-
NMI Holdings, Inc. Reports Second Quarter 2023 Financial Results; Announces Additional $200 Million Share Repurchase Authorization
Source: Nasdaq GlobeNewswire / 01 Aug 2023 16:01:01 America/New_York
EMERYVILLE, Calif., Aug. 01, 2023 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported net income of $80.3 million, or $0.95 per diluted share, for the second quarter ended June 30, 2023, which compares to $74.5 million, or $0.88 per diluted share, in the first quarter ended March 31, 2023 and $75.4 million, or $0.86 per diluted share, in the second quarter ended June 30, 2022. Adjusted net income for the quarter was $80.3 million, or $0.95 per diluted share, which compares to $74.5 million, or $0.88 per diluted share, in the first quarter ended March 31, 2023 and $74.3 million, or $0.86 per diluted share, in the second quarter ended June 30, 2022.
The company also announced today that its Board of Directors has authorized an additional $200 million share repurchase plan effective through December 31, 2025.
Adam Pollitzer, President and Chief Executive Officer of National MI, said, “We’re proud to have again delivered standout results in the second quarter, including continued growth in our high-quality insured portfolio, record profitability and strong returns. We ended the quarter with a robust funding position and our additional $200 million repurchase authorization will provide investors with further ability to directly access value as we continue to perform, grow our earnings and compound book value. Looking forward, we’re well positioned to continue to serve our customers and their borrowers, support our talented team, and deliver sustained long-term performance for our shareholders.”
Selected second quarter 2023 highlights include:
- Primary insurance-in-force at quarter end was $191.3 billion, compared to $186.7 billion at the end of the first quarter and $168.6 billion at the end of the second quarter of 2022
- Net premiums earned were $126.0 million, compared to $121.8 million in the first quarter and $120.9 million in the second quarter of 2022
- Total revenue was $142.7 million, compared to $136.8 million in the first quarter and $132.2 million in the second quarter of 2022
- Underwriting and operating expenses were $27.4 million, compared to $25.8 million in the first quarter and $30.7 million in the second quarter of 2022
- Insurance claims and claim expenses were $2.9 million, compared to $6.7 million in the first quarter and a benefit of $3.0 million in the second quarter of 2022
- Shareholders’ equity was $1.7 billion at quarter end and book value per share was $21.25. Book value per share excluding the impact of net unrealized gains and losses in the investment portfolio was $23.53, up 4% compared to $22.56 in the first quarter and 18% compared to $19.91 in the second quarter of 2022
- Annualized return on equity for the quarter was 18.6%, compared to 17.9% in the first quarter and 19.7% in the second quarter of 2022
- At quarter-end, total PMIERs available assets were $2.5 billion and net risk-based required assets were $1.3 billion
Quarter Ended Quarter Ended Quarter Ended Change(1) Change(1) 6/30/2023 3/31/2023 6/30/2022 Q/Q Y/Y INSURANCE METRICS ($billions) Primary Insurance-in-Force $ 191.3 $ 186.7 $ 168.6 2 % 13 % New Insurance Written - NIW Monthly premium 11.3 8.6 15.7 32 % (28)% Single premium 0.2 0.2 0.9 15 % (77)% Total(2) 11.5 8.7 16.6 31 % (31)% FINANCIAL HIGHLIGHTS (Unaudited, $millions, except per share amounts) Net Premiums Earned 126.0 121.8 120.9 3 % 4 % Insurance Claims and Claim Expenses (Benefits) 2.9 6.7 (3.0 ) (57)% N/A Underwriting and Operating Expenses 27.4 25.8 30.7 6 % (11)% Net Income 80.3 74.5 75.4 8 % 6 % Book Value per Share (excluding net unrealized gains and losses)(3) 23.53 22.56 19.91 4 % 18 % Loss Ratio 2.3 % 5.5 % (2.5) % Expense