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NMI Holdings, Inc. Reports Third Quarter 2022 Financial Results
Source: Nasdaq GlobeNewswire / 01 Nov 2022 15:01:01 America/Chicago
EMERYVILLE, Calif., Nov. 01, 2022 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported net income of $76.8 million, or $0.90 per diluted share, for the third quarter ended September 30, 2022, which compares to $75.4 million, or $0.86 per diluted share, in the second quarter ended June 30, 2022 and $60.2 million, or $0.69 per diluted share, in the third quarter ended September 30, 2021. Adjusted net income for the quarter was $76.8 million, or $0.90 per diluted share, which compares to $74.3 million, or $0.86 per diluted share, in the second quarter ended June 30, 2022 and $61.8 million, or $0.71 per diluted share, in the third quarter ended September 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’re proud to have delivered strong results in the third 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 continue to manage with discipline and a focus on through-the-cycle performance, and took further steps during the quarter to insulate our business from the impact of any economic stress that may emerge. Looking forward, we're well positioned to continue to serve our customers and their borrowers, support our talented team, and deliver sustained performance for our shareholders.”
Selected third quarter 2022 highlights include:
- Primary insurance-in-force at quarter end was $179.2 billion, compared to $168.6 billion at the end of the second quarter and $143.6 billion at the end of the third quarter of 2021
- Net premiums earned were $118.3 million, compared to $120.9 million in the second quarter and $113.6 million in the third quarter of 2021. Net premiums earned in the third quarter reflect a $5.5 million impact from ceded premiums related to the company’s seasoned quota share reinsurance agreement established during the period
- Underwriting and operating expenses were $27.1 million, compared to $30.7 million in the second quarter and $34.7 million in the third quarter of 2021
- Insurance claims and claim expenses was a benefit of $3.4 million, compared to a benefit of $3.0 million in the second quarter and an expense of $3.2 million in the third quarter of 2021
- Shareholders’ equity was $1.5 billion at quarter end and book value per share was $18.21. Book value per share excluding the impact of net unrealized gains and losses in the investment portfolio was $20.85, up 5% compared to $19.91 per share in the second quarter and 19% compared to $17.46 per share in the third quarter of 2021
- Annualized return on equity for the quarter was 20.1%, compared to 19.7% in the second quarter and 16.2% in the third quarter of 2021
- At quarter-end, total PMIERs available assets were $2.3 billion and net risk-based required assets were $1.2 billion
