EMERYVILLE, Calif., Aug. 02, 2022 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported net income of $75.4 million, or $0.86 per diluted share, for the second quarter ended June 30, 2022, which compares to $67.7 million, or $0.77 per diluted share, in the first quarter ended March 31, 2022 and $57.5 million, or $0.65 per diluted share, in the second quarter ended June 30, 2021. Adjusted net income for the quarter was $74.3 million, or $0.86 per diluted share, which compares to $67.5 million, or $0.77 per diluted share, in the first quarter ended March 31, 2022 and $58.1 million, or $0.67 per diluted share, in the second quarter ended June 30, 2021. The non-GAAP financial measures adjusted net income, adjusted diluted earnings per share and adjusted return on equity are presented in this release to enhance the comparability of financial results between periods. See "Use of Non-GAAP Financial Measures" and our reconciliation of such measures to their most comparable GAAP measures, below.
Adam Pollitzer, President and Chief Executive Officer of National MI, said, “We delivered resoundingly strong results in the second quarter, with significant new business production and increasing persistency driving growth in our high-quality insured portfolio, and favorable credit performance and expense discipline driving record profitability and strong returns. We have long been successful managing National MI with discipline and a focus on through-the-cycle performance, and are taking steps to further insulate our business from the impact of any economic volatility that may emerge. Looking forward, we're well positioned to continue to serve our customers and their borrowers, drive growth in our high-quality insured portfolio and deliver strong performance for our shareholders.”
The company also announced today that it has entered into a new quota share reinsurance agreement, primarily covering a seasoned pool of existing mortgage insurance policies that were previously ceded under its 2017 and 2020-1 ILN transactions.
Selected second quarter 2022 highlights include:
- Primary insurance-in-force at quarter end was $168.6 billion, up 6% from $158.9 billion in the first quarter and 23% compared to $136.6 billion in the second quarter of 2021
- Net premiums earned were $120.9 million, up 4% from $116.5 million in the first quarter and 9% compared to $110.9 million in the second quarter of 2021
- Underwriting and operating expenses were $30.7 million, down 7% from $32.9 million in the first quarter and 12% compared to $34.7 million in the second quarter of 2021
- Insurance claims and claim expenses was a benefit of $3.0 million, compared to a benefit of $0.6 million in the first quarter and an expense of $4.6 million in the second quarter of 2021
- Shareholders’ equity was $1.5 billion at quarter end and book value per share was $18.01. Book value per share excluding the impact of net unrealized gains and losses in the investment portfolio was $19.91, up 5% compared to $18.97 per share in the first quarter and 19% compared to $16.71 per share in the second quarter of 2021
- Annualized return on equity for the quarter was 19.7% and annualized adjusted return on equity was 19.4%
- At quarter-end, total PMIERs available assets were $2.2 billion and net risk-based required assets were $1.2 billion
| Quarter Ended | Quarter Ended | Quarter Ended | Change(1) | Change(1) | ||||||||||
| 6/30/2022 | 3/31/2022 | 6/30/2021 | Q/Q | Y/Y | ||||||||||
| INSURANCE METRICS ($billions) | ||||||||||||||
| Primary Insurance-in-Force | $ | 168.6 | $ | 158.9 | $ | 136.6 | 6 | % | 23 | % | ||||
| New Insurance Written - NIW | ||||||||||||||
| Monthly premium | 15.7 | 13.1 | 19.4 | 20 | % | (19 | )% | |||||||
| Single premium | 0.9 | 1.1 | 3.3 | (14 | )% | (72 | )% | |||||||
| Total(2) | 16.6 | 14.2 | 22.8 | 17 | % | (27 | )% | |||||||
| FINANCIAL HIGHLIGHTS (Unaudited, $millions, except per share amounts) | ||||||||||||||
| Net Premiums Earned | 120.9 | 116.5 | 110.9 | 4 | % | 9 | % | |||||||
| Insurance Claims and Claim (Benefits) Expenses | (3.0 | ) | (0.6 | ) | 4.6 | 390 | % | (165 | )% | |||||
| Underwriting and Operating Expenses | 30.7 | 32.9 | 34.7 | (7 | )% | (12 | )% | |||||||
| Net Income | 75.4 | 67.7 | 57.5 | 11 | % | 31 | % | |||||||
| Adjusted Net Income | 74.3 | 67.5 | 58.1 | 10 | % | 28 | % | |||||||
| Book Value per Share (excluding net unrealized gains and losses)(3) | 19.91 | 18.97 | 16.71 | 5 | % | 19 | % | |||||||
| Loss Ratio | (2.5 | )% | (0.5 | )% | 4.2 | % | ||||||||
| Expense Ratio | 25.4 | % | 28.3 | % | 31.3 | % | ||||||||
| (1) | Percentages may not be replicated based on the rounded figures presented in the table. |
| (2) | Total may not foot due to rounding. |
| (3) | Book value per share (excluding net unrealized gains and losses) is defined as total shareholder's equity, excluding the after-tax effects of unrealized gains and losses on our investment portfolio, divided by shares outstanding. |
Conference Call and Webcast Details The company will hold a conference call, which will be webcast live today, August 2, 2022, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time. The webcast will be available on the company's website, www.nationalmi.com, in the "Investor Relations" section. The conference call can also be accessed by dialing (877) 270-2148 in the U.S., or (412) 902-6510 internationally by referencing NMI Holdings, Inc.
