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): February 15, 2018
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))
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer" "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer x | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company) | |||
Emerging growth company x | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
Item 2.02. Results of Operations and Financial Condition
On February 15, 2018, NMI Holdings, Inc. issued a news release announcing its financial results for the quarter and year to date periods ended December 31, 2017. A copy of the news release is furnished as Exhibit 99.1 to this report.
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.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1* NMI Holdings, Inc. News Release dated February 15, 2018.
_____________________
* Furnished herewith.
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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: February 15, 2018 | By: | /s/ Nicole C. Sanchez |
Nicole C. Sanchez | ||
VP, Associate General Counsel | ||
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EXHIBIT INDEX
Exhibit No. Description
* Furnished herewith
i
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
NMI Holdings, Inc. Reports Record Fourth Quarter 2017 Financial Results
EMERYVILLE, CALIF., February 15, 2018 -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported a GAAP net loss of $1.8 million, or $(0.03) per diluted share, and adjusted net income of $14.0 million, or $0.22 per diluted share for its fourth quarter ended December 31, 2017. Net income (loss) and net income (loss) per share were adjusted to reflect a one-time non-cash expense of $13.6 million primarily related to the re-measurement of the company’s net deferred tax asset as a result of tax reform, and a pre-tax non-cash expense of $3.4 million related to the change in fair value of the company’s warrant liability as a result of the increase in its stock price. This compares with 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, after adjusting for the change in fair value of the warrant liability, in the prior quarter. In the fourth quarter of 2016, the company reported net income of $59.7 million, or $0.98 per diluted share, and adjusted net income of $2.3 million, or $0.04 per diluted share, after adjusting for the change in fair value of the warrant liability and release of the valuation allowance on the company’s net deferred tax asset. We present the non-GAAP financial measures adjusted net income and adjusted net income per share to increase the comparability of our financial results between periods. See "Use of Non-GAAP Financial Measures" below.
Bradley Shuster, Chairman and CEO of National MI, said, "In the fourth quarter, National MI delivered record financial results, including record new insurance written of $6.9 billion, record net premiums earned of $50.1 million, record adjusted net income of $14.0 million, and record adjusted return-on-equity of 11.0%. National MI continued to build its portfolio of high-quality insurance in force at a rate that leads our industry. We also continued to make significant strides in customer development, activating 29 new customers in the fourth quarter and continuing to increase our volume with existing customers.”
• | As of December 31, 2017, the company had primary insurance-in-force of $48.5 billion, up 12% from $43.3 billion at the prior quarter end and up 51% over $32.2 billion as of December 31, 2016. |
• | Premiums earned for the quarter were $50.1 million, including $4.2 million attributable to cancellation of single premium policies, which compares with $44.5 million, including $4.3 million related to cancellations, in the prior quarter. Premiums earned in the fourth quarter of 2017 were up 53% over premium revenue of $32.8 million in the same quarter a year ago, which included $5.1 million related to cancellations. |
• | NIW mix was 83% monthly premium product, which compares with 79% in the prior quarter and 75% in the fourth quarter of 2016. |
• | At quarter-end, cash and investments were $735 million, including $51 million at the holding company, and book equity was $509 million, equal to $8.41 per share. |
• | At quarter-end, the company had total PMIERs available assets of $528 million, which compares with risk-based required assets under PMIERs of $446 million. |
1
EXHIBIT 99.1
Quarter Ended | Quarter Ended | Quarter Ended | Change | Change | |||
12/31/2017 | 9/30/2017 | 12/31/2016 (1) | Q/Q | Y/Y | |||
Primary Insurance-in-Force ($billions) | 48.47 | 43.26 | 32.17 | 12% | 51% | ||
New Insurance Written - NIW ($billions) | |||||||
Monthly premium | 5.74 | 4.83 | 3.90 | 19% | 47% | ||
Single premium | 1.14 | 1.28 | 1.34 | -11% | -15% | ||
Total | 6.88 | 6.11 | 5.24 | 13% | 31% | ||
Premiums Earned ($millions) | 50.08 | 44.52 | 32.83 | 12% | 53% | ||
Underwriting & Operating Expense ($millions) | 28.30 | 24.65 | 23.28 | 15% | 22% | ||
Loss Expense ($millions) | 2.37 | 0.96 | 0.80 | 148% | 197% | ||
Loss Ratio | 4.7% | 2.1% | 2.4% | ||||
Cash & Investments ($millions) | 735 | 713 | 677 | 3% | 9% | ||
Book Equity ($millions) | 509 | 511 | 476 | 0% | 7% | ||
Book Value per Share | 8.41 | 8.53 | 8.04 | -1% | 5% | ||
(1) The 2016 prior period balance sheet has been revised. Please refer to our Form 10-K for the year ended December 31, 2017 for further details.
