Wire Stories

NMI Holdings, Inc. Reports Second Quarter 2022 Financial Results; Announces New Quota Share Reinsurance Agreement

EMERYVILLE, Calif., Aug. 02, 2022 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported net income of $75.4 million, or $0.86 per diluted share, for the second quarter ended June 30, 2022, which compares to $67.7 million, or $0.77 per diluted share, in the first quarter ended March 31, 2022 and $57.5 million, or $0.65 per diluted share, in the second quarter ended June 30, 2021. Adjusted net income for the quarter was $74.3 million, or $0.86 per diluted share, which compares to $67.5 million, or $0.77 per diluted share, in the first quarter ended March 31, 2022 and $58.1 million, or $0.67 per diluted share, in the second quarter ended June 30, 2021. 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.

Adam Pollitzer, President and Chief Executive Officer of National MI, said, “We delivered resoundingly strong results in the second quarter, with significant new business production and increasing persistency driving growth in our high-quality insured portfolio, and favorable credit performance and expense discipline driving record profitability and strong returns. We have long been successful managing National MI with discipline and a focus on through-the-cycle performance, and are taking steps to further insulate our business from the impact of any economic volatility that may emerge. Looking forward, we're well positioned to continue to serve our customers and their borrowers, drive growth in our high-quality insured portfolio and deliver strong performance for our shareholders.”

The company also announced today that it has entered into a new quota share reinsurance agreement, primarily covering a seasoned pool of existing mortgage insurance policies that were previously ceded under its 2017 and 2020-1 ILN transactions.

Selected second quarter 2022 highlights include:

  • Primary insurance-in-force at quarter end was $168.6 billion, up 6% from $158.9 billion in the first quarter and 23% compared to $136.6 billion in the second quarter of 2021
  • Net premiums earned were $120.9 million, up 4% from $116.5 million in the first quarter and 9% compared to $110.9 million in the second quarter of 2021
  • Underwriting and operating expenses were $30.7 million, down 7% from $32.9 million in the first quarter and 12% compared to $34.7 million in the second quarter of 2021
  • Insurance claims and claim expenses was a benefit of $3.0 million, compared to a benefit of $0.6 million in the first quarter and an expense of $4.6 million in the second quarter of 2021
  • Shareholders’ equity was $1.5 billion at quarter end and book value per share was $18.01. Book value per share excluding the impact of net unrealized gains and losses in the investment portfolio was $19.91, up 5% compared to $18.97 per share in the first quarter and 19% compared to $16.71 per share in the second quarter of 2021
  • Annualized return on equity for the quarter was 19.7% and annualized adjusted return on equity was 19.4%
  • At quarter-end, total PMIERs available assets were $2.2 billion and net risk-based required assets were $1.2 billion
  Quarter EndedQuarter EndedQuarter Ended Change(1) Change(1)
  6/30/20223/31/20226/30/2021Q/QY/Y
INSURANCE METRICS ($billions)
Primary Insurance-in-Force$168.6 $158.9 $136.6 6 %23 %
New Insurance Written - NIW     
 Monthly premium 15.7  13.1  19.4 20 %(19)%
 Single premium 0.9  1.1  3.3 (14)%(72)%
 Total(2) 16.6  14.2  22.8 17 %(27)%
        
FINANCIAL HIGHLIGHTS (Unaudited, $millions, except per share amounts)
       
Net Premiums Earned 120.9  116.5  110.9 4 %9 %
Insurance Claims and Claim (Benefits) Expenses (3.0) (0.6) 4.6 390 %(165)%
Underwriting and Operating Expenses 30.7  32.9  34.7 (7)%(12)%
Net Income 75.4  67.7  57.5 11 %31 %
Adjusted Net Income 74.3  67.5  58.1 10 %28 %
Book Value per Share (excluding net unrealized gains and losses)(3) 19.91  18.97  16.71 5 %19 %
Loss Ratio (2.5)% (0.5)% 4.2 %   
Expense Ratio 25.4 % 28.3 % 31.3 %  

(1)Percentages may not be replicated based on the rounded figures presented in the table.
(2)Total may not foot due to rounding.
(3)Book value per share (excluding net unrealized gains and losses) is defined as total shareholder's equity, excluding the after-tax effects of unrealized gains and losses on our investment portfolio, divided by shares outstanding.


