EMERYVILLE, Calif., May 06, 2020 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported GAAP net income of $58.3 million for the first quarter ended March 31, 2020, which compares to $50.2 million in the fourth quarter ended December 31, 2019 and $32.9 million in the first quarter ended March 31, 2019.  Adjusted net income for the quarter was $52.7 million or $0.75 per diluted share, which compares to $52.6 million or $0.75 per diluted share in the fourth quarter ended December 31, 2019 and $38.5 million or $0.56 per diluted share in the first quarter ended March 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 global dislocation caused by the coronavirus pandemic is unprecedented. Our thoughts at National MI are with all of those who have been affected by the outbreak, particularly those suffering from COVID-19, and the health care workers and first responders who are on the front lines of the crisis.  In response to the pandemic, National MI activated its business continuity program to protect the health and safety of our employees, and ensure our continued ability to seamlessly serve our lender customers and their borrowers."

Merkle continued, "We are well positioned at National MI to navigate the current environment.  Our company was founded in the wake of the 2008 Financial Crisis and our approach in the ensuing years has been directly informed by the lessons of that experience. We are committed to being a credible and sustainable counterparty to our customers and policyholders across all market cycles and, in doing so, aim to help borrowers fully achieve their homeownership goals.  We have focused on building a durable franchise in a risk-responsible manner – engaging with our customers in a consultative fashion, actively targeting a higher-quality mix of business, and broadly executing reinsurance and capital markets solutions to mitigate our tail risk under stress scenarios and bolster our funding position.  Our conservative stance heading into this period gives us confidence about the strength of our business today."

Concurrent with its release of earnings, the company has filed a Form 8-K with the SEC that includes its current assessment of the impact the COVID-19 outbreak will have on the U.S. economy and housing market, and its perspective on the implications for the U.S. mortgage insurance market, and its business performance and financial position. Investors may access the Form 8-K on the company’s website, www.nationalmi.com, in the "Investor Relations" section.

Selected highlights from the first quarter 2020 include:

  • Primary insurance-in-force at quarter end was $98.5 billion, up 4% from $94.8 billion at the end of the fourth quarter and up 34% compared to the first quarter of 2019
     
  • New insurance written was $11.3 billion, down 5% seasonally from $11.9 in the fourth quarter and up 63% compared to $6.9 billion in the first quarter of 2019
     
  • Net premiums earned were $98.7 million, up 3% compared to $95.5 million for the fourth quarter and up 34% compared to $73.9 million for the first quarter of 2019
     
  • Underwriting and operating expenses were $32.3 million, including $0.5 million of capital market transaction costs, compared to $31.3 million in the fourth quarter and $30.8 million in the first quarter of 2019
     
  • At quarter-end, cash and investments were $1.2 billion and shareholders’ equity was $975 million, equal to $14.15 per share
     
  • Annualized return-on-equity for the quarter was 24.5% and annualized adjusted return-on-equity was 22.1%
     
  • At quarter-end, the company reported total PMIERs available assets of $1,070 million and net risk- based required assets of $912 million
  Quarter EndedQuarter EndedQuarter EndedChange (1)Change (1)
  3/31/202012/31/20193/31/2019Q/QY/Y
INSURANCE METRICS ($billions)
Primary Insurance-in-Force $98.5 $94.8 $73.2 4 %34 %
New Insurance Written - NIW      
 Monthly premium10.5 11.1 6.2 (6)%68 %
 Single premium0.8 0.9 0.7 (3)%19 %
 Total (2)11.3 11.9 6.9 (5)%63 %
      
FINANCIAL HIGHLIGHTS ($millions, except per share amounts)
Net Premiums Earned98.7 95.5 73.9 3 %34 %
Insurance Claims and Claim Expenses5.7 4.3 2.7 33 %108 %
Underwriting and Operating Expenses (3)32.3 31.3 30.8 3 %5 %
Net Income 58.3 50.2 32.9 16%77%
Adjusted Net Income 52.7 52.6 38.5 —%37%
Cash and Investments $1,179.9 $1,182.0 $980.0 —%20 %
Shareholders' Equity 974.9 930.4 751.9 5 %30 %
Book Value per Share$14.15 $13.61 $11.14 4 %27 %
Loss Ratio5.8%4.5%3.7%  
Expense Ratio (3)32.7%32.8%41.7%  

(1) Percentages may not be replicated based on the rounded figures presented in the table.
(2) Total may not foot due to rounding.
(3) Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.