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: 1986684, 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: 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 current or future versions of their 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 governmental mortgage insurers like the Federal Housing Administration (FHA) and the Veterans Administration (VA) (collectively, public MIs), and potential market entry by new competitors or consolidation of existing competitors; developments in the world's financial capital and reinsurance
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EXHIBIT 99.1
markets and our access to such markets; 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 driven by Congressional or regulatory action 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 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 reinsurance market and to enter into, and receive approval for 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 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 our pricing, risk management or investment strategies; emergence of unexpected claims and coverage issues, including claims exceeding our reserves or amounts we 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, 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 non-cash loss or gain related to the change in fair value of our warrant liability.
Adjusted net income is defined as GAAP net income (loss) excluding the after-tax impact of the aforementioned change in the fair value of our warrant liability and other discrete tax (benefits) expense which are infrequent and unusual non-operating items, such as the one-time non-cash charge due to a re-measurement of our net deferred tax assets in connection with the enactment of the Tax Cuts and Jobs Act (the "Tax Act") in 2017 and the release of the valuation allowance held against certain of our net deferred tax assets in 2016. The amounts of adjustments to components of pre-tax income are tax effected using a federal statutory tax rate of 35%.
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 reflects share dilution from non-vested restricted stock units and from warrants when dilutive.
Adjusted return-on-equity is calculated by dividing the adjusted income on an annualized basis by the average shareholders’ equity for the period.
Although adjusted pre-tax net 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 represent items that 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
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EXHIBIT 99.1
fundamental operating activities can be more clearly identified without the fluctuations of these adjustments. 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) | Infrequent or unusual non-operating items. Our income tax expense for 2017 reflects a one-time non-cash charge due to a re-measurement of our net deferred tax assets in connection with the enactment of the Tax Act in the fourth quarter of 2017. Our income tax benefit in 2016 reflects a one-time non-cash benefit related to the release of the valuation allowance held against certain of our net deferred tax assets. |
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
4
EXHIBIT 99.1
Consolidated statements of operations and comprehensive income | For the three months ended December 31, | For the year ended December 31, | |||||||||||||
2017 | 2016 (3) | 2017 | 2016(3) | ||||||||||||
Revenues | (In Thousands, except for per share data) | ||||||||||||||
Net premiums earned | $ | 50,079 | $ | 32,825 | $ | 165,740 | $ | 110,481 | |||||||
Net investment income | 4,388 | 3,634 | 16,273 | 13,751 | |||||||||||
Net realized investment gains (losses) | 9 | 65 | 208 | (693 | ) | ||||||||||
Other revenues | 62 | 105 | 522 | 276 | |||||||||||
Total revenues | 54,538 | 36,629 | 182,743 | 123,815 | |||||||||||
Expenses | |||||||||||||||
Insurance claims and claims expenses | 2,374 | 800 | 5,339 | 2,392 | |||||||||||
Underwriting and operating expenses | 28,297 | 23,281 | 106,979 | 93,223 | |||||||||||
Total expenses | 30,671 | 24,081 | 112,318 | 95,615 | |||||||||||
Other expense | |||||||||||||||
(Loss) gain from change in fair value of warrant liability | (3,426 | ) | (1,714 | ) | (4,105 | ) | (1,900 | ) | |||||||
