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

EMERYVILLE, Calif., May 01, 2019 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (NMIH) today reported GAAP net income of $32.9 million, or $0.48 per diluted share, and adjusted net income of $38.5 million, or $0.56 per diluted share, for its first quarter ended March 31, 2019.  This compares with 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, in the fourth quarter ended December 31, 2018.  In the first quarter of 2018, the company reported GAAP net income of $22.4 million, or $0.34 per diluted share, and adjusted net income of $22.0 million, or $0.34 per diluted share.  The non-GAAP financial measures adjusted net income, adjusted diluted earnings per share and adjusted return-on-equity are presented in this release to enhance the comparability of financial results between periods. See "Use of Non-GAAP Financial Measures" and our reconciliation of such measures to their most comparable GAAP measures, below.

Claudia Merkle, CEO of National MI, said, "National MI delivered record first quarter financial results, including new insurance written of $6.9 billion, net premiums earned of $73.9 million, adjusted net income of $38.5 million and adjusted return-on-equity of 21.2%.  We continued to grow our high-quality insured portfolio at an industry-leading rate and saw sustained momentum within our customer franchise.  We remain focused on achieving disciplined growth and executing on our broad-based credit risk management framework, which continues to drive favorable loss performance in our insured portfolio.”

  • As of March 31, 2019, the company had primary insurance-in-force of $73.2 billion, up 7% from $68.6 billion at December 31, 2018 and up 37% compared to $53.4 billion as of March 31, 2018.
  • Net premiums earned for the quarter were $73.9 million, up 7% over $69.3 million for the fourth quarter of 2018 and up 35% over $54.9 million for the first quarter of 2018.
  • Total underwriting and operating expenses in the quarter were $30.8 million, compared to $29.4 million in the fourth quarter of 2018 and $28.5 million in first quarter of 2018.
  • At quarter-end, cash and investments were $980 million and shareholders’ equity was $752 million, equal to $11.14 per share. Return-on-equity for the quarter was 18.1% and adjusted return-on-equity (a non-GAAP measure) was 21.2%.
  • At quarter-end, the company had total PMIERs available assets of $818 million, which compares with risk- based required assets under PMIERs of $607 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)
    3/31/2019 12/31/2018 3/31/2018 Q/Q Y/Y
Primary Insurance-in-Force ($billions) $ 73.2   $ 68.6   $ 53.4   7 % 37 %
New Insurance Written - NIW ($billions)          
  Monthly premium 6.2   6.3   5.4   (1 )% 14 %
  Single premium 0.7   0.7   1.0   5 % (31 )%
  Total 6.9   7.0   6.4   (1 )% 7 %
           
Premiums Earned ($millions) 73.9   69.3   54.9   7 % 35 %
Underwriting & Operating Expense ($millions) 30.8   29.4   28.5   5 % 8 %
Loss Expense ($millions) 2.7   2.1   1.6   28 % 75 %
Loss Ratio 3.7 % 3.1 % 2.9 %    
Cash & Investments ($millions) $ 980.0   $ 936.8   $ 825.7   5 % 19 %
Book Equity ($millions) 751.9   701.5   601.9   7 % 25 %
Book Value per Share $ 11.14   $ 10.58   $ 9.18   5 % 21 %

(1)   Percentages may not be recalculated based on the rounded figures presented in the table.


Conference Call and Webcast Details

The company will hold a conference call and live webcast today 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, and using Conference ID: 9578094 or by referencing NMI Holdings, Inc.

About NMI Holdings, Inc.

NMI Holdings, Inc. (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; 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 government mortgage insurers, such as the Federal Housing Administration, 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; 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 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; 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 and adjusted diluted earnings per share (EPS) enhance 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 in order to increase transparency and enhance the comparability of our fundamental operating trends across periods.

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 and adjusted diluted EPS 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.

We believe the disclosure of these items and adjustments provides increased transparency to investors and enhances 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.

