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NMI Holdings, Inc. Reports Record Fourth Quarter 2019 Financial Results

/EIN News/ -- EMERYVILLE, Calif., Feb. 11, 2020 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported GAAP net income of $50.2 million, or $0.71 per diluted share, and adjusted net income of $52.6 million, or $0.75 per diluted share, for its fourth quarter ended December 31, 2019. This compares with GAAP net income of $49.8 million, or $0.69 per diluted share, and adjusted net income of $49.9 million, or $0.71 per diluted share, in the third quarter ended September 30, 2019. In the fourth quarter of 2018, the company reported GAAP net income of $35.5 million, or $0.46 per diluted share, and adjusted net income of $32.1 million, or $0.46 per diluted share. The non-GAAP financial measures adjusted net income, adjusted diluted earnings per share (EPS) and adjusted return-on-equity are presented in this release to enhance the comparability of financial results between periods. See "Use of Non-GAAP Financial Measures" and our reconciliation of such measures to their most comparable GAAP measures, below.

Claudia Merkle, CEO of National MI, said, "In the fourth quarter, National MI delivered record results, capping a year of standout success. In 2019, we delivered exceptionally strong financial performance, broad success in customer development, and best in-class growth in NIW and insurance in-force. We continued to innovate in the reinsurance and capital markets, and remain focused on driving disciplined growth and sustained performance across all market cycles."

  • As of December 31, 2019, the company had primary insurance-in-force of $94.8 billion, up 6% compared to $89.7 billion at September 30, 2019 and 38% compared to $68.6 billion as of December 31, 2018.

  • Net premiums earned for the quarter were $95.5 million, up 3% compared to $92.4 million for the third quarter of 2019 and 38% compared to $69.3 million for the fourth quarter of 2018.

  • Total underwriting and operating expenses in the quarter were $31.3 million, compared to $32.3 million in the third quarter of 2019 and $29.3 million in the fourth quarter of 2018. Expense ratio in the quarter was 32.8%, compared to 35.0% in the third quarter of 2019 and 42.4% in the fourth quarter of 2018.

  • At quarter-end, cash and investments were $1.2 billion and shareholders' equity was $930 million. Book value per share was $13.61.

  • Return-on-equity for the quarter was 22.3% and adjusted return-on-equity was 23.3%.

  • At quarter-end, the company had total PMIERs available assets of $1,016 million, which compares with risk- based required assets under PMIERs of $773 million.

The non-GAAP measures of adjusted net income, adjusted diluted EPS and adjusted return-on-equity for the quarters presented exclude the after-tax impact of periodic capital markets transaction costs, changes in the fair value of our warrant liability and realized gains or losses from our investment portfolio.

    Quarter Ended Quarter Ended Quarter Ended Change (1) Change (1)
    12/31/2019 9/30/2019 12/31/2018 Q/Q Y/Y
INSURANCE METRICS ($billions)
Primary Insurance-in-Force $ 94.8   $ 89.7   $ 68.6   6   % 38 %
New Insurance Written - NIW          
  Monthly premium 11.1   13.0   6.3   (15 ) % 76 %
  Single premium 0.9   1.1   0.7   (22 ) % 30 %
  Total (2) 11.9   14.1   7.0   (15 ) % 72 %
           
FINANCIAL HIGHLIGHTS ($millions, except per share amounts)
Net Premiums Earned 95.5   92.4   69.3   3   % 38 %
Insurance Claims and Claim Expenses 4.3   2.6   2.1   66   % 99 %
Underwriting and Operating Expenses (3) 31.3   32.3   29.3   (3 ) % 7 %
Net Income 50.2   49.8   35.5   1   % 41 %
Adjusted Net Income 52.6   49.9   32.1   5   % 64 %
Cash and Investments $ 1,182.0   $ 1,119.1   $ 936.8   6   % 26 %
Shareholders' Equity 930.4   873.5   701.5   7   % 33 %
Book Value per Share $ 13.61   $ 12.86   $ 10.58   6   % 29 %
Loss Ratio 4.5 % 2.8 % 3.1 %    
Expense Ratio (3) 32.8 % 35.0 % 42.4 %    

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

Conference Call and Webcast Details

The company will hold a conference call, which will be webcast live today, February 11, 2020, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time. The webcast will be available on the company's website, www.nationalmi.com, in the "Investor Relations" section. The conference call can also be accessed by dialing (888) 734-0328 in the U.S., or (914) 495-8578 internationally, and using Conference ID: 1875336 or by referencing NMI Holdings, Inc.