About NMI Holdings, Inc.
NMI Holdings, Inc. (NASDAQ: NMIH), is the parent company of National Mortgage Insurance Corporation (National MI), a U.S.-based, private mortgage insurance company enabling low down payment borrowers to realize home ownership while protecting lenders and investors against losses related to a borrower's default. To learn more, please visit www.nationalmi.com.
Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in this press release or any other written or oral statements made by or on behalf of the Company in connection therewith may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the U.S. Private Securities Litigation Reform Act of 1995 (the "PSLRA"). The PSLRA provides a "safe harbor" for any forward-looking statements. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements, including any statements about our expectations, outlook, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance. These statements are often, but not always, made through the use of words or phrases such as "anticipate," "believe," "can," "could," "may," "predict," "assume," "potential," "should," "will," "estimate," "perceive," "plan," "project," "continuing," "ongoing," "expect," "intend" and similar words or phrases. All forward-looking statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that may turn out to be inaccurate and could cause actual results to differ materially from those expressed in them. Many risks and uncertainties are inherent in our industry and markets. Others are more specific to our business and operations. Important factors that could cause actual events or results to differ materially from those indicated in such statements include, but are not limited to: uncertainty relating to the coronavirus (“COVID-19”) pandemic and the measures taken by governmental authorities and other third parties to contain the spread of COVID-19, including their impact on the global economy, the U.S. housing, real estate, housing finance and mortgage insurance markets, and our business, operations and personnel; changes in the charters, business practices, policy or priorities of Fannie Mae and Freddie Mac (collectively, the GSEs), which may include decisions that have the impact of decreasing or discontinuing the use of mortgage insurance as credit enhancement generally, or with first time homebuyers or on very high loan-to-value mortgages; or changes in the direction of housing policy objectives of the Federal Housing Finance Agency (“FHFA”), such as the FHFA's priority to increase the accessibility to and affordability of homeownership for low-and-moderate income borrowers and underrepresented communities; our ability to remain an eligible mortgage insurer under the private mortgage insurer eligibility requirements (“PMIERs”) and other requirements imposed by the GSEs, which they may change at any time; retention of our existing certificates of authority in each state and the District of Columbia (“D.C.”) and our ability to remain a mortgage insurer in good standing in each state and D.C.; our future profitability, liquidity and capital resources; actions of existing competitors, including other private mortgage insurers and government mortgage insurers such as the Federal Housing Administration, the U.S. Department of Agriculture's Rural Housing Service and the U.S. Department of Veterans Affairs, and potential market entry by new competitors or consolidation of existing competitors; developments in the world's financial, capital and credit markets and our access to such markets, including reinsurance; adoption of new or changes to existing laws, rules and regulations that impact our business or financial condition directly or the mortgage insurance industry generally or their enforcement and implementation by regulators, including the implementation of the final rules defining and/or concerning "Qualified Mortgage" and "Qualified Residential Mortgage"; U.S. federal tax reform and other potential changes in tax law and their impact on us and our operations; legislative or regulatory changes to the GSEs' role in the secondary mortgage market or other changes that could affect the residential mortgage industry generally or mortgage insurance industry in particular; potential legal and regulatory claims, investigations, actions, audits or inquiries that could result in adverse judgements, settlements, fines or other reliefs that could require significant expenditures or have other negative effects on our business; changes in general economic, market and political conditions and policies (including rising interest rates and inflation) and investment results or other conditions that affect the housing market or the markets for home mortgages or mortgage insurance; our ability to successfully execute and implement our capital plans, including our ability to access the capital, credit and reinsurance markets and to enter into, and receive approval of, reinsurance arrangements on terms and conditions that are acceptable to us, the GSEs and our regulators; lenders, the GSEs, or other market participants seeking alternatives to private mortgage insurance; our ability to implement our business strategy, including our ability to write mortgage insurance on high quality low down payment residential mortgage loans, implement successfully and on a timely basis, complex infrastructure, systems, procedures, and internal controls to support our business and regulatory and reporting requirements of the insurance industry; our ability to attract and retain a diverse customer base, including the largest mortgage originators; failure of risk management or pricing or investment strategies; decrease in the length of time our insurance policies are in force; emergence of unexpected claim and coverage issues, including claims exceeding our reserves or amounts we had expected to experience; potential adverse impacts arising from natural disasters (including those that may be caused or exacerbated by climate change), including, with respect to affected areas, a decline in new business, adverse effects on home prices, and an increase in notices of default on insured mortgages; potential adverse impacts arising from the occurrence of any man-made disasters or public health emergencies, including pandemics; the inability of our counter-parties, including third party reinsurers, to meet their obligations to us; failure to maintain, improve and continue to develop necessary information technology systems or the failure of technology providers to perform; effectiveness and security of our information technology systems and digital products and services, including the risks these systems, products or services may fail to operate as expected or planned, or expose us to cybersecurity or third-party risks (including the exposure of our confidential customer and other confidential information); and ability to recruit, train and retain key personnel. These risks and uncertainties also include, but are not limited to, those set forth under the heading "Risk Factors" detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021, as subsequently updated through other reports we file with the SEC. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. We caution you not to place undue reliance on any forward-looking statement, which speaks only as of the date on which it is made, and we undertake no obligation to publicly update or revise any forward-looking statement to reflect new information, future events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events except as required by law.