Ratio 21.8 % 21.2 % 25.4 % (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 1, 2023, 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 (844) 481-2708 in the U.S., or (412) 317-0664 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: 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 U.S. housing market or the U.S. markets for home mortgages, mortgage insurance, reinsurance and credit risk transfer markets, including the risk related to geopolitical instability, inflation, an economic downturn (including any decline in home prices) or recession, and their impacts on our business, operations and personnel; changes in the charters, business practices, policy, pricing 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 (collectively, government MIs), and potential market entry by new competitors or consolidation of existing competitors; 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; uncertainty relating to the coronavirus (COVID-19) virus and its variants or 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; our ability to successfully execute and implement our capital plans, including our ability to access the equity, 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, 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; climate risk and efforts to manage or regulate climate risk by government agencies could affect our business and operations; 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 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, 2022, 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) 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 June 30, For the six months ended June 30, 2023 2022 2023 2022 (In Thousands, except for per share data) Revenues Net premiums earned $ 125,985 $ 120,870 $ 247,739 $ 237,365 Net investment income 16,518 10,921 31,412 21,120 Net realized investment gains (losses) — 53 (33 ) 461 Other revenues 182 376 346 715 Total revenues 142,685 132,220 279,464 259,661 Expenses Insurance claims and claim expenses (benefits) 2,873 (3,036 ) 9,574 (3,655 ) Underwriting and operating expenses 27,448 30,700 53,234 63,635 Service expenses 267 336 347 766 Interest expense 8,048 8,051 16,087 16,092 Gain from change in fair value of warrant liability — (1,020 ) — (1,113 ) Total expenses 38,636 35,031 79,242 75,725 Income before income taxes 104,049 97,189 200,222 183,936 Income tax expense 23,765 21,745 45,480 40,812 Net income $ 80,284 $ 75,444 $ 154,742 $ 143,124 Earnings per share Basic $ 0.97 $ 0.88 $ 1.86 $ 1.67 Diluted $ 0.95 $ 0.86 $ 1.83 $ 1.63 Weighted average common shares outstanding Basic 82,958 85,734 83,277 85,842 Diluted 84,190 86,577 84,504 86,943 Loss ratio(1) 2.3 % (2.5) % 3.9 % (1.5) % Expense ratio(2) 21.8 % 25.4 % 21.5 % 26.8 % Combined ratio(3) 24.1 % 22.9 % 25.4 % 25.3 % Net income $ 80,284 $ 75,444 $ 154,742 $ 143,124 Other comprehensive (loss) income, net of tax: Unrealized (losses) gains in accumulated other comprehensive (loss) income, net of tax (benefit) expense of $(4,120) and $(17,004) for the three months ended June 30, 2023 and 2022, and $4,513 and $(43,180) for the six months ended June 30, 2023 and 2022, respectively (15,499 ) (63,967 ) 16,977 (162,438 ) Reclassification adjustment for realized (gains) losses included in net income, net of tax expense (benefit) of $0 and $11 for the three months ended June 30, 2023 and 2022, and $(7) and $97 for the six months ended June 30, 2023 and 2022, respectively — (44 ) 26 (367 ) Other comprehensive (loss) income, net of tax (15,499 ) (64,011 ) 17,003 (162,805 ) Comprehensive income (loss) $ 64,785 $ 11,433 $ 171,745 $ (19,681 ) (1) Loss ratio is calculated by dividing insurance claims and claim expenses (benefits) 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, 2023 December 31, 2022 Assets (In Thousands, except for share data) Fixed