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NMI Holdings, Inc. Reports Second Quarter 2020 Financial Results

·22 min read

EMERYVILLE, Calif., Aug. 05, 2020 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported GAAP net income of $26.8 million, or $0.36 per diluted share, for the second quarter ended June 30, 2020, which compares to $58.3 million, or $0.74 per diluted share, in the first quarter ended March 31, 2020 and $39.1 million, or $0.56 per diluted share, in the second quarter ended June 30, 2019. Adjusted net income for the quarter was $29.7 million or $0.40 per diluted share, which compares to $52.7 million or $0.75 per diluted share in the first quarter ended March 31, 2020 and $41.4 million or $0.59 per diluted share in the second quarter ended June 30, 2019. Results for the second quarter ended June 30, 2020, reflect the impact of additional claims and claim expenses incurred on higher default experience in connection with the COVID-19 pandemic. 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, "From the start of this crisis, we have taken steps to protect the health and safety of our employees and ensure our continued ability to seamlessly support our lenders and their borrowers. While still early, we have been encouraged by the resiliency weve seen in the housing market. Demand has been robust, house prices have continued to rise and record low interest rates have giving more Americans a chance to access homeownership at a time when its most critical. Merkle continued, This is the time when our customers need us most, and our broadly conservative stance heading into this crisis, and the recent success we have achieved in the capital and reinsurance markets positions us well to continue supporting them and the overall housing market during the COVID-19 pandemic.

Selected highlights from the second quarter 2020 include:

  • Primary insurance-in-force at quarter end was $98.9 billion, up 21% compared to the second quarter of 2019

  • New insurance written was $13.1 billion, up 8% compared to $12.2 billion in the second quarter of 2019

  • Net premiums earned were $98.9 million, up 19% compared to $83.2 million in the second quarter of 2019

  • Underwriting and operating expenses were $30.4 million, including $0.2 million of capital market transaction costs, compared to $32.2 million in the second quarter of 2019, including $0.7 million of capital market transaction costs

  • Insurance claims and claim expenses were $34.3 million, compared to $2.9 million in the second quarter of 2019, reflecting higher default experience attributable to the COVID-19 pandemic
     

  • At quarter-end, cash and investments were $1.9 billion and shareholders equity was $1.3 billion, equal to $14.82 per share

  • Annualized return-on-equity for the quarter was 9.6% and annualized adjusted return-on-equity was 10.7%

  • At quarter-end, the company reported total PMIERs available assets of $1.7 billion and net risk- based required assets of $1.0 billion

Concurrent with the release of second quarter earnings, the company has filed a Form 8-K that includes its current assessment of the impact the COVID-19 outbreak will have on the U.S. economy and housing market, and its perspective on the implications for the U.S. mortgage insurance market, and its business performance and financial position. The Form 8-K also includes selected operating statistics for the month ended July 31, 2020. Investors may access the Form 8-K on the companys website, www.nationalmi.com , in the Investor Relations section.

 

Quarter Ended

Quarter Ended

Quarter Ended

Change (1)

Change (1)

 

6/30/2020

3/31/2020

6/30/2019

Q/Q

Y/Y

INSURANCE METRICS ($billions)

Primary Insurance-in-Force

$

98.9

 

$

98.5

 

$

81.7

 

 

 

%

21 

 

%

New Insurance Written - NIW

 

 

 

 

 

Monthly premium

11.9

 

10.5

 

11.1

 

14 

 

%

 

%

Single premium

1.2

 

0.8

 

1.1

 

48 

 

%

11 

 

%

Total (2)

13.1

 

11.3

 

12.2

 

16 

 

%

 

%

 

 

 

 

 

 

FINANCIAL HIGHLIGHTS ($millions, except per share amounts)

Net Premiums Earned

98.9

 

98.7

 

83.2

 

 

 

%

19 

 

%

Insurance Claims and Claim Expenses

34.3

 

5.7

 

2.9

 

503 

 

%

1075 

 

%

Underwriting and Operating Expenses (3)

30.4

 

32.3

 

32.2

 

(6

)

%

(6

)

%

Net Income

26.8

 

58.3

 

39.1

 

(54

)

%

(31

)

%

Adjusted Net Income

29.7

 

52.7

 

41.4

 

(44

)

%

(28

)

%

Cash and Investments

$

1,855

 

$

1,180

 

$

1,053

 

57 

 

%

76 

 

%

Shareholders' Equity

1,257

 

