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NMI Holdings, Inc. Reports Fourth Quarter and Full Year 2020 Financial Results
Source: Nasdaq GlobeNewswire / 16 Feb 2021 16:01:01 America/New_York
EMERYVILLE, Calif., Feb. 16, 2021 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported net income of $48.3 million, or $0.56 per diluted share, for the fourth quarter ended December 31, 2020, which compares to $38.2 million, or $0.45 per diluted share, in the third quarter ended September 30, 2020 and $50.2 million, or $0.71 per diluted share, in the fourth quarter ended December 31, 2019. Adjusted net income for the quarter was $50.8 million or $0.59 per diluted share, which compares to $40.4 million or $0.47 per diluted share in the third quarter ended September 30, 2020 and $52.6 million or $0.75 per diluted share in the fourth quarter ended December 31, 2019.
Net income for the full year ended December 31, 2020 was $171.6 million or $2.13 per diluted share, which compares to $172.0 million or $2.47 per diluted share, for the year ended December 31, 2019. Adjusted net income for the year was $173.6 million or $2.19 per diluted share, which compares to $182.4 million or $2.62 per diluted share, for the year ended December 31, 2019. 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, “The fourth quarter capped an unprecedented year of challenge, resiliency and reward for National MI. In 2020, we helped over 250,000 borrowers gain access to housing, allowing them to establish a safe and secure environment in which to shelter through the COVID pandemic. We expanded our customer franchise, delivered record NIW volume, grew our high-quality insured portfolio and balance sheet, and delivered significant profitability, all while absorbing the impact of COVID through the year.”
Selected fourth quarter 2020 highlights include:
- New insurance written was $19.8 billion, up 7% compared to $18.5 billion in the third quarter and 66% compared to $11.9 billion in the fourth quarter of 2019
- Primary insurance-in-force at quarter end was $111.3 billion, up 6% from $104.5 billion at the end of the third quarter and 17% compared to the fourth quarter of 2019
- Net premiums earned were $100.7 million, up 2% compared $98.8 million in the third quarter and 5% compared to $95.5 million in the fourth quarter of 2019
- Underwriting and operating expenses were $35.0 million, including $1.7 million of capital market transaction costs, compared to $34.0 million in the third quarter and $31.3 million in the fourth quarter of 2019
- Insurance claims and claim expenses were $3.5 million, compared to $15.7 million in the third quarter and $4.3 million in the fourth quarter of 2019
- At quarter-end, cash and investments were $1.9 billion and shareholders’ equity was $1.4 billion, equal to $16.08 per share
- Annualized return on equity for the quarter was 14.4% and annualized adjusted return on equity was 15.2%
- At quarter-end, the company reported total PMIERs available assets of $1.8 billion and net risk-based required assets of $984 million
Quarter
EndedQuarter
EndedQuarter
EndedChange (1) Change (1) 12/31/2020 9/30/2020 12/31/2019 Q/Q Y/Y INSURANCE METRICS ($billions) Primary Insurance-in-Force $ 111.3 $ 104.5 $ 94.8 6 % 17 % New Insurance Written - NIW Monthly premium 17.8 16.5 11.1 8 % 60 % Single premium 2.0 2.0 0.9 1 % 131 % Total (2) 19.8 18.5 11.9 7 % 66 % FINANCIAL HIGHLIGHTS ($millions, except per share amounts) Net Premiums Earned 100.7 98.8 95.5 2 % 5 % Insurance Claims and Claim Expenses 3.5 15.7 4.3 (77)% (17)% Underwriting and Operating Expenses 35.0 34.0 31.3 3 % 12 % Net Income 48.3 38.2 50.2 26% (4)% Adjusted Net Income 50.8 40.4 52.6 26% (4)% Cash and Investments $ 1,931 $ 1,884 $ 1,182 3 % 63 % Shareholders' Equity 1,370 1,308 930 5 % 47 % Book Value per Share $ 16.08 $ 15.42 $ 13.61 4 % 18 % Loss Ratio 3.5 % 15.9 % 4.5 % Expense Ratio 34.7 % 34.4 % 32.8 % (1) Percentages may not be replicated based on the rounded figures presented in the table.