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 March 31,
  2019   2018
Revenues (In Thousands, except for per share data)
Net premiums earned $ 73,868     $ 54,914  
Net investment income 7,383     4,574  
Net realized investment losses (187 )    
Other revenues 42     64  
Total revenues 81,106     59,552  
Expenses      
Insurance claims and claim expenses 2,743     1,569  
Underwriting and operating expenses 30,849     28,453  
Total expenses 33,592     30,022  
Other expense      
Gain (loss) from change in fair value of warrant liability (5,479 )   420  
Interest expense (3,061 )   (3,419 )
Total other expense (8,540 )   (2,999 )
       
Income before income taxes 38,974     26,531  
Income tax expense 6,075     4,176  
Net income $ 32,899     $ 22,355  
       
Earnings per share      
Basic $ 0.49     $ 0.36  
Diluted $ 0.48     $ 0.34  
       
Weighted average common shares outstanding      
Basic 66,692     62,099  
Diluted 68,996     65,697  
       
Loss ratio(1) 3.7 %   2.9 %
Expense ratio(2) 41.8 %   51.8 %
Combined ratio 45.5 %   54.7 %
       
Net income $ 32,899     $ 22,355  
Other comprehensive income (loss), net of tax:      
Unrealized (losses) gains in accumulated other comprehensive income, net of tax (benefit) expense of $3,953 and ($423) for the quarters ended March 31, 2019 and 2018, respectively 14,868     (10,956 )
Reclassification adjustment for realized losses (gains) included in net income, net of tax expense (benefit) of ($39) and $0 for the quarters ended March 31, 2019 and 2018, respectively 148      
Other comprehensive income (loss), net of tax 15,016     (10,956 )
Comprehensive income $ 47,915     $ 11,399  
 
(1) Loss ratio is calculated by dividing the provision for insurance claims and claim expenses by net premiums earned. 
(2) Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned.
 
 
 


Consolidated balance sheets March 31, 2019   December 31, 2018
Assets (In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $934,712 and $924,987 as of March 31, 2019 and December 31, 2018, respectively) $ 940,223     $ 911,490  
Cash and cash equivalents (including restricted cash of $1,422 and $1,414 as of March 31, 2019 and December 31, 2018, respectively) 39,761     25,294  
Premiums receivable 38,478     36,007  
Accrued investment income 6,553     5,694  
Prepaid expenses 4,454     3,241  
Deferred policy acquisition costs, net 48,820     46,840  
Software and equipment, net 25,105     24,765  
Intangible assets and goodwill 3,634     3,634  
Prepaid reinsurance premiums 27,747     30,370  
Other assets 12,736     4,708  
Total assets $ 1,147,511     $ 1,092,043  
       
Liabilities      
Term loan $ 146,503     $ 146,757  
Unearned premiums 154,325     158,893  
Accounts payable and accrued expenses 16,981     31,141  
Reserve for insurance claims and claim expenses 15,537     12,811  
Reinsurance funds withheld 25,308     27,114  
Warrant liability, at fair value 11,831     7,296  
Deferred tax liability, net 12,770     2,740  
Other liabilities (1) 12,375     3,791  
Total liabilities 395,630     390,543  
       
Shareholders' equity      
Common stock - class A shares, $0.01 par value; 67,501,958 and 66,318,849 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively (250,000,000 shares authorized) 675     663  
Additional paid-in capital 684,635     682,181  
Accumulated other comprehensive income (loss), net of tax 184     (14,832 )
Retain earnings 66,387     33,488  
Total shareholders' equity 751,881     701,500  
Total liabilities and shareholders' equity $ 1,147,511     $ 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  
  3/31/2019   12/31/2018   3/31/2018  
 As Reported (In Thousands, except for per share data)  
Revenues            
Net premiums earned $ 73,868     $ 69,261     $ 54,914    
Net investment income 7,383     6,952     4,574    
Net realized investment gains (losses) (187 )   6        
Other revenues 42     40     64    
Total revenues 81,106     76,259     59,552    
Expenses            
Insurance claims and claim expenses 2,743     2,141     1,569    
Underwriting and operating expenses 30,849     29,384     28,453    
Total expenses 33,592     31,525     30,022    
Other Expense            
Gain (loss) from change in fair value of warrant liability (5,479 )   3,538     420    
Interest expense (3,061 )   (3,028 )   (3,419 )  
Total other expense (8,540 )   510     (2,999 )  
             
Income before income taxes 38,974     45,244     26,531    
Income tax expense 6,075     9,724     4,176    
Net income $ 32,899     $ 35,520     $ 22,355    
             
Adjustments:            
Net realized investment (gains) losses 187     (6 )      
(Gain) Loss from change in fair value of warrant liability 5,479     (3,538 )   (420 )  
Capital markets transaction costs     102        
Adjusted income before taxes 44,640     41,802     26,111    
             
Income tax expense (benefit) on adjustments 39     20     (88 )  
Adjusted net income $ 38,526     $ 32,058     $ 22,023    
             
Weighted average diluted shares outstanding 68,996     69,013     65,697    
Adjusted weighted average diluted shares outstanding 68,996     69,013     65,697    
             
Diluted EPS $ 0.48     $ 0.46   (1) $ 0.34   (1)
Adjusted diluted EPS $ 0.56     $ 0.46     $ 0.34    
             
Return-on-equity 18.1 %   20.9 %   16.1 %  
Adjusted return-on-equity 21.2 %   18.8 %   15.9 %  


(1)  Diluted net income excludes the impact of the warrant fair value change as it was anti-dilutive.  For the three months ended March 31, 2019, diluted net income equals reported net income as the impact of the warrant fair value change was dilutive.