Use of Non-GAAP Financial Measures
We believe the use of the non-GAAP measures of adjusted income before tax, adjusted net income, adjusted diluted EPS, adjusted return-on-equity, adjusted expense ratio, adjusted combined ratio and book value per share (excluding net unrealized gains and losses) and enhances the comparability of our fundamental financial performance between periods, and provides relevant information to investors. These non-GAAP financial measures align with the way the company's business performance is evaluated by management. These measures are not prepared in accordance with GAAP and should not be viewed as alternatives to GAAP measures of performance. These measures have been presented to increase transparency and enhance the comparability of our fundamental operating trends across periods. Other companies may calculate these measures differently; their measures may not be comparable to those we calculate and present.
Adjusted income before tax is defined as GAAP income before tax, excluding the pre-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains or losses from our investment portfolio, and other infrequent, unusual or non-operating items in the periods in which such items are incurred.
Adjusted net income is defined as GAAP net income, excluding the after-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains or losses from our investment portfolio, and other infrequent, unusual or non-operating items in the periods in which such items are incurred. Adjustments to components of pre-tax income are tax effected using the applicable federal statutory tax rate for the respective periods.
Adjusted diluted EPS is defined as adjusted net income divided by adjusted weighted average diluted shares outstanding. Adjusted weighted average diluted shares outstanding is defined as weighted average diluted shares outstanding, adjusted for changes in the dilutive effect of non-vested shares that would otherwise have occurred had GAAP net income been calculated in accordance with adjusted net income. There will be no adjustment to weighted average diluted shares outstanding in the periods that non-vested shares are anti-dilutive under GAAP.
Adjusted return on equity is calculated by dividing adjusted net income on an annualized basis by the average shareholders' equity for the period.
Adjusted expense ratio is defined as GAAP underwriting and operating expenses, excluding the pre-tax effects of periodic costs incurred in connection with capital markets transactions, divided by net premiums earned.
Adjusted combined ratio is defined as the total of GAAP underwriting and operating expenses, excluding the pre-tax effects of periodic costs incurred in connection with capital markets transactions and insurance claims and claims expenses, divided by net premiums earned.
Book value per share (excluding net unrealized gains and losses) is defined as total shareholder's equity, excluding the after-tax effects of unrealized gains and losses on investments, divided by shares outstanding.
Although adjusted income before tax, adjusted net income, adjusted diluted EPS, adjusted return-on-equity, adjusted expense ratio, adjusted combined ratio and book value per share (excluding net unrealized gains and losses) exclude certain items that have occurred in the past and are expected to occur in the future, the excluded items: (1) are not viewed as part of the operating performance of our primary activities; or (2) are impacted by market, economic or regulatory factors and are not necessarily indicative of operating trends, or both. These adjustments, and the reasons for their treatment, are described below.
| (1) | Change in fair value of warrant liability. Outstanding warrants at the end of each reporting period are revalued, and any change in fair value is reported in the statement of operations in the period in which the change occurred. The change in fair value of our warrant liability can vary significantly across periods and is influenced principally by equity market and general economic factors that do not impact or reflect our current period operating results. Furthermore, all unexercised warrants expired in April 2022 and, as such, no change in fair value will be recognized in future reporting periods. We believe trends in our operating performance can be more clearly identified by excluding fluctuations related to the change in fair value of our warrant liability. |