Conference Call and Webcast Details     
The company will hold a conference call, which will be webcast live, May 6, 2020, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time.  The webcast will be available on the company's website, www.nationalmi.com, in the "Investor Relations" section.  The conference call can also be accessed by dialing (888) 734-0328 in the U.S., or (914) 495-8578 internationally, and using Conference ID: 1663849 or by referencing NMI Holdings, Inc.

About NMI Holdings, Inc.
NMI Holdings, Inc. (NASDAQ: NMIH), is the parent company of National Mortgage Insurance Corporation (National MI), a U.S.-based, private mortgage insurance company enabling low down payment borrowers to realize home ownership while protecting lenders and investors against losses related to a borrower's default. To learn more, please visit www.nationalmi.com.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this press release or any other written or oral statements made by or on behalf of the Company in connection therewith may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the U.S. Private Securities Litigation Reform Act of 1995 (the "PSLRA").  The PSLRA provides a "safe harbor" for any forward-looking statements.  All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements, including any statements about our expectations, outlook, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance.  These statements are often, but not always, made through the use of words or phrases such as "anticipate," "believe," "can," "could," "may," "predict," "assume," "potential," "should," "will," "estimate," "plan," "project," "continuing," "ongoing," "expect," "intend" and similar words or phrases.  All forward-looking statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that may turn out to be inaccurate and could cause actual results to differ materially from those expressed in them.  Many risks and uncertainties are inherent in our industry and markets.  Others are more specific to our business and operations.  Important factors that could cause actual events or results to differ materially from those indicated in such statements include, but are not limited to: uncertainty relating to the coronavirus ("COVID-19") pandemic and the measures taken by governmental authorities and other third parties to combat it, including their impact on the global economy, the U.S. housing, real estate, housing finance and mortgage insurance markets, and the 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 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 any action by the Consumer Financial Protection Bureau to address the planned expiration of the "QM Patch" under the Dodd-Frank Act Ability to Repay/Qualified Mortgage Rule; legislative or regulatory changes to the GSEs' role in the secondary mortgage market or other changes that could affect the residential mortgage industry generally or mortgage insurance industry in particular; potential future lawsuits, investigations or inquiries or resolution of current lawsuits or inquiries; changes in general economic, market and political conditions and policies, interest rates, inflation and investment results or other conditions that affect the housing market or the markets for home mortgages or mortgage insurance; our ability to successfully execute and implement our capital plans, including our ability to access the capital, credit and reinsurance markets and to enter into, and receive approval of reinsurance arrangements on terms and conditions that are acceptable to us, the GSEs and our regulators; our ability to implement our business strategy, including our ability to write mortgage insurance on high quality low-down payment residential mortgage loans, implement successfully and on a timely basis, complex infrastructure, systems, procedures, and internal controls to support our business and regulatory and reporting requirements of the insurance industry; our ability to attract and retain a diverse customer base, including the largest mortgage originators; failure of risk management or pricing or investment strategies; emergence of unexpected claim and coverage issues, including claims exceeding our reserves or amounts we had expected to experience; potential adverse impacts arising from natural disasters, including, with respect to affected areas, a decline in new business, adverse effects on home prices, and an increase in notices of default on insured mortgages; the inability of our counterparties, including third party reinsurers, to meet their obligations to us; failure to maintain, improve and continue to develop necessary information technology systems or the failure of technology providers to perform; and, our ability to recruit, train and retain key personnel.  These risks and uncertainties also include, but are not limited to, those set forth under the heading "Risk Factors" detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2019, as subsequently updated through other reports we file with the SEC.  All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.  We caution you not to place undue reliance on any forward-looking statement, which speaks only as of the date on which it is made, and we undertake no obligation to publicly update or revise any forward-looking statement to reflect new information, future events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events except as required by law.

