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NMI Holdings, Inc. Reports Fourth Quarter and Full Year 2023 Financial Results

EMERYVILLE, Calif., Feb. 14, 2024 (GLOBE NEWSWIRE) -- NMI Holdings, Inc. (Nasdaq: NMIH) today reported net income of $83.4 million, or $1.01 per diluted share, for the fourth quarter ended December 31, 2023, which compares to $84.0 million, or $1.00 per diluted share, in the third quarter ended September 30, 2023 and $72.9 million, or $0.86 per diluted share, in the fourth quarter ended December 31, 2022. Adjusted net income for the quarter was $83.4 million, or $1.01 per diluted share, which compares to $84.0 million, or $1.00 per diluted share, in the third quarter ended September 30, 2023 and $72.9 million, or $0.86 per diluted share, in the fourth quarter ended December 31, 2022.

Net income for the full year ended December 31, 2023 was $322.1 million or $3.84 per diluted share, which compares to $292.9 million, or $3.39 per diluted share, for the year ended December 31, 2022. Adjusted net income for the year was $322.1 million or $3.84 per diluted share, which compares to $291.6 million, or $3.39 per diluted share, for the year ended December 31, 2022. 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, “The fourth quarter capped another year of standout success for National MI. In 2023, we delivered strong operating performance, generated significant NIW volume and consistent growth in our insured portfolio, and achieved record financial results and an 18.2% return on equity. We have built an exceptionally high-quality book covered by a comprehensive set of risk transfer solutions, our credit performance continues to stand ahead, and we have a robust balance sheet supported by the significant earnings power of our platform. Looking forward, we’re well-positioned to continue delivering differentiated growth, returns and value for our shareholders.”

Selected fourth quarter 2023 highlights include:

  • Primary insurance-in-force at quarter end was $197.0 billion, compared to $194.8 billion at the end of the third quarter and $184.0 billion at the end of the fourth quarter of 2022

  • Net premiums earned were $132.9 million, compared to $130.1 million in the third quarter and $119.6 million in the fourth quarter of 2022

  • Total revenue was $151.4 million, compared to $148.2 million in the third quarter and $133.1 million in the fourth quarter of 2022

  • Underwriting and operating expenses were $29.7 million, compared to $27.7 million in the third quarter and $26.7 million in the fourth quarter of 2022

  • Insurance claims and claim expenses were $8.2 million, compared to $4.8 million in the third quarter and $3.4 million in the fourth quarter of 2022

  • Shareholders’ equity was $1.9 billion at quarter end and book value per share was $23.81. Book value per share excluding the impact of net unrealized gains and losses in the investment portfolio was $25.54, up 4% compared to $24.56 in the third quarter and 17% compared to $21.76 in the fourth quarter of 2022

  • Annualized return on equity for the quarter was 18.0%, compared to 19.0% in the third quarter and 18.6% in the fourth quarter of 2022

  • At quarter-end, total PMIERs available assets were $2.7 billion and net risk-based required assets were $1.5 billion

  Quarter
Ended
Quarter
Ended
Quarter
Ended
Change (1)Change (1)
  12/31/20239/30/202312/31/2022Q/QY/Y
INSURANCE METRICS ($billions)
Primary Insurance-in-Force$197.0 $194.8 $184.0 1%7%
New Insurance Written - NIW     
 Monthly premium 8.6  11.0  10.5 (22)%(18)%
 Single premium 0.3  0.3  0.3 6%17%
 Total (2) 8.9  11.3  10.7 (21)%(17)%
      
FINANCIAL HIGHLIGHTS (Unaudited, $millions, except per share amounts)
Net Premiums Earned 132.9  130.1  119.6 2%11%
Insurance Claims and Claim Expenses 8.2  4.8  3.4 71%139%
Underwriting and Operating Expenses 29.7  27.7  26.7 7%11%
Net Income 83.4  84.0  72.9 (1)%14%
Book Value per Share (excluding net unrealized gains and losses) (3) 25.54  24.56  21.76 4%17%
Loss Ratio 6.2% 3.7% 2.9%  
Expense Ratio 22.4% 21.3% 22.3%  
            