(2) Total may not foot due to rounding.Conference Call and Webcast Details
The company will hold a conference call, which will be webcast live today, February 16, 2021, 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: 1798854 or by referencing NMI Holdings, IncAbout 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 Company’s 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 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 the timing and eventual implementation of the final rules concerning the expiration of the "QM Patch" and "Qualified Mortgage" definitions 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 Reports on Form 10-Q for the quarters ended June 30 and September 30, 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) 788-8417Press Contact
Mary McGarity
Strategic Vantage Mortgage Public Relations
(203) 513-2721
MaryMcGarity@StrategicVantage.comConsolidated statements of operations and comprehensive income For the three months ended December 31, For the year ended December 31, 2020 2019 2020 2019 Revenues (In Thousands, except for per share data) Net premiums earned $ 100,709 $ 95,517 $ 397,172 $ 345,015 Net investment income 8,386 7,962 31,897 30,856 Net realized investment gains 295 264 930 45 Other revenues 513 1,154 3,284 2,855 Total revenues 109,903 104,897 433,283 378,771 Expenses Insurance claims and claim expenses 3,549 4,269 59,247 12,507 Underwriting and operating expenses 34,994 31,296 131,610 126,621 Service expenses 459 937 2,840 2,248 Interest expense 7,906 2,974 24,387 12,085 Loss (gain) from change in fair value of warrant liability 1,379 2,632 (2,907 ) 8,657 Total expenses 48,287 42,108 215,177 162,118 Income before income taxes 61,616 62,789 218,106 216,653 Income tax expense 13,348 12,594 46,540 44,696 Net income $ 48,268 $ 50,195 $ 171,566 $ 171,957 Earnings per share Basic $ 0.57 $ 0.74 $ 2.20 $ 2.54 Diluted $ 0.56 $ 0.71 $ 2.13 $ 2.47 Weighted average common shares outstanding Basic 84,956 68,140 78,023 67,573 Diluted 86,250 70,276 79,263 69,721 Loss ratio(1) 3.5% 4.5% 14.9% 3.6% Expense ratio(2) 34.7% 32.8% 33.1% 36.7% Combined ratio (3) 38.3% 37.2% 48.1% 40.3% Net income $ 48,268 $ 50,195 $ 171,566 $ 171,957 Other comprehensive income (loss), net of tax: Unrealized gains (losses) in accumulated other
comprehensive income, net of tax expense
(benefit) of $1,869 and ($444) for the three
months ended December 31, 2020 and 2019,
respectively, and $9,525 and $8,548 for the years
ended December 31, 2020, and 2019,
respectively7,031 (1,668 ) 35,829 32,155 Reclassification adjustment for realized (gains)
losses included in net income, net of tax expense
(benefit) of $62 and $55 for the three months
ended December 31, 2020 and 2019,
respectively, and ($196) and $9 for the years
ended December 31, 2020, and 2019 respectively(233 ) (208 ) 739 (35 ) Other comprehensive income (loss), net of tax 6,798 (1,876 ) 36,568 32,120 Comprehensive income $ 55,066 $ 48,319 $ 208,134 $ 204,077 (1) Loss ratio is calculated by dividing 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.
(3) Combined ratio may not foot due to rounding.Consolidated balance sheets December 31, 2020 December 31, 2019 Assets (In Thousands, except for share data) Fixed maturities, available-for-sale, at fair value (amortized cost of $1,730,835 and
$1,113,779 as of December 31, 2020 and December 31, 2019, respectively)$ 1,804,286 $ 1,140,940 Cash and cash equivalents (including restricted cash of $5,555 and $2,662 as of
December 31, 2020 and December 31, 2019, respectively)126,937 41,089 Premiums receivable 49,779 46,085 Accrued investment income 9,862 6,831 Prepaid expenses 3,292 3,512 Deferred policy acquisition costs, net 62,225 59,972 Software and equipment, net 29,665 26,096 Intangible assets and goodwill 3,634 3,634 Prepaid reinsurance premiums 6,190 15,488 Reinsurance recoverable (1) 17,608 4,939 Other assets (1) 53,188 16,232 Total assets $ 2,166,666 $ 1,364,818 Liabilities Debt $ 393,301 $ 145,764 Unearned premiums 118,817 136,642 Accounts payable and accrued expenses 61,716 39,904 Reserve for insurance claims and claim expenses 90,567 23,752 Reinsurance funds withheld 8,653 14,310 Warrant liability, at fair value 4,409 7,641 Deferred tax liability, net 112,586 56,360 Other liabilities 7,026 10,025 Total liabilities 797,075 434,398 Shareholders' equity Common stock - class A shares, $0.01 par value; 85,163,039 and 68,358,074 shares
issued and outstanding as of December 31, 2020 and December 31, 2019,
respectively (250,000,000 shares authorized)852 684 Additional paid-in capital 937,872 707,003 Accumulated other comprehensive income, net of tax 53,856 17,288 Retained earnings 377,011 205,445 Total shareholders' equity 1,369,591 930,420 Total liabilities and shareholders' equity $ 2,166,666 $ 1,364,818 (1) Reinsurance recoverable has been reclassified to "Other assets" in the prior periods.