Use of Non-GAAP Financial Measures

We believe the use of the non-GAAP measures of adjusted income before tax, adjusted net income, adjusted diluted EPS, adjusted return-on-equity, adjusted expense ratio and adjusted combined ratio enhances the comparability of our fundamental financial performance between periods, and provides relevant information to investors. These non-GAAP financial measures align with the way the company's business performance is evaluated by management. These measures are not prepared in accordance with GAAP and should not be viewed as alternatives to GAAP measures of performance.  These measures have been presented to increase transparency and enhance the comparability of our fundamental operating trends across periods. Other companies may calculate these measures differently; their measures may not be comparable to those we calculate and present.

Adjusted income before tax is defined as GAAP income before tax, excluding the pre-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains or losses from our investment portfolio, and discrete, non-recurring and non-operating items in the periods in which such items are incurred.

Adjusted net income is defined as GAAP net income, excluding the after-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains or losses from our investment portfolio, and discrete, non-recurring and non-operating items in the periods in which such items are incurred. Adjustments to components of pre-tax income are tax effected using the applicable federal statutory tax rate for the respective periods.

Adjusted diluted EPS is defined as adjusted net income divided by adjusted weighted average diluted shares outstanding. Adjusted weighted average diluted shares outstanding is defined as weighted average diluted shares outstanding, adjusted for changes in the dilutive effect of non-vested shares that would otherwise have occurred had GAAP net income been calculated in accordance with adjusted net income. There will be no adjustment to weighted average diluted shares outstanding in the periods that non-vested shares are anti-dilutive under GAAP.

Adjusted return-on-equity is calculated by dividing adjusted net income on an annualized basis by the average shareholders' equity for the period.

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

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

Although adjusted income before tax, adjusted net income, adjusted diluted EPS, adjusted return-on-equity, adjusted expense ratio and adjusted combined ratio exclude certain items that have occurred in the past and are expected to occur in the future, the excluded items: (1) are not viewed as part of the operating performance of our primary activities; or (2) are impacted by market, economic or regulatory factors and are not necessarily indicative of operating trends, or both. These adjustments, and the reasons for their treatment, are described below.

  1. Change in fair value of warrant liability. Outstanding warrants at the end of each reporting period are revalued, and any change in fair value is reported in the statement of operations in the period in which the change occurred. The change in fair value of our warrant liability can vary significantly across periods and is influenced principally by equity market and general economic factors that do not impact or reflect our current period operating results. We believe trends in our operating performance can be more clearly identified by excluding fluctuations related to the change in fair value of our warrant liability.
     
  2. Capital markets transaction costs. Capital markets transaction costs result from activities that are undertaken to improve our debt profile or enhance our capital position through activities such as debt refinancing and capital markets reinsurance transactions that may vary in their size and timing due to factors such as market opportunities, tax and capital profile, and overall market cycles.
     
  3. Net realized investment gains and losses.  The recognition of the net realized investment gains or losses can vary significantly across periods as the timing is highly discretionary and is influenced by factors such as market opportunities, tax and capital profile, and overall market cycles that do not reflect our current period operating results.
     
  4. Infrequent or unusual non-operating items. Items that are the result of unforeseen or uncommon events, which occur separately from operating earnings and are not expected to recur in the future.  Identification and exclusion of these items provides clarity about the impact special or rare occurrences may have on our current financial performance. Past adjustments under this category include the effects of the release of the valuation allowance recorded against our net federal and certain state net deferred tax assets in 2016 and the re-measurement of our net deferred tax assets in connection with tax reform in 2017. We believe such items are non-recurring in nature, are not part of our primary operating activities and do not reflect our current period operating results.