About NMI Holdings, Inc.

NMI Holdings, Inc. (NASDAQ: NMIH), is the parent company of National Mortgage Insurance Corporation (National MI), a U.S.-based, private mortgage insurance company enabling low down payment borrowers to realize home ownership while protecting lenders and investors against losses related to a borrower's default. To learn more, please visit www.nationalmi.com.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this press release or any other written or oral statements made by or on behalf of the Company in connection therewith may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), and the U.S. Private Securities Litigation Reform Act of 1995 (PSLRA). The PSLRA provides a "safe harbor" for any forward-looking statements. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements, including any statements about our expectations, outlook, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance. These statements are often, but not always, made through the use of words or phrases such as "anticipate," "believe," "can," "could," "may," "predict," "assume," "potential," "should," "will," "estimate," "plan," "project," "continuing," "ongoing," "expect," "intend" and similar words or phrases. All forward-looking statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that may turn out to be inaccurate and could cause actual results to differ materially from those expressed in them. Many risks and uncertainties are inherent in our industry and markets. Others are more specific to our business and operations. Important factors that could cause actual events or results to differ materially from those indicated in such statements include, but are not limited to: changes in the business practices of Fannie Mae and Freddie Mac (collectively, the GSEs), including decisions that have the impact of decreasing or discontinuing the use of mortgage insurance as credit enhancement generally, or with first time homebuyers or on very high loan-to-value mortgages; our ability to remain an eligible mortgage insurer under the private mortgage insurer eligibility requirements (PMIERs) and other requirements imposed by the GSEs, which they may change at any time; retention of our existing certificates of authority in each state and the District of Columbia (D.C.) and our ability to remain a mortgage insurer in good standing in each state and D.C.; our future profitability, liquidity and capital resources; actions of existing competitors, including other private mortgage insurers and government mortgage insurers, such as the Federal Housing Administration, the U.S. Department of Agriculture's Rural Housing Service and the Veterans Administration, and potential market entry by new competitors or consolidation of existing competitors; developments in the world's financial and capital markets and our access to such markets, including reinsurance; adoption of new or changes to existing laws and regulations that impact our business or financial condition directly or the mortgage insurance industry generally or their enforcement and implementation by regulators, including any action by the Consumer Financial Protection Bureau to address the planned expiration of the "QM Patch" under the Dodd-Frank Act Ability to Repay/Qualified Mortgage Rule; legislative or regulatory changes to the GSEs' role in the secondary mortgage market or other changes that could affect the residential mortgage industry generally or mortgage insurance industry in particular; potential future lawsuits, investigations or inquiries or resolution of current lawsuits or inquiries; changes in general economic, market and political conditions and policies, interest rates, inflation and investment results or other conditions that affect the housing market or the markets for home mortgages or mortgage insurance; our ability to successfully execute and implement our capital plans, including our ability to access the capital, credit and reinsurance markets and to enter into, and receive approval of, reinsurance arrangements on terms and conditions that are acceptable to us, the GSEs and our regulators; our ability to implement our business strategy, including our ability to write mortgage insurance on high quality low-down payment residential mortgage loans, implement successfully and on a timely basis, complex infrastructure, systems, procedures, and internal controls to support our business and regulatory and reporting requirements of the insurance industry; our ability to attract and retain a diverse customer base, including the largest mortgage originators; failure of risk management or pricing or investment strategies; emergence of unexpected claim and coverage issues, including claims exceeding our reserves or amounts we had expected to experience; potential adverse impacts arising from natural disasters, including, with respect to affected areas, a decline in new business, adverse effects on home prices, and an increase in notices of default on insured mortgages; the inability of our counter-parties, including third party reinsurers, to meet their obligations to us; failure to maintain, improve and continue to develop necessary information technology systems or the failure of technology providers to perform; and, our ability to recruit, train and retain key personnel. These risks and uncertainties also include, but are not limited to, those set forth under the heading "Risk Factors" detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2018, as subsequently updated through other reports we file with the SEC.  All subsequent written and oral forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. We caution you not to place undue reliance on any forward-looking statement, which speaks only as of the date on which it is made, and we undertake no obligation to publicly update or revise any forward-looking statement to reflect new information, future events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events except as required by law.

