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NMI Holdings, Inc. Reports Second Quarter 2017 Financial Results

EMERYVILLE, CA--(Marketwired - August 01, 2017) - NMI Holdings, Inc. (NASDAQ: NMIH) today reported net income of $6.0 million, or $0.10 per share, for the second quarter ended June 30, 2017. Results for the quarter include previously disclosed fees and expenses of approximately $3.1 million related to the May 2017 issuance of Insurance-Linked Notes (ILN). The company reported net income of $2.0 million, or $0.03 per share, in the second quarter of 2016.

Bradley Shuster, chairman and CEO of National MI, said, "In the second quarter, National MI again delivered solid financial results, including record pre-tax income, and continued to advance the key metrics that will drive realization of our mid-teens return objectives. We made significant strides in customer development, activating 36 new customers in the second quarter and 73 new customers for the year-to-date. We also continued to build a high-quality portfolio of insurance-in-force at a growth rate that leads our industry, while maintaining our focus on prudently and proactively managing risk, expenses, and capital."

  • As of June 30, 2017, the company had primary insurance-in-force of $38.6 billion, up 11% from $34.8 billion at the prior quarter end and up 64% over $23.6 billion as of June 30, 2016.
  • Premiums earned for the quarter were $37.9 million, including $3.8 million attributable to cancellation of single premium policies, which compares with $33.2 million, including $2.5 million related to cancellations, in the prior quarter. Premiums earned in the second quarter of 2017 were up 46% over premium revenue of $26.0 million in the same quarter a year ago, which included $3.5 million related to cancellations.
  • NIW mix was 81% monthly premium product, which compares with 81% in the prior quarter and 63% in the second quarter of 2016.
  • Total underwriting and operating expenses in the second quarter were $28.0 million and include approximately $3.1 million of transaction costs related to the previously disclosed ILN issuance. This compares with total underwriting and operating expenses of $26.0 million, including financing-related transaction costs of $1.6 million in the prior quarter, and $23.2 million in the same quarter a year ago.
  • Claims expense for the quarter was $1.4 million, resulting in a loss ratio of 3.6%.
  • At quarter-end, cash and investments were $694 million, including $57 million at the holding company, and book equity was $495 million, equal to $8.27 per share.
  • At quarter-end, the company had total PMIERs available assets of $485 million, which compares with risk- based required assets under PMIERs of $298 million.
 
    Quarter   Quarter   Quarter        
    Ended   Ended   Ended   Change   Change
    6/30/2017   3/31/2017   6/30/2016   Q/Q   Y/Y
Primary Insurance-in-Force ($billions)   38.63   34.78   23.62   11%   64%
New Insurance Written - NIW ($billions)                    
    Monthly premium   4.10   2.89   3.70   42%   11%
    Single premium   0.94   0.67   2.14   40%   -56%
    Total   5.04   3.56   5.84   42%   -14%
 
Premiums Earned ($millions)   37.92   33.23   26.04   14%   46%
Underwriting & Operating Expense ($millions)   28.05   25.99   23.23   8%   21%
Claims Expense ($millions)   1.37   0.64   0.47   114%   191%
Loss Ratio   3.6%   1.9%   1.8%        
Cash & Investments ($millions)   694   671   654   3%   6%
Book Equity ($millions)   495   484   422   2%   17%
Book Value per Share   8.27   8.09   7.14   2%   16%
                     

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: 47660998, 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 the GSEs that may impact the use of private mortgage insurance as credit enhancement; our ability to remain an eligible mortgage insurer under the PMIERs, including the financial requirements, and other requirements of 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 governmental agencies like the Federal Housing Administration (FHA) and the Veterans Administration (VA), and potential market entry by new competitors or consolidation of existing competitors; developments in the world's financial and capital markets and our access to such markets, including reinsurance; adoption of new or changes to existing laws and regulations that impact our business or financial condition directly or the mortgage insurance industry generally or their enforcement and implementation by regulators; changes to the GSEs' role in the secondary mortgage market or other changes that could affect the residential mortgage industry generally or mortgage insurance 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 reinsurance market 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 claims and coverage issues, including claims exceeding our reserves or amounts we expected to experience; 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; ability to recruit, train and retain key personnel; 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, 2016, 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