Investor Contact
John M. Swenson
Vice President, Investor Relations and Treasury
john.swenson@nationalmi.com
(510) 788-8417

Press Contact
Mary McGarity
Strategic Vantage Mortgage Public Relations
(203) 513-2721
MaryMcGarity@StrategicVantage.com


Consolidated statements of operations and comprehensive income For the three months ended March 31,
 2020 2019
Revenues(In Thousands, except for per share data)
Net premiums earned$98,717  $73,868 
Net investment income8,104  7,383 
Net realized investment losses(72) (187)
Other revenues900  42 
Total revenues107,649  81,106 
Expenses   
Insurance claims and claim expenses5,697  2,743 
Underwriting and operating expenses(1)32,277  30,800 
Service expenses(1)734  49 
Interest expense2,744  3,061 
(Gain) loss from change in fair value of warrant liability(5,959) 5,479 
Total expenses35,493  42,132 
    
Income before income taxes72,156  38,974 
Income tax expense13,885  6,075 
Net income$58,271  $32,899 
    
Earnings per share   
Basic$0.85  $0.49 
Diluted$0.74  $0.48 
    
Weighted average common shares outstanding   
Basic68,563  66,692 
Diluted70,401  68,996 
    
Loss ratio(2)5.8% 3.7%
Expense ratio(3)32.7% 41.7%
Combined ratio38.5% 45.4%
    
Net income$58,271  $32,899 
Other comprehensive (loss) income, net of tax:   
Unrealized (losses) gains in accumulated other comprehensive income, net of tax (benefit) expense of ($3,424) and $3,953 for the quarters ended March 31, 2020 and 2019, respectively(12,881) 14,868 
Reclassification adjustment for realized losses included in net income, net of tax (benefit) of ($15) and ($39) for the quarters ended March 31, 2020 and 2019, respectively57  148 
Other comprehensive (loss) income, net of tax(12,824) 15,016 
Comprehensive income$45,447  $47,915 

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

Consolidated balance sheets   
 March 31, 2020 December 31, 2019
Assets(In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $1,059,143 and $1,113,779 as of March 31, 2020 and December 31, 2019, respectively)$1,070,072  $1,140,940 
Cash and cash equivalents (including restricted cash of $2,505 and $2,662 as of March 31, 2020 and December 31, 2019, respectively)109,821  41,089 
Premiums receivable46,872  46,085 
Accrued investment income7,192  6,831 
Prepaid expenses4,750  3,512 
Deferred policy acquisition costs, net62,634  59,972 
Software and equipment, net25,667  26,096 
Intangible assets and goodwill3,634  3,634 
Prepaid reinsurance premiums13,100  15,488 
Other assets44,085  21,171 
Total assets$1,387,827  $1,364,818 
    
Liabilities   
Term loan$145,521  $145,764 
Unearned premiums126,908  136,642 
Accounts payable and accrued expenses20,745  39,904 
Reserve for insurance claims and claim expenses29,479  23,752 
Reinsurance funds withheld12,735  14,310 
Warrant liability, at fair value1,461  7,641 
Deferred tax liability, net66,831  56,360 
Other liabilities9,257  10,025 
Total liabilities412,937  434,398 
    
Shareholders' equity   
Common stock - class A shares, $0.01 par value; 68,873,540 and 68,358,074 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively (250,000,000 shares authorized)689  684 
Additional paid-in capital706,021  707,003 
Accumulated other comprehensive income, net of tax4,464  17,288 
Retained earnings263,716  205,445 
Total shareholders' equity974,890  930,420 
Total liabilities and shareholders' equity$1,387,827  $1,364,818 