975

 

812

 

29 

 

%

55 

 

%

Book Value per Share

$

14.82

 

$

14.15

 

$

11.99

 

 

%

24 

 

%

Loss Ratio

34.7

%

5.8

%

3.5

%

 

 

Expense Ratio (3)

30.7

%

32.7

%

38.7

%

 

 

(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, August 5, 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: 3189949 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 (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the U.S. Private Securities Litigation Reform Act of 1995 (the "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: uncertainty relating to the coronavirus ("COVID-19") pandemic and the measures taken by governmental authorities and other third parties to combat it, including their impact on the global economy, the U.S. housing, real estate, housing finance and mortgage insurance markets, and the Companys business, operations and personnel, 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, U.S. Department of Agriculture's Rural Housing Service and the U.S. Department of Veterans Affairs, and potential market entry by new competitors or consolidation of existing competitors; developments in the worlds 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 counterparties, 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, 2019 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, 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, adjusted return-on-equity, adjusted expense ratio and adjusted combined ratio 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 periods 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.

Adjusted expense ratio is defined as GAAP underwriting and operating expenses, excluding the pre-tax effects of periodic costs incurred in connection with capital markets transactions, divided by net premiums earned.

Adjusted combined ratio is defined as the total of GAAP underwriting and operating expenses, excluding the pre-tax effects of periodic costs incurred in connection with capital markets transactions and insurance claims and claims expenses, divided by net premiums earned.

Although adjusted income before tax, adjusted net income, adjusted diluted EPS, adjusted return-on-equity, adjusted expense ratio and adjusted combined ratio 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

 

For the three months ended
June 30,

 

For the six months ended
June 30,

 

 

2020

 

2019

 

2020

 

2019

Revenues

 

(In Thousands, except for per share data)

Net premiums earned

 

$

98,944

 

 

 

$

83,249

 

 

 

$

197,661

 

 

 

$

157,118

 

 

Net investment income

 

7,070

 

 

 

7,629

 

 

 

15,174

 

 

 

15,012

 

 

Net realized investment gains (losses)

 

711

 

 

 

(113

)

 

 

639

 

 

 

(300

)

 

Other revenues

 

1,223

 

 

 

415

 

 

 

2,123

 

 

 

456

 

 

Total revenues

 

107,948

 

 

 

91,180

 

 

 

215,597

 

 

 

172,286

 

 

Expenses

 

 

 

 

 

 

 

 

Insurance claims and claim expenses

 

34,334

 

 

 

2,923

 

 

 

40,031

 

 

 

5,666

 

 

Underwriting and operating expenses (1)

 

30,370

 

 

 

32,190

 

 

 

62,647

 

 

 

62,990

 

 

Service expenses (1)

 

1,090

 

 

 

353

 

 

 

1,824

 

 

 

402

 

 

Interest expense

 

5,941

 

 

 

3,071

 

 

 

8,685

 

 

 

6,132

 

 

Loss (gain) from change in fair value of warrant liability

 

1,236

 

 

 

1,685

 

 

 

(4,723

)

 

 

7,164

 

 

Total expenses

 

72,971

 

 

 

40,222

 

 

 

108,464

 

 

 

82,354

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

34,977

 

 

 

50,958

 

 

 

107,133

 

 

 

89,932

 

 

Income tax expense

 

8,129

 

 

 

11,858

 

 

 

22,014

 

 

 

17,933

 

 

Net income

 

$

26,848

 

 

 

$

39,100

 

 

 

$

85,119

 

 

 

$

71,999

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

Basic

 

$

0.36

 

 

 

$

0.58

 

 

 

$

1.20

 

 

 

$

1.07

 

 

Diluted

 

$

0.36

 

 

 

$

0.56

 

 

 

$

1.11

 

 

 

$

1.04

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

73,617

 

 

 

67,590

 

 

 

71,090

 

 

 

67,143

 

 

Diluted

 

74,174

 

 

 

69,590

 

 

 

72,407

 

 

 

69,348

 

 

 

 

 

 

 

 

 

 

 

Loss ratio (2)

 

34.7

 

%

 

3.5

 

%

 

20.3

 

%

 

3.6

 

%

Expense ratio (3)

 

30.7

 

%

 

38.7

 

%

 

31.7

 

%

 

40.1

 

%

Combined ratio (4)

 

65.4

 

%

 

42.2

 

%

 

51.9

 

%

 

43.7

 