Use of Non-GAAP Financial Measures

We believe the use of the non-GAAP measures of adjusted income before tax, adjusted net income, adjusted diluted EPS and adjusted return-on-equity enhances the comparability of our fundamental financial performance between periods, and provides relevant information to investors. These non-GAAP financial measures align with the way the company's business performance is evaluated by management. These measures are not prepared in accordance with GAAP and should not be viewed as alternatives to GAAP measures of performance. These measures have been presented to increase transparency and enhance the comparability of our fundamental operating trends across periods. Other companies may calculate these measures differently; their measures may not be comparable to those we calculate and present.

Adjusted income before tax is defined as GAAP income before tax, excluding the pre-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains or losses from our investment portfolio, and discrete, non-recurring and non-operating items in the periods in which such items are incurred.

Adjusted net income is defined as GAAP net income, excluding the after-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains or losses from our investment portfolio, and discrete, non-recurring and non-operating items in the periods in which such items are incurred. Adjustments to components of pre-tax income are tax effected using the applicable federal statutory tax rate for the respective periods.

Adjusted diluted EPS is defined as adjusted net income divided by adjusted weighted average diluted shares outstanding. Adjusted weighted average diluted shares outstanding is defined as weighted average diluted shares outstanding, adjusted for changes in the dilutive effect of non-vested shares that would otherwise have occurred had GAAP net income been calculated in accordance with adjusted net income. There will be no adjustment to weighted average diluted shares outstanding in the years that non-vested shares are anti-dilutive under GAAP.

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

Although adjusted income before tax, adjusted net income, adjusted diluted EPS and adjusted return-on-equity exclude certain items that have occurred in the past and are expected to occur in the future, the excluded items: (1) are not viewed as part of the operating performance of our primary activities; or (2) are impacted by market, economic or regulatory factors and are not necessarily indicative of operating trends, or both. These adjustments, and the reasons for their treatment, are described below.

(1) Change in fair value of warrant liability. Outstanding warrants at the end of each reporting period are revalued, and any change in fair value is reported in the statement of operations in the period in which the change occurred. The change in fair value of our warrant liability can vary significantly across periods and is influenced principally by equity market and general economic factors that do not impact or reflect our current period operating results. We believe trends in our operating performance can be more clearly identified by excluding fluctuations related to the change in fair value of our warrant liability.
   
(2) Capital markets transaction costs. Capital markets transaction costs result from activities that are undertaken to improve our debt profile or enhance our capital position through activities such as debt refinancing and capital markets reinsurance transactions that may vary in their size and timing due to factors such as market opportunities, tax and capital profile, and overall market cycles.
   
(3) Net realized investment gains and losses. The recognition of the net realized investment gains or losses can vary significantly across periods as the timing is highly discretionary and is influenced by factors such as market opportunities, tax and capital profile, and overall market cycles that do not reflect our current period operating results.
   
(4) Infrequent or unusual non-operating items. Items that are the result of unforeseen or uncommon events, which occur separately from operating earnings and are not expected to recur in the future. Identification and exclusion of these items provides clarity about the impact special or rare occurrences may have on our current financial performance. Past adjustments under this category include the effects of the release of the valuation allowance recorded against our net federal and certain state net deferred tax assets in 2016 and the re-measurement of our net deferred tax assets in connection with tax reform in 2017. We believe such items are non-recurring in nature, are not part of our primary operating activities and do not reflect our current period operating results.

Investor Contact
John M. Swenson
Vice President, Investor Relations and Treasury
john.swenson@nationalmi.com
(510) 788-8417

Press Contact
Mary McGarity
Strategic Vantage Mortgage Public Relations
(203) 513-2721
MaryMcGarity@StrategicVantage.com


Consolidated statements of operations and comprehensive income (loss) For the three months ended December 31,   For the year ended December 31,
  2019   2018   2019   2018
               
Revenues (In Thousands, except for per share data)
Net premiums earned $ 95,517     $ 69,261     $ 345,015     $ 251,197  
Net investment income 7,962     6,952     30,856     23,538  
Net realized investment gains 264     6     45     57  
Other revenues 1,154     40     2,855     233  
Total revenues 104,897     76,259     378,771     275,025  
Expenses              
Insurance claims and claim expenses 4,269     2,141     12,507     5,452  
Underwriting and operating expenses(1) 31,296     29,339     126,621     116,966  
Service expenses(1) 937     45     2,248     270  
Interest expense 2,974     3,028     12,085     14,979  
Loss (gain) from change in fair value of warrant liability 2,632     (3,538 )   8,657     1,397  
Total expenses 42,108     31,015     162,118     139,064  
               
