NMI Holdings, Inc. Reports Second Quarter 2021 Financial Results

ソース: Nasdaq GlobeNewswire / 03 8 2021 16:01:01 America/New_York

EMERYVILLE, Calif., Aug. 03, 2021 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported net income of $57.5 million, or $0.65 per diluted share, for the second quarter ended June 30, 2021, which compares to $52.9 million, or $0.61 per diluted share, in the first quarter ended March 31, 2021 and $26.8 million, or $0.36 per diluted share, in the second quarter ended June 30, 2020. Adjusted net income for the quarter was $58.1 million, or $0.67 per diluted share, which compares to $53.4 million, or $0.62 per diluted share, in the first quarter ended March 31, 2021 and $29.7 million, or $0.40 per diluted share, in the second quarter ended June 30, 2020. 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, “We delivered strong operating performance, significant growth in our high-quality insured portfolio and record financial results in the second quarter. Our credit performance continued to trend in a favorable direction, and we remain optimistic about the broad strength of the economic recovery and resiliency of the housing market. We believe we are well positioned to continue to win with customers, drive disciplined growth in our insurance in-force, deliver strong returns and consistently compound book value going forward.”

Selected second quarter 2021 highlights include:

Primary insurance-in-force at quarter end was $136.6 billion, up 10% from $123.8 billion in the first quarter and 38% compared to $98.9 billion in the second quarter of 2020
Net premiums earned were $110.9 million, up 5% compared to $105.9 million in the first quarter and 12% compared to $98.9 million in the second quarter of 2020
Underwriting and operating expenses were $34.7 million, including $1.6 million of capital market transaction costs, compared to $34.1 million in the first quarter and $30.4 million in the second quarter of 2020
Insurance claims and claim expenses were $4.6 million, compared to $5.0 million in the first quarter and $34.3 million in the second quarter of 2020
Shareholders' equity was $1.5 billion at quarter end, equal to $17.03 per share, up 6% compared to $16.13 per share in the first quarter and 15% compared to $14.82 per share in the second quarter of 2020
Annualized return on equity for the quarter was 16.2% and annualized adjusted return on equity was 16.4%
At quarter-end, total PMIERs available assets were $1.9 billion and net risk-based required assets were $1.2 billion

	*Quarter Ended*			*Quarter Ended*			*Quarter Ended*			*Change* ⁽¹⁾		*Change* ⁽¹⁾
	*6/30/2021*			*3/31/2021*			*6/30/2020*			*Q/Q*		*Y/Y*
INSURANCE METRICS ($billions)
Primary Insurance-in-Force	$	136.6		$	123.8		$	98.9		10	%	38	%
New Insurance Written - NIW
Monthly premium	19.4			23.8			11.9			(18	)%	63	%
Single premium	3.3			2.6			1.2			26	%	169	%
Total⁽²⁾	22.8			26.4			13.1			(14	)%	73	%

FINANCIAL HIGHLIGHTS ($millions, except per share amounts)
Net Premiums Earned	$	110.9		$	105.9		$	98.9		5	%	12	%
Insurance Claims and Claim Expenses	4.6			5.0			34.3			(6	)%	(86	)%
Underwriting and Operating Expenses	34.7			34.1			30.4			2	%	14	%
Net Income	57.5			52.9			26.8			9	%	114	%
Adjusted Net Income	58.1			53.4			29.7			9	%	96	%
Cash and Investments	2,062			1,947			1,855			6	%	11	%
Shareholders' Equity	1,460			1,380			1,257			6	%	16	%
Book Value per Share	17.03			16.13			14.82			6	%	15	%
Loss Ratio	4.2		%	4.7		%	34.7		%
Expense Ratio	31.3		%	32.2		%	30.7		%

⁽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, August 3, 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: 5182409 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 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 "Qualified Mortgage" and “Qualified Residential Mortgage” definitions and the 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, 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

Consolidated statements of operations and comprehensive income	For the three months ended June 30,						For the six months ended June 30,
	2021			2020			2021			2020
Revenues	(In Thousands, except for per share data)
Net premiums earned	$	110,888		$	98,944		$	216,767		$	197,661
Net investment income	9,382			7,070			18,196			15,174
Net realized investment gains	12			711			12			639
Other revenues	483			1,223			984			2,123
Total revenues	120,765			107,948			235,959			215,597
Expenses
Insurance claims and claim expenses	4,640			34,334			9,602			40,031
Underwriting and operating expenses	34,725			30,370			68,790			62,647
Service expenses	481			1,090			1,072			1,824
Interest expense	7,922			5,941			15,837			8,685
(Gain) loss from change in fair value of warrant liability	(658		)	1,236			(453		)	(4,723		)
Total expenses	47,110			72,971			94,848			108,464

