nmih-20201105
0001547903false00015479032020-11-052020-11-05


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 5, 2020

NMI Holdings, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware001-3617445-4914248
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
2100 Powell Street, 12th Floor, Emeryville, CA
(Address of Principal Executive Offices)
94608
(Zip Code)
(855) 530-6642
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.01NMIHNasdaq
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 




Item 2.02    Results of Operations and Financial Condition
On November 5, 2020, NMI Holdings, Inc. (the "Company" or "NMIH") issued a press release announcing its financial results for the quarter ended September 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report.
The information included in, or furnished with, this Item 2.02, including Exhibit 99.1, has been "furnished" and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor shall it be deemed incorporated by reference in any filing or other document under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing or document.
Item 7.01    Regulation FD
Operating Statistics
On November 5, 2020, the Company reported selected operating statistics for the month of October 2020. At October 31, 2020, the Company reported 13,108 loans in default and a default ratio of 3.41%.
Default Activity as of:
3/31/20206/30/20207/31/20208/31/20209/30/202010/31/2020
Number of loans in default (1)
1,44910,81614,17514,23613,76513,108
Default rate (2)
0.38%2.90%3.78%3.76%3.60%3.41%

New Insurance Written During:
Quarter Ended 3/31/2020
Quarter Ended 6/30/2020
Month Ended 7/31/2020
Month Ended 8/31/2020
Month Ended 9/30/2020
Month Ended 10/31/2020
Weighted average composition
FICO757762763764764764
Loan-to-value (LTV)91.3%90.7%90.9%90.6%90.7%90.6%
Debt-to-income (DTI)34.4%33.3%33.0%33.0%32.6%32.7%
In-focus risk segments
95.01-97.0% LTV6.4%4.2%2.5%2.3%4.6%7.7%
<680 FICO1.9%1.0%0.7%0.7%0.7%0.9%
>45% DTI10.3%7.0%4.8%5.0%4.9%5.5%
Layered risk (3)0.2%0.1%0.1%0.0%0.1%0.1%
(1)    Loans are considered to be in default as of the payment date at which a borrower has missed the preceding two or more consecutive monthly payments
(2)    Default ratio is calculated as total loans in default divided by total policies in force
(3)    Layered risk includes loans with more than one in-focus risk factor

The information concerning the Company's default inventory is compiled from reports received from loan servicers and can be influenced by, among other things, the date on which a servicer generates its report, the number of business days in a month, and transfers of servicing rights between loan servicers. While our total default population declined from September 30, 2020 to October 31, 2020, our default population may increase going forward if additional borrowers face challenges related to the COVID-19 outbreak and choose to access the forbearance program for federally backed loans codified under the CARES Act or other programs made available by private lenders.
Forward-Looking Statements
This report may contain statements that are deemed to be 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. Forward-looking statements are statements about future, not past, events and involve certain important risks and uncertainties, any of which could cause our actual results to differ materially from those expressed in our forward-looking statements. Any or all of our forward–looking statements in this press release may turn out to be inaccurate. More information about the risks, uncertainties and assumptions affecting the company can be found in
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the risk factors and forward-looking statements cautionary language contained in our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and in other filings we make with the Securities and Exchange Commission. We have based any forward–looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, operating results, business strategy and financial needs. All forward–looking statements are necessarily only estimates and actual events may differ materially from our current expectations. You are, therefore, cautioned not to place undue reliance on such statements. We do not undertake, and specifically disclaim, any obligation to revise any forward-looking statements to reflect the occurrence of future events or circumstances.
Item 9.01.    Financial Statements and Exhibits
(d) Exhibits.
Exhibit No.    Description
99.1    NMI Holdings, Inc. Press Release Dates November 5, 2020
104    Cover Page Interactive Data File (embedded within the Inline XBRL document)
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


NMI Holdings, Inc.
(Registrant)

                
Date: November 5, 2020By:/s/ Nicole C. Sanchez
Nicole C. Sanchez
VP, Associate General Counsel

