NMI : Reports Fourth Quarter and Full Year 2021 Financial Results; Announces $125 Million Share Repurchase Authorization - Form 8-K
February 15, 2022 at 04:07 pm EST
Share
NMI Holdings, Inc. Reports Fourth Quarter and Full Year 2021 Financial Results;
Announces $125 Million Share Repurchase Authorization
EMERYVILLE, Calif., Feb. 15, 2022 -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported net income of $60.5 million, or $0.69 per diluted share, for the fourth quarter ended December 31, 2021, which compares to $60.2 million, or $0.69 per diluted share, in the third quarter ended September 30, 2021 and $48.3 million, or $0.56 per diluted share, in the fourth quarter ended December 31, 2020.Adjusted net income for the quarter was $63.5 million or $0.73 per diluted share, which compares to $61.8 million or $0.71 per diluted share in the third quarter ended September 30, 2021 and $50.8 million or $0.59 per diluted share in the fourth quarter ended December 31, 2020.
Net income for the full year ended December 31, 2021 was $231.1 million or $2.65 per diluted share, which compares to $171.6 million, or $2.13 per diluted share, for the year ended December 31, 2020.Adjusted net income for the year was $236.8 million or $2.73 per diluted share, which compares to $173.6 million, or $2.19 per diluted share, for the year ended December 31, 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.
The company also announced today that its Board of Directors has authorized a $125 million share repurchase plan effective through December 31, 2023.
Adam Pollitzer, President and Chief Executive Officer of National MI, said, "The fourth quarter capped a year of standout success for National MI.In 2021, we delivered record NIW volume, grew our high-quality insured portfolio, and achieved record profitability and consistently strong mid-teen returns.We ended the year with a robust funding position and are pleased to announce our $125 million debut share repurchase program.We are excited to progress along our capital roadmap and provide investors with the ability to directly access value as we continue to perform, grow our earnings and compound book value.National MI is leading with impact; helping a record number of borrowers gain access to housing and providing them support as they build long-term value and community.Looking forward, we see a compelling opportunity to continue to support borrowers in need, drive strong growth in our high-quality insurance in-force and deliver strong risk-adjusted returns."
Selected fourth quarter 2021 highlights include:
•New insurance written was $18.3 billion, compared to $18.1 billion in the third quarter and $19.8 billion in the fourth quarter of 2020, primarily reflecting a decline in refinancing origination volume year-on-year
•Primary insurance-in-force at quarter-end was $152.3 billion, up 6% from $143.6 billion in the third quarter and 37% compared to $111.3 billion in the fourth quarter of 2020
•Net premiums earned were $113.9 million, compared to $113.6 million in the third quarter and $100.7 million in the fourth quarter of 2020
•Underwriting and operating expenses were $38.8 million, including $2.5 million of costs incurred in connection with our CEO transition and $1.5 million of capital market transaction costs, compared to $34.7 million in the third quarter and $35.0 million in the fourth quarter of 2020
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•Insurance claims and claim expenses was a benefit of $0.5 million, compared to an expense of $3.2 million in the third quarter and $3.5 million in the fourth quarter of 2020
•Shareholders' equity was $1.6 billion at quarter end, equal to $18.25 per share, up 3% compared to $17.68 per share in the third quarter and 13% compared to $16.08 per share in the fourth quarter of 2020
•Annualized return on equity for the quarter was 15.7% and annualized adjusted return on equity was 16.5%
•At quarter-end, total PMIERs available assets were $2.0 billion and net risk-based required assets of $1.2 billion
Quarter Ended
Quarter Ended
Quarter Ended
Change (1)
Change (1)
12/31/2021
9/30/2021
12/31/2020
Q/Q
Y/Y
INSURANCE METRICS ($billions)
Primary Insurance-in-Force
$
152.3
$
143.6
$
111.3
6
%
37
%
New Insurance Written - NIW
Monthly premium
17.0
16.9
17.8
1
%
(5)
%
Single premium
1.4
1.2
2.0
12
%
(31)
%
Total (2)
18.3
18.1
19.8
1
%
(7)
%
FINANCIAL HIGHLIGHTS (Unaudited, $millions, except per share amounts)
Net Premiums Earned
113.9
113.6
100.7
-
%
13
%
Insurance Claims and Claim Expenses
(0.5)
3.2
3.5
(116)
%
(114)
%
Underwriting and Operating Expenses
38.8
34.7
35.0
12
%
11
%
Net Income
60.5
60.2
48.3
1
%
25
%
Adjusted Net Income
63.5
61.8
50.8
3
%
25
%
Cash and Investments
2,163
2,152
1,931
1
%
12
%
Shareholders' Equity
1,566
1,516
1,370
3
%
14
%
Book Value per Share
18.25
17.68
16.08
3
%
13
%
Loss Ratio
(0.4)
%
2.8
%
3.5
%
Expense Ratio
34.1
%
30.5
%
34.7
%
(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, February 15, 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 (888) 734-0328 in the U.S., or (914) 495-8578 internationally, and using Conference ID: 9990952 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.