Income before income taxes	73,655			34,977			141,111			107,133
Income tax expense	16,133			8,129			30,697			22,014
Net income	$	57,522		$	26,848		$	110,414		$	85,119

Earnings per share
Basic	$	0.67		$	0.36		$	1.29		$	1.20
Diluted	$	0.65		$	0.36		$	1.27		$	1.11

Weighted average common shares outstanding
Basic	85,647			73,617			85,483			71,090
Diluted	86,819			74,174			86,729			72,407

Loss ratio ⁽¹⁾	4.2		%	34.7		%	4.4		%	20.3		%
Expense ratio ⁽²⁾	31.3		%	30.7		%	31.7		%	31.7		%
Combined ratio ⁽³⁾	35.5		%	65.4		%	36.2		%	51.9		%

Net income	$	57,522		$	26,848		$	110,414		$	85,119

Other comprehensive income (loss), net of tax:
Unrealized gains (losses) in accumulated other comprehensive gain (loss), net of tax expense (benefit) of $4,995 and $8,978 for the three months ended June 30, 2021 and 2020, and $(7,003) and $5,162 for the six months ended June 30, 2021 and 2020, respectively	18,790			33,773			(26,343		)	19,418
Reclassification adjustment for realized (gains) losses included in net income, net of tax expense (benefit) of $3 and $149 for the three months ended June 30, 2021 and 2020, and $3 and ($258) for the six months ended June 30, 2021 and 2020, respectively	(10		)	(562		)	(10		)	969
Other comprehensive income (loss), net of tax	18,780			33,211			(26,353		)	20,387
Comprehensive income	$	76,302		$	60,059		$	84,061		$	105,506

⁽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	June 30, 2021		December 31, 2020
Assets	(In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $1,954,187 and $1,730,835 as of June 30, 2021 and December 31, 2020, respectively)	$	1,994,280	$	1,804,286
Cash and cash equivalents (including restricted cash of $4,159 and $5,555 as of June 30, 2021 and December 31, 2020, respectively)	68,080		126,937
Premiums receivable	55,939		49,779
Accrued investment income	11,148		9,862
Prepaid expenses	4,095		3,292
Deferred policy acquisition costs, net	62,137		62,225
Software and equipment, net	31,443		29,665
Intangible assets and goodwill	3,634		3,634
Prepaid reinsurance premiums	3,831		6,190
Reinsurance recoverable	19,726		17,608
Other assets	51,565		53,188
Total assets	$	2,305,878	$	2,166,666

Liabilities
Debt	$	393,949	$	393,301
Unearned premiums	142,148		118,817
Accounts payable and accrued expenses	56,803		61,716
Reserve for insurance claims and claim expenses	101,235		90,567
Reinsurance funds withheld	6,904		8,653
Warrant liability, at fair value	3,385		4,409
Deferred tax liability, net	136,273		112,586
Other liabilities	5,276		7,026
Total liabilities	845,973		797,075

Shareholders' equity
Common stock - class A shares, $0.01 par value; 85,703,487 and 85,163,039 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively (250,000,000 shares authorized)	857		852
Additional paid-in capital	944,121		937,872
Accumulated other comprehensive income, net of tax	27,503		53,856
Retained earnings	487,424		377,011
Total shareholders' equity	1,459,905		1,369,591
Total liabilities and shareholders' equity	$	2,305,878	$	2,166,666

Non-GAAP Financial Measure Reconciliations
	For the three months ended											For the six months ended
	6/30/2021				3/31/2021			6/30/2020				6/30/2021				6/30/2020
As Reported	(In Thousands, except for per share data)
Revenues
Net premiums earned	$	110,888			$	105,879		$	98,944			$	216,767			$	197,661
Net investment income	9,382				8,814			7,070				18,196				15,174
Net realized investment gains	12				—			711				12				639
Other revenues	483				501			1,223				984				2,123
Total revenues	120,765				115,194			107,948				235,959				215,597
Expenses
Insurance claims and claim expenses	4,640				4,962			34,334				9,602				40,031
Underwriting and operating expenses	34,725				34,065			30,370				68,790				62,647
Service expenses	481				591			1,090				1,072				1,824
Interest expense	7,922				7,915			5,941				15,837				8,685
(Gain) loss from change in fair value of warrant liability	(658		)		205			1,236				(453		)		(4,723		)
Total expenses	47,110				47,738			72,971				94,848				108,464