Conference Call and Webcast Details

The company will hold a conference call, which will be webcast live today, August 2, 2022, 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 (877) 270-2148 in the U.S., or (412) 902-6510 internationally 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," "perceive," "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 contain the spread of COVID-19, including their impact on the global economy, the U.S. housing, real estate, housing finance and mortgage insurance markets, and our business, operations and personnel; changes in the charters, business practices, policy or priorities of Fannie Mae and Freddie Mac (collectively, the GSEs), which may include 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; or changes in the direction of housing policy objectives of the Federal Housing Finance Agency (“FHFA”), such as the FHFA's priority to increase the accessibility to and affordability of homeownership for low-and-moderate income borrowers and underrepresented communities; our ability to remain an eligible mortgage insurer under the private mortgage insurer eligibility requirements (“PMIERs”) and other requirements imposed by the GSEs, which they may change at any time; retention of our existing certificates of authority in each state and the District of Columbia (“D.C.”) and our ability to remain a mortgage insurer in good standing in each state and D.C.; our future profitability, liquidity and capital resources; actions of existing competitors, including other private mortgage insurers and government mortgage insurers such as the Federal Housing Administration, the U.S. Department of Agriculture's Rural Housing Service and the U.S. Department of Veterans Affairs, and potential market entry by new competitors or consolidation of existing competitors; developments in the world's financial, capital and credit markets and our access to such markets, including reinsurance; adoption of new or changes to existing laws, rules 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 implementation of the final rules defining and/or concerning "Qualified Mortgage" and "Qualified Residential Mortgage"; U.S. federal tax reform and other potential changes in tax law and their impact on us and our operations; 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 legal and regulatory claims, investigations, actions, audits or inquiries that could result in adverse judgements, settlements, fines or other reliefs that could require significant expenditures or have other negative effects on our business; changes in general economic, market and political conditions and policies (including rising interest rates and 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; lenders, the GSEs, or other market participants seeking alternatives to private mortgage insurance; 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; decrease in the length of time our insurance policies are in force; 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 those that may be caused or exacerbated by climate change), 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; potential adverse impacts arising from the occurrence of any man-made disasters or public health emergencies, including pandemics; the inability of our counter-parties, including third party reinsurers, to meet their obligations to us; failure to maintain, improve and continue to develop necessary information technology systems or the failure of technology providers to perform; effectiveness and security of our information technology systems and digital products and services, including the risks these systems, products or services may fail to operate as expected or planned, or expose us to cybersecurity or third-party risks (including the exposure of our confidential customer and other confidential information); and 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, 2021, 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, adjusted combined ratio and book value per share (excluding net unrealized gains and losses) and 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 other infrequent, unusual or 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 other infrequent, unusual or 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.

Book value per share (excluding net unrealized gains and losses) is defined as total shareholder's equity, excluding the after-tax effects of unrealized gains and losses on investments, divided by shares outstanding.

Although adjusted income before tax, adjusted net income, adjusted diluted EPS, adjusted return-on-equity, adjusted expense ratio, adjusted combined ratio and book value per share (excluding net unrealized gains and losses) 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. Furthermore, all unexercised warrants expired in April 2022 and, as such, no change in fair value will be recognized in future reporting periods. 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) Other infrequent, unusual or non-operating items. Items that are the result of unforeseen or uncommon events, and are not expected to recur with frequency 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 infrequent, unusual or non-operating adjustments related to severance, restricted stock modification and other expenses incurred in connection with the CEO transition announced in September 2021 and 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 infrequent or non-recurring in nature, and are not indicative of the performance of, or ongoing trends in, our primary operating activities or business.
  
(5) Net unrealized gains and losses on investments. The recognition of the net unrealized gains or losses on investment can vary significantly across periods and is influenced by factors such as interest rate movement, overall market and economic conditions, and tax and capital profiles. These valuation adjustments may not necessarily result in economic gains or losses and not reflective of ongoing operations. Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these unrealized gains or losses.