Income before income taxes 62,789     45,244     216,653     135,961  
Income tax expense 12,594     9,724     44,696     28,034  
Net income $ 50,195     $ 35,520     $ 171,957     $ 107,927  
               
Earnings per share              
Basic $ 0.74     $ 0.54     $ 2.54     $ 1.66  
Diluted $ 0.71     $ 0.46     $ 2.47     $ 1.60  
               
Weighted average common shares outstanding              
Basic 68,140     66,308     67,573     65,019  
Diluted 70,276     69,013     69,721     67,652  
               
Loss ratio(2) 4.5 %   3.1 %   3.6 %   2.2 %
Expense ratio(3) 32.8 %   42.4 %   36.7 %   46.6 %
Combined ratio (4) 37.2 %   45.5 %   40.3 %   48.8 %
               
Net income $ 50,195     $ 35,520     $ 171,957     $ 107,927  
Other comprehensive income (loss), net of tax:              
Unrealized (losses) gains in accumulated other comprehensive income, net of tax (benefit) expense of ($444) and $392 for the three months ended December 31, 2019 and 2018, respectively, and $8,548 and ($3,285) for the years ended December 31, 2019, and 2018 respectively (1,668 )   1,476     32,155     (12,357 )
Reclassification adjustment for realized (gains) losses included in net income, net of tax expense (benefit) of $55 and $1 for the three months ended December 31, 2019 and 2018, respectively, and $9 and ($27) for the years ended December 31, 2019, and 2018 respectively (208 )   (4 )   (35 )   102  
Other comprehensive (loss) income, net of tax (1,876 )   1,472     32,120     (12,255 )
Comprehensive income $ 48,319     $ 36,992     $ 204,077     $ 95,672  

(1)        Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2)        Loss ratio is calculated by dividing the provision for insurance claims and claim expenses by net premiums earned.
(3)        Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned.
(4)        Combined ratio may not foot due to rounding.

Consolidated balance sheets December 31, 2019   December 31, 2018
       
Assets (In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $1,113,779 and $924,987 as of December 31, 2019 and December 31, 2018, respectively) $ 1,140,940     $ 911,490  
Cash and cash equivalents (including restricted cash of $2,662 and $1,414 as of December 31, 2019 and December 31, 2018, respectively) 41,089     25,294  
Premiums receivable 46,085     36,007  
Accrued investment income 6,831     5,694  
Prepaid expenses 3,512     3,241  
Deferred policy acquisition costs, net 59,972     46,840  
Software and equipment, net 26,096     24,765  
Intangible assets and goodwill 3,634     3,634  
Prepaid reinsurance premiums 15,488     30,370  
Other assets 21,171     4,708  
Total assets $ 1,364,818     $ 1,092,043  
       
Liabilities      
Term loan $ 145,764     $ 146,757  
Unearned premiums 136,642     158,893  
Accounts payable and accrued expenses 39,904     31,141  
Reserve for insurance claims and claim expenses 23,752     12,811  
Reinsurance funds withheld 14,310     27,114  
Warrant liability, at fair value 7,641     7,296  
Deferred tax liability, net 56,360     2,740  
Other liabilities (1) 10,025     3,791  
Total liabilities 434,398     390,543  
       
Shareholders' equity      
Common stock - class A shares, $0.01 par value; 68,358,074 and 66,318,849 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively (250,000,000 shares authorized) 684     663  
Additional paid-in capital 707,003     682,181  
Accumulated other comprehensive income (loss), net of tax 17,288     (14,832 )
Retained earnings 205,445     33,488  
Total shareholders' equity 930,420     701,500  
Total liabilities and shareholders' equity $ 1,364,818     $ 1,092,043  

(1)     "Deferred Ceding Commissions have" been reclassified to "Other liabilities" in prior periods.