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 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 and affordability of homeownership for low-and-moderate income borrowers and minority 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, 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, 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 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; 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, 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; 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; 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.
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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 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.
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) 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
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impact special or rare occurrences may have on our current financial performance. Infrequent, unusual or non-operating adjustments for the three and twelve months ended December 31, 2021, include severance, restricted stock modification and other expenses incurred in connection with the CEO transition we announced on September 9, 2021. 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 infrequent or non-recurring in nature, and are not indicative of the performance of, or ongoing trends in, our primary operating activities or business.
Investor Contact
John M. Swenson
Vice President, Investor Relations and Treasury
john.swenson@nationalmi.com
(510) 788-8417
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Consolidated statements of operations and comprehensive income (unaudited)
For the three months ended December 31,
For the year ended December 31,
2021
2020
2021
2020
Revenues
(In Thousands, except for per share data)
Net premiums earned
$
113,933
$
100,709
$
444,294
$
397,172
Net investment income
10,045
8,386
38,072
31,897
Net realized investment gains
714
295
729
930
Other revenues
380
513
1,977
3,284
Total revenues
125,072
109,903
485,072
433,283
Expenses
Insurance claims and claim (benefits) expenses
(500)
3,549
12,305
59,247
Underwriting and operating expenses
38,843
34,994
142,303
131,610
Service expenses
650
459
2,509
2,840
Interest expense
8,029
7,906
31,796
24,387
(Gain) loss from change in fair value of warrant liability
(112)
1,379
(566)
(2,907)
Total expenses
46,910
48,287
188,347
215,177
Income before income taxes
78,162
61,616
296,725
218,106
Income tax expense
17,639
13,348
65,595
46,540
Net income
$
60,523
$
48,268
$
231,130
$
171,566
Earnings per share
Basic
$
0.71
$
0.57
$
2.70
$
2.20
Diluted
$
0.69
$
0.56
$
2.65
$
2.13
Weighted average common shares outstanding
Basic
85,757
84,956
85,620
78,023
Diluted
87,117
86,250
86,885
79,263
Loss ratio(1)
(0.4)
%
3.5
%
2.8
%
14.9
%
Expense ratio(2)
34.1
%
34.7
%
32.0
%
33.1
%
Combined ratio (3)
33.7
%
38.3
%
34.8
%
48.1
%
Net income
$
60,523
$
48,268
$
231,130
$
171,566
Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains in accumulated other comprehensive income, net of tax (benefit) expense of $(4,601) and $1,869 for the three months ended December 31, 2021 and 2020, respectively, and $(13,768) and $9,525 for the years ended December 31, 2021, and 2020, respectively
(17,307)
7,031
(51,795)
35,829
Reclassification adjustment for realized (gains) losses included in net income, net of tax expense (benefit) of $150 and $62 for the three months ended December 31, 2021 and 2020, respectively, and $153 and $(196) for the years ended December 31, 2021, and 2020 respectively
(564)
(233)
(576)
739
Other comprehensive income (loss), net of tax
(17,871)
6,798
(52,371)
36,568
Comprehensive income
$
42,652
$
55,066
$
178,759
$
208,134
(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.