(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 shareholders' 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, February 14, 2024, 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, Section 21E of the Securities Exchange Act of 1934, as amended, 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 changes in 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, 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 virus and its variants, 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 the exposure of our confidential customer and other 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, 2023, 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) 788-8417

Consolidated statements of operations and comprehensive income (unaudited)For the three months ended
December 31,
 For the year ended
December 31,
  2023   2022   2023   2022 
 (In Thousands, except for per share data)
Revenues       
Net premiums earned$132,940  $119,584  $510,768  $475,266 
Net investment income 18,247   13,341   67,512   46,406 
Net realized investment gains (losses)    6   (33)  481 
Other revenues 193   176   756   1,192 
Total revenues 151,380   133,107   579,003   523,345 
Expenses       
Insurance claims and claim expenses (benefits) 8,232   3,450   22,618   (3,594)
Underwriting and operating expenses 29,716   26,711   110,699   117,490 
Service expenses 185   131   771   1,094 
Interest expense 8,066   8,035   32,212   32,163 
Gain from change in fair value of warrant liability          (1,113)
Total expenses 46,199   38,327   166,300   146,040 
        
Income before income taxes 105,181   94,780   412,703   377,305 
Income tax expense 21,768   21,840   90,593   84,403 
Net income$83,413  $72,940  $322,110  $292,902 
        
Earnings per share       
Basic$1.03  $0.87  $3.91  $3.45 
Diluted$1.01  $0.86  $3.84  $3.39 
        
Weighted average common shares outstanding       
Basic 81,005   83,592   82,407   84,921 
Diluted 82,685   84,809   83,854   85,999 
        
Loss ratio (1) 6.2%  2.9%  4.4%  (0.8)%
Expense ratio (2) 22.4%  22.3%  21.7%  24.7%
Combined ratio (3) 28.5%  25.2%  26.1%  24.0%
        
Net income$83,413  $72,940  $322,110  $292,902 
Other comprehensive income (loss), net of tax:       
Unrealized gains (losses) in accumulated other comprehensive income, net of tax expense (benefit) of $19,580 and $4,505 for the three months ended December 31, 2023 and 2022, and $17,113 and $(54,608) for the years ended December 31, 2023 and 2022, respectively 73,660   16,948   64,380   (205,428)
Reclassification adjustment for realized (gains) losses included in net income, net of tax expense (benefit) of $0 and $1 for the three months ended December 31, 2023 and 2022, and $(7) and $101 for the years ended December 31, 2023, and 2022, respectively    (5)  26   (380)
Other comprehensive income (loss), net of tax 73,660   16,943   64,406   (205,808)
Comprehensive income$157,073  $89,883  $386,516  $87,094 

(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)December 31, 2023 December 31, 2022
Assets(In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $2,542,862 and $2,352,747 as of December 31, 2023 and December 31, 2022, respectively)$2,371,021  $2,099,389 
Cash and cash equivalents (including restricted cash of $1,338 and $2,176 as of December 31, 2023 and December 31, 2022, respectively) 96,689   44,426 
Premiums receivable 76,456   69,680 
Accrued investment income 19,785   14,144 
Deferred policy acquisition costs, net 62,905   58,564 
Software and equipment, net 30,252   31,930 
Intangible assets and goodwill 3,634   3,634 
Reinsurance recoverable 27,514   21,587 
Prepaid federal income taxes 235,286   154,409 
Other assets 16,965   18,267 
Total assets$2,940,507  $2,516,030 
    