Non-GAAP Financial Measure Reconciliations
  Quarter ended   Quarter ended   Quarter ended
  12/31/2019   9/30/2019   12/31/2018
 As Reported (In Thousands, except for per share data)
Revenues          
Net premiums earned $ 95,517     $ 92,381     $ 69,261  
Net investment income 7,962     7,882     6,952  
Net realized investment gains 264     81     6  
Other revenues 1,154     1,244     40  
Total revenues 104,897     101,588     76,259  
Expenses          
Insurance claims and claim expenses 4,269     2,572     2,141  
Underwriting and operating expenses(1) 31,296     32,335     29,339  
Service expenses(1) 937     909     45  
Interest expense 2,974     2,979     3,028  
Loss (gain) from change in fair value of warrant liability 2,632     (1,139 )   (3,538 )
Total expenses 42,108     37,656     31,015  
           
Income before income taxes 62,789     63,932     45,244  
Income tax expense 12,594     14,169     9,724  
Net income $ 50,195     $ 49,763     $ 35,520  
           
Adjustments:          
Net realized investment gains (264 )   (81 )   (6 )
Loss (gain) from change in fair value of warrant liability 2,632     (1,139 )   (3,538 )
Capital markets transaction costs     1,689     102  
Adjusted income before taxes 65,157     64,401     41,802  
           
Income tax expense on adjustments (55 )   338     20  
Adjusted net income $ 52,618     $ 49,894     $ 32,058  
           
Weighted average diluted shares outstanding 70,276     70,137     69,013  
           
Diluted EPS $ 0.71     $ 0.69     $ 0.46  
Adjusted diluted EPS $ 0.75     $ 0.71     $ 0.46  
           
Return-on-equity 22.3 %   23.6 %   20.9 %
Adjusted return-on-equity 23.3 %   23.7 %   18.8 %

(1)        Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.


Historical Quarterly Data 2019   2018
  December 31   September 30 June 30   March 31   December 31   September 30
                     
Revenues (In Thousands, except for per share data)
Net premiums earned $ 95,517     $ 92,381   $ 83,249     $ 73,868     $ 69,261     $ 65,407  
Net investment income 7,962     7,882   7,629     7,383     6,952     6,277  
Net realized investment gains (losses) 264     81   (113 )   (187 )   6     (8 )
Other revenues 1,154     1,244   415     42     40     85  
Total revenues 104,897     101,588   91,180     81,106     76,259     71,761  
Expenses                    
Insurance claims and claim expenses 4,269     2,572   2,923     2,743     2,141     1,099  
Underwriting and operating expenses(1) 31,296     32,335   32,190     30,800     29,339     30,323  
Service expenses(1) 937     909   353     49     45     56  
Interest expense 2,974     2,979   3,071     3,061     3,028     2,972  
Loss (gain) from change in fair value of warrant liability 2,632     (1,139 ) 1,685     5,479     (3,538 )   5,464  
Total expenses 42,108     37,656   40,222     42,132     31,015     39,914  
                     
Income before income taxes 62,789     63,932   50,958     38,974     45,244     31,847  
Income tax expense 12,594     14,169   11,858     6,075     9,724     7,036  
Net income $ 50,195     $ 49,763   $ 39,100     $ 32,899     $ 35,520     $ 24,811  
                     
Earnings per share                    
Basic $ 0.74     $ 0.73   $ 0.58     $ 0.49     $ 0.54     $ 0.38  
Diluted $ 0.71     $ 0.69   $ 0.56     $ 0.48     $ 0.46     $ 0.36  
                     
Weighted average common shares outstanding                    
Basic 68,140     67,849   67,590     66,692     66,308     65,948  
Diluted 70,276     70,137   69,590     68,996     69,013     68,844  
                     
Other data                    
Loss Ratio(2) 4.5 %   2.8 % 3.5 %   3.7 %   3.1 %   1.7 %
Expense Ratio(3) 32.8 %   35.0 % 38.7 %   41.7 %   42.4 %   46.4 %
Combined ratio (4) 37.2 %   37.8 % 42.2 %   45.4 %   45.5 %   48.0 %

(1)        Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2)        Loss ratio is calculated by dividing the provision for insurance claims and claim expenses by net premiums earned.
(3)        Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned.
(4)       Combined ratio may not foot due to rounding.


New Insurance Written (NIW), Insurance in Force (IIF) and Premiums

The tables below present primary NIW and primary and pool IIF, as of the dates and for the periods indicated.