Non-GAAP Financial Measure Reconciliations
 Quarter ended Quarter ended Quarter ended
 3/31/2020 12/31/2019 3/31/2019
 As Reported(In Thousands, except for per share data)
Revenues     
Net premiums earned$98,717  $95,517  $73,868 
Net investment income8,104  7,962  7,383 
Net realized investment (losses) gains(72) 264  (187)
Other revenues900  1,154  42 
Total revenues107,649  104,897  81,106 
Expenses     
Insurance claims and claim expenses5,697  4,269  2,743 
Underwriting and operating expenses(1)32,277  31,296  30,800 
Service expenses(1)734  937  49 
Interest expense2,744  2,974  3,061 
(Gain) loss from change in fair value of warrant liability(5,959) 2,632  5,479 
Total expenses35,493  42,108  42,132 
      
Income before income taxes72,156  62,789  38,974 
Income tax expense13,885  12,594  6,075 
Net income $58,271  $50,195  $32,899 
      
Adjustments:     
Net realized investment losses (gains)72  (264) 187 
(Gain) loss from change in fair value of warrant liability(5,959) 2,632  5,479 
Capital markets transaction costs474  —  — 
Adjusted income before taxes66,743  65,157  44,640 
      
Income tax expense (benefit) on adjustments115  (55) 39 
Adjusted net income$52,743  $52,618  $38,526 
      
Weighted average diluted shares outstanding70,401  70,276  68,996 
      
Diluted EPS$0.74 (2)$0.71  $0.48 
Adjusted diluted EPS $0.75  $0.75  $0.56 
      
Return-on-equity 24.5% 22.3% 18.1%
Adjusted return-on-equity22.1% 23.3% 21.2%
      
      
Expense ratio (3)32.7% 32.8% 41.7%
Adjusted expense ratio (4)32.2% 32.8% 41.7%
      
Combined ratio (5)38.5% 37.2% 45.4%
Adjusted combined ratio (6)38.0% 37.2% 45.4%

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

Historical Quarterly Data2020 2019 2018
 March 31 December 31 September 30 June 30 March 31 December 31
Revenues(In Thousands, except for per share data)
Net premiums earned$98,717  $95,517  $92,381  $83,249  $73,868  $69,261 
Net investment income8,104  7,962  7,882  7,629  7,383  6,952 
Net realized investment (losses) gains (72) 264  81  (113) (187) 6 
Other revenues900  1,154  1,244  415  42  40 
Total revenues107,649  104,897  101,588  91,180  81,106  76,259 
Expenses           
Insurance claims and claim expenses5,697  4,269  2,572  2,923  2,743  2,141 
Underwriting and operating expenses(1)32,277  31,296  32,335  32,190  30,800  29,339 
Service expenses(1)734  937  909  353  49  45 
Interest expense2,744  2,974  2,979  3,071  3,061  3,028 
(Gain) loss from change in fair value of warrant liability(5,959) 2,632  (1,139) 1,685  5,479  (3,538)
Total expenses35,493  42,108  37,656  40,222  42,132  31,015 
            
Income before income taxes72,156  62,789  63,932  50,958  38,974  45,244 
Income tax expense13,885  12,594  14,169  11,858  6,075  9,724 
Net income$58,271  $50,195  $49,763  $39,100  $32,899  $35,520 
            
Earnings per share           
Basic$0.85  $0.74  $0.73  $0.58  $0.49  $0.54 
Diluted$0.74  $0.71  $0.69  $0.56  $0.48  $0.46 
            
Weighted average common shares outstanding           
Basic68,563  68,140  67,849  67,590  66,692  66,308 
Diluted70,401  70,276  70,137  69,590  68,996  69,013 
            
Other data           
Loss Ratio(2)5.8% 4.5% 2.8% 3.5% 3.7% 3.1%
Expense Ratio(3)32.7% 32.8% 35.0% 38.7% 41.7% 42.4%
Combined ratio (4)38.5% 37.2% 37.8% 42.2% 45.4% 45.5%

(1) Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2) Loss ratio is calculated by dividing the provision for insurance claims and claim expenses by net premiums earned.
(3) Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
(4) Combined ratio may not foot due to rounding.