Investor Contact
John M. Swenson
Vice President, Investor Relations and Treasury
[email protected]
(510) 788-8417

Consolidated statements of operations and comprehensive income (loss) (unaudited)For the three months ended June 30, For the six months ended June 30,
  2022   2021   2022   2021 
Revenues(In Thousands, except for per share data)
Net premiums earned$120,870  $110,888  $237,365  $216,767 
Net investment income 10,921   9,382   21,120   18,196 
Net realized investment gains 53   12   461   12 
Other revenues 376   483   715   984 
Total revenues 132,220   120,765   259,661   235,959 
Expenses       
Insurance claims and claim (benefits) expenses (3,036)  4,640   (3,655)  9,602 
Underwriting and operating expenses 30,700   34,725   63,635   68,790 
Service expenses 336   481   766   1,072 
Interest expense 8,051   7,922   16,092   15,837 
Gain from change in fair value of warrant liability (1,020)  (658)  (1,113)  (453)
Total expenses 35,031   47,110   75,725   94,848 
        
Income before income taxes 97,189   73,655   183,936   141,111 
Income tax expense 21,745   16,133   40,812   30,697 
Net income$75,444  $57,522  $143,124  $110,414 
        
Earnings per share       
Basic$0.88  $0.67  $1.67  $1.29 
Diluted$0.86  $0.65  $1.63  $1.27 
        
Weighted average common shares outstanding       
Basic 85,734   85,647   85,842   85,483 
Diluted 86,577   86,819   86,943   86,729 
        
Loss ratio(1) (2.5)%  4.2 %  (1.5)%  4.4 %
Expense ratio(2) 25.4 %  31.3 %  26.8 %  31.7 %
Combined ratio(3) 22.9 %  35.5 %  25.3 %  36.2 %
        
Net income$75,444  $57,522  $143,124  $110,414 
Other comprehensive (loss) income, net of tax:       
Unrealized (losses) gains in accumulated other comprehensive income (loss), net of tax (benefit) expense of $(17,004) and $4,995 for the three months ended June 30, 2022 and 2021, and $(43,180) and $(7,003) for the six month ended June 30, 2022 and 2021, respectively (63,967)  18,790   (162,438)  (26,343)
Reclassification adjustment for realized gains included in net income, net of tax expense of $11 and $3 for the three months ended June 30, 2022 and 2021, and $97 and $3 for the six months ended June 30, 2022 and 2021, respectively (44)  (10)  (367)  (10)
Other comprehensive (loss) income, net of tax (64,011)  18,780   (162,805)  (26,353)
Comprehensive income (loss)$11,433  $76,302  $(19,681) $84,061 

(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 (unaudited)June 30, 2022 December 31, 2021
Assets(In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $2,218,344 and $2,078,773 as of June 30, 2022 and December 31, 2021, respectively)$2,019,420  $2,085,931
Cash and cash equivalents (including restricted cash of $2,152 and $3,165 as of June 30, 2022 and December 31, 2021, respectively) 72,398   76,646
Premiums receivable 63,708   60,358
Accrued investment income 12,430   11,900
Prepaid expenses 4,994   3,530
Deferred policy acquisition costs, net 59,768   59,584
Software and equipment, net 32,071   32,047
Intangible assets and goodwill 3,634   3,634
Prepaid reinsurance premiums 1,711   2,393
Reinsurance recoverable 19,588   20,320
Other assets 102,566   94,238
Total assets$2,392,288  $2,450,581
    
Liabilities   
Debt$395,323  $394,623
Unearned premiums 135,681   139,237
Accounts payable and accrued expenses 58,947   72,000
Reserve for insurance claims and claim expenses 98,462   103,551
Reinsurance funds withheld 4,489   5,601
Warrant liability, at fair value    2,363
Deferred tax liability, net 161,658   164,175
Other liabilities 12,636   3,245
Total liabilities 867,196   884,795
    
Shareholders' equity   
Common stock - class A shares, $0.01 par value; 86,375,154 shares issued and 84,701,092 shares outstanding as of June 30, 2022 and 85,792,849 shares issued and outstanding as of December 31, 2021 (250,000,000 shares authorized) 864   858
Additional paid-in capital 964,654   955,302
Treasury Stock, at cost: 1,674,062 and 0 common shares as of June 30, 2022 and December 31, 2021, respectively (30,371)  
Accumulated other comprehensive (loss) income, net of tax (161,320)  1,485
Retained earnings 751,265   608,141
Total shareholders' equity 1,525,092   1,565,786
Total liabilities and shareholders' equity$2,392,288  $2,450,581