%

 

 

 

 

 

 

 

 

 

Net income

 

$

26,848

 

 

 

$

39,100

 

 

 

$

85,119

 

 

 

$

71,999

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

Unrealized gains in accumulated other comprehensive income, net of tax expense of $8,978 and $3,662 for the three months ended June 30, 2020 and 2019, and $5,162 and $7,615 for the six months ended June 30, 2020 and 2019, respectively

 

33,773

 

 

 

13,779

 

 

 

19,418

 

 

 

28,647

 

 

Reclassification adjustment for realized (gains) losses included in net income, net of tax expense (benefit) of $149 and ($24) for the three months ended June 30, 2020 and 2019, and ($258) and ($63) for the six months ended June 30, 2020 and 2019, respectively

 

(562

)

 

 

89

 

 

 

969

 

 

 

237

 

 

Other comprehensive income, net of tax

 

33,211

 

 

 

13,868

 

 

 

20,387

 

 

 

28,884

 

 

Comprehensive income

 

$

60,059

 

 

 

$

52,968

 

 

 

$

105,506

 

 

 

$

100,883

 

 

(1)   Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2)   Loss ratio is calculated by dividing 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

 

June 30, 2020

 

December 31, 2019

Assets

 

(In Thousands, except for share data)

Fixed maturities, available-for-sale, at fair value (amortized cost of $1,286,803 and $1,113,779 as of June 30, 2020 and December 31, 2019, respectively)

 

$

1,339,771

 

 

$

1,140,940

 

Cash and cash equivalents (including restricted cash of $2,068 and $2,662 as of June 30, 2020 and December 31, 2019, respectively)

 

515,450

 

 

41,089

 

Premiums receivable

 

46,408

 

 

46,085

 

Accrued investment income

 

7,909

 

 

6,831

 

Prepaid expenses

 

3,416

 

 

3,512

 

Deferred policy acquisition costs, net

 

63,619

 

 

59,972

 

Software and equipment, net

 

26,105

 

 

26,096

 

Intangible assets and goodwill

 

3,634

 

 

3,634

 

Prepaid reinsurance premiums

 

10,263

 

 

15,488

 

Reinsurance recoverable (1)

 

14,307

 

 

4,939

 

Other assets (1)

 

16,049

 

 

16,232

 

Total assets

 

$

2,046,931

 

 

$

1,364,818

 

 

 

 

 

 

Liabilities

 

 

 

 

Debt

 

$

392,773

 

 

$

145,764

 

Unearned premiums

 

115,236

 

 

136,642

 

Accounts payable and accrued expenses

 

104,777

 

 

39,904

 

Reserve for insurance claims and claim expenses

 

69,903

 

 

23,752

 

Reinsurance funds withheld

 

12,205

 

 

14,310

 

Warrant liability, at fair value

 

2,698

 

 

7,641

 

Deferred tax liability, net

 

83,785

 

 

56,360

 

Other liabilities

 

8,517

 

 

10,025

 

Total liabilities

 

789,894

 

 

434,398

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

Common stock - class A shares, $0.01 par value; 84,804,766 and 68,358,074 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively (250,000,000 shares authorized)

 

848

 

 

684

 

Additional paid-in capital

 

927,950

 

 

707,003

 

Accumulated other comprehensive income, net of tax

 

37,675

 

 

17,288

 

Retained earnings

 

290,564

 

 

205,445

 

Total shareholders' equity

 

1,257,037

 

 

930,420

 

Total liabilities and shareholders' equity

 

$

2,046,931

 

 

$

1,364,818

 

(1)   Reinsurance recoverable has been reclassified from "Other assets" in the prior period.



 

Non-GAAP Financial Measure Reconciliations

 

Quarter ended

 

Quarter ended

 

Quarter ended

 

6/30/2020

 

3/31/2020

 

6/30/2019

 As Reported

(In Thousands, except for per share data)

Revenues

 

 

 

 

 

Net premiums earned

$

98,944

 

 

 

$

98,717

 

 

 

$

83,249

 

 

Net investment income

7,070

 

 

 

8,104

 

 

 

7,629

 

 

Net realized investment gains (losses)

711

 

 

 

(72

)

 

 

(113

)

 

Other revenues

1,223

 

 

 

900

 

 

 

415

 

 

Total revenues

107,948

 

 

 

107,649

 

 

 

91,180

 

 

Expenses

 

 

 

 

 