Non-GAAP Financial Measure Reconciliations For the three months ended For the year ended 12/31/2020 9/30/2020 12/31/2019 12/31/2020 12/31/2019 As Reported (In Thousands, except for per share data) Revenues Net premiums earned $ 100,709 $ 98,802 $ 95,517 $ 397,172 $ 345,015 Net investment income 8,386 8,337 7,962 31,897 30,856 Net realized investment gains (losses) 295 (4 ) 264 930 45 Other revenues 513 648 1,154 3,284 2,855 Total revenues 109,903 107,783 104,897 433,283 378,771 Expenses Insurance claims and claim expenses 3,549 15,667 4,269 59,247 12,507 Underwriting and operating expenses 34,994 33,969 31,296 131,610 126,621 Service expenses 459 557 937 2,840 2,248 Interest expense 7,906 7,796 2,974 24,387 12,085 Loss (gain) from change in fair value of warrant liability 1,379 437 2,632 (2,907 ) 8,657 Total expenses 48,287 58,426 42,108 215,177 162,118 Income before income taxes 61,616 49,357 62,789 218,106 216,653 Income tax expense 13,348 11,178 12,594 46,540 44,696 Net income $ 48,268 $ 38,179 $ 50,195 $ 171,566 171,957 Adjustments: Net realized investment (gains) losses (295 ) 4 (264 ) (930 ) (45 ) Loss (gain) from change in fair value of warrant liability 1,379 437 2,632 (2,907 ) 8,657 Capital markets transaction costs 1,719 2,254 — 7,237 2,353 Adjusted income before taxes 64,419 52,052 65,157 221,506 227,618 Income tax expense on adjustments 299 474 (55 ) 1,324 485 Adjusted net income $ 50,772 $ 40,400 $ 52,618 $ 173,642 $ 182,437 Weighted average diluted shares outstanding 86,250 85,599 70,276 79,263 69,721 Diluted EPS $ 0.56 $ 0.45 $ 0.71 $ 2.13 (1) $ 2.47 Adjusted diluted EPS $ 0.59 $ 0.47 $ 0.75 $ 2.19 $ 2.62 Return on equity (2) 14.4% 11.9% 22.3% 14.9% 21.1% Adjusted return on equity (3) 15.2% 12.6% 23.3% 15.1% 22.4% Expense ratio (4) 34.7% 34.4% 32.8% 33.1% 36.7% Adjusted expense ratio (5) 33.0% 32.1% 32.8% 32.0% 36.0% Combined ratio (6) 38.3% 50.2% 37.2% 48.1% 40.3% Adjusted combined ratio (7) 36.6% 48.0% 37.2% 46.9% 39.6% (1) Diluted net income for the year ended December 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.
(2) Return on equity is calculated by dividing net income on an annualized basis by the average shareholders' equity for the period
(3) Adjusted return on equity is calculated by dividing adjusted net income on an annualized basis by the average shareholders' equity for the period.
(4) Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
(5) 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.
(6) Combined ratio is calculated by dividing the total of underwriting and operating expenses and insurance claims and claims expense by net premiums earned.