Income before income taxes	73,655				67,456			34,977				141,111				107,133
Income tax expense	16,133				14,565			8,129				30,697			⁽⁶⁾	22,014
Net income	$	57,522			$	52,891		$	26,848			$	110,414		⁽⁶⁾	$	85,119

Adjustments:
Net realized investment (gains)	(12		)		—			(711		)		(12		)		(639		)
(Gain) loss from change in fair value of warrant liability	(658		)		205			1,236				(453		)		(4,723		)
Capital markets transaction costs	1,615				378			2,790				1,993				3,264
Adjusted income before taxes	74,600				68,039			38,292				142,639				105,035

Income tax expense on adjustments	337				79			437				416				551
Adjusted net income	$	58,130			$	53,395		$	29,726			$	111,526			$	82,470

Weighted average diluted shares outstanding	86,819				86,487			74,174				86,729				72,407

Diluted EPS ⁽¹⁾	$	0.65			$	0.61		$	0.36			$	1.27			$	1.11
Adjusted diluted EPS	$	0.67			$	0.62		$	0.40			$	1.29			$	1.14

Return-on-equity	16.2			%	15.4		%	9.6			%	15.6			%	15.6			%
Adjusted return-on-equity	16.4			%	15.5		%	10.7			%	15.8			%	15.1			%

Expense ratio ⁽²⁾	31.3			%	32.2		%	30.7			%	31.7			%	31.7			%
Adjusted expense ratio ⁽³⁾	29.9			%	31.8		%	30.5			%	30.8			%	31.4			%

Combined ratio ⁽⁴⁾	35.5			%	36.9		%	65.4			%	36.2			%	51.9			%
Adjusted combined ratio ⁽⁵⁾	34.0			%	36.5		%	65.2			%	35.2			%	51.6			%

⁽¹⁾ Diluted net income for the quarter ended March 31, 2021 and June 30, 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⁾ Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
⁽³⁾ 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.
⁽⁴⁾ Combined ratio is calculated by dividing the total of underwriting and operating expenses and insurance claims and claims expense by net premiums earned.
⁽⁵⁾ 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.
⁽⁶⁾ May not foot by summing up the quarterly results due to rounding.

Historical Quarterly Data	2021							2020
	June 30				March 31			December 31			September 30				June 30			March 31
Revenues	(In Thousands, except for per share data)
Net premiums earned	$	110,888			$	105,879		$	100,709		$	98,802			$	98,944		$	98,717
Net investment income	9,382				8,814			8,386			8,337				7,070			8,104
Net realized investment gains (losses)	12				—			295			(4		)		711			(72		)
Other revenues	483				501			513			648				1,223			900
Total revenues	120,765				115,194			109,903			107,783				107,948			107,649
Expenses
Insurance claims and claim expenses	4,640				4,962			3,549			15,667				34,334			5,697
Underwriting and operating expenses	34,725				34,065			34,994			33,969				30,370			32,277
Service expenses	481				591			459			557				1,090			734
Interest expense	7,922				7,915			7,906			7,796				5,941			2,744
(Gain) loss from change in fair value of warrant liability	(658		)		205			1,379			437				1,236			(5,959		)
Total expenses	47,110				47,738			48,287			58,426				72,971			35,493

Income before income taxes	73,655				67,456			61,616			49,357				34,977			72,156
Income tax expense	16,133				14,565			13,348			11,178				8,129			13,885
Net income	$	57,522			$	52,891		$	48,268		$	38,179			$	26,848		$	58,271

Earnings per share
Basic	$	0.67			$	0.62		$	0.57		$	0.45			$	0.36		$	0.85
Diluted	$	0.65			$	0.61		$	0.56		$	0.45			$	0.36		$	0.74

Weighted average common shares outstanding
Basic	85,647				85,317			84,956			84,805				73,617			68,563
Diluted	86,819				86,487			86,250			85,599				74,174			70,401