New Insurance Written (NIW), Insurance in Force (IIF) and Premiums

The tables below present primary NIW and primary and pool IIF, as of the dates and for the periods indicated.

Primary NIWThree months ended
 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018
 (In Millions)
Monthly$10,461 $11,085 $12,994 $11,067 $6,211 $6,296
Single836 864 1,106 1,112 702 666
Primary$11,297 $11,949 $14,100 $12,179 $6,913 $6,962


Primary and pool IIFAs of
 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018
 (In Millions)
Monthly$81,347 $77,097 $71,814 $63,922 $55,995 $51,655
Single17,147 17,657 17,899 17,786 17,239 16,896
Primary98,494 94,754 89,713 81,708 73,234 68,551
            
Pool2,487 2,570 2,668 2,758 2,838 2,901
Total$100,981 $97,324 $92,381 $84,466 $76,072 $71,452

The following table presents the amounts related to the company's quota-share reinsurance transactions (the 2016 QSR Transaction and 2018 QSR Transaction, and collectively, the QSR Transactions), and Insurance-Linked Note transactions (the 2017 ILN Transaction, 2018 ILN Transaction and 2019 ILN Transaction, and collectively, the ILN Transactions) for the periods indicated.

 For the three months ended
 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019December 31, 2018
  
The QSR Transactions          
Ceded risk-in-force$4,843,715  $5,137,249  $4,901,809  $4,558,862  $4,534,353  $4,292,450 
Ceded premiums earned(23,011) (23,673) (23,151) (20,919) (21,468) (20,487)
Ceded claims and claim expenses1,532  1,030  766  770  899  710 
Ceding commission earned4,513  4,691  4,584  4,171  4,206  4,084 
Profit commission12,413  13,314  13,254  11,884  12,061  11,666 
           
The ILN Transactions          
Ceded premiums$(3,872) $(4,263) $(4,409) $(2,895) $(3,023) $(3,257)

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
 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 December 31, 2018
 ($ Values In Millions)
New insurance written$11,297  $11,949  $14,100  $12,179  $6,913  $6,962 
New risk written2,897  3,082  3,651  3,183  1,799  1,799 
Insurance in force (IIF) (1)98,494  94,754  89,713  81,708  73,234  68,551 
Risk in force (1)25,192  24,173  22,810  20,661  18,373  17,091 
Policies in force (count) (1)376,852  366,039  350,395  324,876  297,232  280,825 
Average loan size (1)$0.261  $0.259  $0.256  $0.252  $0.246  $0.244 
Coverage percentage (2)25.6% 25.5% 25.4% 25.3% 25.1% 24.9%
Loans in default (count) (1)1,449  1,448  1,230  1,028  940  877 
Percentage of loans in default (1)0.38% 0.40% 0.35% 0.32% 0.32% 0.31%
Risk in force on defaulted loans (1)$84  $84  $70  $58  $53  $48 
Average premium yield (3)0.41% 0.41% 0.43% 0.43% 0.42% 0.42%
Earnings from cancellations$8.6  $8.0  $7.4  $4.5  $2.3  $2.1 
Annual persistency (4)71.7% 76.8% 82.4% 86.0% 87.2% 87.1%
Quarterly run-off (5)8.0% 7.7% 7.5% 5.1% 3.3% 3.1%

(1) Reported as of the end of the period.
(2) Calculated as end of period risk-in-force (RIF) divided by end of period IIF.
(3) Calculated as net premiums earned, divided by average primary IIF for the period, annualized.
(4) Defined as the percentage of IIF that remains on our books after a given 12-month period.
(5) Defined as the percentage of IIF that is no longer on our books after a given three month period.

The tables below present our total primary NIW by FICO, loan-to-value (LTV) ratio, and purchase/refinance mix for the periods indicated.