(7) 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 December 31 September 30 June 30 March 31 December 31 September 30 Revenues (In Thousands, except for per share data) Net premiums earned $ 100,709 $ 98,802 $ 98,944 $ 98,717 $ 95,517 $ 92,381 Net investment income 8,386 8,337 7,070 8,104 7,962 7,882 Net realized investment gains (losses) 295 (4 ) 711 (72 ) 264 81 Other revenues 513 648 1,223 900 1,154 1,244 Total revenues 109,903 107,783 107,948 107,649 104,897 101,588 Expenses Insurance claims and claim expenses 3,549 15,667 34,334 5,697 4,269 2,572 Underwriting and operating expenses 34,994 33,969 30,370 32,277 31,296 32,335 Service expenses 459 557 1,090 734 937 909 Interest expense 7,906 7,796 5,941 2,744 2,974 2,979 Loss (gain) from change in fair value of warrant liability 1,379 437 1,236 (5,959 ) 2,632 (1,139 ) Total expenses 48,287 58,426 72,971 35,493 42,108 37,656 Income before income taxes 61,616 49,357 34,977 72,156 62,789 63,932 Income tax expense 13,348 11,178 8,129 13,885 12,594 14,169 Net income $ 48,268 $ 38,179 $ 26,848 $ 58,271 $ 50,195 $ 49,763 Earnings per share Basic $ 0.57 $ 0.45 $ 0.36 $ 0.85 $ 0.74 $ 0.73 Diluted $ 0.56 $ 0.45 $ 0.36 $ 0.74 $ 0.71 $ 0.69 Weighted average common shares outstanding Basic 84,956 84,805 73,617 68,563 68,140 67,849 Diluted 86,250 85,599 74,174 70,401 70,276 70,137 Other data Loss Ratio(2) 3.5% 15.9% 34.7% 5.8% 4.5% 2.8% Expense Ratio(3) 34.7% 34.4% 30.7% 32.7% 32.8% 35.0% Combined ratio (4) 38.3% 50.2% 65.4% 38.5% 37.2% 37.8% (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.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,
2020September 30,
2020June 30, 2020 March 31,
2020December 31,
2019September 30,
2019($ Values In Millions) New insurance written $ 19,782 $ 18,499 $ 13,124 $ 11,297 $ 11,949 $ 14,100 New risk written 4,868 4,577 3,260 2,897 3,082 3,651 Insurance in force (IIF) (1) 111,252 104,494 98,905 98,494 94,754 89,713 Risk in force (1) 28,164 26,568 25,238 25,192 24,173 22,810 Policies in force (count) (1) 399,429 381,899 372,934 376,852 366,039 350,395 Average loan size ($ value in thousands) (1) $ 279 $ 274 $ 265 $ 261 $ 259 $ 256 Coverage percentage (2) 25.3 % 25.4 % 25.5 % 25.6 % 25.5 % 25.4 % Loans in default (count) (1) 12,209 13,765 10,816 1,449 1,448 1,230 Default rate (1) 3.06 % 3.60 % 2.90 % 0.38 % 0.40 % 0.35 % Risk in force on defaulted loans (1) $ 874 $ 1,008 $ 799 $ 84 $ 84 $ 70 Net premium yield (3) 0.37 % 0.39 % 0.40 % 0.41 % 0.41 % 0.43 % Earnings from cancellations $ 11.7 $ 12.6 $ 15.5 $ 8.6 $ 8.0 $ 7.4 Annual persistency (4) 55.9 % 60.0 % 64.1 % 71.7 % 76.8 % 82.4 % Quarterly run-off (5) 12.5 % 13.1 % 12.9 % 8.0 % 7.7 % 7.5 % (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.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 For the three months ended December 31,
2020September 30,
2020June 30, 2020 March 31, 2020 December 31,
2019September 30,
2019(In Millions) Monthly $ 17,789 $ 16,516 $ 11,885 $ 10,461 $ 11,085 $ 12,994 Single 1,993 1,983 1,239 836 864 1,106 Primary $ 19,782 $ 18,499 $ 13,124 $ 11,297 $ 11,949 $ 14,100 Primary and pool IIF As of December 31,
2020September 30,
2020June 30, 2020 March 31, 2020 December 31,
2019September 30,
2019(In Millions) Monthly $ 95,336 $ 88,584 $ 82,848 $ 81,347 $ 77,097 $ 71,814 Single 15,916 15,910 16,057 17,147 17,657 17,899 Primary 111,252 104,494 98,905 98,494 94,754 89,713 Pool 1,855 2,115 2,340 2,487 2,570 2,668 Total $ 113,107 $ 106,609 $ 101,245 $ 100,981 $ 97,324 $ 92,381 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, 2019 ILN Transaction, 2020-1 ILN Transaction and 2020-2 ILN Transaction, and collectively, the ILN Transactions) for the periods indicated.