Other data
Loss Ratio⁽¹⁾	4.2			%	4.7		%	3.5		%	15.9			%	34.7		%	5.8			%
Expense Ratio⁽²⁾	31.3			%	32.2		%	34.7		%	34.4			%	30.7		%	32.7			%
Combined ratio ⁽³⁾	35.5			%	36.9		%	38.3		%	50.2			%	65.4		%	38.5			%

⁽¹⁾ Loss ratio is calculated by dividing insurance claims and claim expenses by net premiums earned.
⁽²⁾ Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
⁽³⁾ 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
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			March 31, 2020
	($ Values In Millions, except as noted below)
New insurance written	$	22,751		$	26,397		$	19,782		$	18,499		$	13,124		$	11,297
New risk written	5,650			6,531			4,868			4,577			3,260			2,897
Insurance in force (IIF) ⁽¹⁾	136,598			123,777			111,252			104,494			98,905			98,494
Risk in force⁽¹⁾	34,366			31,206			28,164			26,568			25,238			25,192
Policies in force (count)⁽¹⁾	471,794			436,652			399,429			381,899			372,934			376,852
Average loan size ($ value in thousands) ⁽¹⁾	$	290		$	283		$	279		$	274		$	265		$	261
Coverage percentage ⁽²⁾	25.2		%	25.2		%	25.3		%	25.4		%	25.5		%	25.6		%
Loans in default (count) ⁽¹⁾	8,764			11,090			12,209			13,765			10,816			1,449
Default rate ⁽¹⁾	1.86		%	2.54		%	3.06		%	3.60		%	2.90		%	0.38		%
Risk in force on defaulted loans ⁽¹⁾	$	625		$	785		$	874		$	1,008		$	799		$	84
Net premium yield ⁽³⁾	0.34		%	0.36		%	0.37		%	0.39		%	0.40		%	0.41		%
Earnings from cancellations	$	7.0		$	9.9		$	11.7		$	12.6		$	15.5		$	8.6
Annual persistency⁽⁴⁾	53.9		%	51.9		%	55.9		%	60.0		%	64.1		%	71.7		%
Quarterly run-off⁽⁵⁾	8.0		%	12.5		%	12.5		%	13.1		%	12.9		%	8.0		%

⁽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 twelve-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	Three months ended
	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020		March 31, 2020
	(In Millions)
Monthly	$	19,422	$	23,764	$	17,789	$	16,516	$	11,885	$	10,461
Single	3,329		2,633		1,993		1,983		1,239		836
Primary	$	22,751	$	26,397	$	19,782	$	18,499	$	13,124	$	11,297

Primary and pool IIF	As of
	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020		March 31, 2020
	(In Millions)
Monthly	$	117,629	$	106,920	$	95,336	$	88,584	$	82,848	$	81,347
Single	18,969		16,857		15,916		15,910		16,057		17,147
Primary	136,598		123,777		111,252		104,494		98,905		98,494

Pool	1,460		1,642		1,855		2,115		2,340		2,487
Total	$	138,058	$	125,419	$	113,107	$	106,609	$	101,245	$	100,981

The following table presents the amounts related to the company's quota-share reinsurance transactions (the 2016 QSR Transaction, 2018 QSR Transaction, 2020 QSR Transaction and 2021 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, 2020-2 ILN Transaction and 2021 -1 ILN Transaction and collectively, the ILN Transactions) for the periods indicated.

	For the three months ended
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			March 31, 2020
	(In Thousands)
The QSR Transactions
Ceded risk-in-force	$	7,113,707		$	6,330,409		$	5,543,969		$	5,159,061		$	4,563,676		$	4,843,715
Ceded premiums earned	(27,537		)	(25,747		)	(24,161		)	(24,517		)	(23,210		)	(23,011		)
Ceded claims and claim expenses	1,194			1,180			601			3,200			8,669			1,532
Ceding commission earned	5,961			5,162			4,787			4,798			4,428			4,513
Profit commission	14,391			13,380			13,184			11,034			5,271			12,413

The ILN Transactions
Ceded premiums	$	(10,169	)	$	(9,397	)	$	(9,422	)	$	(6,268	)	$	(3,267	)	$	(3,872	)