| (2) | Capital markets transaction costs. Capital markets transaction costs result from activities that are undertaken to improve our debt profile or enhance our capital position through activities such as debt refinancing and capital markets reinsurance transactions that may vary in their size and timing due to factors such as market opportunities, tax and capital profile, and overall market cycles. |
| (3) | Net realized investment gains and losses. The recognition of the net realized investment gains or losses can vary significantly across periods as the timing is highly discretionary and is influenced by factors such as market opportunities, tax and capital profile, and overall market cycles that do not reflect our current period operating results. |
| (4) | Other infrequent, unusual or non-operating items. Items that are the result of unforeseen or uncommon events, and are not expected to recur with frequency in the future. Identification and exclusion of these items provides clarity about the impact special or rare occurrences may have on our current financial performance. Past adjustments under this category include infrequent, unusual or non-operating adjustments related to severance, restricted stock modification and other expenses incurred in connection with the CEO transition announced in September 2021 and the effects of the release of the valuation allowance recorded against our net federal and certain state net deferred tax assets in 2016 and the re-measurement of our net deferred tax assets in connection with tax reform in 2017. We believe such items are infrequent or non-recurring in nature, and are not indicative of the performance of, or ongoing trends in, our primary operating activities or business. |
| (5) | Net unrealized gains and losses on investments. The recognition of the net unrealized gains or losses on investment can vary significantly across periods and is influenced by factors such as interest rate movement, overall market and economic conditions, and tax and capital profiles. These valuation adjustments may not necessarily result in economic gains or losses and not reflective of ongoing operations. Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these unrealized gains or losses. |
Investor ContactJohn M. SwensonVice President, Investor Relations and Treasuryjohn.swenson@nationalmi.com(510) 788-8417
| Consolidated statements of operations and comprehensive income (loss) (unaudited) | For the three months ended June 30, | For the six months ended June 30, | |||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Revenues | (In Thousands, except for per share data) | ||||||||||||||
| Net premiums earned | $ | 120,870 | $ | 110,888 | $ | 237,365 | $ | 216,767 | |||||||
| Net investment income | 10,921 | 9,382 | 21,120 | 18,196 | |||||||||||
| Net realized investment gains | 53 | 12 | 461 | 12 | |||||||||||
| Other revenues | 376 | 483 | 715 | 984 | |||||||||||
| Total revenues | 132,220 | 120,765 | 259,661 | 235,959 | |||||||||||
| Expenses | |||||||||||||||
| Insurance claims and claim (benefits) expenses | (3,036 | ) | 4,640 | (3,655 | ) | 9,602 | |||||||||
| Underwriting and operating expenses | 30,700 | 34,725 | 63,635 | 68,790 | |||||||||||
| Service expenses | 336 | 481 | 766 | 1,072 | |||||||||||
| Interest expense | 8,051 | 7,922 | 16,092 | 15,837 | |||||||||||
| Gain from change in fair value of warrant liability | (1,020 | ) | (658 | ) | (1,113 | ) | (453 | ) | |||||||
| Total expenses | 35,031 | 47,110 | 75,725 | 94,848 | |||||||||||
| Income before income taxes | 97,189 | 73,655 | 183,936 | 141,111 | |||||||||||
| Income tax expense | 21,745 | 16,133 | 40,812 | 30,697 | |||||||||||
| Net income | $ | 75,444 | $ | 57,522 | $ | 143,124 | $ | 110,414 | |||||||
| Earnings per share | |||||||||||||||
| Basic | $ | 0.88 | $ | 0.67 | $ | 1.67 | $ | 1.29 | |||||||
| Diluted | $ | 0.86 | $ | 0.65 | $ | 1.63 | $ | 1.27 | |||||||
| Weighted average common shares outstanding | |||||||||||||||
| Basic | 85,734 | 85,647 | 85,842 | 85,483 | |||||||||||
| Diluted | 86,577 | 86,819 | 86,943 | 86,729 | |||||||||||
| Loss ratio(1) | (2.5 | )% | 4.2 | % | (1.5 | )% | 4.4 | % | |||||||
| Expense ratio(2) | 25.4 | % | 31.3 | % | 26.8 | % | 31.7 | % | |||||||
| Combined ratio(3) | 22.9 | % | 35.5 | % | 25.3 | % | 36.2 | % | |||||||
| Net income | $ | 75,444 | $ | 57,522 | $ | 143,124 | $ | 110,414 | |||||||
| Other comprehensive (loss) income, net of tax: | |||||||||||||||