Quarter Ended Quarter Ended Quarter Ended Change(1) Change(1) 9/30/2022 6/30/2022 9/30/2021 Q/Q Y/Y INSURANCE METRICS ($billions) Primary Insurance-in-Force $ 179.2 $ 168.6 $ 143.6 6 % 25 % New Insurance Written - NIW Monthly premium 16.7 15.7 16.9 6 % (1) % Single premium 0.6 0.9 1.2 (39) % (54) % Total(2) 17.2 16.6 18.1 4 % (5) % FINANCIAL HIGHLIGHTS (Unaudited, $millions, except per share amounts) Net Premiums Earned 118.3 120.9 113.6 (2) % 4 % Insurance Claims and Claim (Benefits) Expenses (3.4) (3.0) 3.2 12 % (206) % Underwriting and Operating Expenses 27.1 30.7 34.7 (12) % (22) % Net Income 76.8 75.4 60.2 2 % 28 % Adjusted Net Income 76.8 74.3 61.8 3 % 24 % Book Value per Share (excluding net unrealized gains and losses)(3) 20.85 19.91 17.46 5 % 19 % Loss Ratio (2.9) % (2.5) % 2.8 % Expense Ratio 22.9 % 25.4 % 30.5 % (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, November 1, 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
john.swenson@nationalmi.com
(510) 788-8417Consolidated statements of operations and comprehensive income (loss) (unaudited) For the three months ended September 30, For the nine months ended September 30, 2022 2021 2022 2021 Revenues ($ In Thousands, except for per share data) Net premiums earned $ 118,317 $ 113,594 $ 355,682 $ 330,361 Net investment income 11,945 9,831 33,065 28,027 Net realized investment gains 14 3 475 15 Other revenues 301 613 1,016 1,597 Total revenues 130,577 124,041 390,238 360,000 Expenses Insurance claims and claim (benefits) expenses (3,389 ) 3,204 (7,044 ) 12,806 Underwriting and operating expenses 27,144 34,669 90,779 103,460 Service expenses 197 787 963 1,859 Interest expense 8,036 7,930 24,128 23,767 Gain from change in fair value of warrant liability — — (1,113 ) (454 ) Total expenses 31,988 46,590 107,713 141,438 Income before income taxes 98,589 77,451 282,525 218,562 Income tax expense 21,751 17,258 62,563 47,956 Net income $ 76,838 $ 60,193 $ 219,962 $ 170,606 Earnings per share Basic $ 0.91 $ 0.70 $ 2.58 $ 1.99 Diluted $ 0.90 $ 0.69 $ 2.53 $ 1.96 Weighted average common shares outstanding Basic 84,444 85,721 85,369 85,563 Diluted 85,485 86,880 86,420 86,794 Loss ratio(1) (2.9 )% 2.8 % (2.0 )% 3.9 % Expense ratio(2) 22.9 % 30.5 % 25.5 % 31.3 % Combined ratio(3) 20.1 % 33.3 % 23.5 % 35.2 % Net income $ 76,838 $ 60,193 $ 219,962 $ 170,606 Other comprehensive loss, net of tax: Unrealized losses in accumulated other comprehensive income (loss), net of tax benefit of $15,932 and $2,165 for the three months ended September 30, 2022 and 2021, and $59,112 and $9,168 for the nine month ended September 30, 2022 and 2021, respectively (59,936 ) (8,144 ) (222,374 ) (34,487 ) Reclassification adjustment for realized gains included in net income, net of tax expense of $3 and $1 for the three months ended September 30, 2022 and 2021, and $100 and $3 for the nine months ended September 30, 2022 and 2021, respectively (10 ) (2 ) (377 ) (12 ) Other comprehensive loss, net of tax (59,946 ) (8,146 ) (222,751 ) (34,499 ) Comprehensive income (loss) $ 16,892 $ 52,047 $ (2,789 ) $ 136,107 (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) September 30, 2022 December 31, 2021 Assets (In Thousands, except for share data) Fixed maturities, available-for-sale, at fair value (amortized cost of $2,248,737 and $2,078,773 as of September 30, 2022 and December 31, 2021, respectively) $ 1,973,931 $ 2,085,931 Cash and cash equivalents (including restricted cash of $2,159 and $3,165 as of September 30, 2022 and December 31, 2021, respectively) 125,812 76,646 Premiums receivable 67,202 60,358 Accrued investment income 13,342 11,900 Prepaid expenses 4,694 3,530 Deferred policy acquisition costs, net 59,483 59,584 Software and equipment, net 32,156 32,047 Intangible assets and