6
Consolidated balance sheets (unaudited)
December 31, 2021
December 31, 2020
Assets
(In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $2,078,773 and $1,730,835 as of December 31, 2021 and December 31, 2020, respectively)
$
2,085,931
$
1,804,286
Cash and cash equivalents (including restricted cash of $3,165 and $5,555 as of December 31, 2021 and December 31, 2020, respectively)
76,646
126,937
Premiums receivable
60,358
49,779
Accrued investment income
11,900
9,862
Prepaid expenses
3,530
3,292
Deferred policy acquisition costs, net
59,584
62,225
Software and equipment, net
32,047
29,665
Intangible assets and goodwill
3,634
3,634
Prepaid reinsurance premiums
2,393
6,190
Reinsurance recoverable
20,320
17,608
Other assets
94,238
53,188
Total assets
$
2,450,581
$
2,166,666
Liabilities
Debt
$
394,623
$
393,301
Unearned premiums
139,237
118,817
Accounts payable and accrued expenses
72,000
61,716
Reserve for insurance claims and claim expenses
103,551
90,567
Reinsurance funds withheld
5,601
8,653
Warrant liability, at fair value
2,363
4,409
Deferred tax liability, net
164,175
112,586
Other liabilities
3,245
7,026
Total liabilities
884,795
797,075
Shareholders' equity
Common stock - class A shares, $0.01 par value; 85,792,849 and 85,163,039 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively (250,000,000 shares authorized)
858
852
Additional paid-in capital
955,302
937,872
Accumulated other comprehensive income, net of tax
(Gain) loss from change in fair value of warrant liability
(112)
-
1,379
(566)
(2,907)
Total expenses
46,910
46,590
48,287
188,347
215,177
Income before income taxes
78,162
77,451
61,616
296,725
218,106
Income tax expense
17,639
17,258
13,348
65,595
46,540
Net income
$
60,523
$
60,193
$
48,268
$
231,130
$
171,566
Adjustments:
Net realized investment gains
(714)
(3)
(295)
(729)
(930)
(Gain) loss from change in fair value of warrant liability
(112)
-
1,379
(566)
(2,907)
Capital markets transaction costs
1,505
481
1,719
3,979
7,237
Other infrequent, unusual or non-operating items (6)
2,540
1,289
-
3,829
-
Adjusted income before taxes
81,381
79,218
64,419
303,238
221,506
Income tax expense on adjustments (7)
251
139
299
806
1,324
Adjusted net income
$
63,491
$
61,821
$
50,772
$
236,837
$
173,642
Weighted average diluted shares outstanding
87,117
86,880
86,250
86,885
79,263
Adjusted weighted average diluted shares outstanding
87,117
86,880
86,250
86,885
79,263
Diluted EPS (1)
$
0.69
$
0.69
$
0.56
$
2.65
(1)
$
2.13
Adjusted diluted EPS
$
0.73
$
0.71
$
0.59
$
2.73
$
2.19
Return on equity
15.7
%
16.2
%
14.4
%
15.7
%
14.9
%
Adjusted return on equity
16.5
%
16.6
%
15.2
%
16.1
%
15.1
%
Expense ratio (2)
34.1
%
30.5
%
34.7
%
32.0
%
33.1
%
Adjusted expense ratio (3)
30.5
%
29.0
%
33.0
%
30.3
%
32.0
%
Combined ratio (4)
33.7
%
33.3
%
38.3
%
34.8
%
48.1
%
Adjusted combined ratio (5)
30.1
%
31.8
%
36.6
%
33.0
%
46.9
%
(1) Diluted net income for the three months ended December 31, 2021, the year ended December 31, 2021 and 2020, excludes the impact of the warrant fair value change as it was dilutive. For all other periods presented, diluted net income equals reported net income as the impact of the warrant fair value change was anti-dilutive.
(2) Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
8
(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 and infrequent or unusual non-operating items) 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 infrequent or unusual non-operating items) and insurance claims and claims expense by net premiums earned.
(6) Represents severance, restricted stock modification and other expenses incurred in connection with the CEO transition announced on September 9, 2021.