Primary NIW Three months ended
  December 31, 2019   September 30, 2019   June 30, 2019   March 31, 2019   December 31, 2018   September 30, 2018
  (In Millions)
Monthly $ 11,085     $ 12,994     $ 11,067     $ 6,211     $ 6,296     $ 6,675  
Single 864     1,106     1,112     702     666     686  
Primary $ 11,949     $ 14,100     $ 12,179     $ 6,913     $ 6,962     $ 7,361  


Primary and pool IIF As of
  December 31, 2019   September 30, 2019   June 30, 2019   March 31, 2019   December 31, 2018   September 30, 2018
  (In Millions)
Monthly $ 77,097     $ 71,814     $ 63,922     $ 55,995     $ 51,655     $ 46,967  
Single 17,657     17,899     17,786     17,239     16,896     16,560  
Primary 94,754     89,713     81,708     73,234     68,551     63,527  
                       
Pool 2,570     2,668     2,758     2,838     2,901     2,974  
Total $ 97,324     $ 92,381     $ 84,466     $ 76,072     $ 71,452     $ 66,501  

The following table presents the amounts related to the company's quota-share reinsurance transactions (the 2016 QSR Transaction and 2018 QSR Transaction, and collectively, the QSR Transactions), and Insurance-Linked Note transactions (the 2017 ILN Transaction, 2018 ILN Transaction and 2019 ILN Transaction, and collectively, the ILN Transactions) for the periods indicated.

  For the three months ended
  December 31, 2019   September 30, 2019   June 30, 2019   March 31, 2019   December 31, 2018 September 30, 2018
   
The QSR Transactions                    
Ceded risk-in-force $ 5,137,249     $ 4,901,809     $ 4,558,862     $ 4,534,353     $ 4,292,450   $ 3,960,461  
Ceded premiums earned (23,673 )   (23,151 )   (20,919 )   (21,468 )   (20,487 ) (19,286 )
Ceded claims and claim expenses 1,030     766     770     899     710   337  
Ceding commission earned 4,691     4,584     4,171     4,206     4,084   3,814  
Profit commission 13,314     13,254     11,884     12,061     11,666   11,272  
                     
The ILN Transactions                    
Ceded premiums $ (4,263 )   $ (4,409 )   $ (2,895 )   $ (3,023 )   $ (3,257 ) $ (3,093 )

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
  December 31, 2019   September 30, 2019   June 30, 2019   March 31, 2019   December 31, 2018   September 30, 2018
  ($ Values In Millions)
New insurance written $ 11,949     $ 14,100     $ 12,179     $ 6,913     $ 6,962     $ 7,361  
New risk written 3,082     3,651     3,183     1,799     1,799     1,883  
Insurance in force (IIF) (1) 94,754     89,713     81,708     73,234     68,551     63,527  
Risk in force (1) 24,173     22,810     20,661     18,373     17,091     15,744  
Policies in force (count) (1) 366,039     350,395     324,876     297,232     280,825     262,485  
Average loan size (1) $ 0.259     $ 0.256     $ 0.252     $ 0.246     $ 0.244     $ 0.242  
Coverage percentage (2) 25.5 %   25.4 %   25.3 %   25.1 %   24.9 %   24.8 %
Loans in default (count) (1) 1,448     1,230     1,028     940     877     746  
Percentage of loans in default (1) 0.40 %   0.35 %   0.32 %   0.32 %   0.31 %   0.28 %
Risk in force on defaulted loans (1) $ 84     $ 70     $ 58     $ 53     $ 48     $ 42  
Average premium yield (3) 0.41 %   0.43 %   0.43 %   0.42 %   0.42 %   0.43 %
Earnings from cancellations $ 8.0     $ 7.4     $ 4.5     $ 2.3     $ 2.1     $ 2.6  
Annual persistency (4) 76.8 %   82.4 %   86.0 %   87.2 %   87.1 %   86.1 %
Quarterly run-off (5) 7.7 %   7.5 %   5.1 %   3.3 %   3.1 %   3.3 %

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

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

Primary NIW by FICO For the three months ended
  December 31, 2019   September 30, 2019   December 31, 2018
           
  ($ In Millions)
>= 760 $ 6,253   $ 6,994   $ 3,125
740-759 1,864   2,288   1,198
720-739 1,712   2,102   1,033
700-719 1,204   1,450   797
680-699 662   915   559
<=679 254   351   250
Total $ 11,949   $ 14,100   $ 6,962
Weighted average FICO 756   754   750


Primary NIW by LTV For the three months ended
  December 31, 2019   September 30, 2019   December 31, 2018
           
  (In Millions)
95.01% and above $ 663     $ 989     $ 582  
90.01% to 95.00% 5,528     6,592     3,409  
85.01% to 90.00% 4,296     4,933     2,224  
85.00% and below 1,462     1,586     747  
Total $ 11,949     $ 14,100     $ 6,962  
Weighted average LTV 91.4 %   91.7 %   92.1 %


Primary NIW by purchase/refinance mix For the three months ended
  December 31, 2019   September 30, 2019   December 31, 2018
           
  (In Millions)
Purchase $ 9,041   $ 11,284   $ 6,627
Refinance 2,908   2,816   335
Total $ 11,949   $ 14,100   $ 6,962

The table below presents a summary of our primary IIF and RIF by book year as of December 31, 2019.