goodwill 3,634 3,634 Prepaid reinsurance premiums 1,454 2,393 Reinsurance recoverable 19,755 20,320 Other assets 102,380 94,238 Total assets $ 2,403,843 $ 2,450,581 Liabilities Debt $ 395,683 $ 394,623 Unearned premiums 130,652 139,237 Accounts payable and accrued expenses 73,945 72,000 Reserve for insurance claims and claim expenses 94,944 103,551 Reinsurance funds withheld 3,716 5,601 Warrant liability, at fair value — 2,363 Deferred tax liability, net 166,609 164,175 Other liabilities 12,428 3,245 Total liabilities 877,977 884,795 Shareholders' equity Common stock - class A shares, $0.01 par value; 86,463,874 shares issued and 83,796,313 shares outstanding as of September 30, 2022 and 85,792,849 shares issued and outstanding as of December 31, 2021 (250,000,000 shares authorized) 865 858 Additional paid-in capital 969,359 955,302 Treasury Stock, at cost: 2,667,561 and 0 common shares as of September 30, 2022 and December 31, 2021, respectively (51,195 ) — Accumulated other comprehensive (loss) income, net of tax (221,266 ) 1,485 Retained earnings 828,103 608,141 Total shareholders' equity 1,525,866 1,565,786 Total liabilities and shareholders' equity $ 2,403,843 $ 2,450,581 Non-GAAP Financial Measure Reconciliations(unaudited) As of and for the three months ended For the nine months ended 9/30/2022 6/30/2022 9/30/2021 9/30/2022 9/30/2021 As Reported ($ In Thousands, except for per share data) Revenues Net premiums earned $ 118,317 $ 120,870 $ 113,594 $ 355,682 $ 330,361 Net investment income 11,945 10,921 9,831 33,065 28,027 Net realized investment gains 14 53 3 475 15 Other revenues 301 376 613 1,016 1,597 Total revenues 130,577 132,220 124,041 390,238 360,000 Expenses Insurance claims and claim (benefits) expenses (3,389 ) (3,036 ) 3,204 (7,044 ) 12,806 Underwriting and operating expenses 27,144 30,700 34,669 90,779 103,460 Service expenses 197 336 787 963 1,859 Interest expense 8,036 8,051 7,930 24,128 23,767 Gain from change in fair value of warrant liability — (1,020 ) — (1,113 ) (454 ) Total expenses 31,988 35,031 46,590 107,713 141,438 Income before income taxes 98,589 97,189 77,451 282,525 218,562 Income tax expense 21,751 21,745 17,258 62,563 47,956 Net income $ 76,838 $ 75,444 $ 60,193 $ 219,962 $ 170,606 Adjustments: Net realized investment gains (14 ) (53 ) (3 ) (475 ) (15 ) Gain from change in fair value of warrant liability — (1,020 ) — (1,113 ) (454 ) Capital markets transaction costs — (55 ) 481 205 2,474 Other infrequent, unusual or non-operating items — — 1,289 — 1,289 Adjusted income before taxes 98,575 96,061 79,218 281,142 221,856 Income tax expense on adjustments(1) (3 ) (23 ) 139 (57 ) 555 Adjusted net income $ 76,827 $ 74,339 $ 61,821 $ 218,636 $ 173,345 Weighted average diluted shares outstanding 85,485 86,577 86,880 86,420 86,794 Diluted EPS $ 0.90 $ 0.86 $ 0.69 $ 2.53 $ 1.96 Adjusted diluted EPS $ 0.90 $ 0.86 $ 0.71 $ 2.53 $ 2.00 Return-on-equity 20.1 % 19.7 % 16.2 % 19.0 % 15.8 % Adjusted return-on-equity 20.1 % 19.4 % 16.6 % 18.9 % 16.0 % Expense ratio(2) 22.9 % 25.4 % 30.5 % 25.5 % 31.3 % Adjusted expense ratio(3) 22.9 % 25.4 % 29.0 % 25.5 % 30.2 % Combined ratio(4) 20.1 % 22.9 % 33.3 % 23.5 % 35.2 % Adjusted combined ratio(5) 20.1 % 22.9 % 31.8 % 23.5 % 34.1 % Book value per share(6) $ 18.21 $ 18.01 $ 17.68 Book value per share (excluding net