| Unrealized (losses) gains in accumulated other comprehensive income (loss), net of tax (benefit) expense of $(17,004) and $4,995 for the three months ended June 30, 2022 and 2021, and $(43,180) and $(7,003) for the six month ended June 30, 2022 and 2021, respectively | (63,967 | ) | 18,790 | (162,438 | ) | (26,343 | ) | ||||||||
| Reclassification adjustment for realized gains included in net income, net of tax expense of $11 and $3 for the three months ended June 30, 2022 and 2021, and $97 and $3 for the six months ended June 30, 2022 and 2021, respectively | (44 | ) | (10 | ) | (367 | ) | (10 | ) | |||||||
| Other comprehensive (loss) income, net of tax | (64,011 | ) | 18,780 | (162,805 | ) | (26,353 | ) | ||||||||
| Comprehensive income (loss) | $ | 11,433 | $ | 76,302 | $ | (19,681 | ) | $ | 84,061 | ||||||
| (1) | Loss ratio is calculated by dividing insurance claims and claim expenses by net premiums earned. |
| (2) | Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned. |
| (3) | Combined ratio may not foot due to rounding. |
| Consolidated balance sheets (unaudited) | June 30, 2022 | December 31, 2021 | ||||
| Assets | (In Thousands, except for share data) | |||||
| Fixed maturities, available-for-sale, at fair value (amortized cost of $2,218,344 and $2,078,773 as of June 30, 2022 and December 31, 2021, respectively) | $ | 2,019,420 | $ | 2,085,931 | ||
| Cash and cash equivalents (including restricted cash of $2,152 and $3,165 as of June 30, 2022 and December 31, 2021, respectively) | 72,398 | 76,646 | ||||
| Premiums receivable | 63,708 | 60,358 | ||||
| Accrued investment income | 12,430 | 11,900 | ||||
| Prepaid expenses | 4,994 | 3,530 | ||||
| Deferred policy acquisition costs, net | 59,768 | 59,584 | ||||
| Software and equipment, net | 32,071 | 32,047 | ||||
| Intangible assets and goodwill | 3,634 | 3,634 | ||||
| Prepaid reinsurance premiums | 1,711 | 2,393 | ||||
| Reinsurance recoverable | 19,588 | 20,320 | ||||
| Other assets | 102,566 | 94,238 | ||||
| Total assets | $ | 2,392,288 | $ | 2,450,581 | ||
| Liabilities | ||||||
| Debt | $ | 395,323 | $ | 394,623 | ||
| Unearned premiums | 135,681 | 139,237 | ||||
| Accounts payable and accrued expenses | 58,947 | 72,000 | ||||
| Reserve for insurance claims and claim expenses | 98,462 | 103,551 | ||||
| Reinsurance funds withheld | 4,489 | 5,601 | ||||
| Warrant liability, at fair value | — | 2,363 | ||||
| Deferred tax liability, net | 161,658 | 164,175 | ||||
| Other liabilities | 12,636 | 3,245 | ||||
| Total liabilities | 867,196 | 884,795 | ||||
| Shareholders' equity | ||||||
| Common stock - class A shares, $0.01 par value; 86,375,154 shares issued and 84,701,092 shares outstanding as of June 30, 2022 and 85,792,849 shares issued and outstanding as of December 31, 2021 (250,000,000 shares authorized) | 864 | 858 | ||||
| Additional paid-in capital | 964,654 | 955,302 | ||||
| Treasury Stock, at cost: 1,674,062 and 0 common shares as of June 30, 2022 and December 31, 2021, respectively | (30,371 | ) | — | |||
| Accumulated other comprehensive (loss) income, net of tax | (161,320 | ) | 1,485 | |||
| Retained earnings | 751,265 | 608,141 | ||||
| Total shareholders' equity | 1,525,092 | 1,565,786 | ||||
| Total liabilities and shareholders' equity | $ | 2,392,288 | $ | 2,450,581 | ||
| Non-GAAP Financial Measure Reconciliations (unaudited) | |||||||||||||||||||
| As of and for the three months ended | For the six months ended | ||||||||||||||||||
| 6/30/2022 | 3/31/2022 | 6/30/2021 | 6/30/2022 | 6/30/2021 | |||||||||||||||
| As Reported | (In Thousands, except for per share data) | ||||||||||||||||||
| Revenues | |||||||||||||||||||
| Net premiums earned | $ | 120,870 | $ | 116,495 | $ | 110,888 | $ | 237,365 | $ | 216,767 | |||||||||
| Net investment income | 10,921 | 10,199 | 9,382 | 21,120 | 18,196 | ||||||||||||||
| Net realized investment gains | 53 | 408 | 12 | 461 | 12 | ||||||||||||||
| Other revenues | 376 | 339 | 483 | 715 | 984 | ||||||||||||||
| Total revenues | 132,220 | 127,441 | 120,765 | 259,661 | 235,959 | ||||||||||||||
| Expenses | |||||||||||||||||||
| Insurance claims and claim (benefits) expenses | (3,036 | ) | (619 | ) | 4,640 | (3,655 | ) | 9,602 | |||||||||||
| Underwriting and operating expenses | 30,700 | 32,935 | 34,725 | 63,635 | 68,790 | ||||||||||||||
| Service expenses | 336 | 430 | 481 | 766 | 1,072 | ||||||||||||||