Primary NIW by FICO	For the three months ended						For the six months ended
	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	($ In Millions)
>= 760	$	11,390	$	12,914	$	8,052	$	24,304	$	14,342
740-759	4,246		5,312		1,866		9,558		3,481
720-739	3,152		3,963		1,607		7,115		3,186
700-719	1,798		2,358		959		4,156		1,997
680-699	1,292		1,360		514		2,652		1,079
<=679	873		490		126		1,363		336
Total	$	22,751	$	26,397	$	13,124	$	49,148	$	24,421
Weighted average FICO	754		755			762	755		760

Primary NIW by LTV	For the three months ended									For the six months ended
	June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
	(In Millions)
95.01% and above	$	2,177		$	2,451		$	547		$	4,628		$	1,268
90.01% to 95.00%	9,941			11,051			5,385			20,992			10,394
85.01% to 90.00%	6,262			7,848			5,067			14,110			9,149
85.00% and below	4,371			5,047			2,125			9,418			3,610
Total	$	22,751		$	26,397		$	13,124		$	49,148		$	24,421
Weighted average LTV	91.3		%	91.0		%	90.7		%	91.1		%	91.0		%

Primary NIW by purchase/refinance mix	For the three months ended						For the six months ended
	June 30, 2021		March 31, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(In Millions)
Purchase	$	18,911	$	17,909	$	7,776	$	36,820	$	15,767
Refinance	3,840		8,488		5,348		12,328		8,654
Total	$	22,751	$	26,397	$	13,124	$	49,148	$	24,421

The table below presents a summary of our primary IIF and RIF by book year as of June 30, 2021.

Primary IIF and RIF	As of June 30, 2021
	IIF		RIF
	(In Millions)
June 30, 2021	$	48,314	$	11,986
2020	51,100		12,792
2019	17,279		4,527
2018	6,745		1,719
2017	5,687		1,424
2016 and before	7,473		1,918
Total	$	136,598	$	34,366

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, 2021		March 31, 2021		June 30, 2020
	(In Millions)
>= 760	$	70,583	$	63,919	$	48,898
740-759	23,175		20,537		15,764
720-739	18,857		17,167		13,882
700-719	12,230		11,536		10,228
680-699	7,927		7,329		6,657
<=679	3,826		3,289		3,476
Total	$	136,598	$	123,777	$	98,905

Primary RIF by FICO	As of
	June 30, 2021		March 31, 2021		June 30, 2020
	(In Millions)
>= 760	$	17,531	$	15,920	$	12,433
740-759	5,873		5,214		4,031
720-739	4,798		4,378		3,585
700-719	3,161		2,981		2,625
680-699	2,047		1,896		1,706
<=679	956		817		858
Total	$	34,366	$	31,206	$	25,238

Primary IIF by LTV	As of
	June 30, 2021		March 31, 2021		June 30, 2020
	(In Millions)
95.01% and above	$	12,026	$	10,616	$	8,453
90.01% to 95.00%	60,358		54,832		45,862
85.01% to 90.00%	43,064		40,057		32,603
85.00% and below	21,150		18,272		11,987
Total	$	136,598	$	123,777	$	98,905

Primary RIF by LTV	As of
	June 30, 2021		March 31, 2021		June 30, 2020
	(In Millions)
95.01% and above	$	3,552	$	3,106	$	2,387
90.01% to 95.00%	17,774		16,139		13,463
85.01% to 90.00%	10,555		9,818		7,985
85.00% and below	2,485		2,143		1,403
Total	$	34,366	$	31,206	$	25,238

Primary RIF by Loan Type	As of
	June 30, 2021		March 31, 2021		June 30, 2020

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
	June 30, 2021			March 31, 2021			June 30, 2020
	(In Millions)
IIF, beginning of period	$	123,777		$	111,252		$	98,494
NIW	22,751			26,397			13,124
Cancellations, principal repayments and other reductions	(9,930		)	(13,872		)	(12,713		)
IIF, end of period	$	136,598		$	123,777		$	98,905

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, 2021		March 31, 2021		June 30, 2020
California	10.3	%	10.8	%	11.3	%
Texas	9.8		9.5		8.1
Florida	8.3		7.9		6.2
Virginia	5.0		5.0		5.4
Colorado	4.1		4.1		3.8
Maryland	3.9		3.8		3.5
Illinois	3.8		3.7		4.0
Washington	3.6		3.5		3.4
Georgia	3.5		3.3		2.8
Pennsylvania	3.2		3.3		3.6
Total	55.5	%	54.9	%	52.1	%

The table below presents selected primary portfolio statistics, by book year, as of June 30, 2021.