 
 
 
Historical Quarterly Data 2019   2018   2017
  March 31   December 31   September 30   June 30   March 31   December 31
Revenues (In Thousands, except for per share data)
Net premiums earned $ 73,868     $ 69,261     $ 65,407     $ 61,615     $ 54,914     $ 50,079  
Net investment income 7,383     6,952     6,277     5,735     4,574     4,388  
Net realized investment gains (losses) (187 )   6     (8 )   59         9  
Other revenues 42     40     85     44     64     62  
Total revenues 81,106     76,259     71,761     67,453     59,552     54,538  
Expenses                      
Insurance claims and claim expenses 2,743     2,141     1,099     643     1,569     2,374  
Underwriting and operating expenses 30,849     29,384     30,379     29,020     28,453     28,297  
Total expenses 33,592     31,525     31,478     29,663     30,022     30,671  
                       
Other expense (1) (8,540 )   510     (8,436 )   (5,451 )   (2,999 )   (6,808 )
                       
Income before income taxes 38,974     45,244     31,847     32,339     26,531     17,059  
Income tax expense 6,075     9,724     7,036     7,098     4,176     18,825  
Net income (loss) $ 32,899     $ 35,520     $ 24,811     $ 25,241     $ 22,355     $ (1,766 )
                       
Earnings (losses) per share                      
Basic $ 0.49     $ 0.54     $ 0.38     $ 0.38     $ 0.36     $ (0.03 )
Diluted $ 0.48     $ 0.46     $ 0.36     $ 0.37     $ 0.34     $ (0.03 )
                       
Weighted average common shares outstanding                      
Basic 66,692     66,308     65,948     65,664     62,099     60,219  
Diluted 68,996     69,013     68,844     68,616     65,697     60,219  
                       
Other data                      
Loss Ratio  (2) 3.7 %   3.1 %   1.7 %   1.0 %   2.9 %   4.7 %
Expense Ratio (3) 41.8 %   42.4 %   46.4 %   47.1 %   51.8 %   56.5 %
Combined ratio 45.5 %   45.5 %   48.1 %   48.1 %   54.7 %   61.2 %


(1)  Other expense includes the gain (loss) from change in fair value of warrant liability and interest expense.
(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.
   
   
   

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
  March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018

  December 31,
2017

   
  (In Millions)
Monthly $ 6,211     $ 6,296   $ 6,675   $ 5,711   $ 5,441   $ 5,736
Single   702       666     686     802     1,019     1,140
Primary $ 6,913     $ 6,962   $ 7,361   $ 6,513   $ 6,460   $ 6,876


Primary and pool IIF As of
  March 31,
2019

  December
31, 2018

  September
30, 2018

  June 30,
2018

  March 31,
2018

  December
31, 2017

  (In Millions)
Monthly $ 55,995   $ 51,655   $ 46,967   $ 41,843   $ 37,574   $ 33,268
Single   17,239     16,896     16,560     16,246     15,860     15,197
Primary   73,234     68,551     63,527     58,089     53,434     48,465
                                   
Pool   2,838     2,901     2,974     3,064     3,153     3,233
Total $ 76,072   $ 71,452   $ 66,501   $ 61,153   $ 56,587   $ 51,698

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) for the periods indicated.

  As of and for the three months ended
   March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
 
  (In Thousands)
Ceded risk-in-force $ 4,534,353     $ 4,292,450     $ 3,960,461     $ 3,606,928     $ 3,304,335     $ 2,983,353  
Ceded premiums written (18,845 )   (17,799 )   (16,546 )   (15,318 )   (14,525 )   (15,233 )
Ceded premiums earned (21,468 )   (20,487 )   (19,286 )   (18,077 )   (16,218 )   (14,898 )
Ceded claims and claim expenses 899     710     337     173     543     800  
Ceding commission written 3,771     3,549     3,320     3,064     2,905     3,047  
Ceding commission earned 4,206     4,084     3,814     3,536     3,151     2,885  
Profit commission 12,061     11,666     11,272     10,707     9,201     8,139  