maturities, available-for-sale, at fair value (amortized cost of $2,465,556 and $2,352,747 as of June 30, 2023 and December 31, 2022, respectively) $ 2,233,656 $ 2,099,389 Cash and cash equivalents (including restricted cash of $2,222 and $2,176 as of June 30, 2023 and December 31, 2022, respectively) 73,319 44,426 Premiums receivable 72,367 69,680 Accrued investment income 17,393 14,144 Deferred policy acquisition costs, net 61,162 58,564 Software and equipment, net 32,262 31,930 Intangible assets and goodwill 3,634 3,634 Reinsurance recoverable 24,023 21,587 Prepaid federal income taxes 154,409 154,409 Other assets 17,625 18,267 Total assets $ 2,689,850 $ 2,516,030 Liabilities Debt $ 396,808 $ 396,051 Unearned premiums 105,067 123,035 Accounts payable and accrued expenses 72,506 74,576 Reserve for insurance claims and claim expenses 110,448 99,836 Reinsurance funds withheld 1,696 2,674 Deferred tax liability, net 242,144 193,859 Other liabilities 12,226 12,272 Total liabilities 940,895 902,303 Shareholders' equity Common stock - class A shares, $0.01 par value; 86,925,030 shares issued and 82,289,763 shares outstanding as of June 30, 2023 and 86,472,742 shares issued and 83,549,879 shares outstanding as of December 31, 2022 (250,000,000 shares authorized) 870 865 Additional paid-in capital 977,295 972,717 Treasury Stock, at cost: 4,635,267 and 2,922,863 common shares as of June 30, 2023 and December 31, 2022, respectively (97,675 ) (56,575 ) Accumulated other comprehensive loss, net of tax (187,320 ) (204,323 ) Retained earnings 1,055,785 901,043 Total shareholders' equity 1,748,955 1,613,727 Total liabilities and shareholders' equity $ 2,689,850 $ 2,516,030 Non-GAAP Financial Measure Reconciliations (unaudited) As of and for the three months ended For the six months ended 6/30/2023 3/31/2023 6/30/2022 06/30/23 6/30/2022 As Reported (In Thousands, except for per share data) Revenues Net premiums earned $ 125,985 $ 121,754 $ 120,870 $ 247,739 $ 237,365 Net investment income 16,518 14,894 10,921 31,412 21,120 Net realized investment (losses) gains — (33 ) 53 (33 ) 461 Other revenues 182 164 376 346 715 Total revenues 142,685 136,779 132,220 279,464 259,661 Expenses Insurance claims and claim expenses (benefits) 2,873 6,701 (3,036 ) 9,574 (3,655 ) Underwriting and operating expenses 27,448 25,786 30,700 53,234 63,635 Service expenses 267 80 336 347 766 Interest expense 8,048 8,039 8,051 16,087 16,092 Gain from change in fair value of warrant liability — — (1,020 ) — (1,113 ) Total expenses 38,636 40,606 35,031 79,242 75,725 Income before income taxes 104,049 96,173 97,189 200,222 183,936 Income tax expense 23,765 21,715 21,745 45,480 40,812 Net income $ 80,284 $ 74,458 $ 75,444 $ 154,742 $ 143,124 Adjustments: Net realized investment losses (gains) — 33 (53 ) 33 (461 ) Gain from change in fair value of warrant liability — — (1,020 ) — (1,113 ) Capital markets transaction costs — — (55 ) — 205 Adjusted income before taxes 104,049 96,206 96,061 200,255 182,567 Income tax expense (benefit) on adjustments (1) — 7 (23 ) 7 (54 ) Adjusted net income $ 80,284 $ 74,484 $ 74,339 $ 154,768 $ 141,809 Weighted average diluted shares outstanding 84,190 84,840 86,577 84,504 86,943 Diluted EPS $ 0.95 $ 0.88 $ 0.86 $ 1.83 $ 1.63 Adjusted diluted EPS $ 0.95 $ 0.88 $ 0.86 $ 1.83 $ 1.63 Return-on-equity 18.6 % 17.9 % 19.7 % 18.4 % 18.5 % Adjusted return-on-equity 18.6 % 17.9 % 19.4 % 18.4 % 18.4 % Expense ratio (2) 21.8 % 21.2 % 25.4 % 21.5 % 26.8 % Adjusted expense ratio (3) 21.8 % 21.2 % 25.4 % 21.5 % 26.7 % Combined ratio (4) 24.1 % 26.7 % 22.9 % 25.4 % 25.3 % Adjusted combined ratio (5) 24.1 % 26.7 % 22.9 % 25.4 % 25.2 % Book value per share (6) $ 21.25 $ 20.49 $ 18.01 Book value per share (excluding net unrealized gains and losses) (7) $ 23.53 $ 22.56 $ 19.91 (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.