Non-GAAP Financial Measure Reconciliations (unaudited)
 As of and for the three months ended For the six months ended
 6/30/2022 3/31/2022 6/30/2021 6/30/2022 6/30/2021
As Reported(In Thousands, except for per share data)    
Revenues         
Net premiums earned$120,870  $116,495  $110,888  $237,365  $216,767 
Net investment income 10,921   10,199   9,382   21,120   18,196 
Net realized investment gains 53   408   12   461   12 
Other revenues 376   339   483   715   984 
Total revenues 132,220   127,441   120,765   259,661   235,959 
Expenses         
Insurance claims and claim (benefits) expenses (3,036)  (619)  4,640   (3,655)  9,602 
Underwriting and operating expenses 30,700   32,935   34,725   63,635   68,790 
Service expenses 336   430   481   766   1,072 
Interest expense 8,051   8,041   7,922   16,092   15,837 
Gain from change in fair value of warrant liability (1,020)  (93)  (658)  (1,113)  (453)
Total expenses 35,031   40,694   47,110   75,725   94,848 
Income before income taxes 97,189   86,747   73,655   183,936   141,111 
Income tax expense 21,745   19,067   16,133   40,812   30,697 
Net income$75,444  $67,680  $57,522  $143,124  $110,414 
          
Adjustments:         
Net realized investment gains (53)  (408)  (12)  (461)  (12)
Gain from change in fair value of warrant liability (1,020)  (93)  (658)  (1,113)  (453)
Capital markets transaction costs (55)  260   1,615   205   1,993 
Adjusted income before taxes 96,061   86,506   74,600   182,567   142,639 
          
Income tax expense on adjustments(1) (23)  (31)  337   (54)  416 
Adjusted net income$74,339  $67,470  $58,130  $141,809  $111,526 
          
Weighted average diluted shares outstanding 86,577   87,310   86,819   86,943   86,729 
          
Diluted EPS$0.86  $0.77  $0.65  $1.63  $1.27 
Adjusted diluted EPS$0.86  $0.77  $0.67  $1.63  $1.29 
          
Return-on-equity 19.7 %  17.5 %  16.2 %  18.5 %  15.6 %
Adjusted return-on-equity 19.4 %  17.4 %  16.4 %  18.4 %  15.8 %
          
Expense ratio(2) 25.4 %  28.3 %  31.3 %  26.8 %  31.7 %
Adjusted expense ratio(3) 25.4 %  28.0 %  29.9 %  26.7 %  30.8 %
          
Combined ratio(4) 22.9 %  27.7 %  35.5 %  25.3 %  36.2 %
Adjusted combined ratio(5) 22.9 %  27.5 %  34.0 %  25.2 %  35.2 %
          
Book value per share(6)$18.01  $17.84  $17.03     
Book value per share (excluding net unrealized gains and losses)(7)$19.91  $18.97  $16.71     

(1)Marginal tax impact of non-GAAP adjustments is calculated based on our statutory U.S. federal corporate income tax rate of 21%, except for those items that are not eligible for an income tax deduction. Such non-deductible items include gains or losses from the change in the fair value of our warrant liability and certain costs incurred in connection with the CEO transition, which are limited under Section 162(m) of the Internal Revenue Code.
(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)Book value per share is calculated by dividing total shareholder's equity by shares outstanding.
(7)Book value per share (excluding net unrealized gains and losses) is defined as total shareholder's equity, excluding the after-tax effects of unrealized gains and losses on our investment portfolio, divided by shares outstanding.

Historical Quarterly Data 2022
  2021
 June 30 March 31 December 31 September 30 June 30 March 31
Revenues(In Thousands, except for per share data)
Net premiums earned$120,870  $116,495  $113,933  $113,594  $110,888  $105,879 
Net investment income 10,921   10,199   10,045   9,831   9,382   8,814 
Net realized investment gains 53   408   714   3   12    
Other revenues 376   339   380   613   483   501 
Total revenues 132,220   127,441   125,072   124,041   120,765   115,194 
Expenses           
Insurance claims and claim (benefits) expenses (3,036)  (619)  (500)  3,204   4,640   4,962 
Underwriting and operating expenses 30,700   32,935   38,843   34,669   34,725   34,065 
Service expenses 336   430   650   787   481   591 
Interest expense 8,051   8,041   8,029   7,930   7,922   7,915 
(Gain) loss from change in fair value of warrant liability (1,020)  (93)  (112)     (658)  205 
Total expenses 35,031   40,694   46,910   46,590   47,110   47,738 
            
Income before income taxes 97,189   86,747   78,162   77,451   73,655   67,456 
Income tax expense 21,745   19,067   17,639   17,258   16,133   14,565 
Net income$75,444  $67,680  $60,523  $60,193  $57,522  $52,891 
            