3
Document
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
NMI Holdings, Inc. Reports Third Quarter 2020 Financial Results
EMERYVILLE, Calif., Nov. 5, 2020, -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported GAAP net income of $38.2 million, or $0.45 per diluted share, for the third quarter ended September 30, 2020, which compares to $26.8 million, or $0.36 per diluted share, in the second quarter ended June 30, 2020 and $49.8 million, or $0.69 per diluted share, in the third quarter ended September 30, 2019. Adjusted net income for the quarter was $40.4 million or $0.47 per diluted share, which compares to $29.7 million or $0.40 per diluted share in the second quarter ended June 30, 2020 and $49.9 million or $0.71 per diluted share in the third quarter ended September 30, 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 housing market has proven to be resilient in the wake of the COVID pandemic, with low interest rates allowing more Americans to access homeownership at a time when it’s most critical and robust demand driving sustained house price appreciation. Against this backdrop, our new business opportunity has grown significantly and we have delivered record new insurance written as more borrowers and lenders have turned to us for support than ever before. While still early, we have also begun to see encouraging credit trends in our in-force portfolio, with default activity stabilizing and an increasing number of borrowers exiting forbearance and resuming payment of their mortgages.”

Selected highlights from the third quarter 2020 include:

Primary insurance-in-force at quarter end was $104.5 billion, up 16% compared to the third quarter of 2019
New insurance written was $18.5 billion, up 31% compared to $14.1 billion in the third quarter of 2019
Net premiums earned were $98.8 million, up 7% compared to $92.4 million in the third quarter of 2019
Underwriting and operating expenses were $34.0 million, including $2.3 million of capital market transaction costs, compared to $32.3 million in the third quarter of 2019, including $1.7 million of capital market transaction costs
Insurance claims and claim expenses were $15.7 million, compared to $2.6 million in the third quarter of 2019, reflecting higher default experience attributable to the COVID-19 pandemic
At quarter-end, cash and investments were $1.9 billion and shareholders’ equity was $1.3 billion, equal to $15.42 per share
Annualized return-on-equity for the quarter was 11.9% and annualized adjusted return-on-equity was 12.6%
At quarter-end, the company reported total PMIERs available assets of $1.7 billion and net risk- based required assets of $991 million

Concurrent with the release of third quarter earnings, the company has filed a Form 8-K that includes selected operating statistics for the month ended October 31, 2020. Investors may access the Form 8-K on the company’s website, www.nationalmi.com, in the “Investor Relations” section.
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EXHIBIT 99.1
Quarter EndedQuarter EndedQuarter Ended
Change (1)
Change (1)
9/30/20206/30/20209/30/2019Q/QY/Y
INSURANCE METRICS ($billions)
Primary Insurance-in-Force $104.5 $98.9 $89.7 %16 %
New Insurance Written - NIW
Monthly premium16.5 11.9 13.0 39 %27 %
Single premium2.0 1.2 1.1 60 %79 %
Total (2)
18.5 13.1 14.1 41 %31 %
FINANCIAL HIGHLIGHTS ($millions, except per share amounts)
Net Premiums Earned98.8 98.9 92.4 — %%
Insurance Claims and Claim Expenses15.7 34.3 2.6 (54)%509 %
Underwriting and Operating Expenses (3)
34.0 30.4 32.3 12 %%
Net Income 38.2 26.8 49.8 42 %(23)%
Adjusted Net Income 40.4 29.7 49.9 36 %(19)%
Cash and Investments $1,884 $1,855 $1,119 %68 %
Shareholders' Equity 1,308 1,257 873 %50 %
Book Value per Share$15.42 $14.82 $12.86 %20 %
Loss Ratio15.9 %34.7 %2.8 %
Expense Ratio (3)
34.4 %30.7 %35.0 %
(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 today, November 5, 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: 5874734 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
2