| Interest expense | 8,051 | 8,041 | 7,922 | 16,092 | 15,837 | ||||||||||||||
| Gain from change in fair value of warrant liability | (1,020 | ) | (93 | ) | (658 | ) | (1,113 | ) | (453 | ) | |||||||||
| Total expenses | 35,031 | 40,694 | 47,110 | 75,725 | 94,848 | ||||||||||||||
| Income before income taxes | 97,189 | 86,747 | 73,655 | 183,936 | 141,111 | ||||||||||||||
| Income tax expense | 21,745 | 19,067 | 16,133 | 40,812 | 30,697 | ||||||||||||||
| Net income | $ | 75,444 | $ | 67,680 | $ | 57,522 | $ | 143,124 | $ | 110,414 | |||||||||
| Adjustments: | |||||||||||||||||||
| Net realized investment gains | (53 | ) | (408 | ) | (12 | ) | (461 | ) | (12 | ) | |||||||||
| Gain from change in fair value of warrant liability | (1,020 | ) | (93 | ) | (658 | ) | (1,113 | ) | (453 | ) | |||||||||
| Capital markets transaction costs | (55 | ) | 260 | 1,615 | 205 | 1,993 | |||||||||||||
| Adjusted income before taxes | 96,061 | 86,506 | 74,600 | 182,567 | 142,639 | ||||||||||||||
| Income tax expense on adjustments(1) | (23 | ) | (31 | ) | 337 | (54 | ) | 416 | |||||||||||
| Adjusted net income | $ | 74,339 | $ | 67,470 | $ | 58,130 | $ | 141,809 | $ | 111,526 | |||||||||
| Weighted average diluted shares outstanding | 86,577 | 87,310 | 86,819 | 86,943 | 86,729 | ||||||||||||||
| Diluted EPS | $ | 0.86 | $ | 0.77 | $ | 0.65 | $ | 1.63 | $ | 1.27 | |||||||||
| Adjusted diluted EPS | $ | 0.86 | $ | 0.77 | $ | 0.67 | $ | 1.63 | $ | 1.29 | |||||||||
| Return-on-equity | 19.7 | % | 17.5 | % | 16.2 | % | 18.5 | % | 15.6 | % | |||||||||
| Adjusted return-on-equity | 19.4 | % | 17.4 | % | 16.4 | % | 18.4 | % | 15.8 | % | |||||||||
| Expense ratio(2) | 25.4 | % | 28.3 | % | 31.3 | % | 26.8 | % | 31.7 | % | |||||||||
| Adjusted expense ratio(3) | 25.4 | % | 28.0 | % | 29.9 | % | 26.7 | % | 30.8 | % | |||||||||
| Combined ratio(4) | 22.9 | % | 27.7 | % | 35.5 | % | 25.3 | % | 36.2 | % | |||||||||
| Adjusted combined ratio(5) | 22.9 | % | 27.5 | % | 34.0 | % | 25.2 | % | 35.2 | % | |||||||||
| Book value per share(6) | $ | 18.01 | $ | 17.84 | $ | 17.03 | |||||||||||||
| Book value per share (excluding net unrealized gains and losses)(7) | $ | 19.91 | $ | 18.97 | $ | 16.71 | |||||||||||||
| (1) | Marginal tax impact of non-GAAP adjustments is calculated based on our statutory U.S. federal corporate income tax rate of 21%, except for those items that are not eligible for an income tax deduction. Such non-deductible items include gains or losses from the change in the fair value of our warrant liability and certain costs incurred in connection with the CEO transition, which are limited under Section 162(m) of the Internal Revenue Code. |
| (2) | Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned. |
| (3) | Adjusted expense ratio is calculated by dividing adjusted underwriting and operating expense (underwriting and operating expenses excluding costs related to capital markets reinsurance transactions) by net premiums earned. |
| (4) | Combined ratio is calculated by dividing the total of underwriting and operating expenses and insurance claims and claims expense by net premiums earned. |
| (5) | Adjusted combined ratio is calculated by dividing the total of adjusted underwriting and operating expenses (underwriting and operating expenses excluding costs related to capital market reinsurance transaction) and insurance claims and claims expense by net premiums earned. |
| (6) | Book value per share is calculated by dividing total shareholder's equity by shares outstanding. |
| (7) | Book value per share (excluding net unrealized gains and losses) is defined as total shareholder's equity, excluding the after-tax effects of unrealized gains and losses on our investment portfolio, divided by shares outstanding. |
| Historical Quarterly Data | 2022 | 2021 | |||||||||||||||||||||
| June 30 | March 31 | December 31 | September 30 | June 30 | March 31 | ||||||||||||||||||
| Revenues | (In Thousands, except for per share data) | ||||||||||||||||||||||
| Net premiums earned | $ | 120,870 | $ | 116,495 | $ | 113,933 | $ | 113,594 | $ | 110,888 | $ | 105,879 | |||||||||||
| Net investment income | 10,921 | 10,199 | 10,045 | 9,831 | 9,382 | 8,814 | |||||||||||||||||
| Net realized investment gains | 53 | 408 | 714 | 3 | 12 | — | |||||||||||||||||
| Other revenues | 376 | 339 | 380 | 613 | 483 | 501 | |||||||||||||||||
| Total revenues | 132,220 | 127,441 | 125,072 | 124,041 | 120,765 | 115,194 | |||||||||||||||||