 
Consolidated statements of operations and comprehensive                          
income   For the three months ended June 30,     For the six months ended June 30,  
      2017     2016     2017     2016  
Revenues   (In Thousands, except for share data)  
  Net premiums earned   $ 37,917      $ 26,041      $ 71,142     $ 45,848    
  Net investment income     3,908       3,342       7,715       6,573    
  Net realized investment gains (losses)     188       61       130       (824 )  
  Other revenues     185       37       265       69    
Total revenues     42,198       29,481       79,252       51,666    
Expenses                                  
  Insurance claims and claims expenses     1,373       470       2,008       928    
  Underwriting and operating expenses     28,048       23,234       54,037       45,906    
Total expenses     29,421       23,704       56,045       46,834    
Other (expense) income                                  
  Gain (loss) from change in fair value of warrant liability     19       (59 )     (177 )     611    
  Interest expense     (3,300 )     (3,707 )     (6,794 )     (7,339 )  
Total other expense     (3,281 )     (3,766 )     (6,971 )     (6,728 )  
 
Income (loss) before income taxes     9,496       2,011       16,236       (1,896 )  
  Income tax expense     3,484       -       4,732       -    
Net income (loss)   $ 6,012     $ 2,011     $ 11,504     $ (1,896 )  
 
Earnings (loss) per share                                  
  Basic   $ 0.10     $ 0.03     $ 0.19     $ (0.03 )  
  Diluted   $ 0.10      $ 0.03     $ 0.18     $ (0.03 )  
 
Weighted average common shares outstanding                                  
Basic     59,823,396       59,105,613       59,576,747       59,005,983    
Diluted     63,010,362       59,830,899       62,688,563       59,005,983    
Loss Ratio(1)     3.6 %     1.8 %     2.8 %     2.0 %  
Expense Ratio(2)     74.0       89.2       76.0       100.1    
Combined ratio     77.6 %     91.0 %     78.8 %     102.1 %  
 
Net income (loss)   $ 6,012      $ 2,011     $ 11,504     $ (1,896 )  
Other comprehensive income, net of tax:                                  
  Net unrealized gains in accumulated other comprehensive income, net of tax expense of $1,388 and $0 for the three months ended June 30, 2017 and 2016, respectively, and $2,073 and $0 for the six months ended June 30, 2017 and 2016     2,822       8,670       4,017       17,771    
  Reclassification adjustment for losses (gains) included in net income, net of tax expense of $66 and $0 for the three months ended June 30, 2017 and 2016, respectively, and $45 and $0 for the six months ended June 30, 2017 and 2016     (122 )     (61 )     (84 )     824    
Other comprehensive income, net of tax     2,700       8,609       3,933       18,595    
Comprehensive income   $ 8,712     $ 10,620     $ 15,437     $ 16,699    
                                   
(1) Loss ratio is calculated by dividing the provision for insurance claims and claims expenses by net premiums earned.
(2) Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned.
                                   
   
Consolidated balance sheets     June 30, 2017     December 31, 2016 (1)  
Assets     (In Thousands, except for share data)  
  Fixed maturities, available-for-sale, at fair value (amortized cost of $669,363 and $630,688 as of June 30, 2017 and December 31, 2016, respectively)   $ 673,695     $ 628,969  
  Cash and cash equivalents     20,035       47,746  
  Premiums receivable     17,795       13,728  
  Accrued investment income     3,867       3,421  
  Prepaid expenses     2,072       1,991  
  Deferred policy acquisition costs, net     34,206       30,109  
  Software and equipment, net     21,530       20,402  
  Intangible assets and goodwill     3,634       3,634  
  Prepaid reinsurance premiums     38,919       37,921  
  Deferred tax asset, net     45,771       51,434  
  Other assets     1,471       542  
Total assets   $ 862,995     $ 839,897  
   