EXHIBIT 99.1
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 U.S. Department of Veterans Affairs, and potential market entry by new competitors or consolidation of existing competitors; developments in the world’s financial and capital markets and our access to such markets, including reinsurance; adoption of new or changes to existing laws and regulations that impact our business or financial condition directly or the mortgage insurance industry generally or their enforcement and implementation by regulators, including 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 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, as subsequently updated through other reports we file with the SEC. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. We caution you not to place undue reliance on any forward-looking statement, which speaks only as of the date on which it is made, and we undertake no obligation to publicly update or revise any forward-looking statement to reflect new information, future events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events except as required by law.

Use of Non-GAAP Financial Measures
We believe the use of the non-GAAP measures of adjusted income before tax, adjusted net income, adjusted diluted EPS, adjusted return-on-equity, adjusted expense ratio and adjusted combined ratio enhances the comparability of our fundamental financial performance between periods, and provides relevant information to investors. These non-GAAP financial measures align with the way the company's business performance is evaluated by management. These measures are not prepared in accordance with GAAP and should not be viewed as alternatives to GAAP measures of performance. These measures have been presented to increase transparency and enhance the comparability of our fundamental operating trends across periods. Other companies may calculate these measures differently; their measures may not be comparable to those we calculate and present.
Adjusted income before tax is defined as GAAP income before tax, excluding the pre-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains or losses from our investment portfolio, and discrete, non-recurring and non-operating items in the periods in which such items are incurred.
Adjusted net income is defined as GAAP net income, excluding the after-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains
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EXHIBIT 99.1
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
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EXHIBIT 99.1

Consolidated statements of operations and comprehensive income For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Revenues(In Thousands, except for per share data)
Net premiums earned$98,802 $92,381 $296,463 $249,499 
Net investment income8,337 7,882 23,511 22,894 
Net realized investment (losses) gains (4)81 635 (219)
Other revenues648 1,244 2,771 1,700 
Total revenues107,783 101,588 323,380 273,874 
Expenses
Insurance claims and claim expenses15,667 2,572 55,698 8,238 
Underwriting and operating expenses(1)
33,969 32,335 96,616 95,325 
Service expenses(1)
557 909 2,381 1,311 
Interest expense7,796 2,979 16,481 9,111 
Loss (gain) from change in fair value of warrant liability437 (1,139)(4,286)6,025 
Total expenses58,426 37,656 166,890 120,010 
Income before income taxes49,357 63,932 156,490 153,864 
Income tax expense 11,178 14,169 33,192 32,102 
Net income $38,179 $49,763 $123,298 $121,762 
Earnings per share
Basic$0.45 $0.73 $1.63 $1.81 
Diluted$0.45 $0.69 $1.55 $1.75 
Weighted average common shares outstanding
Basic84,805 67,849 75,695 67,381 
Diluted85,599 70,137 76,867 69,520 
Loss ratio(2)
15.9 %2.8 %18.8 %3.3 %
Expense ratio(3)
34.4 %35.0 %32.6 %38.2 %
Combined ratio (4)
50.2 %37.8 %51.4 %41.5 %
Net income $38,179 $49,763 $123,298 $121,762 
Other comprehensive income, net of tax:
Unrealized gains in accumulated other comprehensive income, net of tax expense of $2,494 and $1,376 for the three months ended September 30, 2020 and 2019, respectively, and $7,655 and $8,991 for the nine months ended September 30, 2020 and 2019, respectively9,381 5,177 28,799 33,824 
Reclassification adjustment for realized losses (gains) included in net income, net of tax (benefit) expense of ($1) and $17 for the three months ended September 30, 2020 and 2019, respectively, and ($258) and ($46) for the nine months ended September 30, 2020 and 2019, respectively(64)972 173 
Other comprehensive income, net of tax9,384 5,113 29,771 33,997 
Comprehensive income $47,563 $54,876 $153,069 $155,759 
(1)    Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2)    Loss ratio is calculated by dividing 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.
(4)    Combined ratio may not foot due to rounding.
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EXHIBIT 99.1