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 
     March 31,
2019
      December 31,
2018 
       September 30, 2018        June 30,
2018
       March 31,
2018
      December 31,
2017 
 
  ($ Values In Millions) 
New insurance written $ 6,913     $ 6,962     $ 7,361     $ 6,513     $ 6,460     $ 6,876  
New risk written   1,799       1,799        1,883        1,647        1,580       1,665  
Insurance in force (IIF) (1)   73,234       68,551        63,527        58,089        53,434       48,465   
Risk in force (1)   18,373       17,091        15,744        14,308        13,085       11,843   
Policies in force (count) (1)   297,232       280,825        262,485        241,993        223,263       202,351   
Average loan size (1) $ 0.246     $ 0.244     $ 0.242     $ 0.240     $ 0.239     $ 0.240  
Average coverage (2)   25.1 %     24.9  %     24.8  %     24.6  %     24.5 %     24.4  %
Loans in default (count) (1)   940       877        746        768        1,000       928   
Percentage of loans in default   0.3 %     0.3  %     0.3  %     0.3  %     0.5 %     0.5  %
Risk in force on defaulted loans (1) $ 53     $ 48     $ 42     $ 43     $ 57     $ 53  
Average premium yield (3)   0.42 %     0.42  %     0.43  %     0.44  %     0.43  %     0.44  %
Earnings from cancellations $ 2.3     $ 2.1     $ 2.6     $ 3.1     $ 2.8     $ 4.2  
Annual persistency (4)   87.2 %     87.1  %     86.1  %     85.5  %     85.7  %     86.1  %
Quarterly run-off (5)   3.3 %     3.1  %     3.3  %     3.5  %     3.1  %     3.9  %

 

(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 primary 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 is 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
  March 31, 2019
  December 31, 2018
  March 31, 2018
 
             
  ($ In Millions)
>= 760 $ 3,057   $ 3,125   $ 2,619  
740-759   1,224     1,198     1,073  
720-739   1,044     1,033     914  
700-719   792     797     811  
680-699   553     559     567  
<=679   243     250     476  
Total $ 6,913   $ 6,962   $ 6,460  
Weighted average FICO   749     750     743  


Primary NIW by LTV For the three months ended
  March 31, 2019   December 31, 2018   March 31, 2018
           
  (In Millions)
95.01% and above $ 569     $ 582     $ 997  
90.01% to 95.00% 3,424     3,409     2,765  
85.01% to 90.00% 2,241     2,224     1,755  
85.00% and below 679     747     943  
Total $ 6,913     $ 6,962     $ 6,460  
Weighted average LTV 92.2 %   92.1 %   92.5 %


Primary NIW by purchase/refinance mix For the three months ended
  March 31, 2019   December 31, 2018   March 31, 2018
           
  (In Millions)
Purchase $ 6,383     $ 6,627     $ 5,425  
Refinance 530     335     1,035  
Total $ 6,913     $ 6,962     $ 6,460  
 
 
 

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

Primary IIF and RIF As of March 31, 2019
  IIF   RIF
       
  (In Millions)
March 31, 2019 $ 6,872     $ 1,789  
2018 25,609     6,492  
2017 18,353     4,514  
2016 14,750     3,652  
2015 6,585     1,658  
2014 and before 1,065     268  
Total $ 73,234     $ 18,373  
 
 
 

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
  March 31, 2019   December 31, 2018   March 31, 2018
           
  (In Millions)
>= 760 $ 33,902     $ 31,870     $ 25,371  
740-759 12,160     11,294     8,635  
720-739 10,096     9,338     6,981  
700-719 8,122     7,574     5,814  
680-699 5,435     5,062     3,852  
<=679 3,519     3,413     2,781  
Total $ 73,234     $ 68,551     $ 53,434  


Primary RIF by FICO As of
  March 31, 2019   December 31, 2018   March 31, 2018
           
  (In Millions)
>= 760 $ 8,506     $ 7,955     $ 6,246  
740-759 3,076     2,836     2,125  
720-739 2,550     2,341     1,710  
700-719 2,036     1,886     1,416  
680-699 1,357     1,256     932  
<=679 848     817     656  
Total $ 18,373     $ 17,091     $ 13,085  


Primary IIF by LTV As of
  March 31, 2019   December 31, 2018   March 31, 2018
           
  (In Millions)
95.01% and above $ 7,204     $ 6,774     $ 4,872  
90.01% to 95.00% 34,024     31,507     23,937  
85.01% to 90.00% 22,208     20,668     16,034  
85.00% and below 9,798     9,602     8,591  
Total $ 73,234     $ 68,551     $ 53,434  