Liabilities   
Debt$397,595  $396,051 
Unearned premiums 92,295   123,035 
Accounts payable and accrued expenses 86,189   74,576 
Reserve for insurance claims and claim expenses 123,974   99,836 
Reinsurance funds withheld 1,421   2,674 
Deferred tax liability, net 301,573   193,859 
Other liabilities 11,456   12,272 
Total liabilities 1,014,503   902,303 
    
Shareholders' equity   
Common stock - class A shares, $0.01 par value; 87,334,138 shares issued and 80,881,280 shares outstanding as of December 31, 2023 and 86,472,742 shares issued and 83,549,879 shares outstanding as of December 31, 2022 (250,000,000 shares authorized) 873   865 
Additional paid-in capital 990,816   972,717 
Treasury stock, at cost: 6,452,858 and 2,922,863 common shares as of December 31, 2023 and December 31, 2022, respectively (148,921)  (56,575)
Accumulated other comprehensive loss, net of tax (139,917)  (204,323)
Retained earnings 1,223,153   901,043 
Total shareholders' equity 1,926,004   1,613,727 
Total liabilities and shareholders' equity$2,940,507  $2,516,030 


Non-GAAP Financial Measure Reconciliations (unaudited)
 As of and for the three months ended For the year ended
 12/31/2023 9/30/2023 12/31/2022 12/31/2023 12/31/2022
As Reported(In Thousands, except for per share data)
Revenues         
Net premiums earned$132,940  $130,089  $119,584  $510,768  $475,266 
Net investment income 18,247   17,853   13,341   67,512   46,406 
Net realized investment gains (losses)       6   (33)  481 
Other revenues 193   217   176   756   1,192 
Total revenues 151,380   148,159   133,107   579,003   523,345 
Expenses         
Insurance claims and claim expenses (benefits) 8,232   4,812   3,450   22,618   (3,594)
Underwriting and operating expenses 29,716   27,749   26,711   110,699   117,490 
Service expenses 185   239   131   771   1,094 
Interest expense 8,066   8,059   8,035   32,212   32,163 
Gain from change in fair value of warrant liability             (1,113)
Total expenses 46,199   40,859   38,327   166,300   146,040 
          
Income before income taxes 105,181   107,300   94,780   412,703   377,305 
Income tax expense 21,768   23,345   21,840   90,593   84,403 
Net income $83,413  $83,955  $72,940  $322,110  $292,902 
          
Adjustments:         
Net realized investment (gains) losses       (6)  33   (481)
Gain from change in fair value of warrant liability             (1,113)
Capital markets transaction costs             205 
Adjusted income before taxes 105,181   107,300   94,774   412,736   375,916 
          
Income tax (benefit) expense on adjustments (1)       (1)  7   (58)
Adjusted net income$83,413  $83,955  $72,935  $322,136  $291,571 
          
Weighted average diluted shares outstanding 82,685   83,670   84,809   83,854   85,999 
          
Diluted EPS $1.01  $1.00  $0.86  $3.84  $3.39 
Adjusted diluted EPS $1.01  $1.00  $0.86  $3.84  $3.39 
          
Return-on-equity  18.0%  19.0%  18.6%  18.2%  18.4%
Adjusted return-on-equity 18.0%  19.0%  18.6%  18.2%  18.3%
          
Expense ratio (2) 22.4%  21.3%  22.3%  21.7%  24.7%
Adjusted expense ratio (3) 22.4%  21.3%  22.3%  21.7%  24.7%
          
Combined ratio (4) 28.5%  25.0%  25.2%  26.1%  24.0%
Adjusted combined ratio (5) 28.5%  25.0%  25.2%  26.1%  23.9%
          
Book value per share (6)$23.81  $21.94  $19.31     
Book value per share (excluding net unrealized gains and losses) (7)$25.54  $24.56  $21.76     