(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 expenses (benefit) 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 expenses (benefit) 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 2023 2022 June 30 March 31 December 31 September 30 June 30 March 31 (In Thousands, except for per share data) Revenues Net premiums earned $ 125,985 $ 121,754 $ 119,584 $ 118,317 $ 120,870 $ 116,495 Net investment income 16,518 14,894 13,341 11,945 10,921 10,199 Net realized investment (losses) gains — (33 ) 6 14 53 408 Other revenues 182 164 176 301 376 339 Total revenues 142,685 136,779 133,107 130,577 132,220 127,441 Expenses Insurance claims and claim expenses (benefits) 2,873 6,701 3,450 (3,389 ) (3,036 ) (619 ) Underwriting and operating expenses 27,448 25,786 26,711 27,144 30,700 32,935 Service expenses 267 80 131 197 336 430 Interest expense 8,048 8,039 8,035 8,036 8,051 8,041 Gain from change in fair value of warrant liability — — — — (1,020 ) (93 ) Total expenses 38,636 40,606 38,327 31,988 35,031 40,694 Income before income taxes 104,049 96,173 94,780 98,589 97,189 86,747 Income tax expense 23,765 21,715 21,840 21,751 21,745 19,067 Net income $ 80,284 $ 74,458 $ 72,940 $ 76,838 $ 75,444 $ 67,680 Earnings per share Basic $ 0.97 $ 0.89 $ 0.87 $ 0.91 $ 0.88 $ 0.79 Diluted $ 0.95 $ 0.88 $ 0.86 $ 0.90 $ 0.86 $ 0.77 Weighted average common shares outstanding Basic 82,958 83,600 83,592 84,444 85,734 85,953 Diluted 84,190 84,840 84,809 85,485 86,577 87,310 Other data Loss ratio(1) 2.3 % 5.5 % 2.9 % (2.9) % (2.5) % (0.5) % Expense ratio(2) 21.8 % 21.2 % 22.3 % 22.9 % 25.4 % 28.3 % Combined ratio(3) 24.1 % 26.7 % 25.2 % 20.1 % 22.9 % 27.7 % (1) Loss ratio is calculated by dividing insurance claims and claim expenses (benefits) 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, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 ($ Values In Millions, except as noted below) New insurance written (NIW) $ 11,478 $ 8,734 $ 10,719 $ 17,239 $ 16,611 $ 14,165 New risk written 3,022 2,258 2,797 4,616 4,386 3,721 Insurance in force (IIF)(1) 191,306 186,724 183,968 179,173 168,639 158,877 Risk in force(1) 49,875 48,494 47,648 46,259 43,260 40,522 Policies in force (count)(1) 611,441 600,294 594,142 580,525 551,543 526,976 Average loan size($ value in thousands)(1) $ 313 $ 311 $ 310 $ 309 $ 306 $ 301 Coverage percentage(2) 26.1 % 26.0 % 25.9 % 25.8 % 25.7 % 25.5 % Loans in default (count)(1) 4,349 4,475 4,449 4,096 4,271 5,238 Default rate(1) 0.71 % 0.75 % 0.75 % 0.71 % 0.77 % 0.99 % Risk in force on defaulted loans(1) $ 335 $ 337 $ 323 $ 284 $ 295 $ 362 Net premium yield(3) 0.27 % 0.26 % 0.26 % 0.27 % 0.30 % 0.30 % Earnings from cancellations $ 1.1 $ 1.4 $ 1.5 $ 1.8 $ 2.2 $ 2.9 Annual persistency(4) 86.0 % 85.1 % 83.5 % 80.1 % 76.0 % 71.5 % Quarterly run-off(5) 3.7 % 3.2 % 3.3 % 4.0 % 4.3 % 5.0 % (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.NIW, IIF and Premiums
The tables below present primary NIW and primary and pool IIF, as of the dates and for the periods indicated.