	As of June 30, 2021
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	$	8	5	%	655	56	2	1	0.3	%	0.5	%	3.6	%
2014	3,451		357		10	%	14,786	2,159	77	48	4.2	%	0.8	%	3.6	%
2015	12,422		2,186		18	%	52,548	11,723	419	114	3.2	%	1.0	%	3.6	%
2016	21,187		4,922		23	%	83,626	23,999	965	126	2.9	%	1.3	%	4.0	%
2017	21,582		5,687		26	%	85,897	28,150	1,539	88	4.5	%	1.9	%	5.5	%
2018	27,295		6,745		25	%	104,043	32,452	2,039	69	8.5	%	2.0	%	6.3	%
2019	45,141		17,279		38	%	148,423	67,015	2,505	13	13.5	%	1.7	%	3.7	%
2020	62,702		51,100		81	%	186,174	157,288	1,171	1	7.5	%	0.6	%	0.7	%
2021	49,148		48,314		98	%	150,923	148,952	47	—	0.5	%	—	%	—	%
Total	$	243,090	$	136,598			827,075	471,794	8,764	460

⁽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, 2021			June 30, 2020			June 30, 2021			June 30, 2020
	(In Thousands)
Beginning balance	$	96,103		$	29,479		$	90,567		$	23,752
Less reinsurance recoverables ⁽¹⁾	(18,686		)	(6,193		)	(17,608		)	(4,939		)
Beginning balance, net of reinsurance recoverables	77,417			23,286			72,959			18,813

Add claims incurred:
Claims and claim expenses incurred:
Current year ⁽²⁾	5,069			34,958			15,626			42,516
Prior years⁽³⁾	(429		)	(624		)	(6,024		)	(2,485		)
Total claims and claim expenses incurred	4,640			34,334			9,602			40,031

Less claims paid:
Claims and claim expenses paid:
Current year ⁽²⁾	—			39			12			39
Prior years ⁽³⁾	548			1,985			1,040			3,209
Total claims and claim expenses paid	548			2,024			1,052			3,248

Reserve at end of period, net of reinsurance recoverables	81,509			55,596			81,509			55,596
Add reinsurance recoverables ⁽¹⁾	19,726			14,307			19,726			14,307
Ending balance	$	101,235		$	69,903		$	101,235		$	69,903

⁽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 and included $9.8 million attributed to net case reserves and $5.6 million attributed to net IBNR reserves for the six months ended June 30, 2021 and $34.7 million attributed to net case reserves and $7.1 million attributed to net IBNR reserves for the six months ended June 30, 2020.
⁽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 and included $1.1 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the six months ended June 30, 2021 and $1.1 million attributed to net case reserves and $1.3 million attributed to net IBNR reserves for the six months ended June 30, 2020.

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, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Beginning default inventory	11,090		1,449		12,209		1,448
Plus: new defaults	1,095		9,770		2,862		10,282
Less: cures	(3,402	)	(353	)	(6,270	)	(828	)
Less: claims paid	(19	)	(49	)	(35	)	(83	)
Less: claims denied	—		(1	)	(2	)	(3	)
Ending default inventory	8,764		10,816		8,764		10,816

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, 2021			June 30, 2020			June 30, 2021			June 30, 2020
	(In Thousands)
Number of claims paid ⁽¹⁾	19			49			35			83
Total amount paid for claims	$	702		$	2,578		$	1,308		$	4,081
Average amount paid per claim	$	37		$	53		$	37		$	49
Severity⁽²⁾	66		%	89		%	64		%	87		%

⁽¹⁾ Count includes three and four claims settled without payment during the three and six months ended June 30, 2021, respectively, and one and two claims settled without payment during the three and six months ended 2020, 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, 2021		As of June 30, 2020
	(In Thousands)
Case ⁽¹⁾	$	10.6	$	5.6
IBNR ⁽¹⁾⁽²⁾	1.0		0.9
Total	$	11.6	$	6.5

⁽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, 2021		March 31, 2021		June 30, 2020
	(In Thousands)
Available Assets	$	1,886,993	$	1,809,589	$	1,656,426
Risk-Based Required Assets	1,170,854		1,261,015		1,047,619

NMI Holdings, Inc. Reports Second Quarter 2021 Financial Results

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