(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 claim expenses (benefits) 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 claim expenses (benefits) 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 
 December 31 September 30 June 30 March 31 December 31 September 30
 (In Thousands, except for per share data)
Revenues           
Net premiums earned$132,940  $130,089  $125,985  $121,754  $119,584  $118,317 
Net investment income 18,247   17,853   16,518   14,894   13,341   11,945 
Net realized investment (losses) gains          (33)  6   14 
Other revenues 193   217   182   164   176   301 
Total revenues 151,380   148,159   142,685   136,779   133,107   130,577 
Expenses           
Insurance claims and claim expenses (benefits) 8,232   4,812   2,873   6,701   3,450   (3,389)
Underwriting and operating expenses 29,716   27,749   27,448   25,786   26,711   27,144 
Service expenses 185   239   267   80   131   197 
Interest expense 8,066   8,059   8,048   8,039   8,035   8,036 
Total expenses 46,199   40,859   38,636   40,606   38,327   31,988 
            
Income before income taxes 105,181   107,300   104,049   96,173   94,780   98,589 
Income tax expense 21,768   23,345   23,765   21,715   21,840   21,751 
Net income$83,413  $83,955  $80,284  $74,458  $72,940  $76,838 
            
Earnings per share           
Basic$1.03  $1.02  $0.97  $0.89  $0.87  $0.91 
Diluted$1.01  $1.00  $0.95  $0.88  $0.86  $0.90 
            
Weighted average common shares outstanding           
Basic 81,005   82,096   82,958   83,600   83,592   84,444 
Diluted 82,685   83,670   84,190   84,840   84,809   85,485 
            
Other data           
Loss Ratio (1) 6.2%  3.7%  2.3%  5.5%  2.9%  (2.9)%
Expense Ratio (2) 22.4%  21.3%  21.8%  21.2%  22.3%  22.9%
Combined ratio (3) 28.5%  25.0%  24.1%  26.7%  25.2%  20.1%

(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 trendsAs of and for the three months ended
 December 31,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 31,
2022
 September 30,
2022
 ($ Values In Millions, except as noted below)
New insurance written (NIW)$8,927  $11,334  $11,478  $8,734  $10,719  $17,239 
New risk written 2,354   3,027   3,022   2,258   2,797   4,616 
Insurance-in-force (IIF) (1) 197,029   194,781   191,306   186,724   183,968   179,173 
Risk-in-force (RIF) (1) 51,796   51,011   49,875   48,494   47,648   46,259 
Policies in force (count) (1) 629,690   622,993   611,441   600,294   594,142   580,525 
Average loan size ($ value in thousands) (1)$313  $313  $313  $311  $310  $309 
Coverage percentage (2) 26.3%  26.2%  26.1%  26.0%  25.9%  25.8%
Loans in default (count) (1) 5,099   4,594   4,349   4,475   4,449   4,096 
Default rate (1) 0.81%  0.74%  0.71%  0.75%  0.75%  0.71%
Risk-in-force on defaulted loans (1)$408  $359  $335  $337  $323  $284 
Average net premium yield (3) 0.27%  0.27%  0.27%  0.26%  0.26%  0.27%
Earnings from cancellations$1.0  $0.9  $1.1  $1.4  $1.5  $1.8 
Annual persistency (4) 86.1%  86.2%  86.0%  85.1%  83.5%  80.1%
Quarterly run-off (5) 3.4%  4.1%  3.7%  3.2%  3.3%  4.0%

(1) Reported as of the end of the period.
(2) Calculated as end of period 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 NIWFor the three months ended
 December 31,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 31,
2022
 September 30,
2022
 (In Millions)
Monthly$8,614 $11,038 $11,266 $8,550 $10,451 $16,676
Single 313  296  212  184  268  563
Primary$8,927 $11,334 $11,478 $8,734 $10,719 $17,239


Primary and pool IIFAs of
 December 31,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 31,
2022
 September 30,
2022
 (In Millions)
Monthly$177,764 $175,308 $171,685 $166,924 $163,903 $158,897
Single 19,265  19,473  19,621  19,800  20,065  20,276
Primary 197,029  194,781  191,306  186,724  183,968  179,173
            
Pool     1,000  1,025  1,049  1,078
Total$197,029 $194,781 $192,306 $187,749 $185,017 $180,251


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 (and amended effective January 1, 2024), 2021 QSR Transaction, 2022 QSR Transaction, 2022 Seasoned QSR Transaction, and 2023 QSR Transaction and collectively, the QSR Transactions), insurance-linked note transactions (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, 2023-1 XOL Transaction, and 2023-2 XOL Transaction and collectively, the XOL Transactions) for the periods indicated.