Primary NIW For the three months ended June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 (In Millions) Monthly $ 11,266 $ 8,550 $ 10,451 $ 16,676 $ 15,695 $ 13,094 Single 212 184 268 563 916 1,071 Primary $ 11,478 $ 8,734 $ 10,719 $ 17,239 $ 16,611 $ 14,165 Primary and pool IIF As of June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 (In Millions) Monthly $ 171,685 $ 166,924 $ 163,903 $ 158,897 $ 148,488 $ 139,156 Single 19,621 19,800 20,065 20,276 20,151 19,721 Primary 191,306 186,724 183,968 179,173 168,639 158,877 Pool 1,000 1,025 1,049 1,078 1,114 1,162 Total $ 192,306 $ 187,749 $ 185,017 $ 180,251 $ 169,753 $ 160,039 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, 2022 Seasoned QSR Transaction, and 2023 QSR Transaction and collectively, the QSR Transactions), insurance-linked note transactions (2018 ILN Transaction, 2019 ILN Transaction, 2020-2 ILN Transaction, 2021-1 ILN Transaction, and 2021-2 ILN Transaction and collectively, the ILN Transactions), and traditional reinsurance transactions (2022-1 XOL Transaction, 2022-2 XOL Transaction, 2022-3 XOL Transaction and 2023-1 XOL Transaction and collectively, the XOL Transactions) for the periods indicated.
For the three months ended June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 (In Thousands) The QSR Transactions Ceded risk-in-force $ 12,761,294 $ 12,635,442 $ 12,617,169 $ 12,511,797 $ 9,040,944 $ 8,504,853 Ceded premiums earned (42,002 ) (42,096 ) (42,246 ) (42,265 ) (30,231 ) (29,005 ) Ceded claims and claim expenses (benefits) 803 1,965 1,934 248 (403 ) (159 ) Ceding commission earned 9,877 9,965 10,089 10,193 6,146 5,886 Profit commission 23,486 22,279 22,314 23,899 17,778 16,723 The ILN Transactions(1) Ceded premiums $ (8,815 ) $ (9,095 ) $ (10,112 ) $ (10,730 ) $ (10,132 ) $ (10,939 ) The XOL Transactions Ceded Premiums $ (7,672 ) $ (7,237 ) $ (6,199 ) $ (4,808 ) $ (2,907 ) $ — (1) Effective March 25, 2022 and April 25, 2022, NMIC exercised its optional clean-up call to terminate and commute its previously outstanding excess of loss reinsurance agreements with Oaktown Re Ltd. and Oaktown Re IV Ltd., respectively. Effective July 25, 2023, NMIC exercised its optional call to terminate and commute its previously outstanding excess of loss reinsurance agreement with Oaktown Re II Ltd. NMIC no longer makes risk premium payments to Oaktown Re Ltd., Oaktown Re II Ltd. and Oaktown Re IV Ltd. thereafter.
The tables below present our total primary NIW by FICO, loan-to-value (LTV) ratio, and purchase/refinance mix for the periods indicated.
Primary NIW by FICO For the three months ended For the six months ended June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022 (In Millions) >= 760 $ 6,919 $ 5,251 $ 7,990 $ 12,170 $ 14,362 740-759 1,836 1,514 2,900 3,350 5,288 720-739 1,541 1,107 2,056 2,648 3,993 700-719 668 456 1,650 1,124 3,289 680-699 413 342 1,277 755 2,521 <=679 101 64 738 165 1,323 Total $ 11,478 $ 8,734 $ 16,611 $ 20,212 $ 30,776 Weighted average FICO 763 762 751 762 750 Primary NIW by LTV For the three months ended For the six months ended June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022 (In Millions) 95.01% and above $ 1,003 $ 358 $ 1,577 $ 1,361 $ 2,943 90.01% to 95.00% 5,323 4,085 8,253 9,408 15,308 85.01% to 90.00% 3,891 3,234 4,772 7,125 8,640 85.00% and below 1,261 1,057 2,009 2,318 3,885 Total $ 11,478 $ 8,734 $ 16,611 $ 20,212 $ 30,776 Weighted average LTV 92.0 % 91.6 % 92.2 % 91.9 % 92.1 % Primary NIW by purchase/refinance mix For the three months ended For the six months ended June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022 (In Millions) Purchase $ 11,233 $ 8,494 $ 16,203 $ 19,727 $ 29,601 Refinance 245 240 408 485 1,175 Total $ 11,478 $ 8,734 $ 16,611 $ 20,212 $ 30,776 The table below presents a summary of our primary IIF and RIF by book year as of June 30, 2023.