(7) 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.
Historical Quarterly Data
2021
2020
December 31
September 30
June 30
March 31
December 31
September 30
Revenues
(In Thousands, except for per share data)
Net premiums earned
$
113,933
$
113,594
$
110,888
$
105,879
$
100,709
$
98,802
Net investment income
10,045
9,831
9,382
8,814
8,386
8,337
Net realized investment gains (losses)
714
3
12
-
295
(4)
Other revenues
380
613
483
501
513
648
Total revenues
125,072
124,041
120,765
115,194
109,903
107,783
Expenses
Insurance claims and claim (benefits) expenses
(500)
3,204
4,640
4,962
3,549
15,667
Underwriting and operating expenses
38,843
34,669
34,725
34,065
34,994
33,969
Service expenses
650
787
481
591
459
557
Interest expense
8,029
7,930
7,922
7,915
7,906
7,796
(Gain) loss from change in fair value of warrant liability
(112)
-
(658)
205
1,379
437
Total expenses
46,910
46,590
47,110
47,738
48,287
58,426
Income before income taxes
78,162
77,451
73,655
67,456
61,616
49,357
Income tax expense
17,639
17,258
16,133
14,565
13,348
11,178
Net income
$
60,523
$
60,193
$
57,522
$
52,891
$
48,268
$
38,179
Earnings per share
Basic
$
0.71
$
0.70
$
0.67
$
0.62
$
0.57
$
0.45
Diluted
$
0.69
$
0.69
$
0.65
$
0.61
$
0.56
$
0.45
Weighted average common shares outstanding
Basic
85,757
85,721
85,467
85,317
84,956
84,805
Diluted
87,117
86,880
86,819
86,487
86,250
85,599
Other data
Loss Ratio(1)
(0.4)
%
2.8
%
4.2
%
4.7
%
3.5
%
15.9
%
Expense Ratio(2)
34.1
%
30.5
%
31.3
%
32.2
%
34.7
%
34.4
%
Combined ratio (3)
33.7
%
33.3
%
35.5
%
36.9
%
38.3
%
50.2
%
(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.
.
9
Portfolio Statistics
The table below highlights trends in our primary portfolio as of the date and for the periods indicated.
Primary portfolio trends
As of and for the three months ended
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
September 30, 2020
($ Values In Millions)
New insurance written
$
18,342
$
18,084
$
22,751
$
26,397
$
19,782
$
18,499
New risk written
$
4,786
4,640
5,650
6,531
4,868
4,577
Insurance in force (IIF) (1)
152,343
143,618
136,598
123,777
111,252
104,494
Risk in force (1)
$
38,661
36,253
34,366
31,206
28,164
26,568
Policies in force (count) (1)
512,316
490,714
471,794
436,652
399,429
381,899
Average loan size ($ value in thousands) (1)
$
297
$
293
$
290
$
283
$
279
$
274
Coverage percentage (2)
25.4
%
25.2
%
25.2
%
25.2
%
25.3
%
25.4
%
Loans in default (count) (1)
6,227
7,670
8,764
11,090
12,209
13,765
Default rate (1)
1.22
%
1.56
%
1.86
%
2.54
%
3.06
%
3.60
%
Risk in force on defaulted loans (1)
$
435
$
546
$
625
$
785
$
874
$
1,008
Net premium yield (3)
0.34
%
0.32
%
0.34
%
0.36
%
0.37
%
0.39
%
Earnings from cancellations
$
5.1
$
7.7
$
7.0
$
9.9
$
11.7
$
12.6
Annual persistency (4)
63.8
%
58.1
%
53.9
%
51.9
%
55.9
%
60.0
%
Quarterly run-off (5)
6.7
%
8.1
%
8.0
%
12.5
%
12.5
%
13.1
%
(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 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
For the three months ended
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
September 30, 2020
(In Millions)
Monthly
$
16,972
$
16,861
$
19,422
$
23,764
$
17,789
$
16,516
Single
1,370
1,223
3,329
2,633
1,993
1,983
Primary
$
18,342
$
18,084
$
22,751
$
26,397
$
19,782
$
18,499
10
Primary and pool IIF
As of
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
September 30, 2020
(In Millions)
Monthly
$
133,104
$
124,767
$
117,629
$
106,920
$
95,336
$
88,584
Single
19,239
18,851
18,969
16,857
15,916
15,910
Primary
152,343
143,618
136,598
123,777
111,252
104,494
Pool
1,229
1,339
1,460
1,642
1,855
2,115
Total
$
153,572
$
144,957
$
138,058
$
125,419
$
113,107
$
106,609
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), and 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 and collectively, the ILN Transactions) for the periods indicated.