Liabilities                
  Term loan   $ 143,990     $ 144,353  
  Unearned premiums     157,152       152,906  
  Accounts payable and accrued expenses     21,349       25,297  
  Reserve for insurance claims and claim expenses     5,048       3,001  
  Reinsurance funds withheld     32,042       30,633  
  Deferred ceding commission     4,830       4,831  
  Warrant liability, at fair value     3,544       3,367  
  Deferred tax liability, net     -       -  
Total liabilities     367,955       364,388  
Commitments and contingencies                
   
Shareholders' equity                
  Common stock - class A shares, $0.01 par value; 59,858,418 and 59,145,161 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively (250,000,000 shares authorized)     598       591  
  Additional paid-in capital     580,499       576,927  
  Accumulated other comprehensive loss, net of tax     (1,354 )     (5,287 )
  Accumulated deficit     (84,703 )     (96,722 )
Total shareholders' equity     495,040       475,509  
Total liabilities and shareholders' equity   $ 862,995     $ 839,897  
                 
                 
(1)The 2016 prior period balance sheet has been revised. Please refer to our Form 10-Q for the quarter ended June 30, 2017 for further details.
 
   
Historical Quarterly Data   2017   2016
                    December     September              
      June 30       March 31       31(4)       30      June 30       March 31  
Revenues   (In Thousands, except for share data)
  Net premiums earned   $ 37,917     $ 33,225     $ 32,825     $ 31,808     $ 26,041     $ 19,807  
  Net investment income     3,908       3,807       3,634       3,544       3,342       3,231  
   
  Net realized investment (losses) gains     188       (58 )     65       66       61       (885 )
  Other revenues     185       80       105       102       37       32  
Total revenues     42,198       37,054       36,629       35,520       29,481       22,185  
Expenses                                                
  Insurance claims and claims expenses     1,373       635       800       664       470       458  
  Underwriting and operating expenses     28,048       25,989       23,281       24,037       23,234       22,672  
Total expenses     29,421       26,624       24,081       24,701       23,704       23,130  
   
Other expense     (3,281 )     (3,690 )     (5,490 )     (4,530 )     (3,766 )     (2,962 )
   
Income (loss) before income taxes     9,496       6,740       7,058       6,289       2,011       (3,907 )
  Income tax expense (benefit)     3,484       1,248       (52,664 )     114       -       -  
Net income (loss)   $ 6,012     $ 5,492     $ 59,722     $ 6,175     $ 2,011     $ (3,907 )
   
Earnings (loss) per share                                                
  Basic   $ 0.10     $ 0.09     $ 1.01     $ 0.10     $ 0.03     $ (0.07 )
  Diluted   $ 0.10     $ 0.09     $ 0.98     $ 0.10     $ 0.03     $ (0.07 )
   
Weighted average common shares                                                
outstanding                                                
Basic     59,823,396       59,183,973       59,140,011       59,130,401       59,105,613       58,936,694  
Diluted     63,010,362       62,338,856       61,229,338       60,284,746       59,830,899       58,936,694  
   
Other data                                                
Loss Ratio (2)     3.6 %     1.9 %     2.4 %     2.1 %     1.8 %     2.3 %
Expense Ratio (3)     74.0 %     78.2 %     70.9 %     75.6 %     89.2 %     114.5 %
Combined ratio     77.6 %     80.1 %     73.3 %     77.7 %     91.0 %     116.8 %
                                                 
(1) Other expense 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.
(4) The Q4 2016 quarterly data has been revised. Please refer to our Form 10-Q for the quarter ended June 30, 2017 for further details.
                                                 