 For the three months ended
 December 31,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 31,
2022
 September 30,
2022
 (In Thousands)
The QSR Transactions           
Ceded risk-in-force$12,626,541  $12,753,261  $12,761,294  $12,635,442  $12,617,169  $12,511,797 
Ceded premiums earned (41,218)  (42,015)  (42,002)  (42,096)  (42,246)  (42,265)
Ceded claims and claim expenses 2,447   2,221   803   1,965   1,934   248 
Ceding commission earned 9,561   9,808   9,877   9,965   10,089   10,193 
Profit commission 22,057   22,184   23,486   22,279   22,314   23,899 
            
The ILN Transactions (1)           
Ceded premiums$(6,305) $(6,925) $(8,815) $(9,095) $(10,112) $(10,730)
            
The XOL Transactions           
Ceded premiums$(8,302) $(7,968) $(7,672) $(7,237) $(6,199) $(4,808)

(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 FICOFor the three months ended For the year ended
 December 31,
2023
 September 30,
2023
 December 31,
2022
 December 31,
2023
 December 31,
2022
 (In Millions)
>= 760$4,564 $6,261 $5,574 $22,995 $26,751
740-759 1,542  1,877  1,902  6,769  10,853
720-739 1,280  1,556  1,564  5,484  8,308
700-719 816  876  918  2,816  6,452
680-699 568  623  638  1,946  4,636
<=679 157  141  123  463  1,734
Total$8,927 $11,334 $10,719 $40,473 $58,734
Weighted average FICO 755  758  756  760  750


Primary NIW by LTVFor the three months ended For the year ended
 December 31,
2023
 September 30,
2023
 December 31,
2022
 December 31,
2023
 December 31,
2022
 (In Millions)
95.01% and above$990  $1,362  $646  $3,713  $5,199 
90.01% to 95.00% 4,107   5,414   5,325   18,929   30,031 
85.01% to 90.00% 2,947   3,525   3,492   13,597   16,637 
85.00% and below 883   1,033   1,256   4,234   6,867 
Total$8,927  $11,334  $10,719  $40,473  $58,734 
Weighted average LTV 92.2%  92.4%  92.0%  92.1%  92.2%


Primary NIW by purchase/refinance mixFor the three months ended For the year ended
 December 31,
2023
 September 30,
2023
 December 31,
2022
 December 31,
2023
 December 31,
2022
 (In Millions)
Purchase$8,759 $11,143 $10,500 $39,629 $57,045
Refinance 168  191  219  844  1,689
Total$8,927 $11,334 $10,719 $40,473 $58,734


The table below presents a summary of our primary IIF and RIF by book year as of December 31, 2023.

Primary IIF and RIFAs of December 31, 2023
 IIF RIF
Book Year(In Millions)
2023$38,586 $10,162
2022 52,783  14,003
2021 62,051  16,190
2020 27,428  7,210
2019 7,602  2,030
2018 and before 8,579  2,201
Total$197,029 $51,796

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
 December 31, 2023 September 30, 2023 December 31, 2022
 (In Millions)
>= 760$98,034 $97,026 $89,554
740-759 34,829  34,394  32,691
720-739 27,755  27,360  25,910
700-719 18,734  18,484  18,245
680-699 12,867  12,683  12,480
<=679 4,810  4,834  5,088
Total$197,029 $194,781 $183,968