Insurance claims and claim expenses

34,334

 

 

 

5,697

 

 

 

2,923

 

 

Underwriting and operating expenses (1)

30,370

 

 

 

32,277

 

 

 

32,190

 

 

Service expenses (1)

1,090

 

 

 

734

 

 

 

353

 

 

Interest expense

5,941

 

 

 

2,744

 

 

 

3,071

 

 

Loss (gain) from change in fair value of warrant liability

1,236

 

 

 

(5,959

)

 

 

1,685

 

 

Total expenses

72,971

 

 

 

35,493

 

 

 

40,222

 

 

 

 

 

 

 

 

Income before income taxes

34,977

 

 

 

72,156

 

 

 

50,958

 

 

Income tax expense

8,129

 

 

 

13,885

 

 

 

11,858

 

 

Net income

$

26,848

 

 

 

$

58,271

 

 

 

$

39,100

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

Net realized investment (gains) losses

(711

)

 

 

72

 

 

 

113

 

 

Loss (gain) from change in fair value of warrant liability

1,236

 

 

 

(5,959

)

 

 

1,685

 

 

Capital markets transaction costs

2,790

 

 

 

474

 

 

 

664

 

 

Adjusted income before taxes

38,292

 

 

 

66,743

 

 

 

53,420

 

 

 

 

 

 

 

 

Income tax expense on adjustments

437

 

 

 

115

 

 

 

163

 

 

Adjusted net income

$

29,726

 

 

 

$

52,743

 

 

 

$

41,399

 

 

 

 

 

 

 

 

Weighted average diluted shares outstanding

74,174

 

 

 

70,401

 

 

 

69,590

 

 

 

 

 

 

 

 

Diluted EPS

$

0.36

 

 

 

$

0.74

 

 

(2

)

$

0.56

 

 

Adjusted diluted EPS

$

0.40

 

 

 

$

0.75

 

 

 

$

0.59

 

 

 

 

 

 

 

 

Return-on-equity

9.6

 

%

 

24.5

 

%

 

20.0

 

%

Adjusted return-on-equity

10.7

 

%

 

22.1

 

%

 

21.2

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Expense ratio (3)

30.7

 

%

 

32.7

 

%

 

38.7

 

%

Adjusted expense ratio (4)

30.5

 

%

 

32.2

 

%

 

37.9

 

%

 

 

 

 

 

 

Combined ratio (5)

65.4

 

%

 

38.5

 

%

 

42.2

 

%

Adjusted combined ratio (6)

65.2

 

%

 

38.0

 

%

 

41.4

 

%

(1)   Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2)   Diluted net income for the quarter ended March 31, 2020 excludes the impact of the warrant fair value change as it was anti-dilutive. For all other periods presented, diluted net income equals reported net income as the impact of the warrant fair value change was dilutive.
(3)   Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
(4)   Adjusted expense ratio is calculated by dividing adjusted underwriting and operating expense (underwriting and operating expenses excluding costs related to capital markets reinsurance transactions) by net premiums earned.
(5)   Combined ratio is calculated by dividing the total of underwriting and operating expenses and insurance claims and claims expense by net premiums earned.
(6)   Adjusted combined ratio is calculated by dividing the total of adjusted underwriting and operating expenses (underwriting and operating expenses excluding costs related to capital market reinsurance transaction) and insurance claims and claims expense by net premiums earned.



 

 

 

 

Historical Quarterly Data

2020

 

2019

 

June 30

 

March 31

 

December 31

 

September 30

 

June 30

 

March 31

Revenues

(In Thousands, except for per share data)

Net premiums earned

$

98,944

 

 

$

98,717

 

 

 

$

95,517

 

 

$

92,381

 

 

 

$

83,249

 

 

 

$

73,868

 

 

Net investment income

7,070

 

 

8,104

 

 

 

7,962

 

 

7,882

 

 

 

7,629

 

 

 

7,383

 

 

Net realized investment gains (losses)

711

 

 

(72

)

 

 

264

 

 

81

 

 

 

(113

)

 

 

(187

)

 

Other revenues

1,223

 

 

900

 

 

 

1,154

 

 

1,244

 

 

 

415

 

 

 

42

 

 

Total revenues

107,948

 

 

107,649

 

 

 

104,897

 

 

101,588

 

 

 

91,180

 

 

 

81,106

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Insurance claims and claim expenses

34,334

 

 

5,697

 

 

 

4,269

 

 

2,572

 