| Expenses | |||||||||||||||||||||||
| Insurance claims and claim (benefits) expenses | (3,036 | ) | (619 | ) | (500 | ) | 3,204 | 4,640 | 4,962 | ||||||||||||||
| Underwriting and operating expenses | 30,700 | 32,935 | 38,843 | 34,669 | 34,725 | 34,065 | |||||||||||||||||
| Service expenses | 336 | 430 | 650 | 787 | 481 | 591 | |||||||||||||||||
| Interest expense | 8,051 | 8,041 | 8,029 | 7,930 | 7,922 | 7,915 | |||||||||||||||||
| (Gain) loss from change in fair value of warrant liability | (1,020 | ) | (93 | ) | (112 | ) | — | (658 | ) | 205 | |||||||||||||
| Total expenses | 35,031 | 40,694 | 46,910 | 46,590 | 47,110 | 47,738 | |||||||||||||||||
| Income before income taxes | 97,189 | 86,747 | 78,162 | 77,451 | 73,655 | 67,456 | |||||||||||||||||
| Income tax expense | 21,745 | 19,067 | 17,639 | 17,258 | 16,133 | 14,565 | |||||||||||||||||
| Net income | $ | 75,444 | $ | 67,680 | $ | 60,523 | $ | 60,193 | $ | 57,522 | $ | 52,891 | |||||||||||
| Earnings per share | |||||||||||||||||||||||
| Basic | $ | 0.88 | $ | 0.79 | $ | 0.71 | $ | 0.70 | $ | 0.67 | $ | 0.62 | |||||||||||
| Diluted | $ | 0.86 | $ | 0.77 | $ | 0.69 | $ | 0.69 | $ | 0.65 | $ | 0.61 | |||||||||||
| Weighted average common shares outstanding | |||||||||||||||||||||||
| Basic | 85,734 | 85,953 | 85,757 | 85,721 | 85,647 | 85,317 | |||||||||||||||||
| Diluted | 86,577 | 87,310 | 87,117 | 86,880 | 86,819 | 86,487 | |||||||||||||||||
| Other data | |||||||||||||||||||||||
| Loss Ratio(1) | (2.5 | )% | (0.5 | )% | (0.4 | )% | 2.8 | % | 4.2 | % | 4.7 | % | |||||||||||
| Expense Ratio(2) | 25.4 | % | 28.3 | % | 34.1 | % | 30.5 | % | 31.3 | % | 32.2 | % | |||||||||||
| Combined ratio(3) | 22.9 | % | 27.7 | % | 33.7 | % | 33.3 | % | 35.5 | % | 36.9 | % | |||||||||||
| (1) | Loss ratio is calculated by dividing insurance claims and claim (benefit) expenses by net premiums earned. |
| (2) | Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned. |
| (3) | Combined ratio may not foot due to rounding. |
Portfolio Statistics
The table below highlights trends in our primary portfolio as of the date and for the periods indicated.
| Primary portfolio trends | As of and for the three months ended | ||||||||||||||||||||||
| June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | ||||||||||||||||||
| ($ Values In Millions, except as noted below) | |||||||||||||||||||||||
| New insurance written | $ | 16,611 | $ | 14,165 | $ | 18,342 | $ | 18,084 | $ | 22,751 | $ | 26,397 | |||||||||||
| New risk written | 4,386 | 3,721 | 4,786 | 4,640 | 5,650 | 6,531 | |||||||||||||||||
| Insurance in force (IIF)(1) | 168,639 | 158,877 | 152,343 | 143,618 | 136,598 | 123,777 | |||||||||||||||||
| Risk in force(1) | 43,260 | 40,522 | 38,661 | 36,253 | 34,366 | 31,206 | |||||||||||||||||
| Policies in force (count)(1) | 551,543 | 526,976 | 512,316 | 490,714 | 471,794 | 436,652 | |||||||||||||||||
| Average loan size($ value in thousands)(1) | $ | 306 | $ | 301 | $ | 297 | $ | 293 | $ | 290 | $ | 283 | |||||||||||
| Coverage percentage(2) | 25.7 | % | 25.5 | % | 25.4 | % | 25.2 | % | 25.2 | % | 25.2 | % | |||||||||||
| Loans in default (count)(1) | 4,271 | 5,238 | 6,227 | 7,670 | 8,764 | 11,090 | |||||||||||||||||
| Default rate(1) | 0.77 | % | 0.99 | % | 1.22 | % | 1.56 | % | 1.86 | % | 2.54 | % | |||||||||||
| Risk in force on defaulted loans(1) | $ | 295 | $ | 362 | $ | 435 | $ | 546 | $ | 625 | $ | 785 | |||||||||||
| Net premium yield(3) | 0.30 | % | 0.30 | % | 0.31 | % | 0.32 | % | 0.34 | % | 0.36 | % | |||||||||||
| Earnings from cancellations | $ | 2.2 | $ | 2.9 | $ | 5.1 | $ | 7.7 | $ | 7.0 | $ | 9.9 | |||||||||||
| Annual persistency(4) | 76.0 | % | 71.5 | % | 63.8 | % | 58.1 | % | 53.9 | % | 51.9 | % | |||||||||||
| Quarterly run-off(5) | 4.3 | % | 5.0 | % | 6.7 | % | 8.1 | % | 8.0 | % | 12.5 | % | |||||||||||
| (1) | Reported as of the end of the period. |
| (2) | Calculated as end of period risk-in-force (RIF) divided by end of period IIF. |
| (3) | Calculated as net premiums earned, divided by average primary IIF for the period, annualized. |
| (4) | Defined as the percentage of IIF that remains on our books after a given twelve-month period. |
| (5) | Defined as the percentage of IIF that is no longer on our books after a given three month period. |
New Insurance Written (NIW), Insurance in Force (IIF) and Premiums
The tables below present primary NIW and primary and pool IIF, as of the dates and for the periods indicated.