For the three months ended December 31,
2020September 30,
2020June 30, 2020 March 31,
2020December 31,
2019September 30,
2019(In Thousands) The QSR Transactions Ceded risk-in-force $ 5,543,969 $ 5,159,061 $ 4,563,676 $ 4,843,715 $ 5,137,249 $ 4,901,809 Ceded premiums earned (24,161 ) (24,517 ) (23,210 ) (23,011 ) (23,673 ) (23,151 ) Ceded claims and claim expenses 601 3,200 8,669 1,532 1,030 766 Ceding commission earned 4,787 4,798 4,428 4,513 4,691 4,584 Profit commission 13,184 11,034 5,271 12,413 13,314 13,254 The ILN Transactions Ceded premiums $ (9,422 ) $ (6,268 ) $ (3,267 ) $ (3,872 ) $ (4,263 ) $ (4,409 ) 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 For the year ended December 31,
2020September 30,
2020December 31,
2019December 31,
2020December 31,
2019($ In Millions) >= 760 $ 11,495 $ 11,600 $ 6,253 $ 37,437 $ 21,931 740-759 3,387 2,575 1,864 9,443 7,541 720-739 2,447 2,187 1,712 7,820 6,643 700-719 1,430 1,217 1,204 4,644 4,783 680-699 820 793 662 2,692 3,021 <=679 203 127 254 666 1,222 Total $ 19,782 $ 18,499 $ 11,949 $ 62,702 $ 45,141 Weighted average FICO 761 764 756 761 753 Primary NIW by LTV For the three months ended For the year ended December 31,
2020September 30,
2020December 31,
2019December 31,
2020December 31,
2019(In Millions) 95.01% and above $ 1,877 $ 587 $ 663 $ 3,732 $ 3,192 90.01% to 95.00% 7,839 7,767 5,528 26,000 21,475 85.01% to 90.00% 6,239 6,968 4,296 22,356 15,555 85.00% and below 3,827 3,177 1,462 10,614 4,919 Total $ 19,782 $ 18,499 $ 11,949 $ 62,702 $ 45,141 Weighted average LTV 90.9 % 90.7 % 91.4 % 90.9 % 91.8 % Primary NIW by purchase/refinance mix For the three months ended For the year ended December 31,
2020September 30,
2020December 31,
2019December 31,
2020December 31,
2019(In Millions) Purchase $ 13,085 $ 12,764 $ 9,041 $ 41,616 $ 37,405 Refinance 6,697 5,735 2,908 21,086 7,736 Total $ 19,782 $ 18,499 $ 11,949 $ 62,702 $ 45,141 The table below presents a summary of our primary IIF and RIF by book year as of December 31, 2020.
Primary IIF and RIF As of December 31, 2020 IIF RIF (In Millions) December 31, 2020 $ 58,232 $ 14,510 2019 25,038 6,548 2018 9,788 2,494 2017 8,009 2,002 2016 6,756 1,732 2015 and before 3,429 878 Total $ 111,252 $ 28,164 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, 2020 September 30, 2020 December 31, 2019 (In Millions) >= 760 $ 58,368 $ 53,742 $ 44,793 740-759 17,442 16,193 15,728 720-739 15,091 14,352 13,417 700-719 10,442 10,235 10,284 680-699 6,777 6,713 6,774 <=679 3,132 3,259 3,758 Total $ 111,252 $ 104,494 $ 94,754 Primary RIF by FICO As of December 31, 2020 September 30, 2020 December 31, 2019 (In Millions) >= 760 $ 14,634 $ 13,563 $ 11,388 740-759 4,449 4,141 4,034 720-739 3,868 3,694 3,465 700-719 2,692 2,635 2,632 680-699 1,748 1,730 1,728 <=679 773 805 926 Total $ 28,164 $ 26,568 $ 24,173 Primary IIF by LTV As of December 31, 2020 September 30, 2020 December 31, 2019 (In Millions) 95.01% and above $ 9,129 $ 8,130 $ 8,640 90.01% to 95.00% 49,898 47,828 44,668 85.01% to 90.00% 36,972 35,224 30,163 85.00% and below 15,253 13,312 11,283 Total $ 111,252 $ 104,494 $ 94,754 Primary RIF by LTV As of December 31, 2020 September 30, 2020 December 31, 2019 (In Millions) 95.01% and above $ 2,637 $ 2,310 $ 2,390 90.01% to 95.00% 14,673 14,056 13,086 85.01% to 90.00% 9,067 8,642 7,376 85.00% and below 1,787 1,560 1,321 Total $ 28,164 $ 26,568 $ 24,173 Primary RIF by Loan Type As of December 31, 2020 September 30, 2020 December 31, 2019 Fixed 99 % 99 % 98 % Adjustable rate mortgages: Less than five years — — — Five years and longer 1 1 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, 2020 September 30, 2020 December 31, 2019 (In Millions) IIF, beginning of period $ 104,494 $ 98,905 $ 89,713 NIW 19,782 18,499 11,949 Cancellations, principal repayments and other reductions (13,024 ) (12,910 ) (6,908 ) IIF, end of period $ 111,252 $ 104,494 $ 94,754 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, 2020 September 30, 2020 December 31, 2019 California 11.2 % 11.3 % 11.8 % Texas 8.8 8.3 8.2 Florida 7.3 6.7 5.7 Virginia 5.1 5.4 5.3 Colorado 4.1 4.0 3.4 Illinois 3.8 4.0 3.8 Maryland 3.7 3.6 3.4 Washington 3.5 3.5 3.3 Pennsylvania 3.4 3.5 3.6 Massachusetts 3.3 3.5 3.3 Total 54.2 % 53.8 % 51.8 % The table below presents selected primary portfolio statistics, by book year, as of December 31, 2020.