For the three months ended
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
September 30, 2020
(In Thousands)
The QSR Transactions
Ceded risk-in-force
$
8,194,604
$
7,610,870
$
7,113,707
$
6,330,409
$
5,543,969
$
5,159,061
Ceded premiums earned
(28,490)
(28,366)
(27,537)
(25,747)
(24,161)
(24,517)
Ceded claims and claim expenses
19
840
1,194
1,180
601
3,200
Ceding commission earned
6,208
6,142
5,961
5,162
4,787
4,798
Profit commission
16,142
15,191
14,391
13,380
13,184
11,034
The ILN Transactions
Ceded premiums
$
(11,344)
$
(10,390)
$
(10,169)
$
(9,397)
$
(9,422)
$
(6,268)
The tables below present our total primary NIW by FICO, loan-to-value (LTV) ratio, and purchase/refinance mix for the periods indicated.
Primary NIW by FICO
For the three months ended
For the year ended
December 31, 2021
September 30, 2021
December 31, 2020
December 31, 2021
December 31, 2020
($ In Millions)
>= 760
$
8,032
$
8,073
$
11,495
$
40,408
$
37,437
740-759
3,115
3,254
3,387
15,927
9,443
720-739
2,833
2,563
2,447
12,511
7,820
700-719
2,196
2,099
1,430
8,450
4,644
680-699
1,653
1,487
820
5,792
2,692
<=679
514
608
203
2,486
666
Total
$
18,342
$
18,084
$
19,782
$
85,574
$
62,702
Weighted average FICO
748
749
761
752
761
11
Primary NIW by LTV
For the three months ended
For the year ended
December 31, 2021
September 30, 2021
December 31, 2020
December 31, 2021
December 31, 2020
(In Millions)
95.01% and above
$
1,569
$
1,957
$
1,877
$
8,153
$
3,732
90.01% to 95.00%
8,879
8,344
7,839
38,215
26,000
85.01% to 90.00%
5,583
4,961
6,239
24,655
22,356
85.00% and below
2,311
2,822
3,827
14,551
10,614
Total
$
18,342
$
18,084
$
19,782
$
85,574
$
62,702
Weighted average LTV
91.9
%
91.8
%
90.9
%
91.4
%
90.9
%
Primary NIW by purchase/refinance mix
For the three months ended
For the year ended
December 31, 2021
September 30, 2021
December 31, 2020
December 31, 2021
December 31, 2020
(In Millions)
Purchase
$
17,097
$
16,400
$
13,085
$
70,318
$
41,616
Refinance
1,245
1,684
6,697
15,256
21,086
Total
$
18,342
$
18,084
$
19,782
$
85,574
$
62,702
The table below presents a summary of our primary IIF and RIF by book year as of December 31, 2021.
Primary IIF and RIF
As of December 31, 2021
IIF
RIF
(In Millions)
December 31, 2021
$
81,226
$
20,591
2020
43,795
11,023
2019
12,407
3,249
2018
4,929
1,258
2017
4,233
1,062
2016 and before
5,753
1,478
Total
$
152,343
$
38,661
The tables below present our total primary IIF and RIF by FICO and LTV and total primary RIF by loan type as of the dates indicated.