Primary IIF and RIF As of June 30, 2023 IIF RIF (In Millions) June 30, 2023 $ 19,811 $ 5,176 2022 54,739 14,496 2021 68,016 17,553 2020 30,799 7,978 2019 8,385 2,220 2018 and before 9,556 2,452 Total $ 191,306 $ 49,875 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 June 30, 2023 March 31, 2023 June 30, 2022 (In Millions) >= 760 $ 94,931 $ 91,623 $ 83,769 740-759 33,841 33,156 29,195 720-739 26,862 26,233 23,240 700-719 18,261 18,203 16,221 680-699 12,506 12,502 11,160 <=679 4,905 5,007 5,054 Total $ 191,306 $ 186,724 $ 168,639 Primary RIF by FICO As of June 30, 2023 March 31, 2023 June 30, 2022 (In Millions) >= 760 $ 24,472 $ 23,472 $ 21,159 740-759 8,888 8,692 7,564 720-739 7,090 6,903 6,044 700-719 4,865 4,847 4,289 680-699 3,315 3,311 2,936 <=679 1,245 1,269 1,268 Total $ 49,875 $ 48,494 $ 43,260 Primary IIF by LTV As of June 30, 2023 March 31, 2023 June 30, 2022 (In Millions) 95.01% and above $ 18,141 $ 17,583 $ 16,068 90.01% to 95.00% 91,719 89,125 77,804 85.01% to 90.00% 58,210 56,425 51,029 85.00% and below 23,236 23,591 23,738 Total $ 191,306 $ 186,724 $ 168,639 Primary RIF by LTV As of June 30, 2023 March 31, 2023 June 30, 2022 (In Millions) 95.01% and above $ 5,600 $ 5,413 $ 4,914 90.01% to 95.00% 27,097 26,326 22,974 85.01% to 90.00% 14,400 13,937 12,553 85.00% and below 2,778 2,818 2,819 Total $ 49,875 $ 48,494 $ 43,260 Primary RIF by Loan Type As of June 30, 2023 March 31, 2023 June 30, 2022 Fixed 98 % 98 % 99 % Adjustable rate mortgages: Less than five years — — — Five years and longer 2 2 1 Total 100 % 100 % 100 % The table below presents a summary of the change in total primary IIF for the dates and periods indicated.
Primary IIF As of and for the three months ended June 30, 2023 March 31, 2023 June 30, 2022 (In Millions) IIF, beginning of period $ 186,724 $ 183,968 $ 158,877 NIW 11,478 8,734 16,611 Cancellations, principal repayments and other reductions (6,896 ) (5,978 ) (6,849 ) IIF, end of period $ 191,306 $ 186,724 $ 168,639 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 June 30, 2023 March 31, 2023 June 30, 2022 California 10.4 % 10.5 % 10.8 % Texas 8.7 8.8 9.0 Florida 7.9 8.0 8.3 Georgia 4.1 4.1 4.0 Virginia 4.0 4.1 4.3 Washington 4.0 4.0 3.9 Illinois 3.9 3.9 3.9 Pennsylvania 3.4 3.4 3.3 Colorado 3.4 3.5 3.7 Maryland 3.3 3.3 3.5 Total 53.1 % 53.6 % 54.7 % The table below presents selected primary portfolio statistics, by book year, as of June 30, 2023.
As of June 30, 2023 Book Year Original Insurance Written Remaining Insurance in Force % Remaining of Original Insurance Policies
Ever in
ForceNumber of Policies in Force Number of Loans in Default # of Claims Paid Incurred
Loss Ratio (Inception to Date)(1)Cumulative Default
Rate(2)Current
default
rate(3)($ Values In Millions) 2014 and prior $ 3,613 $ 188 5 % 15,441 1,191 14 56 3.7 % 0.5 % 1.2 % 2015 12,422 1,098 9 % 52,548 6,170 104 131 2.5 % 0.4 % 1.7 % 2016 21,187 2,263 11 % 83,626 11,926 220 157 1.8 % 0.5 % 1.8 % 2017 21,582 2,782 13 % 85,897 14,989 403 129 2.4 % 0.6 % 2.7 % 2018 27,295 3,225 12 % 104,043 16,736 480 121 3.6 % 0.6 % 2.9 % 2019 45,141 8,385 19 % 148,423 35,522 546 44 3.3 % 0.4 % 1.5 % 2020 62,702 30,799 49 % 186,174 101,899 538 10 2.1 % 0.3 % 0.5 % 2021 85,574 68,016 79 % 257,972 214,464 1,283 7 5.3 % 0.5 % 0.6 % 2022 58,734 54,739 93 % 163,281 154,826 753 — 21.8 % 0.5 % 0.5 % 2023 20,212 19,811 98 % 54,625 53,718 8 — 0.2 % — % — % Total $ 358,462 $ 191,306 1,152,030 611,441 4,349 655 (1) Calculated as total claims incurred (paid and reserved) divided by cumulative premiums earned, net of reinsurance.