Primary RIF by FICOAs of
 December 31, 2023 September 30, 2023 December 31, 2022
 (In Millions)
>= 760$25,523 $25,149 $22,834
740-759 9,207  9,067  8,556
720-739 7,387  7,254  6,807
700-719 5,021  4,938  4,859
680-699 3,433  3,373  3,305
<=679 1,225  1,230  1,287
Total$51,796 $51,011 $47,648


Primary IIF by LTVAs of
 December 31, 2023 September 30, 2023 December 31, 2022
 (In Millions)
95.01% and above$19,609 $19,007 $17,577
90.01% to 95.00% 95,415  93,908  87,354
85.01% to 90.00% 60,348  59,371  55,075
85.00% and below 21,657  22,495  23,962
Total$197,029 $194,781 $183,968


Primary RIF by LTVAs of
 December 31, 2023 September 30, 2023 December 31, 2022
 (In Millions)
95.01% and above$6,062 $5,876 $5,408
90.01% to 95.00% 28,184  27,741  25,797
85.01% to 90.00% 14,961  14,704  13,584
85.00% and below 2,589  2,690  2,859
Total$51,796 $51,011 $47,648


Primary RIF by Loan TypeAs of
 December 31, 2023 September 30, 2023 December 31, 2022
      
Fixed98% 98% 99%
Adjustable rate mortgages:     
Less than five years     
Five years and longer2  2  1 
Total100% 100% 100%


The table below presents a summary of the change in total primary IIF during the periods indicated.

Primary IIFAs of and for the three months ended
 December 31, 2023 September 30, 2023 December 31, 2022
 (In Millions)
IIF, beginning of period$194,781  $191,306  $179,173 
NIW 8,927   11,334   10,719 
Cancellations, principal repayments and other reductions (6,679)  (7,859)  (5,924)
IIF, end of period$197,029  $194,781  $183,968 


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
 December 31, 2023 September 30, 2023 December 31, 2022
California10.2% 10.3% 10.6%
Texas8.7  8.7  8.7 
Florida7.6  7.7  8.2 
Georgia4.1  4.1  4.1 
Washington4.0  4.0  3.9 
Illinois4.0  3.9  3.9 
Virginia3.9  4.0  4.1 
Pennsylvania3.4  3.4  3.4 
Maryland3.3  3.3  3.4 
Colorado3.2  3.3  3.5 
Total52.4% 52.7% 53.8%


The table below presents selected primary portfolio statistics, by book year, as of December 31, 2023.

 As of December 31, 2023
Book yearOriginal
Insurance
Written
 Remaining
Insurance
in Force
 % Remaining
of Original
Insurance
 Policies
Ever in
Force
 Number
of Policies
in Force
 Number
of Loans
in
Default
 # of
Claims
Paid
 Incurred
Loss Ratio
(Inception
to Date)
(1)
 Cumulative
Default Rate
(2)
 Current
Default
Rate
(3)
 ($ Values in Millions)  
2014 and prior$3,613 $157 4% 15,441 980 20 57 3.7% 0.5% 2.0%
2015 12,422  990 8% 52,548 5,561 84 141 2.5% 0.4% 1.5%
2016 21,187  2,011 9% 83,626 10,697 209 170 1.8% 0.5% 2.0%
2017 21,582  2,487 12% 85,897 13,684 336 153 2.2% 0.6% 2.5%
2018 27,295  2,934 11% 104,043 15,452 481 150 3.1% 0.6% 3.1%
2019 45,141  7,602 17% 148,423 32,733 505 59 2.3% 0.4% 1.5%
2020 62,702  27,428 44% 186,174 92,425 581 21 1.9% 0.3% 0.6%
2021 85,574  62,051 73% 257,972 199,115 1,476 28 4.6% 0.6% 0.7%
2022 58,734  52,783 90% 163,281 150,963 1,262 7 20.9% 0.8% 0.8%
2023 40,473  38,586 95% 111,994 108,080 145 1 8.9%(4)0.1% 0.1%
Total$378,723 $197,029   1,209,399 629,690 5,099 787      

(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.
(4) Excludes a termination fee of $0.7 million incurred in the year of 2023 in connection with the amendment of the 2020 QSR Transaction.