unrealized gains and losses)(7) $ 20.85 $ 19.91 $ 17.46 (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 September 30 June 30 March 31 December 31 September 30 June 30 Revenues ($ In Thousands, except for per share data) Net premiums earned $ 118,317 $ 120,870 $ 116,495 $ 113,933 $ 113,594 $ 110,888 Net investment income 11,945 10,921 10,199 10,045 9,831 9,382 Net realized investment gains 14 53 408 714 3 12 Other revenues 301 376 339 380 613 483 Total revenues 130,577 132,220 127,441 125,072 124,041 120,765 Expenses Insurance claims and claim (benefits) expenses (3,389 ) (3,036 ) (619 ) (500 ) 3,204 4,640 Underwriting and operating expenses 27,144 30,700 32,935 38,843 34,669 34,725 Service expenses 197 336 430 650 787 481 Interest expense 8,036 8,051 8,041 8,029 7,930 7,922 Gain from change in fair value of warrant liability — (1,020 ) (93 ) (112 ) — (658 ) Total expenses 31,988 35,031 40,694 46,910 46,590 47,110 Income before income taxes 98,589 97,189 86,747 78,162 77,451 73,655 Income tax expense 21,751 21,745 19,067 17,639 17,258 16,133 Net income $ 76,838 $ 75,444 $ 67,680 $ 60,523 $ 60,193 $ 57,522 Earnings per share Basic $ 0.91 $ 0.88 $ 0.79 $ 0.71 $ 0.70 $ 0.67 Diluted $ 0.90 $ 0.86 $ 0.77 $ 0.69 $ 0.69 $ 0.65 Weighted average common shares outstanding Basic 84,444 85,734 85,953 85,757 85,721 85,647 Diluted 85,485 86,577 87,310 87,117 86,880 86,819 Other data Loss Ratio(1) (2.9 )% (2.5 )% (0.5 )% (0.4 )% 2.8 % 4.2 % Expense Ratio(2) 22.9 % 25.4 % 28.3 % 34.1 % 30.5 % 31.3 % Combined ratio(3) 20.1 % 22.9 % 27.7 % 33.7 % 33.3 % 35.5 % (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 trends As of and for the three months ended September 30,
2022June 30,
2022March 31,
2022December 31,
2021September 30,
2021June 30,
2021($ Values In Millions, except as noted below) New insurance written $ 17,239 $ 16,611 $ 14,165 $ 18,342 $ 18,084 $ 22,751 New risk written 4,616 4,386 3,721 4,786 4,640 5,650 Insurance in force (IIF)(1) 179,173 168,639 158,877 152,343 143,618 136,598 Risk in force(1) 46,259 43,260 40,522 38,661 36,253 34,366 Policies in force (count)(1) 580,525 551,543 526,976 512,316 490,714 471,794 Average loan size($ value in thousands)(1) $ 309 $ 306 $ 301 $ 297 $ 293 $ 290 Coverage percentage(2) 25.8 % 25.7 % 25.5 % 25.4 % 25.2 % 25.2 % Loans in default (count)(1) 4,096 4,271 5,238 6,227 7,670 8,764 Default rate(1) 0.71 % 0.77 % 0.99 % 1.22 % 1.56 % 1.86 % Risk in force on defaulted loans(1) $ 284 $ 295 $ 362 $ 435 $ 546 $ 625 Net premium yield(3) 0.27 % 0.30 % 0.30 % 0.31 % 0.32 % 0.34 % Earnings from cancellations $ 1.8 $ 2.2 $ 2.9 $ 5.1 $ 7.7 $ 7.0 Annual persistency(4) 80.1 % 76.0 % 71.5 % 63.8 % 58.1 % 53.9 % Quarterly run-off(5) 4.0 % 4.3 % 5.0 % 6.7 % 8.1 % 8.0 % (1) Reported as of the end of the period.
(2) Calculated as end of period risk-in-force (RIF) divided by end of period IIF.
(3) Calculated as net premiums earned, divided by average primary IIF for the period, annualized.
(4) Defined as the percentage of IIF that remains on our books after a given twelve-month period.
(5) Defined as the percentage of IIF that is no longer on our books after a given three month period.New Insurance Written (NIW), Insurance in Force (IIF) and Premiums
The tables below present primary NIW and primary and pool IIF, as of the dates and for the periods indicated.