Primary IIF and RIF As of December 31, 2019
  IIF   RIF
       
  (In Millions)
December 31, 2019 $ 42,060   $ 10,916
2018 19,579   4,977
2017 14,961   3,710
2016 11,944   2,995
2015 5,370   1,361
2014 and before 840   214
Total $ 94,754   $ 24,173

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, 2019   September 30, 2019   December 31, 2018
           
  (In Millions)
>= 760 $ 44,793   $ 41,855   $ 31,870
740-759 15,728   15,028   11,294
720-739 13,417   12,666   9,338
700-719 10,284   9,822   7,574
680-699 6,774   6,559   5,062
<=679 3,758   3,783   3,413
Total $ 94,754   $ 89,713   $ 68,551


Primary RIF by FICO As of
  December 31, 2019   September 30, 2019   December 31, 2018
           
  (In Millions)
>= 760 $ 11,388   $ 10,611   $ 7,955
740-759 4,034   3,847   2,836
720-739 3,465   3,257   2,341
700-719 2,632   2,501   1,886
680-699 1,728   1,665   1,256
<=679 926   929   817
Total $ 24,173   $ 22,810   $ 17,091


Primary IIF by LTV As of
  December 31, 2019   September 30, 2019   December 31, 2018
           
  (In Millions)
95.01% and above $ 8,640   $ 8,500   $ 6,774
90.01% to 95.00% 44,668   42,255   31,507
85.01% to 90.00% 30,163   28,083   20,668
85.00% and below 11,283   10,875   9,602
Total $ 94,754   $ 89,713   $ 68,551


Primary RIF by LTV As of
  December 31, 2019   September 30, 2019   December 31, 2018
           
  (In Millions)
95.01% and above $ 2,390   $ 2,326   $ 1,801
90.01% to 95.00% 13,086   12,358   9,185
85.01% to 90.00% 7,376   6,854   4,994
85.00% and below 1,321   1,272   1,111
Total $ 24,173   $ 22,810   $ 17,091


Primary RIF by Loan Type As of
  December 31, 2019   September 30, 2019   December 31, 2018
           
Fixed 98 %   98 %   98 %
Adjustable rate mortgages:          
Less than five years          
Five years and longer 2     2     2  
Total 100 %   100 %   100 %

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

Primary IIF For the three months ended
  December 31, 2019   September 30, 2019   December 31, 2018
           
  (In Millions)
IIF, beginning of period $ 89,713     $ 81,708     $ 63,527  
NIW 11,949     14,100     6,962  
Cancellations, principal repayments and other reductions (6,908 )   (6,095 )   (1,938 )
IIF, end of period $ 94,754     $ 89,713     $ 68,551  

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, 2019   September 30, 2019   December 31, 2018
California 11.8 %   11.9 %   13.0 %
Texas 8.2     8.1     8.2  
Florida 5.7     5.6     5.0  
Virginia 5.3     5.3     4.9  
Arizona 3.9     4.2     4.9  
Illinois 3.8     3.8     3.4  
Pennsylvania 3.6     3.6     3.6  
Michigan 3.5     3.5     3.6  
Colorado 3.4     3.4     3.5  
Maryland 3.4     3.3     3.2  
Total 52.6 %   52.7 %   53.3 %


The table below presents selected primary portfolio statistics, by book year, as of December 31, 2019.

  As of December 31, 2019
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)   Current default rate  (3)
  ($ Values in Millions)    
2013 $ 162   $ 22   14 %   655   123   1   1   0.3 %   0.3 %   0.8 %
2014 3,451   818   24 %   14,786   4,406   43   40   4.2 %   0.6 %   1.0 %
2015 12,422   5,370   43 %   52,548   25,459   179   94   2.8 %   0.5 %   0.7 %
2016 21,187   11,944   56 %   83,626   51,347   293   87   2.2 %   0.5 %   0.6 %
2017 21,582   14,961   69 %   85,897   64,041   464   41   3.2 %   0.6 %   0.7 %
2018 27,295   19,579   72 %   104,043   80,456   399   19   4.0 %   0.4 %   0.5 %
2019 45,141   42,060   93 %   148,423   140,207   69     1.4 %   %   %
Total $ 131,240   $ 94,754       489,978   366,039   1,448   282            

(1)        Calculated as total claims incurred (paid and reserved) divided by cumulative premiums earned, net of reinsurance.
(2)        Calculated as the sum of the number of claims paid ever to date and number of loans in default divided by policies ever in force.
(3)        Calculated as the number of loans in default divided by number of policies in force.