Consolidated balance sheetsSeptember 30, 2020December 31, 2019
Assets(In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $1,624,970 and $1,113,779 as of September 30, 2020 and December 31, 2019, respectively)$1,689,815 $1,140,940 
Cash and cash equivalents (including restricted cash of $5,555 and $2,662 as of September 30, 2020 and December 31, 2019, respectively)194,199 41,089 
Premiums receivable48,159 46,085 
Accrued investment income9,766 6,831 
Prepaid expenses4,579 3,512 
Deferred policy acquisition costs, net63,194 59,972 
Software and equipment, net28,131 26,096 
Intangible assets and goodwill3,634 3,634 
Prepaid reinsurance premiums8,014 15,488 
Reinsurance recoverable (1)
17,180 4,939 
Other assets (1)
15,149 16,232 
Total assets$2,081,820 $1,364,818 
Liabilities
Debt$392,987 $145,764 
Unearned premiums116,008 136,642 
Accounts payable and accrued expenses59,316 39,904 
Reserve for insurance claims and claim expenses87,230 23,752 
Reinsurance funds withheld10,364 14,310 
Warrant liability, at fair value3,135 7,641 
Deferred tax liability, net97,451 56,360 
Other liabilities 7,773 10,025 
Total liabilities774,264 434,398 
Shareholders' equity
Common stock - class A shares, $0.01 par value; 84,808,516 and 68,358,074 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively (250,000,000 shares authorized)848 684 
Additional paid-in capital930,906 707,003 
Accumulated other comprehensive income, net of tax47,059 17,288 
Retained earnings 328,743 205,445 
Total shareholders' equity1,307,556 930,420 
Total liabilities and shareholders' equity$2,081,820 $1,364,818 
(1) Reinsurance recoverable has been reclassified from "Other assets" in the prior period.







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EXHIBIT 99.1
Non-GAAP Financial Measure Reconciliations
Quarter endedQuarter endedQuarter ended
9/30/20206/30/20209/30/2019
 As Reported(In Thousands, except for per share data)
Revenues
Net premiums earned$98,802 $98,944 $92,381 
Net investment income8,337 7,070 7,882 
Net realized investment (losses) gains(4)711 81 
Other revenues648 1,223 1,244 
Total revenues107,783 107,948 101,588 
Expenses
Insurance claims and claim expenses15,667 34,334 2,572 
Underwriting and operating expenses(1)
33,969 30,370 32,335 
Service expenses(1)
557 1,090 909 
Interest expense7,796 5,941 2,979 
Loss (gain) from change in fair value of warrant liability437 1,236 (1,139)
Total expenses58,426 72,971 37,656 
Income before income taxes49,357 34,977 63,932 
Income tax expense 11,178 8,129 14,169 
Net income $38,179 $26,848 $49,763 
Adjustments:
Net realized investment losses (gains) (711)(81)
Loss (gain) from change in fair value of warrant liability437 1,236 (1,139)
Capital markets transaction costs2,254 2,790 1,689 
Adjusted income before taxes52,052 38,292 64,401 
Income tax expense on adjustments474 437 338 
Adjusted net income$40,400 $29,726 $49,894 
Weighted average diluted shares outstanding 85,599 74,174 70,137 
Diluted EPS$0.45 $0.36 $0.69 (2)
Adjusted diluted EPS $0.47 $0.40 $0.71 
Return-on-equity 11.9 %9.6 %23.6 %
Adjusted return-on-equity12.6 %10.7 %23.7 %
Expense ratio (3)
34.4 %30.7 %35.0 %
Adjusted expense ratio (4)
32.1 %30.5 %33.2 %
Combined ratio (5)
50.2 %65.4 %37.8 %
Adjusted combined ratio (6)
48.0 %65.2 %36.0 %