Primary NIW Three months ended September 30,
2022June 30,
2022March 31,
2022December 31,
2021September 30,
2021June 30,
2021(In Millions) Monthly $ 16,676 $ 15,695 $ 13,094 $ 16,972 $ 16,861 $ 19,422 Single 563 916 1,071 1,370 1,223 3,329 Primary $ 17,239 $ 16,611 $ 14,165 $ 18,342 $ 18,084 $ 22,751 Primary and pool IIF As of September 30, 2022 June 30,
2022March 31,
2022December 31, 2021 September 30, 2021 June 30,
2021(In Millions) Monthly $ 158,897 $ 148,488 $ 139,156 $ 133,104 $ 124,767 $ 117,629 Single 20,276 20,151 19,721 19,239 18,851 18,969 Primary 179,173 168,639 158,877 152,343 143,618 136,598 Pool 1,078 1,114 1,162 1,229 1,339 1,460 Total $ 180,251 $ 169,753 $ 160,039 $ 153,572 $ 144,957 $ 138,058 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, 2022 QSR Transaction, and 2022 Seasoned 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 reinsurance transactions (2022-1 XOL Transaction and 2022-2 XOL Transaction and collectively, the XOL Transactions) for the periods indicated.
For the three months ended September 30,
2022June 30,
2022March 31,
2022December 31,
2021September 30,
2021June 30,
2021(In Thousands) The QSR Transactions Ceded risk-in-force $ 12,511,797 $ 9,040,944 $ 8,504,853 $ 8,194,604 $ 7,610,870 $ 7,113,707 Ceded premiums earned (42,265 ) (30,231 ) (29,005 ) (28,490 ) (28,366 ) (27,537 ) Ceded claims and claim expenses 248 (403 ) (159 ) 19 840 1,194 Ceding commission earned 10,193 6,146 5,886 6,208 6,142 5,961 Profit commission 23,899 17,778 16,723 16,142 15,191 14,391 The ILN Transactions Ceded premiums $ (10,730 ) $ (10,132 ) $ (10,939 ) $ (11,344 ) $ (10,390 ) $ (10,169 ) The XOL Transactions Ceded Premiums $ (4,808 ) $ (2,907 ) $ — $ — $ — $ — Primary NIW by FICO For the three months ended For the nine months ended September 30,
2022June 30,
2022September 30,
2021September 30,
2022September 30,
2021($ In Millions) >= 760 $ 6,815 $ 7,990 $ 8,073 $ 21,177 $ 32,377 740-759 3,663 2,900 3,254 8,951 12,812 720-739 2,751 2,056 2,563 6,744 9,678 700-719 2,245 1,650 2,099 5,534 6,255 680-699 1,477 1,277 1,487 3,998 4,139 <=679 288 738 608 1,611 1,971 Total $ 17,239 $ 16,611 $ 18,084 $ 48,015 $ 67,232 Weighted average FICO 748 751 749 749 753 Primary NIW by LTV For the three months ended For the nine months ended September 30,
2022June 30,
2022September 30,
2021September 30,
2022September 30,
2021(In Millions) 95.01% and above $ 1,610 $ 1,577 $ 1,957 $ 4,553 $ 6,585 90.01% to 95.00% 9,398 8,253 8,344 24,706 29,336 85.01% to 90.00% 4,505 4,772 4,961 13,145 19,071 85.00% and below 1,726 2,009 2,822 5,611 12,240 Total $ 17,239 $ 16,611 $ 18,084 $ 48,015 $ 67,232 Weighted average LTV 92.6 % 92.2 % 91.8 % 92.3 % 91.3 % Primary NIW bypurchase/refinance mix For the three months ended For the nine months ended September 30,
2022June 30,
2022September 30,
2021September 30,
2022September 30,
2021(In Millions) Purchase $ 16,944 $ 16,203 $ 16,400 $ 46,545 $ 53,220 Refinance 295 408 1,684 1,470 14,012 Total $ 17,239 $ 16,611 $ 18,084 $ 48,015 $ 67,232 The table below presents a summary of our primary IIF and RIF by book year as of the date indicated.