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

  For the three months ended   For the year ended
  December 31, 2019   December 31, 2018   December 31, 2019   December 31, 2018
               
  (In Thousands)
Beginning balance $ 20,505     $ 10,908     $ 12,811     $ 8,761  
Less reinsurance recoverables (1) (4,309 )   (2,517 )   (3,001 )   (1,902 )
Beginning balance, net of reinsurance recoverables 16,196     8,391     9,810     6,859  
               
Add claims incurred:              
Claims and claim expenses incurred:              
Current year (2) 3,789     2,770     14,737     7,860  
Prior years (3) 480     (629 )   (2,230 )   (2,408 )
Total claims and claim expenses incurred 4,269     2,141     12,507     5,452  
               
Less claims paid:              
Claims and claim expenses paid:              
Current year (2) 204     93     204     130  
Prior years (3) 1,448     629     3,849     2,371  
Reinsurance terminations (4)         (549 )    
Total claims and claim expenses paid 1,652     722     3,504     2,501  
               
Reserve at end of period, net of reinsurance recoverables 18,813     9,810     18,813     9,810  
Add reinsurance recoverables (1) 4,939     3,001     4,939     3,001  
Ending balance $ 23,752     $ 12,811     $ 23,752     $ 12,811  


(1) Related to ceded losses recoverable under the QSR Transactions, included in "Other assets" on the consolidated balance sheets.
(2) Related to insured loans with their most recent defaults occurring in the current year. For example, if a loan had defaulted in a prior year and subsequently cured and later re-defaulted in the current year, the default would be included in the current year. Amounts are presented net of reinsurance.
(3) Related to insured loans with defaults occurring in prior years, which have been continuously in default before the start of the current year. Amounts are presented net of reinsurance.
(4) Represents the settlement of reinsurance recoverables in conjunction with the termination of one reinsurer under the 2016 QSR Transaction on a cut-off basis.

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

  For the three months ended   For the year ended
  December 31, 2019   December 31, 2018   December 31, 2019   December 31, 2018
Beginning default inventory 1,230     746     877     928  
Plus: new defaults 591     479     2,429     1,559  
Less: cures (319 )   (318 )   (1,702 )   (1,521 )
Less: claims paid (54 )   (30 )   (152 )   (89 )
Less: claims denied         (4 )    
Ending default inventory 1,448     877     1,448     877  

The following table provides details of our claims paid, before giving effect to claims ceded under the QSR Transactions, for the periods indicated.

  For the three months ended   For the year ended
  December 31, 2019   December 31, 2018   December 31, 2019   December 31, 2018
               
  (In Thousands)
Number of claims paid (1) 54     30     152     89  
Total amount paid for claims $ 2,051     $ 947     $ 5,030     $ 3,164  
Average amount paid per claim $ 38     $ 32     $ 33     $ 36  
Severity(2) 80 %   64 %   74 %   72 %


(1) Count includes 5 and 19 claims settled without payment for the three months and year ended December 31, 2019, respectively, and 3 and 8 claims settled without payment for the three months and year ended December 31, 2018, respectively.
(2) Severity represents the total amount of claims paid including claim expenses divided by the related RIF on the loan at the time the claim is perfected, and is calculated including claims settled without payment.


The following table shows our average reserve per default, before giving effect to reserves ceded under the QSR Transactions, as of the periods indicated.

Average reserve per default: As of December 31, 2019   As of December 31, 2018
       
  (In Thousands)
Case (1) $ 15   $ 14
IBNR (2) 1   1
Total $ 16   $ 15

(1)     Defined as the gross reserve per insured loan in default.
(2)     Amount includes claims adjustment expenses.


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

  As of
  December 31, 2019   September 30, 2019   December 31, 2018
           
  (In Thousands)
Available Assets $ 1,016,387   $ 955,554   $ 733,762
Risk-Based Required Assets 773,474   637,914   511,268

 

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