Interest expense | 3,382 | 3,776 | (13,528 | ) | (14,848 | ) | |||||||||
Total other expense | (6,808 | ) | (5,490 | ) | (17,633 | ) | (16,748 | ) | |||||||
Income (loss) before income taxes | 17,059 | 7,058 | 52,792 | 11,452 | |||||||||||
Income tax expense (benefit) | 18,825 | (52,664 | ) | 30,742 | (52,549 | ) | |||||||||
Net income (loss) | $ | (1,766 | ) | $ | 59,722 | $ | 22,050 | $ | 64,001 | ||||||
Earnings (loss) per share | |||||||||||||||
Basic | $ | (0.03 | ) | $ | 1.01 | $ | 0.37 | $ | 1.08 | ||||||
Diluted | $ | (0.03 | ) | $ | 0.98 | $ | 0.35 | $ | 1.05 | ||||||
Weighted average common shares outstanding | |||||||||||||||
Basic | 60,219 | 59,140 | 59,816 | 59,071 | |||||||||||
Diluted | 60,219 | 61,229 | 62,186 | 60,829 | |||||||||||
Loss Ratio(1) | 4.7 | % | 2.4 | % | 3.2 | % | 2.2 | % | |||||||
Expense Ratio(2) | 56.5 | % | 70.9 | % | 64.5 | % | 84.4 | % | |||||||
Combined ratio | 61.2 | % | 73.3 | % | 67.7 | % | 86.6 | % | |||||||
Net income (loss) | $ | (1,766 | ) | $ | 59,722 | $ | 22,050 | $ | 64,001 | ||||||
Other comprehensive income, net of tax: | |||||||||||||||
Net unrealized gains (losses) in accumulated other comprehensive income, net of tax expense of $1,234 and $1,178 for the years ended December 31, 2017 and 2016, respectively, and $(1,273) and $1,178 for the quarters ended December 2017 and 2016, respectively | (2,094 | ) | (16,196 | ) | 2,559 | 1,429 | |||||||||
Reclassification adjustment for realized losses (gains) included in net income, net of tax expense of $73, and $0 for the years ended December 31, 2017 and 2016, respectively and $73 and $0 for the quarters ended December 31, 2017 and 2016, respectively | (135 | ) | (65 | ) | (131 | ) | 758 | ||||||||
Other comprehensive income, net of tax | (2,229 | ) | (16,261 | ) | 2,428 | 2,187 | |||||||||
Comprehensive income (loss) | $ | (3,995 | ) | $ | 43,461 | $ | 24,478 | $ | 66,188 | ||||||
(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.
(3) The 2016 prior period consolidated results of operations have been revised. Please refer to our Form 10-K for the year ended December 31, 2017 for further details.
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EXHIBIT 99.1
Consolidated balance sheets | December 31, 2017 | December 31, 2016 (1) | |||||
Assets | (In Thousands, except for share data) | ||||||
Fixed maturities, available-for-sale, at fair value (amortized cost of $713,859 and $630,688 as of December 31, 2017 and December 31, 2016, respectively) | $ | 715,875 | $ | 628,969 | |||
Cash and cash equivalents | 19,196 | 47,746 | |||||
Premiums receivable | 25,179 | 13,728 | |||||
Accrued investment income | 4,212 | 3,421 | |||||
Prepaid expenses | 2,151 | 1,991 | |||||
Deferred policy acquisition costs, net | 37,925 | 30,109 | |||||
Software and equipment, net | 22,802 | 20,402 | |||||
Intangible assets and goodwill | 3,634 | 3,634 | |||||
Prepaid reinsurance premiums | 40,250 | 37,921 | |||||
Deferred tax asset, net | 19,929 | 51,434 | |||||
Other assets | 3,695 | 542 | |||||
Total assets | $ | 894,848 | $ | 839,897 | |||
Liabilities | |||||||
Term loan | $ | 143,882 | $ | 144,353 | |||
Unearned premiums | 163,166 | 152,906 | |||||
Accounts payable and accrued expenses | 23,364 | 25,297 | |||||
Reserve for insurance claims and claim expenses | 8,761 | 3,001 | |||||
Reinsurance funds withheld | 34,102 | 30,633 | |||||
Deferred ceding commission | 5,024 | 4,831 | |||||
Warrant liability, at fair value | 7,472 | 3,367 | |||||
Total liabilities | 385,771 | 364,388 | |||||
Commitments and contingencies | |||||||
Shareholders' equity | |||||||
Common stock - class A shares, $0.01 par value; 60,517,512 and 59,145,161 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively (250,000,000 shares authorized) | 605 | 591 | |||||
Additional paid-in capital | 585,488 | 576,927 | |||||
Accumulated other comprehensive loss, net of tax | (2,859 | ) | (5,287 | ) | |||
Accumulated deficit | (74,157 | ) | (96,722 | ) | |||
Total shareholders' equity | 509,077 | 475,509 | |||||
Total liabilities and shareholders' equity | $ | 894,848 | $ | 839,897 | |||
(1) The 2016 prior period consolidated results of operations have been revised. Please refer to our Form 10-K for the year ended December 31, 2017 for further details.