 

 

2,923

 

 

 

2,743

 

 

Underwriting and operating expenses (1)

30,370

 

 

32,277

 

 

 

31,296

 

 

32,335

 

 

 

32,190

 

 

 

30,800

 

 

Service expenses (1)

1,090

 

 

734

 

 

 

937

 

 

909

 

 

 

353

 

 

 

49

 

 

Interest expense

5,941

 

 

2,744

 

 

 

2,974

 

 

2,979

 

 

 

3,071

 

 

 

3,061

 

 

Loss (gain) from change in fair value of warrant liability

1,236

 

 

(5,959

)

 

 

2,632

 

 

(1,139

)

 

 

1,685

 

 

 

5,479

 

 

Total expenses

72,971

 

 

35,493

 

 

 

42,108

 

 

37,656

 

 

 

40,222

 

 

 

42,132

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

34,977

 

 

72,156

 

 

 

62,789

 

 

63,932

 

 

 

50,958

 

 

 

38,974

 

 

Income tax expense

8,129

 

 

13,885

 

 

 

12,594

 

 

14,169

 

 

 

11,858

 

 

 

6,075

 

 

Net income

$

26,848

 

 

$

58,271

 

 

 

$

50,195

 

 

$

49,763

 

 

 

$

39,100

 

 

 

$

32,899

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.36

 

 

$

0.85

 

 

 

$

0.74

 

 

$

0.73

 

 

 

$

0.58

 

 

 

$

0.49

 

 

Diluted

$

0.36

 

 

$

0.74

 

 

 

$

0.71

 

 

$

0.69

 

 

 

$

0.56

 

 

 

$

0.48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

73,617

 

 

68,563

 

 

 

68,140

 

 

67,849

 

 

 

67,590

 

 

 

66,692

 

 

Diluted

74,174

 

 

70,401

 

 

 

70,276

 

 

70,137

 

 

 

69,590

 

 

 

68,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other data

 

 

 

 

 

 

 

 

 

 

 

Loss Ratio (2)

34.7

%

 

5.8

 

%

 

4.5

%

 

2.8

 

%

 

3.5

% 3.7 %Expense Ratio(3)30.7% 32.7 % 32.8% 35.0 % 38.7 % 41.7 %Combined ratio (4)65.4% 38.5 % 37.2% 37.8 % 42.2 % 45.4 %

(1) Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2) Loss ratio is calculated by dividing insurance claims and claim expenses by net premiums earned.
(3) Expense ratio is calculated by dividing 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

June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

(In Millions)

Monthly

$

11,885

$

10,461

$

11,085

$

12,994

$

11,067

$

6,211

Single

1,239

836

864

1,106

1,112

702

Primary

$

13,124

$

11,297

$

11,949

$

14,100

$

12,179

$

6,913


Primary and pool IIF

As of

June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

(In Millions)

Monthly

$

82,848

$

81,347

$

77,097

$

71,814

$

63,922

$

55,995

Single

16,057

17,147

17,657

17,899

17,786

17,239

Primary

98,905

98,494

94,754

89,713

81,708

73,234

Pool

2,340

2,487

2,570

2,668

2,758

2,838

Total

$

101,245

$

100,981

$

97,324

$

92,381

$

84,466

$

76,072


The following table presents the amounts related to the company's quota-share reinsurance transactions (the 2016 QSR Transaction, 2018 QSR Transaction and 2020 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

June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

The QSR Transactions

Ceded risk-in-force

$

4,563,676

$

4,843,715

$

5,137,249

$

4,901,809

$

4,558,862

$

4,534,353

Ceded premiums earned

(23,210

)

(23,011

)

(23,673

)

(23,151

)

(20,919

)

(21,468

)

Ceded claims and claim expenses

8,669

1,532

1,030

766

770

899

Ceding commission earned

4,428

4,513

4,691

4,584

4,171

4,206

Profit commission

5,271

12,413

13,314

13,254

11,884

12,061

The ILN Transactions

Ceded premiums

$

(3,267

)

$

(3,872

)

$

(4,263

)

$

(4,409

)

$

(2,895

)

$

(3,023

)


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,
2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

($ Values In Millions, except as noted below)

New insurance written

$

13,124

$

11,297

$

11,949

$

14,100

$

12,179

$

6,913

New risk written

3,260

2,897

3,082

3,651

3,183

1,799

Insurance in force (IIF) (1)