 
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
    June 30, 2017   March 31,
2017
  December 31,
2016
  September
30, 2016
  June 30, 2016   March 31,
2016
    (In Millions)
Monthly   $ 4,099   $ 2,892   $ 3,904   $ 4,162   $ 3,700   $ 2,492
Single     938     667     1,336     1,695     2,138     1,762
Primary   $ 5,037   $ 3,559   $ 5,240   $ 5,857   $ 5,838   $ 4,254
                                     
 
Primary and pool IIF   As of
   
June 30, 2017
  March 31,
2017
  December 31,
2016
  September
30, 2016
 
June 30, 2016
  March 31,
2016
   
    (In Millions)
Monthly   $ 24,865   $ 21,551   $ 19,205   $ 16,038   $ 12,529   $ 9,210
Single     13,764     13,268     12,963     12,190     11,095     9,354
Primary     38,629     34,779     32,168     28,228     23,624     18,564
 
Pool     3,447     3,545     3,650     3,826     3,999     4,136
Total   $ 42,076   $ 38,324   $ 35,818   $ 32,054   $ 27,623   $ 22,700
                                     

/EINPresswire.com/ -- The following table presents the amounts related to the 2016 QSR transaction, for the last four quarters.

                                 
  For the three months ended  
    June 30, 2017     March 31, 2017     December 31, 2016     September 30, 2016  
  In Thousands  
Ceded risk-in-force   $ 2,403,027     $ 2,167,745     $ 2,008,385     $ 1,778,235  
Ceded premiums written     (12,034 )     (10,292 )     (11,576 )     (38,977 )
Ceded premiums earned     (11,463 )     (9,865 )     (9,746 )     (2,885 )
Ceded claims and claims expenses     342       268       206       90  
Ceding commission written     2,407       2,058       2,316       7,795  
Ceding commission earned     2,275       2,065       1,752       551  
Profit commission     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.
   
Primary portfolio trends As of and for the three months ended  
   
June 30, 2017
    March 31,
2017
    December 31,
2016
    September 30,
2016
 
June 30, 2016
    March 31,
2016
 
 
    ($ Values In Millions)
New insurance written   $ 5,037     $ 3,559     $ 5,240     $ 5,857     $ 5,838     $ 4,254  
New risk written     1,242       868       1,244       1,415       1,411       1,016  
Insurance in force (1)     38,629       34,779       32,168       28,228       23,624       18,564  
Risk in force (1)     9,417       8,444       7,790       6,847       5,721       4,487  
Policies in force (count) (1)     161,195       145,632       134,662       119,002       100,547       79,700  
Weighted-average coverage (2)     24.4 %     24.3 %     24.2 %     24.3 %     24.2 %     24.2 %
Loans in default (count)     249       207       179       115       79       55  
Percentage of loans in default     0.2 %     0.1 %     0.1 %     0.1 %     0.1 %     0.1 %
Risk in force on defaulted loans   $ 14     $ 12     $ 10     $ 6     $ 4     $ 3  
Average premium yield (3)     0.41 %     0.40 %     0.44 %     0.48 %     0.47 %     0.45 %
Earnings from cancellations   $ 3.8     $ 2.5     $ 5.1     $ 5.8     $ 3.5       2.3 %
Annual persistency     83.1 %     81.3 %     80.7 %     81.8 %     83.3 %     82.7 %
Quarterly run-off (4)     3.4 %     2.9 %     4.6 %     5.3 %     4.2 %     3.5 %
                                                 
(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 reflect 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 
      June 30, 2017     March 31, 2017     June 30, 2016
        ($ In Millions)   
  >= 760   $ 2,376 $ 1,683 $ 3,160
  740-759     793     551     961
  720-739     626     456     672
  700-719     568     396     541
  680-699     368     264     308
  <=679     306     209     196
Total   $ 5,037   $ 3,559   $ 5,838
Weighted average FICO     749     749     756
                   