Primary IIF and RIF As of September 30, 2022 IIF RIF (In Millions) September 30, 2022 $ 46,695 $ 12,385 2021 74,507 19,025 2020 36,869 9,386 2019 9,621 2,527 2018 3,755 965 2017 and before 7,726 1,971 Total $ 179,173 $ 46,259 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 September 30, 2022 June 30, 2022 September 30, 2021 (In Millions) >= 760 $ 87,152 $ 83,769 $ 73,080 740-759 31,770 29,195 24,676 720-739 25,089 23,240 19,898 700-719 17,852 16,221 13,206 680-699 12,185 11,160 8,678 <=679 5,125 5,054 4,080 Total $ 179,173 $ 168,639 $ 143,618 Primary RIF by FICO As of September 30, 2022 June 30, 2022 September 30, 2021 (In Millions) >= 760 $ 22,125 $ 21,159 $ 18,200 740-759 8,298 7,564 6,280 720-739 6,574 6,044 5,086 700-719 4,747 4,289 3,432 680-699 3,223 2,936 2,243 <=679 1,292 1,268 1,012 Total $ 46,259 $ 43,260 $ 36,253 Primary IIF by LTV As of September 30, 2022 June 30, 2022 September 30, 2021 (In Millions) 95.01% and above $ 17,269 $ 16,068 $ 13,179 90.01% to 95.00% 84,396 77,804 63,828 85.01% to 90.00% 53,456 51,029 44,451 85.00% and below 24,052 23,738 22,160 Total $ 179,173 $ 168,639 $ 143,618 Primary RIF by LTV As of September 30, 2022 June 30, 2022 September 30, 2021 (In Millions) 95.01% and above $ 5,308 $ 4,914 $ 3,932 90.01% to 95.00% 24,921 22,974 18,810 85.01% to 90.00% 13,167 12,553 10,902 85.00% and below 2,863 2,819 2,609 Total $ 46,259 $ 43,260 $ 36,253 Primary RIF by Loan Type As of September 30, 2022 June 30, 2022 September 30, 2021 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 September 30, 2022 June 30, 2022 September 30, 2021 (In Millions) IIF, beginning of period $ 168,639 $ 158,877 $ 136,598 NIW 17,239 16,611 18,084 Cancellations, principal repayments and other reductions (6,705 ) (6,849 ) (11,064 ) IIF, end of period $ 179,173 $ 168,639 $ 143,618 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 September 30, 2022 June 30, 2022 September 30, 2021 California 10.7 % 10.8 % 10.2 % Texas 8.7 9.0 9.9 Florida 8.2 8.3 8.6 Virginia 4.2 4.3 4.9 Georgia 4.1 4.0 3.7 Illinois 4.0 3.9 3.7 Washington 3.9 3.9 3.5 Colorado 3.5 3.7 4.0 Maryland 3.4 3.5 3.8 Pennsylvania 3.4 3.3 3.2 Total 54.1 % 54.7 % 55.5 % The table below presents selected primary portfolio statistics, by book year, as of September 30, 2022.