Primary IIF by FICO
As of
December 31, 2021
September 30, 2021
December 31, 2020
(In Millions)
>= 760
$
76,449
$
73,080
$
58,368
740-759
26,219
24,676
17,442
720-739
21,356
19,898
15,091
700-719
14,401
13,206
10,442
680-699
9,654
8,678
6,777
<=679
4,264
4,080
3,132
Total
$
152,343
$
143,618
$
111,252
12
Primary RIF by FICO
As of
December 31, 2021
September 30, 2021
December 31, 2020
(In Millions)
>= 760
$
19,125
$
18,200
$
14,634
740-759
6,707
6,280
4,449
720-739
5,497
5,086
3,868
700-719
3,771
3,432
2,692
680-699
2,511
2,243
1,748
<=679
1,050
1,012
773
Total
$
38,661
$
36,253
$
28,164
Primary IIF by LTV
As of
December 31, 2021
September 30, 2021
December 31, 2020
(In Millions)
95.01% and above
$
14,058
$
13,179
$
9,129
90.01% to 95.00%
68,537
63,828
49,898
85.01% to 90.00%
46,971
44,451
36,972
85.00% and below
22,777
22,160
15,253
Total
$
152,343
$
143,618
$
111,252
Primary RIF by LTV
As of
December 31, 2021
September 30, 2021
December 31, 2020
(In Millions)
95.01% and above
$
4,230
$
3,932
$
2,637
90.01% to 95.00%
20,210
18,810
14,673
85.01% to 90.00%
11,533
10,902
9,067
85.00% and below
2,688
2,609
1,787
Total
$
38,661
$
36,253
$
28,164
Primary RIF by Loan Type
As of
December 31, 2021
September 30, 2021
December 31, 2020
Fixed
99
%
99
%
99
%
Adjustable rate mortgages:
Less than five years
-
-
-
Five years and longer
1
1
1
Total
100
%
100
%
100
%
The table below presents a summary of the change in total primary IIF during the periods indicated.
Primary IIF
For the three months ended
December 31, 2021
September 30, 2021
December 31, 2020
(In Millions)
IIF, beginning of period
$
143,618
$
136,598
$
104,494
NIW
18,342
18,084
19,782
Cancellations, principal repayments and other reductions
(9,617)
(11,064)
(13,024)
IIF, end of period
$
152,343
$
143,618
$
111,252
13
Geographic Dispersion
The following table shows the distribution by state of our primary RIF as of the periods indicated.
Top 10 primary RIF by state
As of
December 31, 2021
September 30, 2021
December 31, 2020
California
10.4
%
10.2
%
11.2
%
Texas
9.7
9.9
8.8
Florida
8.6
8.6
7.3
Virginia
4.7
4.9
5.1
Colorado
3.8
4.0
4.1
Georgia
3.8
3.7
3.1
Maryland
3.7
3.8
3.7
Washington
3.7
3.5
3.5
Illinois
3.6
3.7
3.8
Pennsylvania
3.3
3.2
3.4
Total
55.3
%
55.5
%
54.0
%
The table below presents selected primary portfolio statistics, by book year, as of December 31, 2021.
As of December 31, 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
$
6
4
%
655
46
1
1
0.4
%
0.3
%
2.2
%
2014
3,451
274
8
%
14,786
1,693
60
49
4.3
%
0.7
%
3.5
%
2015
12,422
1,706
14
%
52,548
9,341
275
117
3.3
%
0.7
%
2.9
%
2016
21,187
3,768
18
%
83,626
18,987
591
129
2.8
%
0.9
%
3.1
%
2017
21,582
4,233
20
%
85,897
21,718
950
101
4.3
%
1.2
%
4.4
%
2018
27,295
4,928
18
%
104,043
24,448
1,328
89
8.2
%
1.4
%
5.4
%
2019
45,141
12,407
27
%
148,423
50,313
1,479
20
11.4
%
1.0
%
2.9
%
2020
62,702
43,795
70
%
186,174
138,203
1,070
1
6.0
%
0.6
%
0.8
%
2021
85,574
81,226
95
%
257,972
247,567
473
-
2.0
%
0.2
%
0.2
%
Total
$
279,516
$
152,343
934,124
512,316
6,227
507
(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.