98,905

98,494

94,754

89,713

81,708

73,234

Risk in force (1)

25,238

25,192

24,173

22,810

20,661

18,373

Policies in force (count) (1)

372,934

376,852

366,039

350,395

324,876

297,232

Average loan size ($ value in thousands) (1)

$

265

$

261

$

259

$

256

$

252

$

246

Coverage percentage (2)

25.5

%

25.6

%

25.5

%

25.4

%

25.3

%

25.1

%

Loans in default (count) (1)

10,816

1,449

1,448

1,230

1,028

940

Percentage of loans in default (1)

2.90

%

0.38

%

0.40

%

0.35

%

0.32

%

0.32

%

Risk in force on defaulted loans (1)

$

799

$

84

$

84

$

70

$

58

$

53

Average premium yield (3)

0.40

%

0.41

%

0.41

%

0.43

%

0.43

%

0.42

%

Earnings from cancellations

$

15.5

$

8.6

$

8.0

$

7.4

$

4.5

$

2.3

Annual persistency (4)

64.1

%

71.7

%

76.8

%

82.4

%

86.0

%

87.2

%

Quarterly run-off (5)

12.9

%

8.0

%

7.7

%

7.5

%

5.1

%

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

June 30, 2020

March 31, 2020

June 30, 2019

($ In Millions)

>= 760

$

8,052

$

6,290

$

5,627

740-759

1,866

1,615

2,165

720-739

1,607

1,579

1,785

700-719

959

1,038

1,337

680-699

514

565

891

<=679

126

210

374

Total

$

13,124

$

11,297

$

12,179

Weighted average FICO

762

757

751


Primary NIW by LTV

For the three months ended

June 30, 2020

March 31, 2020

June 30, 2019

(In Millions)

95.01% and above

$

547

$

721

$

971

90.01% to 95.00%

5,385

5,009

5,931

85.01% to 90.00%

5,067

4,082

4,085

85.00% and below

2,125

1,485

1,192

Total

$

13,124

$

11,297

$

12,179

Weighted average LTV

90.7

%

91.3

%

92.0

%


Primary NIW by purchase/refinance mix

For the three months ended

June 30, 2020

March 31, 2020

June 30, 2019

(In Millions)

Purchase

$

7,776

$

7,991

$

10,697

Refinance

5,348

3,306

1,482

Total

$

13,124

$

11,297

$

12,179


The table below presents a summary of our primary IIF and RIF by book year as of June 30, 2020.

Primary IIF and RIF

As of June 30, 2020

IIF

RIF

(In Millions)

June 30, 2020

$

23,949

$

6,039

2019

34,658

9,017

2018

14,322

3,643

2017

11,548

2,877

2016

9,595

2,428

2015 and before

4,833

1,234

Total

$

98,905

$

25,238


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

June 30, 2020

March 31, 2020

June 30, 2019

(In Millions)

>= 760

$

48,898

$

47,340

$

37,830

740-759

15,764

16,060

13,731

720-739

13,882

14,002

11,388

700-719

10,228

10,518

9,028

680-699

6,657

6,879

6,045

<=679

3,476

3,695

3,686

Total

$

98,905

$

98,494

$

81,708


Primary RIF by FICO

As of

June 30, 2020

March 31, 2020

June 30, 2019

(In Millions)

>= 760

$

12,433

$

12,076

$

9,551

740-759

4,031

4,121

3,499

720-739

3,585

3,626

2,904

700-719

2,625

2,696

2,286

680-699

1,706

1,760

1,524

<=679

858

913

897

Total

$

25,238

$

25,192

$

20,661


Primary IIF by LTV

As of

June 30, 2020

March 31, 2020

June 30, 2019

(In Millions)

95.01% and above

$

8,453

$

8,838

$

7,925

90.01% to 95.00%

45,862

46,318

38,371

85.01% to 90.00%

32,603

31,729

25,099

85.00% and below

11,987

11,609

10,313

Total

$

98,905

$

98,494

$

81,708


Primary RIF by LTV

As of

June 30, 2020

March 31, 2020

June 30, 2019

(In Millions)

95.01% and above

$

2,387

$

2,478

$

2,145

90.01% to 95.00%

13,463

13,587

11,206

85.01% to 90.00%

7,985

7,767

6,108

85.00% and below

1,403

1,360

1,202

Total

$

25,238

$

25,192

$

20,661


Primary RIF by Loan Type

As of

June 30, 2020

March 31, 2020

June 30, 2019

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

June 30, 2020

March 31, 2020

June 30, 2019

(In Millions)