(1)    Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2)    Diluted net income for the quarter ended September 30, 2019 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 costs related to capital markets reinsurance transactions) by net premiums earned.
(5)    Combined ratio is calculated by dividing the total of underwriting and operating expenses and 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 costs related to capital market reinsurance transaction) and insurance claims and claims expense by net premiums earned.
7

EXHIBIT 99.1

Historical Quarterly Data20202019
September 30June 30March 31December 31September 30June 30
Revenues(In Thousands, except for per share data)
Net premiums earned$98,802 $98,944 $98,717 $95,517 $92,381 $83,249 
Net investment income8,337 7,070 8,104 7,962 7,882 7,629 
Net realized investment (losses) gains (4)711 (72)264 81 (113)
Other revenues648 1,223 900 1,154 1,244 415 
Total revenues107,783 107,948 107,649 104,897 101,588 91,180 
Expenses
Insurance claims and claim expenses15,667 34,334 5,697 4,269 2,572 2,923 
Underwriting and operating expenses(1)
33,969 30,370 32,277 31,296 32,335 32,190 
Service expenses(1)
557 1,090 734 937 909 353 
Interest expense7,796 5,941 2,744 2,974 2,979 3,071 
Loss (gain) from change in fair value of warrant liability437 1,236 (5,959)2,632 (1,139)1,685 
Total expenses58,426 72,971 35,493 42,108 37,656 40,222 
Income before income taxes49,357 34,977 72,156 62,789 63,932 50,958 
Income tax expense 11,178 8,129 13,885 12,594 14,169 11,858 
Net income $38,179 $26,848 $58,271 $50,195 $49,763 $39,100 
Earnings per share
Basic$0.45 $0.36 $0.85 $0.74 $0.73 $0.58 
Diluted$0.45 $0.36 $0.74 $0.71 $0.69 $0.56 
Weighted average common shares outstanding
Basic84,805 73,617 68,563 68,140 67,849 67,590 
Diluted85,599 74,174 70,401 70,276 70,137 69,590 
Other data
Loss Ratio(2)
15.9 %34.7 %5.8 %4.5 %2.8 %3.5 %
Expense Ratio(3)
34.4 %30.7 %32.7 %32.8 %35.0 %38.7 %
Combined ratio (4)
50.2 %65.4 %38.5 %37.2 %37.8 %42.2 %
(1)    Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
(2)    Loss ratio is calculated by dividing 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.
8

EXHIBIT 99.1
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
September 30, 2020June 30, 2020March 31, 2020December 31, 2019September 30, 2019June 30, 2019
(In Millions)
Monthly$16,516 $11,885 $10,461 $11,085 $12,994 $11,067 
Single1,983 1,239 836 864 1,106 1,112 
Primary$18,499 $13,124 $11,297 $11,949 $14,100 $12,179 

Primary and pool IIFAs of
September 30, 2020June 30, 2020March 31, 2020December 31, 2019September 30, 2019June 30, 2019
(In Millions)
Monthly$88,584 $82,848 $81,347 $77,097 $71,814 $63,922 
Single15,910 16,057 17,147 17,657 17,899 17,786 
Primary104,494 98,905 98,494 94,754 89,713 81,708 
Pool2,115 2,340 2,487 2,570 2,668 2,758 
Total$106,609 $101,245 $100,981 $97,324 $92,381 $84,466 

    The following table presents the amounts related to the company's quota-share reinsurance transactions (the 2016 QSR Transaction, 2018 QSR Transaction and 2020 QSR Transaction, and collectively, the QSR Transactions), and Insurance-Linked Note transactions (the 2017 ILN Transaction, 2018 ILN Transaction, 2019 ILN Transaction and 2020-1 ILN Transaction, and collectively, the ILN Transactions) for the periods indicated.
For the three months ended
September 30, 2020June 30, 2020March 31, 2020December 31, 2019September 30, 2019June 30, 2019
(In Thousands)
The QSR Transactions
Ceded risk-in-force$5,159,061 $4,563,676 $4,843,715 $5,137,249 $4,901,809 $4,558,862 
Ceded premiums earned(24,517)(23,210)(23,011)(23,673)(23,151)(20,919)
Ceded claims and claim expenses3,200 8,669 1,532 1,030 766 770 
Ceding commission earned4,798 4,428 4,513 4,691 4,584 4,171 
Profit commission11,034 5,271 12,413 13,314 13,254 11,884 
The ILN Transactions
Ceded premiums$(6,268)$(3,267)$(3,872)$(4,263)$(4,409)$(2,895)
9