Earnings per share           
Basic$0.88  $0.79  $0.71  $0.70  $0.67  $0.62 
Diluted$0.86  $0.77  $0.69  $0.69  $0.65  $0.61 
            
Weighted average common shares outstanding           
Basic 85,734   85,953   85,757   85,721   85,647   85,317 
Diluted 86,577   87,310   87,117   86,880   86,819   86,487 
            
Other data           
Loss Ratio(1) (2.5)%  (0.5)%  (0.4)%  2.8 %  4.2 %  4.7 %
Expense Ratio(2) 25.4 %  28.3 %  34.1 %  30.5 %  31.3 %  32.2 %
Combined ratio(3) 22.9 %  27.7 %  33.7 %  33.3 %  35.5 %  36.9 %

(1)Loss ratio is calculated by dividing insurance claims and claim (benefit) 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 trendsAs of and for the three months ended
 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021
 ($ Values In Millions, except as noted below)
New insurance written$16,611  $14,165  $18,342  $18,084  $22,751  $26,397 
New risk written 4,386   3,721   4,786   4,640   5,650   6,531 
Insurance in force (IIF)(1) 168,639   158,877   152,343   143,618   136,598   123,777 
Risk in force(1) 43,260   40,522   38,661   36,253   34,366   31,206 
Policies in force (count)(1) 551,543   526,976   512,316   490,714   471,794   436,652 
Average loan size($ value in thousands)(1)$306  $301  $297  $293  $290  $283 
Coverage percentage(2) 25.7 %  25.5 %  25.4 %  25.2 %  25.2 %  25.2 %
Loans in default (count)(1) 4,271   5,238   6,227   7,670   8,764   11,090 
Default rate(1) 0.77 %  0.99 %  1.22 %  1.56 %  1.86 %  2.54 %
Risk in force on defaulted loans(1)$295  $362  $435  $546  $625  $785 
Net premium yield(3) 0.30 %  0.30 %  0.31 %  0.32 %  0.34 %  0.36 %
Earnings from cancellations$2.2  $2.9  $5.1  $7.7  $7.0  $9.9 
Annual persistency(4) 76.0 %  71.5 %  63.8 %  58.1 %  53.9 %  51.9 %
Quarterly run-off(5) 4.3 %  5.0 %  6.7 %  8.1 %  8.0 %  12.5 %

(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 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 NIWThree months ended
 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021
 (In Millions)
Monthly$15,695 $13,094 $16,972 $16,861 $19,422 $23,764
Single 916  1,071  1,370  1,223  3,329  2,633
Primary$16,611 $14,165 $18,342 $18,084 $22,751 $26,397

Primary and pool IIFAs of
 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021
 (In Millions)
Monthly$148,488 $139,156 $133,104 $124,767 $117,629 $106,920
Single 20,151  19,721  19,239  18,851  18,969  16,857
Primary 168,639  158,877  152,343  143,618  136,598  123,777
            
Pool 1,114  1,162  1,229  1,339  1,460  1,642
Total$169,753 $160,039 $153,572 $144,957 $138,058 $125,419

          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, 2021 QSR Transaction, and 2022 QSR Transaction, and collectively, the QSR Transactions), Insurance-Linked Note transactions (the 2017 ILN Transaction, 2018 ILN Transaction, 2019 ILN Transaction, 2020-1 ILN Transaction, 2020-2 ILN Transaction, 2021-1 ILN Transaction, and 2021-2 ILN Transaction and collectively, the ILN Transactions), and traditional excess-of-loss transaction (2022 -1 XOL Transaction) for the periods indicated.

 For the three months ended
 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021
 (In Thousands)
The QSR Transactions           
Ceded risk-in-force$9,040,944  $8,504,853  $8,194,604  $7,610,870  $7,113,707  $6,330,409 
Ceded premiums earned (30,231)  (29,005)  (28,490)  (28,366)  (27,537)  (25,747)
Ceded claims and claim expenses (403)  (159)  19   840   1,194   1,180 
Ceding commission earned 6,146   5,886   6,208   6,142   5,961   5,162 
Profit commission 17,778   16,723   16,142   15,191   14,391   13,380 
            
The ILN Transactions           
Ceded premiums$(10,132) $(10,939) $(11,344) $(10,390) $(10,169) $(9,397)
            