Primary NIW by FICOFor the three months ended
 March 31, 2020 December 31, 2019 March 31, 2019
 ($ In Millions)
>= 760$6,290 $6,253 $3,057
740-7591,615 1,864 1,224
720-7391,579 1,712 1,044
700-7191,038 1,204 792
680-699565 662 553
<=679210 254 243
Total$11,297 $11,949 $6,913
Weighted average FICO757 756 749


Primary NIW by LTVFor the three months ended
 March 31, 2020 December 31, 2019 March 31, 2019
 (In Millions)
95.01% and above$721  $663  $569 
90.01% to 95.00%5,009  5,528  3,424 
85.01% to 90.00%4,082  4,296  2,241 
85.00% and below1,485  1,462  679 
Total$11,297  $11,949  $6,913 
Weighted average LTV91.3% 91.4% 92.2%


Primary NIW by purchase/refinance mixFor the three months ended
 March 31, 2020 December 31, 2019 March 31, 2019
 (In Millions)
Purchase$7,991 $9,041 $6,383
Refinance (1)3,306 2,908 530
Total$11,297 $11,949 $6,913

(1) The amount of cash-out refinance loans insured in our portfolio was de minimis for the periods presented.

The table below presents a summary of our primary IIF and RIF by book year as of March 31, 2020.

Primary IIF and RIFAs of March 31, 2020
 IIF RIF
 (In Millions)
March 31, 2020$11,236  $2,882 
201939,485  10,259 
201817,545  4,464 
201713,656  3,398 
201610,962  2,763 
2015 and before5,610  1,426 
Total$98,494  $25,192 

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
 March 31, 2020 December 31, 2019 March 31, 2019
 (In Millions)
>= 760$47,340 $44,793 $33,902
740-75916,060 15,728 12,160
720-73914,002 13,417 10,096
700-71910,518 10,284 8,122
680-6996,879 6,774 5,435
<=6793,695 3,758 3,519
Total$98,494 $94,754 $73,234
Weighted average FICO751 751 749


Primary RIF by FICOAs of
 March 31, 2020 December 31, 2019 March 31, 2019
 (In Millions)
>= 760$12,076 $11,388 $8,506
740-7594,121 4,034 3,076
720-7393,626 3,465 2,550
700-7192,696 2,632 2,036
680-6991,760 1,728 1,357
<=679 (1)913 926 848
Total$25,192 $24,173 $18,373
Weighted average FICO751 751 749

(1) There were no loans with a FICO  <=620 insured in our portfolio for the periods presented.

Primary IIF by LTVAs of
 March 31, 2020 December 31, 2019 March 31, 2019
 (In Millions)
95.01% and above$8,838  $8,640  $7,204 
90.01% to 95.00%46,318  44,668  34,024 
85.01% to 90.00%31,729  30,163  22,208 
85.00% and below11,609  11,283  9,798 
Total$98,494  $94,754  $73,234 
Weighted average LTV91.9% 91.9% 91.9%


Primary RIF by LTVAs of
 March 31, 2020 December 31, 2019 March 31, 2019
 (In Millions)
95.01% and above$2,478  $2,390  $1,928 
90.01% to 95.00%13,587  13,086  9,923 
85.01% to 90.00%7,767  7,376  5,384 
85.00% and below1,360  1,321  1,138 
Total$25,192  $24,173  $18,373 
Weighted average LTV92.7% 92.7% 92.7%


Primary RIF by Loan TypeAs of
 March 31, 2020 December 31, 2019 March 31, 2019
      
Fixed98% 98% 98%
Adjustable rate mortgages     
Less than five years—  —  — 
Five years and longer2  2  2 
Total (1)100% 100% 100%

(1) There were no interest-only mortgages insured in our portfolio for the periods presented.