EXHIBIT 99.1
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
September 30, 2020June 30, 2020March 31, 2020December 31, 2019September 30, 2019June 30, 2019
($ Values In Millions, except as noted below)
New insurance written $18,499 $13,124 $11,297 $11,949 $14,100 $12,179 
New risk written4,577 3,260 2,897 3,082 3,651 3,183 
Insurance in force (IIF) (1)
104,494 98,905 98,494 94,754 89,713 81,708 
Risk in force (1)
26,568 25,238 25,192 24,173 22,810 20,661 
Policies in force (count) (1)
381,899 372,934 376,852 366,039 350,395 324,876 
Average loan size ($ value in thousands) (1)
$274 $265 $261 $259 $256 $252 
Coverage percentage (2)
25.4 %25.5 %25.6 %25.5 %25.4 %25.3 %
Loans in default (count) (1)
13,765 10,816 1,449 1,448 1,230 1,028 
Default rate (1)
3.60 %2.90 %0.38 %0.40 %0.35 %0.32 %
Risk in force on defaulted loans (1)
$1,008 $799 $84 $84 $70 $58 
Net premium yield (3)
0.39 %0.40 %0.41 %0.41 %0.43 %0.43 %
Earnings from cancellations$12.6 $15.5 $8.6 $8.0 $7.4 $4.5 
Annual persistency (4)
60.0 %64.1 %71.7 %76.8 %82.4 %86.0 %
Quarterly run-off (5)
13.1 %12.9 %8.0 %7.7 %7.5 %5.1 %
(1)    Reported as of the end of the period.
(2)    Calculated as end of period risk-in-force (RIF) divided by end of period IIF.
(3)    Calculated as net premiums earned, divided by average primary IIF for the period, annualized.
(4)    Defined as the percentage of IIF that remains on our books after a given 12-month period.
(5)    Defined as the percentage of IIF that is no longer on our books after a given three month period.
    The tables below present our total primary NIW by FICO, loan-to-value (LTV) ratio, and purchase/refinance mix for the periods indicated.
Primary NIW by FICOFor the three months ended
September 30, 2020June 30, 2020September 30, 2019
($ In Millions)
>= 760$11,600 $8,052 $6,994 
740-7592,575 1,866 2,288 
720-7392,187 1,607 2,102 
700-7191,217 959 1,450 
680-699793 514 915 
<=679127 126 351 
Total$18,499 $13,124 $14,100 
Weighted average FICO764 762 754

10

EXHIBIT 99.1
Primary NIW by LTVFor the three months ended
September 30, 2020June 30, 2020September 30, 2019
(In Millions)
95.01% and above$587 $547 $989 
90.01% to 95.00%7,767 5,385 6,592 
85.01% to 90.00%6,968 5,067 4,933 
85.00% and below3,177 2,125 1,586 
Total$18,499 $13,124 $14,100 
Weighted average LTV90.7 %90.7 %91.7 %

Primary NIW by purchase/refinance mixFor the three months ended
September 30, 2020June 30, 2020September 30, 2019
(In Millions)
Purchase$12,764 $7,776 $11,284 
Refinance
5,735 5,348 2,816 
Total$18,499 $13,124 $14,100 