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  For the year ended
 December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022
 (In Thousands)
Beginning balance$116,078  $94,944  $99,836  $103,551 
Less reinsurance recoverables (1) (25,956)  (19,755)  (21,587)  (20,320)
Beginning balance, net of reinsurance recoverables 90,122   75,189   78,249   83,231 
        
Add claims incurred:       
Claims and claim expenses (benefits) incurred:       
Current year (2) 17,298   17,033   78,285   45,168 
Prior years (3) (9,789)  (13,583)  (56,390)  (48,762)
Total claims and claim expenses (benefits) incurred (4) 7,509   3,450   21,895   (3,594)
        
Less claims paid:       
Claims and claim expenses paid:       
Current year (2) 481   1   600   74 
Prior years (3) 1,181   389   3,575   1,314 
Reinsurance terminations (491)     (491)   
Total claims and claim expenses paid 1,171   390   3,684   1,388 
        
Reserve at end of period, net of reinsurance recoverables 96,460   78,249   96,460   78,249 
Add reinsurance recoverables (1) 27,514   21,587   27,514   21,587 
Ending balance$123,974  $99,836  $123,974  $99,836 

(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 $70.6 million attributed to net case reserves and $6.3 million attributed to net IBNR reserves for the year ended December 31, 2023, $39.9 million attributed to net case reserves and $4.5 million attributed to net IBNR reserves for the year ended December 31, 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 $50.9 million attributed to net case reserves and $4.5 million attributed to net IBNR reserves for the year ended December 31, 2023, $42.5 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the year ended December 31, 2022.
(4) Excludes a termination fee for the year ended December 31, 2023, of $0.7 million incurred in connection with the amendment of the 2020 QSR Transaction.

The following table provides a reconciliation of the beginning and ending count of loans in default:

 For the three months ended For the year ended
 December 31,
2023
 December 31,
2022
 December 31,
2023
 December 31,
2022
Beginning default inventory4,594  4,096  4,449  6,227 
Plus: new defaults2,039  1,639  6,758  5,225 
Less: cures(1,458) (1,262) (5,892) (6,916)
Less: claims paid(70) (22) (199) (81)
Less: rescission and claims denied(6) (2) (17) (6)
Ending default inventory5,099  4,449  5,099  4,449 

The following table provides details of our claims paid, before giving effect to claims ceded under the QSR Transactions, for the periods indicated.

 For the three months ended For the year ended
 December 31,
2023
 December 31,
2022
 December 31,
2023
 December 31,
2022
 (In Thousands)
Number of claims paid (1) 70   22   199   81 
Total amount paid for claims$2,060  $492  $5,192  $1,741 
Average amount paid per claim$29  $22  $26  $21 
Severity (2) 64%  60%  55%  49%

(1) Count includes 23 and 70 claims settled without payment during the three months and year ended December 31, 2023, respectively, and 11 and 30 claims settled without payment during the three months and year ended December 31, 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:

Average reserve per default:As of
 December 31, 2023 December 31, 2022
 (In Thousands)
Case (1)$22.4 $20.8
IBNR (1) (2) 1.9  1.6
Total$24.3 $22.4

(1) Defined as the gross reserve per insured loan in default.
(2) Amount includes claims adjustment expenses.

The following table provides a comparison of the PMIERs available assets and risk-based required asset amount as reported by NMIC as of the dates indicated.

 As of
 December 31, 2023 September 30, 2023 December 31, 2022
 (In Thousands)
Available assets$2,717,804 $2,602,680 $2,378,627
Risk-based required assets 1,516,140  1,414,233  1,203,708

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