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EXHIBIT 99.1
Non-GAAP Financial Measure Reconciliations | |||||||||||
Quarter Ended | Quarter Ended | Quarter Ended | |||||||||
(In Thousands, except for per share data) | 12/31/2017 | 9/30/2017 | 12/31/2016 | ||||||||
As Reported | |||||||||||
Revenues | |||||||||||
Net premiums earned | $ | 50,079 | $ | 44,519 | $ | 32,825 | |||||
Net investment income | 4,388 | 4,170 | 3,634 | ||||||||
Net realized investment gains (losses) | 9 | 69 | 65 | ||||||||
Other revenues | 62 | 195 | 105 | ||||||||
Total revenues | 54,538 | 48,953 | 36,629 | ||||||||
Expenses | |||||||||||
Insurance claims and claims expenses | 2,374 | 957 | 800 | ||||||||
Underwriting and operating expenses | 28,297 | 24,645 | 23,281 | ||||||||
Total expenses | 30,671 | 25,602 | 24,081 | ||||||||
Other Expense | |||||||||||
Gain (loss) from change in fair value of warrant liability | (3,426 | ) | (502 | ) | (1,713 | ) | |||||
Interest expense | 3,382 | 3,352 | 3,777 | ||||||||
Total other expense | (6,808 | ) | (3,854 | ) | (5,490 | ) | |||||
Income before income taxes | 17,059 | 19,497 | 7,059 | ||||||||
Income tax expense (benefit) | 18,825 | 7,185 | (52,663 | ) | |||||||
Net income | $ | (1,766 | ) | $ | 12,312 | $ | 59,722 | ||||
Adjustments: | |||||||||||
(Gain) loss from change in fair value of warrant liability | 3,426 | 502 | 1,713 | ||||||||
Adjusted Income before income taxes | 20,485 | 19,999 | 8,771 | ||||||||
After-tax warrant adjustment | 2,227 | 326 | 1,113 | ||||||||
Deferred tax asset adjustments | 13,554 | — | (58,535 | ) | |||||||
Adjusted Net income | $ | 14,015 | $ | 12,638 | $ | 2,300 | |||||
Weighted average diluted shares outstanding - Reported | 60,219 | 63,089 | 61,229 | ||||||||
Dilutive effect of non-vested shares and warrants | 3,449 | — | — | ||||||||
Weighted average diluted shares outstanding - Adjusted | 63,668 | 63,089 | 61,229 | ||||||||
Diluted EPS - Reported | $ | (0.03 | ) | $ | 0.20 | $ | 0.98 | ||||
Diluted EPS - Adjusted | $ | 0.22 | $ | 0.20 | $ | 0.04 | |||||
Return on Equity - Reported | (1.4 | )% | 9.8 | % | 52.7 | % | |||||
Return on Equity - Adjusted | 11.0 | % | 10.0 | % | 2.0 | % | |||||
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EXHIBIT 99.1
Historical Quarterly Data | 2017 | 2016 | |||||||||||||||||||||
December 31 | September 30 | June 30 | March 31 | December 31 (4) | September 30 | ||||||||||||||||||
Revenues | (In Thousands, except for per share data) | ||||||||||||||||||||||
Net premiums earned | $ | 50,079 | $ | 44,519 | $ | 37,917 | $ | 33,225 | $ | 32,825 | $ | 31,808 | |||||||||||
Net investment income | 4,388 | 4,170 | 3,908 | 3,807 | 3,634 | 3,544 | |||||||||||||||||
Net realized investment gains (losses) | 9 | 69 | 188 | (58 | ) | 65 | 66 | ||||||||||||||||
Other revenues | 62 | 195 | 185 | 80 | 105 | 102 | |||||||||||||||||
Total revenues | 54,538 | 48,953 | 42,198 | 37,054 | 36,629 | 35,520 | |||||||||||||||||
Expenses | |||||||||||||||||||||||
Insurance claims and claims expenses | 2,374 | 957 | 1,373 | 635 | 800 | 664 | |||||||||||||||||
Underwriting and operating expenses | 28,297 | 24,645 | 28,048 | 25,989 | 23,281 | 24,037 | |||||||||||||||||
Total expenses | 30,671 | 25,602 | 29,421 | 26,624 | 24,081 | 24,701 | |||||||||||||||||
Other expense (1) | (6,808 | ) | (3,854 | ) | (3,281 | ) | (3,690 | ) | (5,490 | ) | (4,530 | ) | |||||||||||
Income (loss) before income taxes | 17,059 | 19,497 | 9,496 | 6,740 | 7,058 | 6,289 | |||||||||||||||||