14
The following table provides a reconciliation of the beginning and ending reserve balances for primary insurance claims and claim expenses:
For the three months ended
For the year ended
December 31, 2021
December 31, 2020
December 31, 2021
December 31, 2020
(In Thousands)
Beginning balance
$
104,604
$
87,230
$
90,567
$
23,752
Less reinsurance recoverables (1)
(20,420)
(17,180)
(17,608)
(4,939)
Beginning balance, net of reinsurance recoverables
84,184
70,050
72,959
18,813
Add claims incurred:
Claims and claim expenses incurred:
Current year (2)
4,159
5,745
23,433
66,943
Prior years (3)
(4,659)
(2,196)
(11,128)
(7,696)
Total claims and claim expenses incurred
(500)
3,549
12,305
59,247
Less claims paid:
Claims and claim expenses paid:
Current year (2)
1
434
16
586
Prior years (3)
452
206
2,017
4,515
Total claims and claim expenses paid
453
640
2,033
5,101
Reserve at end of period, net of reinsurance recoverables
83,231
72,959
83,231
72,959
Add reinsurance recoverables (1)
20,320
17,608
20,320
17,608
Ending balance
$
103,551
$
90,567
$
103,551
$
90,567
(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 $18.1 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the year ended December 31, 2021, $60.8 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for year ended December 31, 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 $6.3 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the year ended December 31, 2021, $6.2 million attributed to net case reserves and $1.3 million attributed to net IBNR reserves for the year ended December 31, 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 year ended
December 31, 2021
December 31, 2020
December 31, 2021
December 31, 2020
Beginning default inventory
7,670
13,765
12,209
1,448
Plus: new defaults
1,244
2,589
5,730
19,459
Less: cures
(2,664)
(4,122)
(11,626)
(8,548)
Less: claims paid
(23)
(20)
(82)
(143)
Less: claims denied
-
(3)
(4)
(7)
Ending default inventory
6,227
12,209
6,227
12,209
15
The following table provides details of our claims paid, before giving effect to claims ceded under the QSR Transactions, for the periods indicated.
For the three months ended
For the year ended
December 31, 2021
December 31, 2020
December 31, 2021
December 31, 2020
(In Thousands)
Number of claims paid (1)
23
20
82
143
Total amount paid for claims
$
572
$
813
$
2,554
$
6,434
Average amount paid per claim
$
25
$
41
$
31
$
45
Severity(2)
53%
75%
59
%
80
%
(1) Count includes five and 15 claims settled without payment for the three months and year ended December 31, 2021, respectively, and one and nine claims settled without payment for the three months and year ended December 31, 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 December 31, 2021
As of December 31, 2020
(In Thousands)
Case (1)
$
15.3
$
6.8
IBNR (1)(2)
1.3
0.6
Total
$
16.6
$
7.4
(1) Defined as the gross reserve per insured loan in default.
(2) Amount includes claims adjustment expenses.
The following table provides a comparison of the PMIERs financial requirements as reported by NMIC as of the dates indicated.
As of
December 31, 2021
September 30, 2021
December 31, 2020
(In Thousands)
Available Assets
$
2,041,193
$
1,992,964
$
1,750,668
Risk-Based Required Assets
1,186,272
1,365,656
984,372
16
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Disclaimer
NMI Holdings Inc. published this content on 15 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 February 2022 21:06:08 UTC.
NMI Holdings, Inc. provides mortgage insurance (MI) through its wholly owned insurance subsidiaries, National Mortgage Insurance Corporation (NMIC) and National Mortgage Reinsurance Inc One (Re One). NMIC is its primary insurance subsidiary and is licensed to write MI coverage in all 50 states and District of Columbia (D.C.). Its subsidiary, NMI Services, Inc. (NMIS), provides outsourced loan review services to mortgage loan originators. It offers two principal types of MI coverage, primary and pool. Primary MI provides default protection on individual mortgage loans at specified coverage percentages. All its primary insurance is written on first-lien mortgage loans, with nearly all secured by owner-occupied single-family homes (defined as one-to-four family homes and condominiums). Pool insurance is generally used to provide additional credit enhancement for certain secondary market mortgage transactions. It offers outsourced loan review services to mortgage originators through NMIS.