The table below presents a summary of our primary IIF and RIF by book year as of September 30, 2020.
Primary IIF and RIFAs of September 30, 2020
IIFRIF
(In Millions)
September 30, 2020$40,969 $10,255 
201929,865 7,791 
201811,859 3,019 
20179,671 2,413 
20168,050 2,047 
2015 and before 4,080 1,043 
Total$104,494 $26,568 
    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
September 30, 2020June 30, 2020September 30, 2019
(In Millions)
>= 760$53,742 $48,898 $41,855 
740-75916,193 15,764 15,028 
720-73914,352 13,882 12,666 
700-71910,235 10,228 9,822 
680-6996,713 6,657 6,559 
<=6793,259 3,476 3,783 
Total$104,494 $98,905 $89,713 

11

EXHIBIT 99.1
Primary RIF by FICOAs of
September 30, 2020June 30, 2020September 30, 2019
(In Millions)
>= 760$13,563 $12,433 $10,611 
740-7594,141 4,031 3,847 
720-7393,694 3,585 3,257 
700-7192,635 2,625 2,501 
680-6991,730 1,706 1,665 
<=679 805 858 929 
Total$26,568 $25,238 $22,810 


Primary IIF by LTVAs of
September 30, 2020June 30, 2020September 30, 2019
(In Millions)
95.01% and above$8,130 $8,453 $8,500 
90.01% to 95.00%47,828 45,862 42,255 
85.01% to 90.00%35,224 32,603 28,083 
85.00% and below13,312 11,987 10,875 
Total$104,494 $98,905 $89,713 

Primary RIF by LTVAs of
September 30, 2020June 30, 2020September 30, 2019
(In Millions)
95.01% and above$2,310 $2,387 $2,326 
90.01% to 95.00%14,056 13,463 12,358 
85.01% to 90.00%8,642 7,985 6,854 
85.00% and below1,560 1,403 1,272 
Total$26,568 $25,238 $22,810 

Primary RIF by Loan TypeAs of
September 30, 2020June 30, 2020September 30, 2019
Fixed99 %98 %98 %
Adjustable rate mortgages
Less than five years— — — 
Five years and longer
Total 100 %100 %100 %

12

EXHIBIT 99.1
    The table below presents a summary of the change in total primary IIF during the periods indicated.
Primary IIFFor the three months ended
September 30, 2020June 30, 2020September 30, 2019
(In Millions)
IIF, beginning of period$98,905 $98,494 $81,708 
NIW18,499 13,124 14,100 
Cancellations, principal repayments and other reductions(12,910)(12,713)(6,095)
IIF, end of period$104,494 $98,905 $89,713 
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
September 30, 2020June 30, 2020September 30, 2019
California11.3 %11.3 %11.9 %
Texas8.3 8.1 8.1 
Florida6.7 6.2 5.6 
Virginia5.4 5.4 5.3 
Colorado4.0 3.8 3.4 
Illinois4.0 4.0 3.8 
Maryland3.6 3.5 3.3 
Washington3.5 3.4 3.2 
Pennsylvania3.5 3.6 3.6 
Massachusetts3.5 3.4 3.1 
Total53.8 %52.7 %51.3 %

    The table below presents selected primary portfolio statistics, by book year, as of September 30, 2020.
As of September 30, 2020
Book yearOriginal Insurance WrittenRemaining Insurance in Force% Remaining of Original InsurancePolicies Ever in ForceNumber of Policies in ForceNumber 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 $13 %655 82 0.8 %0.8 %4.9 %
20143,451 556 16 %14,786 3,172 139 48 4.2 %1.3 %4.4 %
201512,422 3,511 28 %52,548 17,706 674 108 3.3 %1.5 %3.8 %
2016 21,187 8,050 38 %83,626 36,731 1,609 116 3.0 %2.1 %4.4 %
201721,582 9,671 45 %85,897 44,498 2,584 79 5.0 %3.1 %5.8 %
201827,295 11,859 43 %104,043 52,967 3,246 49 8.8 %3.2 %6.1 %
201945,141 29,865 66 %148,423 105,991 4,327 15.4 %2.9 %4.1 %
202042,920 40,969 95 %125,639 120,752 1,182 — 12.7 %0.9 %1.0 %
Total$174,160 $104,494 615,617 381,899 13,765 405 
(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.
13