| Primary NIW | Three months ended | ||||||||||||||||
| June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | ||||||||||||
| (In Millions) | |||||||||||||||||
| Monthly | $ | 15,695 | $ | 13,094 | $ | 16,972 | $ | 16,861 | $ | 19,422 | $ | 23,764 | |||||
| Single | 916 | 1,071 | 1,370 | 1,223 | 3,329 | 2,633 | |||||||||||
| Primary | $ | 16,611 | $ | 14,165 | $ | 18,342 | $ | 18,084 | $ | 22,751 | $ | 26,397 | |||||
| Primary and pool IIF | As of | ||||||||||||||||
| June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | ||||||||||||
| (In Millions) | |||||||||||||||||
| Monthly | $ | 148,488 | $ | 139,156 | $ | 133,104 | $ | 124,767 | $ | 117,629 | $ | 106,920 | |||||
| Single | 20,151 | 19,721 | 19,239 | 18,851 | 18,969 | 16,857 | |||||||||||
| Primary | 168,639 | 158,877 | 152,343 | 143,618 | 136,598 | 123,777 | |||||||||||
| Pool | 1,114 | 1,162 | 1,229 | 1,339 | 1,460 | 1,642 | |||||||||||
| Total | $ | 169,753 | $ | 160,039 | $ | 153,572 | $ | 144,957 | $ | 138,058 | $ | 125,419 | |||||
The following table presents the amounts related to the company's quota-share reinsurance transactions (the 2016 QSR Transaction, 2018 QSR Transaction, 2020 QSR Transaction, 2021 QSR Transaction, and 2022 QSR Transaction, and collectively, the QSR Transactions), Insurance-Linked Note transactions (the 2017 ILN Transaction, 2018 ILN Transaction, 2019 ILN Transaction, 2020-1 ILN Transaction, 2020-2 ILN Transaction, 2021-1 ILN Transaction, and 2021-2 ILN Transaction and collectively, the ILN Transactions), and traditional excess-of-loss transaction (2022 -1 XOL Transaction) for the periods indicated.
| For the three months ended | |||||||||||||||||||||||
| June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | ||||||||||||||||||
| (In Thousands) | |||||||||||||||||||||||
| The QSR Transactions | |||||||||||||||||||||||
| Ceded risk-in-force | $ | 9,040,944 | $ | 8,504,853 | $ | 8,194,604 | $ | 7,610,870 | $ | 7,113,707 | $ | 6,330,409 | |||||||||||
| Ceded premiums earned | (30,231 | ) | (29,005 | ) | (28,490 | ) | (28,366 | ) | (27,537 | ) | (25,747 | ) | |||||||||||
| Ceded claims and claim expenses | (403 | ) | (159 | ) | 19 | 840 | 1,194 | 1,180 | |||||||||||||||
| Ceding commission earned | 6,146 | 5,886 | 6,208 | 6,142 | 5,961 | 5,162 | |||||||||||||||||
| Profit commission | 17,778 | 16,723 | 16,142 | 15,191 | 14,391 | 13,380 | |||||||||||||||||
| The ILN Transactions | |||||||||||||||||||||||
| Ceded premiums | $ | (10,132 | ) | $ | (10,939 | ) | $ | (11,344 | ) | $ | (10,390 | ) | $ | (10,169 | ) | $ | (9,397 | ) | |||||
| 2022-1 XOL Transaction | |||||||||||||||||||||||
| Ceded Premiums | $ | (2,907 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Primary NIW by FICO | For the three months ended | For the six months ended | ||||||||||||
| June 30, 2022 | March 31, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | ||||||||||
| ($ In Millions) | ||||||||||||||
| >= 760 | $ | 7,990 | $ | 6,372 | $ | 11,390 | $ | 14,362 | $ | 24,304 | ||||
| 740-759 | 2,900 | 2,388 | 4,246 | 5,288 | 9,558 | |||||||||
| 720-739 | 2,056 | 1,937 | 3,152 | 3,993 | 7,115 | |||||||||
| 700-719 | 1,650 | 1,639 | 1,798 | 3,289 | 4,156 | |||||||||
| 680-699 | 1,277 | 1,244 | 1,292 | 2,521 | 2,652 | |||||||||
| = 760 | $ | 83,769 | $ | 79,141 | $ | 70,583 | ||||||||
| 740-759 | 29,195 | 27,406 | 23,175 | |||||||||||
| 720-739 | 23,240 | 22,176 | 18,857 | |||||||||||
| 700-719 | 16,221 | 15,236 | 12,230 | |||||||||||
| 680-699 | 11,160 | 10,347 | 7,927 | |||||||||||
| = 760 | $ | 21,159 | $ | 19,883 | $ | 17,531 | ||||||||
| 740-759 | 7,564 | 7,054 | 5,873 | |||||||||||
| 720-739 | 6,044 | 5,735 | 4,798 | |||||||||||
| 700-719 | 4,289 | 4,010 | 3,161 | |||||||||||
| 680-699 | 2,936 | 2,706 | 2,047 | |||||||||||