IIF, beginning of period

$

98,494

$

94,754

$

73,234

NIW

13,124

11,297

12,179

Cancellations, principal repayments and other reductions

(12,713

)

(7,557

)

(3,705

)

IIF, end of period

$

98,905

$

98,494

$

81,708


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, 2020

March 31, 2020

June 30, 2019

California

11.3

%

11.5

%

12.3

%

Texas

8.1

8.2

8.2

Florida

6.2

5.9

5.4

Virginia

5.4

5.3

5.2

Illinois

4.0

3.8

3.6

Colorado

3.8

3.6

3.4

Pennsylvania

3.6

3.7

3.6

Maryland

3.5

3.4

3.3

Washington

3.4

3.3

3.0

Massachusetts

3.4

3.3

2.8

Total

52.7

%

52.0

%

50.8

%


The table below presents selected primary portfolio statistics, by book year, as of June 30, 2020.

As of June 30, 2020

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

$

17

10

%

655

98

1

1

0.3

%

0.3

%

1.0

%

2014

3,451

649

19

%

14,786

3,633

117

46

4.2

%

1.1

%

3.2

%

2015

12,422

4,167

34

%

52,548

20,466

559

106

3.4

%

1.3

%

2.7

%

2016

21,187

9,595

45

%

83,626

42,628

1,385

107

3.1

%

1.8

%

3.2

%

2017

21,582

11,548

54

%

85,897

51,702

2,132

65

5.2

%

2.6

%

4.1

%

2018

27,295

14,322

52

%

104,043

62,237

2,732

37

8.4

%

2.7

%

4.4

%

2019

45,141

34,658

77

%

148,423

119,696

3,357

3

12.5

%

2.3

%

2.8

%

2020

24,421

23,949

98

%

73,653

72,474

533

8.5

%

0.7

%

0.7

%

Total

$

155,661

$

98,905

563,631

372,934

10,816

365

(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 six months ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

(In Thousands)

Beginning balance

$

29,479

$

15,537

$

23,752

$

12,811

Less reinsurance recoverables (1)

(6,193

)

(3,678

)

(4,939

)

(3,001

)

Beginning balance, net of reinsurance recoverables

23,286

11,859

18,813

9,810

Add claims incurred:

Claims and claim expenses incurred:

Current year (2)

34,958

3,492

42,516

7,401

Prior years (3)

(624

)

(569

)

(2,485

)

(1,735

)

Total claims and claim expenses incurred

34,334

2,923

40,031

5,666

Less claims paid:

Claims and claim expenses paid:

Current year (2)

39

39

Prior years (3)

1,985

674

3,209

1,368

Reinsurance terminations (4)

(549

)

(549

)

Total claims and claim expenses paid

2,024

125

3,248

819

Reserve at end of period, net of reinsurance recoverables

55,596

14,657

55,596

14,657

Add reinsurance recoverables (1)

14,307

3,775

14,307

3,775

Ending balance

$

69,903

$

18,432

$

69,903

$

18,432

(1) Related to ceded losses recoverable under the QSR Transactions.
(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 six months ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Beginning default inventory

1,449

940

1,448

877

Plus: new defaults

9,770

546

10,282

1,120

Less: cures

(353

)

(433

)

(828

)

(907

)

Less: claims paid

(49

)

(25

)

(83

)

(62

)

Less: claims denied

(1

)

(3

)

Ending default inventory

10,816

1,028

10,816

1,028


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 six months ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

(In Thousands)

Number of claims paid (1)

49

25

83

62

Total amount paid for claims

$

2,578

$

788

$

4,081

$

1,714

Average amount paid per claim

$

53

$

32

$

49

$

28

Severity(2)

89

%

77

%

87

%

69

%

(1) Count includes one and two claims settled without payment for the three and six months ended June 30, 2020, respectively, and four and seven claims settled without payment for the three and six months ended June 30, 2019, 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 June 30, 2020

As of June 30, 2019

(In Thousands)

Case (1)

$

5.6

$

16.4

IBNR (1)(2)

0.9

1.5

Total

$

6.5

$

17.9

(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

June 30, 2020

March 31, 2020

June 30, 2019

(In Thousands)

Available Assets

$

1,656,426

$

1,069,695

$

878,550

Risk-Based Required Assets

1,047,619

912,321

782,460