2022-1 XOL Transaction           
Ceded Premiums$(2,907) $  $  $  $  $ 

Primary NIW by FICOFor the three months ended For the six months ended
 June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021
 ($ In Millions)
>= 760$7,990 $6,372 $11,390 $14,362 $24,304
740-759 2,900  2,388  4,246  5,288  9,558
720-739 2,056  1,937  3,152  3,993  7,115
700-719 1,650  1,639  1,798  3,289  4,156
680-699 1,277  1,244  1,292  2,521  2,652
<=679 738  585  873  1,323  1,363
Total$16,611 $14,165 $22,751 $30,776 $49,148
Weighted average FICO 751  748  754  750  755

Primary NIW by LTVFor the three months ended For the six months ended
 June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022June 30, 2021
 (In Millions)
95.01% and above$1,577  $1,366  $2,177  $2,943 $4,628 
90.01% to 95.00% 8,253   7,055   9,941   15,308  20,992 
85.01% to 90.00% 4,772   3,868   6,262   8,640  14,110 
85.00% and below 2,009   1,876   4,371   3,885  9,418 
Total$16,611  $14,165  $22,751  $30,776 $49,148 
Weighted average LTV 92.2 %  92.1 %  91.3 %  92.1 % 91.1 %

Primary NIW by purchase/refinance mixFor the three months ended For the six months ended
 June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022June 30, 2021
 (In Millions)
Purchase$16,203 $13,398 $18,911 $29,601$36,820
Refinance 408  767  3,840  1,175 12,328
Total$16,611 $14,165 $22,751 $30,776$49,148

          The table below presents a summary of our primary IIF and RIF by book year as of June 30, 2022.

Primary IIF and RIFAs of June 30, 2022
 IIF RIF
 (In Millions)
June 30, 2022$30,249 $7,972
2021 76,657  19,522
2020 39,154  9,928
2019 10,248  2,688
2018 4,021  1,030
2017 and before 8,310  2,120
Total$168,639 $43,260

          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 FICOAs of
 June 30, 2022 March 31, 2022 June 30, 2021
 (In Millions)
>= 760$83,769 $79,141 $70,583
740-759 29,195  27,406  23,175
720-739 23,240  22,176  18,857
700-719 16,221  15,236  12,230
680-699 11,160  10,347  7,927
<=679 5,054  4,571  3,826
Total$168,639 $158,877 $136,598

Primary RIF by FICOAs of
 June 30, 2022 March 31, 2022 June 30, 2021
 (In Millions)
>= 760$21,159 $19,883 $17,531
740-759 7,564  7,054  5,873
720-739 6,044  5,735  4,798
700-719 4,289  4,010  3,161
680-699 2,936  2,706  2,047
<=679 1,268  1,134  956
Total$43,260 $40,522 $34,366

Primary IIF by LTVAs of
 June 30, 2022 March 31, 2022 June 30, 2021
 (In Millions)
95.01% and above$16,068 $14,918 $12,026
90.01% to 95.00% 77,804  72,381  60,358
85.01% to 90.00% 51,029  48,406  43,064
85.00% and below 23,738  23,172  21,150
Total$168,639 $158,877 $136,598

Primary RIF by LTVAs of
 June 30, 2022 March 31, 2022 June 30, 2021
 (In Millions)
95.01% and above$4,914 $4,527 $3,552
90.01% to 95.00% 22,974  21,358  17,774
85.01% to 90.00% 12,553  11,895  10,555
85.00% and below 2,819  2,742  2,485
Total$43,260 $40,522 $34,366

Primary RIF by Loan TypeAs of
 June 30, 2022 March 31, 2022 June 30, 2021
      
Fixed99 % 99 % 99 %
Adjustable rate mortgages:     
Less than five years     
Five years and longer1  1  1 
Total100 % 100 % 100 %

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

Primary IIFFor the three months ended
 June 30, 2022 March 31, 2022 June 30, 2021
 (In Millions)
IIF, beginning of period$158,877  $152,343  $123,777 
NIW 16,611   14,165   22,751 
Cancellations, principal repayments and other reductions (6,849)  (7,631)  (9,930)
IIF, end of period$168,639  $158,877  $136,598 


Geographic Dispersion

          The following table shows the distribution by state of our primary RIF as of the periods indicated.