As of September 30, 2022 Book Year Original
Insurance
WrittenRemaining
Insurance in
Force%
Remaining
of Original
InsurancePolicies
Ever in
ForceNumber of
Policies in
ForceNumber
of Loans
in
Default# of
Claims
PaidIncurred
Loss Ratio
(Inception
to Date)(1)Cumulative
Default
Rate(2)Current
default
rate(3)($ Values In Millions) 2013 $ 162 $ 5 3 % 655 38 1 1 1.0 % 0.3 % 2.6 % 2014 3,451 222 6 % 14,786 1,374 30 50 4.0 % 0.5 % 2.2 % 2015 12,422 1,332 11 % 52,548 7,363 147 125 2.8 % 0.5 % 2.0 % 2016 21,187 2,911 14 % 83,626 15,009 315 141 2.5 % 0.5 % 2.1 % 2017 21,582 3,256 15 % 85,897 17,140 526 115 3.4 % 0.7 % 3.1 % 2018 27,295 3,755 14 % 104,043 19,145 648 103 5.5 % 0.7 % 3.4 % 2019 45,141 9,621 21 % 148,423 40,171 673 27 6.6 % 0.5 % 1.7 % 2020 62,702 36,869 59 % 186,174 118,938 625 3 3.9 % 0.3 % 0.5 % 2021 85,574 74,507 87 % 257,972 231,306 1,027 1 5.3 % 0.4 % 0.4 % 2022 48,015 46,695 97 % 132,911 130,041 104 — 4.9 % 0.1 % 0.1 % Total $ 327,531 $ 179,173 1,067,035 580,525 4,096 566 (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 nine months ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 (In Thousands) Beginning balance $ 98,462 $ 101,235 $ 103,551 $ 90,567 Less reinsurance recoverables(1) (19,588 ) (19,726 ) (20,320 ) (17,608 ) Beginning balance, net of reinsurance recoverables 78,874 81,509 83,231 72,959 Add claims incurred: Claims and claim (benefits) expenses incurred: Current year(2) 9,348 3,649 28,135 19,275 Prior years(3) (12,737 ) (445 ) (35,179 ) (6,469 ) Total claims and claim (benefits) expenses incurred (3,389 ) 3,204 (7,044 ) 12,806 Less claims paid: Claims and claim expenses paid: Current year(2) 47 3 73 15 Prior years(3) 249 526 925 1,566 Total claims and claim expenses paid 296 529 998 1,581 Reserve at end of period, net of reinsurance recoverables 75,189 84,184 75,189 84,184 Add reinsurance recoverables(1) 19,755 20,420 19,755 20,420 Ending balance $ 94,944 $ 104,604 $ 94,944 $ 104,604 (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 $23.3 million attributed to net case reserves and $4.2 million attributed to net IBNR reserves for the nine months ended September 30, 2022 and $14.0 million attributed to net case reserves and $4.8 million attributed to net IBNR reserves for the nine months ended September 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 $29.2 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the nine months ended September 30, 2022 and $1.8 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the nine months ended September 30, 2021.The following table provides a reconciliation of the beginning and ending count of loans in default for the periods indicated.
For the three months ended For the nine months ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Beginning default inventory 4,271 8,764 6,227 12,209 Plus: new defaults 1,354 1,624 3,586 4,486 Less: cures (1,511 ) (2,694 ) (5,654 ) (8,964 ) Less: claims paid (16 ) (24 ) (59 ) (59 ) Less: rescission and claims denied (2 ) — (4 ) (2 ) Ending default inventory 4,096 7,670 4,096 7,670 The following table provides details of our claims paid, before giving effect to claims ceded under the QSR Transactions, for the periods indicated.
For the three months ended For the nine months ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 ($ In Thousands) Number of claims paid(1) 16 24 59 59 Total amount paid for claims $ 376 $ 674 $ 1,249 $ 1,982 Average amount paid per claim $ 24 $ 28 $ 21 $ 34 Severity(2) 55 % 55 % 46 % 60 % (1) Count includes three and 19 claims settled without payment during the three and nine months ended September 30, 2022, respectively, and six and ten claims settled without payment during the three and nine months ended September 30, 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 September 30, 2022 As of September 30, 2021 (In Thousands) Case(1) $ 21.5 $ 12.6 IBNR(1)(2) 1.7 1.0 Total $ 23.2 $ 13.6 (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 September 30, 2022 June 30, 2022 September 30, 2021 (In Thousands) Available Assets $ 2,275,487 $ 2,169,388 $ 1,992,964 Risk-Based Required Assets 1,172,581 1,240,143 1,365,656 