   
Primary NIW by LTV   For the three months ended  
      June 30, 2017       March 31, 2017       June 30, 2016  
    (In Millions)  
  95.01% and above   $ 474     $ 274     $ 362  
  90.01% to 95.00%     2,297       1,612       2,633  
  85.01% to 90.00%     1,506       1,101       1,732  
  85.00% and below     760       572       1,111  
Total   $ 5,037     $ 3,559     $ 5,838  
Weighted average LTV     92.18 %     92.00 %     91.73 %
   
   
Primary NIW by purchase/refinance mix     For the three months ended  
      June 30, 2017       March 31, 2017       June 30, 2016  
      (In Millions)  
  Purchase   $ 4,518     $ 2,984     $ 4,199  
  Refinance     519       575       1,639  
Total   $ 5,037     $ 3,559     $ 5,838  
                         

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

Primary IIF and RIF As of June 30, 2017 
  IIF   RIF
   (In Millions)
June 30, 2017 $ 8,460   $ 2,078
2016 19,288   4,650
2015 9,243   2,284
2014 1,596   395
2013 42   10
Total $ 38,629   $ 9,417

The tables below reflect 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
      June 30, 2017     March 31, 2017     June 30, 2016
    (In Millions)
  >= 760   $ 19,224   $ 17,408   $ 11,929
  740-759     6,269     5,658     3,876
  720-739     4,927     4,460     3,082
  700-719     3,973     3,533     2,341
  680-699     2,615     2,336     1,561
  <=679     1,621     1,384     835
Total   $ 38,629   $ 34,779   $ 23,624
                   
 
Primary RIF by FICO   As of
      June 30, 2017     March 31, 2017     June 30, 2016
    (In Millions)
  >= 760   $ 4,720   $ 4,253   $ 2,895
  740-759     1,535     1,383     951
  720-739     1,198     1,081     750
  700-719     960     851     566
  680-699     627     556     369
  <=679     377     320     190
Total   $ 9,417   $ 8,444   $ 5,721
 
 
Primary IIF by LTV     As of
      June 30, 2017     March 31, 2017     June 30, 2016
      (In Millions)
  95.01% and above   $ 2,367   $ 1,931   $ 1,049
  90.01% to 95.00%     17,441     15,601     10,574
  85.01% to 90.00%     12,157     11,058     7,754
  85.00% and below     6,664     6,189     4,247
Total   $ 38,629   $ 34,779   $ 23,624
 
 
Primary RIF by LTV     As of
      June 30, 2017     March 31, 2017     June 30, 2016
      (In Millions)
  95.01% and above   $ 648   $ 533   $ 293
  90.01% to 95.00%     5,120     4,585     3,116
  85.01% to 90.00%     2,893     2,626     1,838
  85.00% and below     756     700     474
Total   $ 9,417   $ 8,444   $ 5,721
 
 
Primary RIF by Loan Type     As of
      June 30, 2017     March 31, 2017     June 30, 2016
 
Fixed     98%     99%     98%
Adjustable rate mortgages:                  
  Five years and longer     2     1     2
Total     100%     100%     100%
                   

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

   
Primary IIF   For the three months ended  
     June 30, 2017      March 31, 2017      June 30, 2016  
    (In Millions)  
IIF, beginning of period   $ 34,779     $ 32,168     $ 18,564  
  NIW     5,037       3,559       5,838  
  Cancellations and other reductions     (1,187 )     (948 )     (778 )
IIF, end of period   $ 38,629     $ 34,779     $ 23,624  
                         
   
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  
    June 30, 2017     March 31, 2017     June 30, 2016  
California   13.8 %   13.8 %   13.0 %
Texas   7.5     7.2     6.8  
Virginia   6.0     6.3     6.4  
Florida   4.4     4.4     5.0  
Arizona   4.2     4.1     3.8  
Colorado   3.9     3.9     4.1  
Maryland   3.7     3.7     3.4  
Utah   3.7     3.6     3.4  
Pennsylvania   3.6     3.6     3.5  
Michigan   3.6     3.7     4.1  
Total   54.4 %   54.3 %   53.5 %
                   

The following table shows portfolio data by book year, as of June 30, 2017.