Top 10 primary RIF by stateAs of
 June 30, 2022 March 31, 2022 June 30, 2021
California10.8 % 10.8 % 10.3 %
Texas9.0  9.5  9.8 
Florida8.3  8.4  8.3 
Virginia4.3  4.5  5.0 
Georgia4.0  3.9  3.5 
Illinois3.9  3.8  3.8 
Washington3.9  3.7  3.6 
Colorado3.7  3.7  4.1 
Maryland3.5  3.6  3.9 
Pennsylvania3.3  3.3  3.2 
Total54.7 % 55.2 % 55.5 %
      

          The table below presents selected primary portfolio statistics, by book year, as of June 30, 2022.

 As of June 30, 2022
Book yearOriginal 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 $6 3 % 655 40 1 1 0.6 % 0.3 % 2.5 %
2014 3,451  235 7 % 14,786 1,455 29 50 4.0 % 0.5 % 2.0 %
2015 12,422  1,440 12 % 52,548 7,941 170 121 3.0 % 0.6 % 2.1 %
2016 21,187  3,145 15 % 83,626 16,073 343 138 2.7 % 0.6 % 2.1 %
2017 21,582  3,484 16 % 85,897 18,205 607 112 3.9 % 0.8 % 3.3 %
2018 27,295  4,021 15 % 104,043 20,359 785 100 6.6 % 0.9 % 3.9 %
2019 45,141  10,248 23 % 148,423 42,491 812 25 8.5 % 0.6 % 1.9 %
2020 62,702  39,154 62 % 186,174 125,400 696 2 4.6 % 0.4 % 0.6 %
2021 85,574  76,657 90 % 257,972 236,705 811 1 4.3 % 0.3 % 0.3 %
2022 30,776  30,249 98 % 84,034 82,874 17  1.0 %  %  %
Total$310,292 $168,639   1,018,158 551,543 4,271 550      

(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 (benefits) expenses:

 For the three months ended For the six months ended
 June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
 (In Thousands)
Beginning balance$102,372  $96,103  $103,551  $90,567 
Less reinsurance recoverables(1) (20,080)  (18,686)  (20,320)  (17,608)
Beginning balance, net of reinsurance recoverables 82,292   77,417   83,231   72,959 
        
Add claims incurred:       
Claims and claim (benefits) expenses incurred:       
Current year(2) 8,707   5,069   18,787   15,626 
Prior years(3) (11,743)  (429)  (22,442)  (6,024)
Total claims and claim (benefits) expenses incurred (3,036)  4,640   (3,655)  9,602 
        
Less claims paid:       
Claims and claim expenses paid:       
Current year(2) 26      26   12 
Prior years(3) 356   548   676   1,040 
Total claims and claim expenses paid 382   548   702   1,052 
        
Reserve at end of period, net of reinsurance recoverables 78,874   81,509   78,874   81,509 
Add reinsurance recoverables(1) 19,588   19,726   19,588   19,726 
Ending balance$98,462  $101,235  $98,462  $101,235 

(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 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 $14.0 million attributed to net case reserves and $4.5 million attributed to net IBNR reserves for the six months ended June 30, 2022 and $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.
(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 $17.0 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the six months ended June 30, 2022 and $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.

          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, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Beginning default inventory5,238  11,090  6,227  12,209 
Plus: new defaults1,069  1,095  2,232  2,862 
Less: cures(2,011) (3,402) (4,143) (6,270)
Less: claims paid(24) (19) (43) (35)
Less: rescission and claims denied(1)   (2) (2)
Ending default inventory4,271  8,764  4,271  8,764 

          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, 2022 June 30, 2021 June 30, 2022 June 30, 2021
 (In Thousands)
Number of claims paid(1) 24   19   43   35 
Total amount paid for claims$471  $702  $873  $1,308 
Average amount paid per claim$20  $37  $20  $37 
Severity(2) 46 %  66 %  43 %  64 %

(1)Count includes 10 and 16 claims settled without payment during the three and six months ended June 30, 2022, respectively, and three and four claims settled with out payment during the three and six months ended 2021, 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, 2022 As of June 30, 2021
 (In Thousands)
Case(1)$21.3 $10.6
IBNR(1)(2) 1.8  1.0
Total$23.1 $11.6

(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, 2022 March 31, 2022 June 30, 2021
 (In Thousands)
Available Assets$2,169,388 $2,127,030 $1,886,993
Risk-Based Required Assets 1,240,143  1,341,217  1,170,854

To Top