Income tax expense (benefit) | 18,825 | 7,185 | 3,484 | 1,248 | (52,664 | ) | 114 | ||||||||||||||||
Net income (loss) | $ | (1,766 | ) | $ | 12,312 | $ | 6,012 | $ | 5,492 | $ | 59,722 | $ | 6,175 | ||||||||||
Earnings (loss) per share | |||||||||||||||||||||||
Basic | $ | (0.03 | ) | $ | 0.21 | $ | 0.10 | $ | 0.09 | $ | 1.01 | $ | 0.10 | ||||||||||
Diluted | $ | (0.03 | ) | $ | 0.20 | $ | 0.10 | $ | 0.09 | $ | 0.98 | $ | 0.10 | ||||||||||
Weighted average common shares outstanding | |||||||||||||||||||||||
Basic | 60,219 | 59,884 | 59,823 | 59,184 | 59,140 | 59,130 | |||||||||||||||||
Diluted | 60,219 | 63,089 | 63,010 | 62,339 | 61,229 | 60,285 | |||||||||||||||||
Other data | |||||||||||||||||||||||
Loss Ratio (2) | 4.7 | % | 2.1 | % | 3.6 | % | 1.9 | % | 2.4 | % | 2.1 | % | |||||||||||
Expense Ratio (3) | 56.5 | % | 55.4 | % | 74.0 | % | 78.2 | % | 70.9 | % | 75.6 | % | |||||||||||
Combined ratio | 61.2 | % | 57.5 | % | 77.6 | % | 80.1 | % | 73.3 | % | 77.7 | % | |||||||||||
(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.
(4) The 2016 prior period consolidated results of operations have been revised. Please refer to our Form 10-K for the year ended December 31, 2017 for further details.
8
EXHIBIT 99.1
New Insurance Written (NIW), Insurance in Force (IIF) and Premiums
The tables below present primary and pool NIW and IIF, as of the dates and for the periods indicated.
Primary NIW | Three months ended | |||||||||||||||||||||
December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||||
(In Millions) | ||||||||||||||||||||||
Monthly | $ | 5,736 | $ | 4,833 | $ | 4,099 | $ | 2,892 | $ | 3,904 | $ | 4,162 | ||||||||||
Single | 1,140 | 1,282 | 938 | 667 | 1,336 | 1,695 | ||||||||||||||||
Primary | $ | 6,876 | $ | 6,115 | $ | 5,037 | $ | 3,559 | $ | 5,240 | $ | 5,857 | ||||||||||
Primary and pool IIF | As of | ||||||||||||||||||||||
December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||||||||||
(In Millions) | |||||||||||||||||||||||
Monthly | $ | 33,268 | $ | 28,707 | $ | 24,865 | $ | 21,511 | $ | 19,205 | $ | 16,038 | |||||||||||
Single | 15,197 | 14,552 | 13,764 | 13,268 | 12,963 | 12,190 | |||||||||||||||||
Primary | 48,465 | 43,259 | 38,629 | 34,779 | 32,168 | 28,228 | |||||||||||||||||
Pool | 3,233 | 3,330 | 3,447 | 3,545 | 3,650 | 3,826 | |||||||||||||||||
Total | $ | 51,698 | $ | 46,589 | $ | 42,076 | $ | 38,324 | $ | 35,818 | $ | 32,054 | |||||||||||
The following table presents the amounts related to the 2016 QSR transaction for the periods indicated.
December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||
(In Thousands) | ||||||||||||||||||
Ceded risk-in-force | $ | 2,983,353 | $ | 2,682,982 | $ | 2,403,027 | $ | 2,167,745 | $ | 2,008,385 | $ | 1,778,235 | ||||||
Ceded premiums written | (15,233 | ) | (14,389 | ) | (12,034 | ) | (10,292 | ) | (11,576 | ) | (38,977 | ) | ||||||
Ceded premiums earned | (14,898 | ) | (13,393 | ) | (11,463 | ) | (9,865 | ) | (9,746 | ) | (2,885 | ) | ||||||
Ceded claims and claims expenses | 800 | 277 | 342 | 268 | 206 | 90 | ||||||||||||
Ceding commission written | 3,047 | 2,878 | 2,407 | 2,058 | 2,316 | 7,795 | ||||||||||||
Ceding commission earned | 2,885 | 2,581 | 2,275 | 2,065 | 1,752 | 551 | ||||||||||||
Profit commission | 8,139 | 7,758 | 6,536 | 5,651 | 5,642 | 1,641 | ||||||||||||
Portfolio Statistics
The table below highlights trends in our primary portfolio as of the date and for the periods indicated.