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

Primary IIFFor the three months ended
 March 31, 2020 December 31, 2019 March 31, 2019
 (In Millions)
IIF, beginning of period$94,754  $89,713  $68,551 
NIW11,297  11,949  6,913 
Cancellations, principal repayments and other reductions(7,557) (6,908) (2,230)
IIF, end of period$98,494  $94,754  $73,234 

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
 March 31, 2020 December 31, 2019 March 31, 2019
California11.5% 11.8% 12.7%
Texas8.2  8.2  8.3 
Florida5.9  5.7  5.2 
Virginia5.3  5.3  5.0 
Illinois3.8  3.8  3.4 
Arizona3.7  3.9  4.8 
Pennsylvania3.7  3.6  3.6 
Colorado3.6  3.4  3.4 
Michigan3.4  3.5  3.6 
Maryland3.4  3.4  3.2 
Total52.5% 52.6% 53.2%

The table below presents selected primary portfolio statistics, by book year, as of March 31, 2020.

 As of March 31, 2020
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  $20  12% 655  115  —  1  0.2% 0.2% —%
20143,451  747  22% 14,786  4,081  40  44  4.1% 0.6% 1.0%
201512,422  4,843  39% 52,548  23,277  158  97  3.0% 0.5% 0.7%
201621,187  10,962  52% 83,626  47,687  254  97  2.4% 0.4% 0.5%
201721,582  13,656  63% 85,897  59,356  441  53  3.4% 0.6% 0.7%
201827,295  17,545  64% 104,043  73,620  429  24  4.6% 0.4% 0.6%
201945,141  39,485  87% 148,423  133,291  127  —  2.3% 0.1% 0.1%
202011,297  11,236  99% 35,581  35,425  —  —  —% —% —%
Total$142,537  $98,494    525,559  376,852  1,449  316       

(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
 March 31, 2020 March 31, 2019
 (In Thousands)
Beginning balance$23,752  $12,811 
Less reinsurance recoverables (1)(4,939) (3,001)
Beginning balance, net of reinsurance recoverables18,813  9,810 
    
Add claims incurred:   
Claims and claim expenses incurred:   
Current year (2)7,558  3,909 
Prior years (3)(1,861) (1,166)
Total claims and claim expenses incurred5,697  2,743 
    
Less claims paid:   
Claims and claim expenses paid:   
Current year (2)—  — 
Prior years (3)1,224  694 
Total claims and claim expenses paid1,224  694 
    
Reserve at end of period, net of reinsurance recoverables23,286  11,859 
Add reinsurance recoverables (1)6,193  3,678 
Ending balance$29,479  $15,537 

(1) Related to ceded losses recoverable under the QSR Transactions, included in "Other assets" on the consolidated balance sheets.
(2) Related to insured loans with their most recent defaults occurring in the current year. For example, if a loan had defaulted in a prior year and subsequently  cured and later re-defaulted in the current year, 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.

The following table provides a reconciliation of the beginning and ending count of loans in default for the periods indicated.

 For the three months ended
 March 31, 2020 March 31, 2019
Beginning default inventory1,448  877 
Plus: new defaults512  574 
Less: cures(475) (474)
Less: claims paid(34) (37)
Less: claims denied(2) — 
Ending default inventory1,449  940 

The following table provides details of our claims paid, before giving effect to claims ceded under the QSR Transactions, for the periods indicated.

 For the three months ended
 March 31, 2020 March 31, 2019
 (In Thousands)
Number of claims paid (1)34  37 
Total amount paid for claims$1,503  $926 
Average amount paid per claim$44  $25 
Severity(2)83% 64%

(1) Count includes one claims settled without payment for the three months ended March 31, 2020, and three claims settled without payment for the three months ended March 31, 2019.
(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 March 31, 2020 As of March 31, 2019
 (In Thousands)
Case (1)$18  $15 
IBNR (2)2  2 
Total$20  $17 

(1) Defined as the gross reserve per insured loan in default.
(2) Amount includes claims adjustment expenses.

The following table provides a comparison of the PMIERs financial requirements as reported by NMIC as of the dates indicated.

 As of
 March 31, 2020 December 31, 2019 March 31, 2019
 (In Thousands)
Available Assets$1,069,695  $955,554  $817,758 
Risk-Based Required Assets912,321  637,914  607,325 

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