(2) Calculated as the sum of the number of claims paid ever to date and number of loans in default divided by policies ever in force.
(3) Calculated as the number of loans in default divided by number of policies in force.The following table provides a reconciliation of the beginning and ending reserve balances for primary insurance claims and claim expenses (benefits):
For the three months ended June 30, For the six months ended June 30, 2023 2022 2023 2022 (In Thousands) Beginning balance $ 108,157 $ 102,372 $ 99,836 $ 103,551 Less reinsurance recoverables(1) (23,479 ) (20,080 ) (21,587 ) (20,320 ) Beginning balance, net of reinsurance recoverables 84,678 82,292 78,249 83,231 Add claims incurred: Claims and claim expenses (benefits) incurred: Current year(2) 17,262 8,707 44,870 18,787 Prior years(3) (14,389 ) (11,743 ) (35,296 ) (22,442 ) Total claims and claim expenses (benefits) incurred 2,873 (3,036 ) 9,574 (3,655 ) Less claims paid: Claims and claim expenses paid: Current year(2) 54 26 54 26 Prior years(3) 1,072 356 1,344 676 Total claims and claim expenses paid 1,126 382 1,398 702 Reserve at end of period, net of reinsurance recoverables 86,425 78,874 86,425 78,874 Add reinsurance recoverables(1) 24,023 19,588 24,023 19,588 Ending balance $ 110,448 $ 98,462 $ 110,448 $ 98,462 (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 $39.1 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the six months ended June 30, 2023 and $14.0 million attributed to net case reserves and $4.5 million attributed to net IBNR reserves for the six months ended June 30, 2022.
(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 $30.3 million attributed to net case reserves and $4.5 million attributed to net IBNR reserves for the six months ended June 30, 2023 and $17.0 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the six months ended June 30, 2022.The following table provides a reconciliation of the beginning and ending count of loans in default:
For the three months ended June 30, For the six months ended June 30, 2023 2022 2023 2022 Beginning default inventory 4,475 5,238 4,449 6,227 Plus: new defaults 1,417 1,069 2,975 2,232 Less: cures (1,493 ) (2,011 ) (3,000 ) (4,143 ) Less: claims paid (46 ) (24 ) (67 ) (43 ) Less: rescission and claims denied (4 ) (1 ) (8 ) (2 ) Ending default inventory 4,349 4,271 4,349 4,271 The following table provides details of our claims paid, before giving effect to claims ceded under the QSR Transactions, for the periods indicated:
For the three months ended June 30, For the six months ended June 30, 2023 2022 2023 2022 ($ Values In Thousands) Number of claims paid(1) 46 24 67 43 Total amount paid for claims $ 1,386 $ 471 $ 1,730 $ 873 Average amount paid per claim $ 30 $ 20 $ 26 $ 20 Severity(2) 62 % 46 % 56 % 43 % (1) Count includes 17 and 24 claims settled without payment during the three and six months ended June 30, 2023, respectively, and 10 and 16 claims settled without payment during the three and six months ended June 30, 2022, 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 dates indicated:
As of June 30, Average reserve per default: 2023 2022 (In Thousands) Case(1) $ 23.5 $ 21.3 IBNR(1)(2) 1.9 1.8 Total $ 25.4 $ 23.1 (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 available assets and risk-based required asset amount as reported by NMIC as of the dates indicated:
As of June 30, 2023 March 31, 2023 June 30, 2022 (In Thousands) Available Assets $ 2,491,280 $ 2,480,882 $ 2,169,388 Risk-Based Required Assets 1,317,961 1,231,780 1,240,143 