9
EXHIBIT 99.1
Primary portfolio trends | As of and for the three months ended | |||||||||||||||||||||
December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||||
($ Values In Millions) | ||||||||||||||||||||||
New insurance written | $ | 6,876 | $ | 6,115 | $ | 5,037 | $ | 3,559 | $ | 5,240 | $ | 5,857 | ||||||||||
New risk written | 1,665 | 1,496 | 1,242 | 868 | 1,244 | 1,415 | ||||||||||||||||
Insurance in force (IIF) (1) | 48,465 | 43,259 | 38,629 | 34,779 | 32,168 | 28,228 | ||||||||||||||||
Risk in force (1) | 11,843 | 10,572 | 9,417 | 8,444 | 7,790 | 6,847 | ||||||||||||||||
Policies in force (count) (1) | 202,351 | 180,089 | 161,195 | 145,632 | 134,662 | 119,002 | ||||||||||||||||
Average loan size (1) | $ | 0.240 | $ | 0.240 | $ | 0.240 | $ | 0.239 | $ | 0.239 | $ | 0.237 | ||||||||||
Average coverage (2) | 24.4 | % | 24.4 | % | 24.4 | % | 24.3 | % | 24.2 | % | 24.3 | % | ||||||||||
Loans in default (count) | 928 | 350 | 249 | 207 | 179 | 115 | ||||||||||||||||
Percentage of loans in default | 0.5 | % | 0.2 | % | 0.2 | % | 0.1 | % | 0.1 | % | 0.1 | % | ||||||||||
Risk in force on defaulted loans | $ | 53 | $ | 19 | $ | 14 | $ | 12 | $ | 10 | $ | 6 | ||||||||||
Average premium yield (3) | 0.44 | % | 0.43 | % | 0.41 | % | 0.40 | % | 0.43 | % | 0.49 | % | ||||||||||
Earnings from cancellations | $ | 4.2 | $ | 4.3 | $ | 3.8 | $ | 2.5 | $ | 5.1 | $ | 5.8 | ||||||||||
Annual persistency (4) | 86.1 | % | 85.1 | % | 83.1 | % | 81.3 | % | 80.7 | % | 81.8 | % | ||||||||||
Quarterly run-off (5) | 3.9 | % | 3.8 | % | 3.4 | % | 2.9 | % | 4.6 | % | 5.3 | % | ||||||||||
(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 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 | ||||||||||
December 31, 2017 | September 30, 2017 | December 31, 2016 | |||||||||
($ In Millions) | |||||||||||
>= 760 | $ | 2,847 | $ | 2,806 | $ | 2,566 | |||||
740-759 | 1,055 | 934 | 846 | ||||||||
720-739 | 943 | 807 | 647 | ||||||||
700-719 | 877 | 697 | 560 | ||||||||
680-699 | 611 | 456 | 375 | ||||||||
<=679 | 543 | 415 | 246 | ||||||||
Total | $ | 6,876 | $ | 6,115 | $ | 5,240 | |||||
Weighted average FICO | 743 | 747 | 764 | ||||||||
Primary NIW by LTV | For the three months ended | ||||||||||
December 31, 2017 | September 30, 2017 | December 31, 2016 | |||||||||
(In Millions) | |||||||||||
95.01% and above | $ | 988 | $ | 722 | $ | 355 | |||||
90.01% to 95.00% | 2,889 | 2,714 | 2,224 | ||||||||
85.01% to 90.00% | 1,870 | 1,765 | 1,580 | ||||||||
85.00% and below | 1,129 | 914 | 1,081 | ||||||||
Total | $ | 6,876 | $ | 6,115 | $ | 5,240 | |||||
Weighted average LTV | 92.3 | % | 92.3 | % | 91.6 | % | |||||
10
EXHIBIT 99.1
Primary NIW by purchase/refinance mix | For the three months ended | ||||||||||
December 31, 2017 | September 30, 2017 | December 31, 2016 | |||||||||
(In Millions) | |||||||||||
Purchase | $ | 5,738 | $ | 5,387 | $ | 3,776 | |||||
Refinance | 1,137 | 728 | 1,464 | ||||||||
Total | $ | 6,876 | $ | 6,115 | $ | 5,240 | |||||
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 December 31, 2017 | ||||||
IIF | RIF | ||||||
(In Millions) | |||||||
December 31, 2017 | $ | 20,739 | $ | 5,059 | |||
2016 | 18,066 | 4,383 | |||||