Primary RIF by LTV As of
  March 31, 2019   December 31, 2018   March 31, 2018
           
  (In Millions)
95.01% and above $ 1,928     $ 1,801     $ 1,294  
90.01% to 95.00% 9,923     9,185     6,978  
85.01% to 90.00% 5,384     4,994     3,831  
85.00% and below 1,138     1,111     982  
Total $ 18,373     $ 17,091     $ 13,085  


Primary RIF by Loan Type As of
  March 31, 2019   December 31, 2018   March 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
  March 31, 2019   December 31, 2018   March 31, 2018
           
  (In Millions)
IIF, beginning of period $ 68,551     $ 63,527     $ 48,465  
NIW 6,913     6,962     6,460  
Cancellations and other reductions (2,230 )   (1,938 )   (1,491 )
IIF, end of period $ 73,234     $ 68,551     $ 53,434  
 
 
 

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
  March 31, 2019   December 31, 2018   March 31, 2018
California 12.7 %   13.0 %   13.5 %
Texas 8.3     8.2     8.0  
Florida 5.2     5.0     4.7  
Virginia 5.0     4.9     5.1  
Arizona 4.8     4.9     4.8  
Michigan 3.6     3.6     3.7  
Pennsylvania 3.6     3.6     3.6  
Colorado 3.4     3.5     3.5  
Illinois 3.4     3.4     3.3  
Maryland 3.2     3.2     3.4  
Total 53.2 %   53.3 %   53.6 %
 
 
 

The following table shows portfolio data by book year, as of March 31, 2019.

  As of March 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)
  ($ Values in Millions)
2013 $ 162   $ 28   17   655   153     1 0.20%   0.15 %
2014 3,451   1,037   30   14,786   5,450   45   34 3.44%   0.53 %
2015 12,422   6,585   53   52,548   30,653   167   64 2.64%   0.44 %
2016 21,187   14,750   70   83,626   61,940   231   56 2.28%   0.34 %
2017 21,582   18,353   85   85,897   75,951   326   10 2.99%   0.39 %
2018 27,289   25,609   94   104,017   99,200   171   2 2.34%   0.17 %
2019 6,913   6,872   99   24,006   23,885     —%   %
  $ 93,006   $ 73,234       365,535   297,232   940   167      


(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 claim expenses:

  For the three months ended
  March 31, 2019   March 31, 2018
  (In Thousands)
Beginning balance $ 12,811     $ 8,761  
Less reinsurance recoverables (1) (3,001 )   (1,902
Beginning balance, net of reinsurance recoverables 9,810     6,859  
       
Add claims incurred:      
Claims and claim expenses incurred:      
Current year (2) 3,909     1,940  
Prior years (3) (1,166 )   (371
Total claims and claim expenses incurred 2,743     1,569  
       
Less claims paid:      
Claims and claim expenses paid:      
Current year (2)      
Prior years (3) 694     371  
Total claims and claim expenses paid 694     371  
       
Reserve at end of period, net of reinsurance recoverables 11,859     8,057  
Add reinsurance recoverables (1) 3,678     2,334  
Ending balance $ 15,537     $ 10,391  


(1) Related to ceded losses recoverable under the QSR Transactions, included in "Other Assets" on the Condensed 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, that 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 since that time. Amounts are presented net of reinsurance.
   
   
   


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
  March 31, 2019   March 31, 2018
       
Beginning default inventory 877     928  
Plus: new defaults 574     413  
Less: cures (474 )   (324 )
Less: claims paid (37 )   (17 )
Ending default inventory 940     1,000  
 
 
 


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
  March 31, 2019   March 31, 2018
       
  (In Thousands)
Number of claims paid (1) 37     17  
Total amount paid for claims $ 926     $ 482  
Average amount paid per claim (2) $ 27     $ 34  
Severity(3) 64 %   74 %


(1)    Count includes claims settled without payment.
(2)  Calculation is net of claims settled without payment.
(3)    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 which included 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 March 31, 2019   As of March 31, 2018
       
  (In Thousands)
Case (1) $ 15     $ 9  
IBNR (2) 2     1  
Total $ 17     $ 10  


(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
  March 31, 2019   December 31, 2018   March 31, 2018
           
  (In Thousands)
Available Assets $ 817,758     $ 733,762     $ 555,336  
Risk-Based Required Assets 607,325     511,268     522,260