EXHIBIT 99.1
    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 nine months ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
(In Thousands)
Beginning balance$69,903 $18,432 $23,752 $12,811 
Less reinsurance recoverables (1)
(14,307)(3,775)(4,939)(3,001)
Beginning balance, net of reinsurance recoverables55,596 14,657 18,813 9,810 
Add claims incurred:
Claims and claim expenses incurred:
Current year (2)
18,682 3,547 61,198 10,948 
Prior years (3)
(3,015)(975)(5,500)(2,710)
Total claims and claim expenses incurred15,667 2,572 55,698 8,238 
Less claims paid:
Claims and claim expenses paid:
Current year (2)
113 — 152 — 
Prior years (3)
1,100 1,033 4,309 2,401 
Reinsurance terminations (4)
— — — (549)
Total claims and claim expenses paid1,213 1,033 4,461 1,852 
Reserve at end of period, net of reinsurance recoverables70,050 16,196 70,050 16,196 
Add reinsurance recoverables (1)
17,180 4,309 17,180 4,309 
Ending balance$87,230 $20,505 $87,230 $20,505 

(1)    Related to ceded losses recoverable under the QSR Transactions.
(2)    Related to insured loans with their most recent defaults occurring in the current year. For example, if a loan had defaulted in a prior year and subsequently cured and later re-defaulted in the current year, the default would be included in the current year. Amounts are presented net of reinsurance.
(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.
(4)    Represents the settlement of reinsurance recoverables in conjunction with the termination of one reinsurer under the 2016 QSR Transaction on a cut-off basis. 

    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, 2020September 30, 2019September 30, 2020September 30, 2019
Beginning default inventory10,816 1,028 1,448 877 
Plus: new defaults6,588 718 16,870 1,838 
Less: cures(3,598)(476)(4,426)(1,383)
Less: claims paid(40)(37)(123)(98)
Less: claims denied(1)(3)(4)(4)
Ending default inventory13,765 1,230 13,765 1,230 

14

EXHIBIT 99.1
    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 endedFor the nine months ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
(In Thousands)
Number of claims paid (1)
40 37 123 98 
Total amount paid for claims$1,540 $1,265 $5,621 $2,979 
Average amount paid per claim
$39 $34 $46 $30 
Severity(2)
67 %70 %80 %70 %
(1)    Count includes six and eight claims settled without payment for the three and nine months ended September 30, 2020, respectively, and eight and fourteen claims settled without payment for the three and nine months ended September 30, 2019, 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, 2020As of September 30, 2019
(In Thousands)
Case (1)
$5.8 $15.3 
IBNR (1)(2)
0.5 1.4 
Total$6.3 $16.7 
(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, 2020June 30, 2020September 30, 2019
(In Thousands)
Available Assets$1,671,990 $1,656,426 $955,554 
Risk-Based Required Assets990,678 1,047,619 637,914 

15
v3.20.2
Cover Page
Nov. 05, 2020
Cover [Abstract]  
Document Type 8-K
Document Period End Date Nov. 05, 2020
Entity Registrant Name NMI Holdings, Inc.
Entity Central Index Key 0001547903
Amendment Flag false
Entity Incorporation, State or Country Code DE
Entity File Number 001-36174
Entity Tax Identification Number 45-4914248
Entity Address, Address Line One 2100 Powell Street
Entity Address, Address Line Two 12th Floor
Entity Address, City or Town Emeryville
Entity Address, State or Province CA
Entity Address, Postal Zip Code 94608
City Area Code 855
Local Phone Number 530-6642
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Class A Common Stock, par value $0.01
Trading Symbol NMIH
Security Exchange Name NASDAQ
Entity Emerging Growth Company false