2015 | 8,256 | 2,051 | |||||
2014 | 1,368 | 341 | |||||
2013 | 36 | 9 | |||||
Total | $ | 48,465 | $ | 11,843 | |||
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 | ||||||||||
December 31, 2017 | September 30, 2017 | December 31, 2016 | |||||||||
(In Millions) | |||||||||||
>= 760 | $ | 23,438 | $ | 21,329 | $ | 16,166 | |||||
740-759 | 7,781 | 6,983 | 5,248 | ||||||||
720-739 | 6,259 | 5,547 | 4,130 | ||||||||
700-719 | 5,179 | 4,505 | 3,245 | ||||||||
680-699 | 3,408 | 2,942 | 2,151 | ||||||||
<=679 | 2,400 | 1,953 | 1,228 | ||||||||
Total | $ | 48,465 | $ | 43,259 | $ | 32,168 | |||||
Primary RIF by FICO | As of | ||||||||||
December 31, 2017 | September 30, 2017 | December 31, 2016 | |||||||||
(In Millions) | |||||||||||
>= 760 | $ | 5,764 | $ | 5,251 | $ | 3,934 | |||||
740-759 | 1,909 | 1,713 | 1,281 | ||||||||
720-739 | 1,527 | 1,349 | 1,000 | ||||||||
700-719 | 1,256 | 1,092 | 782 | ||||||||
680-699 | 821 | 707 | 511 | ||||||||
<=679 | 566 | 460 | 282 | ||||||||
Total | $ | 11,843 | $ | 10,572 | $ | 7,790 | |||||
11
EXHIBIT 99.1
Primary IIF by LTV | As of | ||||||||||
December 31, 2017 | September 30, 2017 | December 31, 2016 | |||||||||
(In Millions) | |||||||||||
95.01% and above | $ | 3,946 | $ | 3,038 | $ | 1,686 | |||||
90.01% to 95.00% | 21,763 | 19,562 | 14,358 | ||||||||
85.01% to 90.00% | 14,766 | 13,437 | 10,282 | ||||||||
85.00% and below | 7,990 | 7,222 | 5,842 | ||||||||
Total | $ | 48,465 | $ | 43,259 | $ | 32,168 | |||||
Primary RIF by LTV | As of | ||||||||||
December 31, 2017 | September 30, 2017 | December 31, 2016 | |||||||||
(In Millions) | |||||||||||
95.01% and above | $ | 1,054 | $ | 822 | $ | 467 | |||||
90.01% to 95.00% | 6,354 | 5,722 | 4,226 | ||||||||
85.01% to 90.00% | 3,523 | 3,205 | 2,439 | ||||||||
85.00% and below | 912 | 823 | 658 | ||||||||
Total | $ | 11,843 | $ | 10,572 | $ | 7,790 | |||||
Primary RIF by Loan Type | As of | |||||||
December 31, 2017 | September 30, 2017 | December 31, 2016 | ||||||
Fixed | 98 | % | 98 | % | 99 | % | ||
Adjustable rate mortgages: | ||||||||
Less than five years | — | — | — | |||||
Five years and longer | 2 | 2 | 1 | |||||
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 | ||||||||||
December 31, 2017 | September 30, 2017 | December 31, 2016 | |||||||||
(In Millions) | |||||||||||
IIF, beginning of period | $ | 43,259 | $ | 38,629 | $ | 28,228 | |||||
NIW | 6,876 | 6,115 | 5,240 | ||||||||
Cancellations and other reductions | (1,670 | ) | (1,485 | ) | (1,300 | ) | |||||
IIF, end of period | $ | 48,465 | $ | 43,259 | $ | 32,168 | |||||
12
EXHIBIT 99.1
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 | |||||||
December 31, 2017 | September 30, 2017 | December 31, 2016 | ||||||
California | 13.5 | % | 13.6 | % | 13.6 | % | ||
Texas | 7.8 | 7.6 | 7.0 | |||||
Virginia | 5.3 | 5.6 | 6.5 | |||||
Arizona | 4.6 | 4.4 | 3.9 | |||||
Florida | 4.5 | 4.3 | 4.5 | |||||
Michigan | 3.7 | 3.7 | 3.7 | |||||
Pennsylvania | 3.6 | 3.6 | 3.6 | |||||
Colorado | 3.6 | 3.8 | 3.9 | |||||
Maryland | 3.5 | 3.6 | 3.7 | |||||
Utah | 3.5 | 3.6 | 3.7 | |||||
Total | 53.6 | % | 53.8 | % | 54.1 | % | ||
The following table shows portfolio data by book year, as of December 31, 2017.
