1 | — | % | 0.2 | % | ||||||||||||||
2014 | 3,451 | 2,266 | 66 | % | 14,786 | 10,640 | 30 | 2 | 2.0 | % | — | % | ||||||||||||||||
2015 | 12,422 | 11,348 | 91 | % | 52,550 | 49,180 | 47 | 2 | 1.9 | % | 0.4 | % | ||||||||||||||||
2016 (through June 30) | 10,092 | 9,951 | 99 | % | 40,862 | 40,438 | 2 | — | 0.2 | % | — | % | ||||||||||||||||
Total | $ | 26,127 | $ | 23,624 | 108,853 | 100,547 | 79 | 5 | ||||||||||||||||||||
1) | The ratio of total losses incurred (paid and reserved) divided by the total premiums earned. |
(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. |
12
EXHIBIT 99.1
The following table provides a reconciliation of the beginning and ending reserve balances for primary insurance claims and claims expenses:
Three months ended | Six months ended | ||||||||||||||
June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||
(In Thousands) | |||||||||||||||
Beginning balance | $ | 1,137 | $ | 187 | $ | 679 | $ | 83 | |||||||
Add claims incurred: | |||||||||||||||
Claims and claim expenses incurred: | |||||||||||||||
Current year | 560 | 59 | 1,113 | 139 | |||||||||||
Prior years | (90 | ) | (65 | ) | (185 | ) | (41 | ) | |||||||
Total claims and claims expenses incurred | 470 | (6 | ) | 928 | 98 | ||||||||||
Less claims paid: | |||||||||||||||
Claims and claim expenses paid: | |||||||||||||||
Current year | — | — | — | — | |||||||||||
Prior years | 132 | — | 132 | — | |||||||||||
Total claims and claim expenses paid | 132 | — | 132 | — | |||||||||||
Balance, June 30 | $ | 1,475 | $ | 181 | $ | 1,475 | $ | 181 | |||||||
The following table provides a reconciliation of the beginning and ending count of loans in default.
Three months ended | Six months ended | ||||||||||
June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | ||||||||
Beginning default inventory | 55 | 6 | 36 | 4 | |||||||
Plus: new defaults | 50 | 5 | 89 | 10 | |||||||
Less: cures | (23 | ) | (2 | ) | (43 | ) | (5 | ) | |||
Less: claims paid | (3 | ) | — | (3 | ) | — | |||||
Ending default inventory | 79 | 9 | 79 | 9 | |||||||
The following tables provide details of our claims and reserves.
Three months ended | Six months ended | ||||||||||||||
June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||
($ Values In Thousands) | |||||||||||||||
Number of claims paid | 3 | — | 3 | — | |||||||||||
Total amount paid for claims | $ | 132 | $ | — | $ | 132 | $ | — | |||||||
Average amount paid per claim | $ | 44 | $ | — | $ | 44 | $ | — | |||||||
Severity | 71 | % | — | 71 | % | — | |||||||||
Average reserve per default: | As of June 30, 2016 | As of June 30, 2015 | |||||
(In Thousands) | |||||||
Case | $ | 17 | $ | 19 | |||
IBNR | 1 | 1 | |||||
Total | $ | 18 | $ | 20 | |||
13
EXHIBIT 99.1
The following table provides a trended comparison of the PMIERs financial requirements as reported by National MI.
As of | |||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | |||||||||
(In thousands) | |||||||||||
Available Assets | $ | 432,074 | $ | 434,138 | $ | 431,411 | |||||
Risk-Based Required Assets | 377,468 | 302,852 | 249,805 | ||||||||
Asset charge % (1) | 6.10 | % | 6.12 | % | 6.17 | % | |||||
(1)Asset charge represents the risk based required asset amount divided by the outstanding RIF on performing primary loans.
14
© 2016 Copyright. National MI
Information Supplement
Second Quarter 2016
1
Without Reinsurance Reinsurance
NIW 1,000,000 Cession 25%
Coverage 25% Ceding Commission 20%
Insured Risk 250,000 Reinsurer's Margin 20%
Price 0.500%
Loss Ratio 2%
Expense Ratio 20%
Without
Reinsurance Impact of Cession
With
Reinsurance Profit Commission
Impact of
Cession
% of Gross
Cession Accounting Classification
Direct Premiums 5,000 (1,250) 3,750 Ceded Premiums 1,250 100% Premium Revenue
Profit Commission - 725 725 Ceded Losses (25) -2% Losses
Ceding Commission (250) -20% Underwriting Expense
Net Premiums 5,000 (525) 4,475 Reinsurer's Margin (250) -20%
Profit Commission 725 58% Premium Revenue
Losses 100 (25) 75
Expenses 1,000 (250) 750
Pretax Income 3,900 (250) 3,650
Reinsurance Illustration
For illustration only: actual terms
of any reinsurance treaty may vary
This illustration is based on terms of recent mortgage insurance
industry reinsurance agreements. In this illustration, the
reinsurer receives a margin equal to 20% of the ceded premiums,
while the originating insurer receives a pre-tax margin of up to
80% of the ceded premium.
Assumptions
2
Second Quarter 2016:
Continued High Performance
$919
$1,460 $1,582
$2,029
$2,492
$3,700
$777
$1,089
$2,051
$2,518 $1,762
$2,138
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Strong NIW Growth
Monthly Single
$1,696
$2,549
$3,633
$4,547
$4,254
$5,838
3
2Q16 Financial Highlights
4.8
7.2
10.6
14.8
18.6
23.6
$5.7
$7.6
$11.6
$15.7
$18.7
$24.9
0
5
10
15
20
25
30
0
5
10
15
20
25
30
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
In
suran
ce
in
F
o
rc
e
$B
ill
io
n
s
P
re
m
iu
m
Ea
rn
e
d
$
M
ill
io
n
s
Insurance-in-Force & Primary Premiums Earned
Primary Insurance in Force Premium Earned - Primary
$18.4
$20.9
$19.7
$21.7
$22.7 $23.2
$-
$5
$10
$15
$20
$25
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Ex
p
en
se
s
$mi
lli
o
n
s
Underwriting & Operating Expenses
$millions
276 271 286 517 546 576
158 163 161
100 84 78
$0
$100
$200
$300
$400
$500
$600
$700
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Cash & Investments
$millions
Insurance Companies Holding Company
$(7.8)
$(10.4)
$(4.8) $(4.8) $(3.9)
$2.0
-$15
-$10
-$5
$0
$5
$10
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Net Income (Loss)
$millions
$654$630
4
Primary Portfolio Metrics
<679,
3.4%
680-699,
6.4%
700-719,
9.9%
720-739,
13.1%
740-759,
16.6%
760+,
50.6%
Primary RIF By FICO Score
as of June 30, 2016
5
Growing Customer Base
64
195
305
436
570
664
735
777
842
906
964
1023
1061 1061
6 19
43 55
145
222
288
320
366
419
469
504 522
692
4 9 22
35
94
180
251
291
340
391
427
469
518
649
-
200
400
600
800
1,000
1,200
N
u
m
b
e
r
o
f C
u
st
o
m
e
rs
Customers with Approved Master Policies and
Those Generating Applications, NIW During the Period
Master Policies Generating Apps Generating NIW
2016 YTD:
• Signed up 97 new customers to master policies
• Generated NIW with 124 new active customers