As of December 31, 2020 Book year Original
Insurance
WrittenRemaining
Insurance in
Force%
Remaining
of Original
InsurancePolicies
Ever in
ForceNumber of
Policies in
ForceNumber
of Loans
in
Default# of
Claims
PaidIncurred
Loss Ratio
(Inception
to Date) (1)Cumulative
Default Rate (2)Current
default
rate (3)($ Values in Millions) 2013 $ 162 $ 12 7 % 655 74 1 1 0.2 % 0.3 % 1.4 % 2014 3,451 478 14 % 14,786 2,783 128 48 4.2 % 1.2 % 4.6 % 2015 12,422 2,939 24 % 52,548 15,201 597 111 3.2 % 1.3 % 3.9 % 2016 21,187 6,756 32 % 83,626 31,635 1,417 118 2.9 % 1.8 % 4.5 % 2017 21,582 8,009 37 % 85,897 37,919 2,219 82 4.6 % 2.7 % 5.9 % 2018 27,295 9,788 36 % 104,043 44,969 2,962 57 8.4 % 2.9 % 6.6 % 2019 45,141 25,038 55 % 148,423 91,657 3,724 8 14.7 % 2.5 % 4.1 % 2020 62,702 58,232 93 % 186,174 175,191 1,161 — 9.4 % 0.6 % 0.7 % Total $ 193,942 $ 111,252 676,152 399,429 12,209 425 (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,
2020December 31,
2019December 31,
2020December 31,
2019(In Thousands) Beginning balance $ 87,230 $ 20,505 $ 23,752 $ 12,811 Less reinsurance recoverables (1) (17,180 ) (4,309 ) (4,939 ) (3,001 ) Beginning balance, net of reinsurance recoverables 70,050 16,196 18,813 9,810 Add claims incurred: Claims and claim expenses incurred: Current year (2) 5,745 3,789 66,943 14,737 Prior years (3) (2,196 ) 480 (7,696 ) (2,230 ) Total claims and claim expenses incurred 3,549 4,269 59,247 12,507 Less claims paid: Claims and claim expenses paid: Current year (2) 434 204 586 204 Prior years (3) 206 1,448 4,515 3,849 Reinsurance terminations (4) — — — (549 ) Total claims and claim expenses paid 640 1,652 5,101 3,504 Reserve at end of period, net of reinsurance recoverables 72,959 18,813 72,959 18,813 Add reinsurance recoverables (1) 17,608 4,939 17,608 4,939 Ending balance $ 90,567 $ 23,752 $ 90,567 $ 23,752 (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 year ended December 31,
2020December 31,
2019December 31,
2020December 31,
2019Beginning default inventory 13,765 1,230 1,448 877 Plus: new defaults 2,589 591 19,459 2,429 Less: cures (4,122 ) (319 ) (8,548 ) (1,702 ) Less: claims paid (20 ) (54 ) (143 ) (152 ) Less: claims denied (3 ) — (7 ) (4 ) Ending default inventory 12,209 1,448 12,209 1,448 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,
2020December 31,
2019December 31,
2020December 31,
2019(In Thousands) Number of claims paid (1) 20 54 143 152 Total amount paid for claims $ 813 $ 2,051 $ 6,434 $ 5,030 Average amount paid per claim $ 41 $ 38 $ 45 $ 33 Severity(2) 75 % 80 % 80 % 74 % (1) Count includes one and nine claims settled without payment for the three months and year ended December 31, 2020, respectively, and five and 19 claims settled without payment for the three months and year ended December 31, 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 December 31,
2020As of December 31,
2019(In Thousands) Case (1) $ 6.8 $ 15.0 IBNR (2) $ 0.6 $ 1.4 Total $ 7.4 $ 16.4 (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, 2020 September 30, 2020 December 31, 2019 (In Thousands) Available Assets $ 1,750,668 $ 1,671,990 $ 1,016,387 Risk-Based Required Assets 984,372 990,678 773,474 