As of December 31, 2017 | ||||||||||||||||||||||||||||
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 | $ | 36 | 22 | % | 655 | 187 | 1 | 1 | 0.2 | % | 0.3 | % | ||||||||||||||
2014 | 3,451 | 1,368 | 40 | % | 14,786 | 6,970 | 80 | 14 | 4.0 | % | 0.6 | % | ||||||||||||||||
2015 | 12,422 | 8,256 | 66 | % | 52,548 | 37,771 | 316 | 17 | 2.8 | % | 0.6 | % | ||||||||||||||||
2016 | 21,187 | 18,066 | 85 | % | 83,626 | 73,986 | 363 | 6 | 2.3 | % | 0.4 | % | ||||||||||||||||
2017 | 21,587 | 20,739 | 96 | % | 85,912 | 83,437 | 168 | — | 2.4 | % | 0.2 | % | ||||||||||||||||
Total | $ | 58,809 | $ | 48,465 | 237,527 | 202,351 | 928 | 38 | ||||||||||||||||||||
(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. |
13
EXHIBIT 99.1
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 year ended | ||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | ||||||||||||
(In Thousands) | |||||||||||||||
Beginning balance | $ | 6,123 | $ | 2,133 | $ | 3,001 | $ | 679 | |||||||
Less reinsurance recoverables (1) | (1,174 | ) | (90 | ) | (297 | ) | — | ||||||||
Beginning balance, net of reinsurance recoverables | 4,949 | 2,043 | 2,704 | 679 | |||||||||||
Add claims incurred: | |||||||||||||||
Claims and claim expenses incurred: | |||||||||||||||
Current year (2) | 2,594 | 654 | 6,140 | 2,457 | |||||||||||
Prior years (3) | (220 | ) | 149 | (801 | ) | (65 | ) | ||||||||
Total claims and claims expenses incurred | 2,374 | 803 | 5,339 | 2,392 | |||||||||||
Less claims paid: | |||||||||||||||
Claims and claim expenses paid: | |||||||||||||||
Current year (2) | 27 | 171 | 27 | 171 | |||||||||||
Prior years (3) | 437 | (29 | ) | 1,157 | 196 | ||||||||||
Total claims and claim expenses paid | 464 | 142 | 1,184 | 367 | |||||||||||
Reserve at end of period, net of reinsurance recoverables | 6,859 | 2,704 | 6,859 | 2,704 | |||||||||||
Add reinsurance recoverables (1) | 1,902 | 297 | 1,902 | 297 | |||||||||||
Ending balance | $ | 8,761 | $ | 3,001 | $ | 8,761 | $ | 3,001 | |||||||
(1) Related to ceded losses recoverable on our 2016 quota-share reinsurance transaction, included in "Other Assets" on the Consolidated Balance Sheet.
(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 year ended | ||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | ||||||||
Beginning default inventory | 350 | 115 | 179 | 36 | |||||||
Plus: new defaults | 783 | 126 | 1,262 | 284 | |||||||
Less: cures | (194 | ) | (59 | ) | (486 | ) | (132 | ) | |||
Less: claims paid | (11 | ) | (3 | ) | (27 | ) | (9 | ) | |||
Ending default inventory | 928 | 179 | 928 | 179 | |||||||
14
EXHIBIT 99.1
The following tables provide details of our claims and reserves for the periods indicated, before claims paid covered under the 2016 QSR Transaction.
For the three months ended | For the year ended | ||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | ||||||||||||
($ Values In Thousands) | |||||||||||||||
Number of claims paid | 11 | 3 | 27 | 9 | |||||||||||
Total amount paid for claims | $ | 535 | $ | 136 | $ | 1,266 | $ | 367 | |||||||
Average amount paid per claim | $ | 49 | $ | 45 | $ | 47 | $ | 41 | |||||||
Severity(1) | 90 | % | 65 | % | 86 | % | 64 | % | |||||||
(1) Severity represents the total amount of claims paid divided by the related RIF on the loan at the time the claim is perfected.
Average reserve per default: | As of December 31, 2017 | As of December 31, 2016 | |||||
(In Thousands) | |||||||
Case (1) | $ | 8 | $ | 15 | |||
IBNR | 1 | 2 | |||||
Total | $ | 9 | $ | 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 National MI as of the dates indicated.
As of | |||||||||||
December 31, 2017 | September 30, 3017 | December 31, 2016 | |||||||||
(In thousands) | |||||||||||
Available assets | $ | 527,897 | $ | 495,182 | $ | 453,523 | |||||
Risk-based required assets | 446,226 | 356,207 | 366,584 | ||||||||
15