   
    As of June 30, 2017  
   
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)
 
   
   
Book year  
    ($ Values in Millions)  
2013   $ 162   $ 42   26 %   655   212   1   1   0.2 %   0.3 %
2014     3,451     1,596   46 %   14,786   7,963   53   7   3.5 %   0.4 %
2015     12,422     9,243   74 %   52,548   41,747   128   13   2.7 %   0.3 %
2016     21,187     19,288   91 %   83,626   78,111   67   2   1.3 %   0.1 %
2017   $ 8,596   $ 8,460   98 %   33,593   33,162   -   -   - %   - %
Total   $ 45,818   $ 38,629         185,208   161,195   249   23            
                                               
(1) The ratio of claims incurred (paid and reserved) divided by cumulative premiums earned, net of reinsurance.  
(2) The sum of claims paid ever to date and notices of default as of the end of the period divided by policies ever in force.  
                                               

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

                 
    For the three months ended     For the six months ended  
    June 30, 2017     June 30, 2016     June 30, 2017     June 30, 2016  
   
    (In Thousands)  
Beginning balance   $ 3,761     $ 1,137     $ 3,001     $ 679  
Less reinsurance recoverables (1)     (564 )     -       (297 )     -  
Beginning balance, net of reinsurance recoverables     3,197       1,137       2,704       679  
   
Add claims incurred:                                
  Claims and claim expenses incurred:                                
    Current year (2)     1,376       560       2,331       1,113  
    Prior years     (3 )     (90 )     (323 )     (185 )
Total claims and claims expenses incurred     1,373       470       2,008       928  
   
Less claims paid:                                
  Claims and claim expenses paid:                                
    Current year (2)     -       -       -       -  
    Prior years (3)     421       132       563       132  
Total claims and claim expenses paid     421       132       563       132  
   
Reserve at end of period, net of reinsurance                                
recoverables     4,149       1,475       4,149       1,475  
Add reinsurance recoverables (1)     899       -       899       -  
Balance, June 30   $ 5,048     $ 1,475     $ 5,048     $ 1,475  
                                 
(1) Related to ceded losses recoverable on our 2016 quota-share reinsurance transaction, included in "Other Assets" on the Condensed 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.

             
    Three months ended     Six months ended  
   
    June 30, 2017     June 30, 2016     June 30, 2017     June 30, 2016  
Beginning default inventory   207     55     179     36  
Plus: new defaults   147     50     271     89  
Less: cures   (97 )   (23 )   (189 )   (43 )
Less: claims paid   (8 )   (3 )   (12 )   (3 )
Ending default inventory   249     79     249     79  
                         

The following tables provide details of our claims and reserves for the periods indicated.

   
   
    For the three months ended     For the six months ended  
   
      June 30, 2017       June 30, 2016     June 30, 2017       June 30, 2016  
    ($ Values In Thousands)  
Number of claims paid     8       3       12       3  
Total amount paid for claims   $ 429     $ 132     $ 571     $ 132  
Average amount paid per claim   $ 54     $ 44     $ 48     $ 44  
Severity     86 %     71 %     87 %     71 %
   
   
Average reserve per default:                     As of June 30, 2017       As of June 30, 2016  
                      (In Thousands)  
Case                   $ 19     $ 17  
IBNR                     1       1  
Total                   $ 20     $ 18  
                                 

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

                   
    As of
    June 30, 2017   March 31, 2017   June 30, 2016
    (In thousands)
Available assets   $ 485,019   $ 466,982   $ 432,074
Risk-based required assets     298,091     398,859     377,468
                   

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