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Since formation, we have sought to establish customer relationships with a broad group of mortgage lenders and build a diversified, high-quality insured portfolio.
−Removed: As of March 31, 2021, we had master policies with 1,609 customers, including national and regional mortgage banks, money center banks, credit unions, community banks, builder-owned mortgage lenders, internet-sourced lenders and other non-bank lenders.
−Removed: As of March 31, 2021, we had $125.4 billion of total insurance-in-force (IIF), including primary IIF of $123.8 billion, and $31.3 billion of gross RIF, including primary RIF of $31.2 billion.
+Added: As of June 30, 2021, we had master policies with 1,656 customers, including national and regional mortgage banks, money center banks, credit unions, community banks, builder-owned mortgage lenders, internet-sourced lenders and other non-bank lenders.
+Added: As of June 30, 2021, we had $138.1 billion of total insurance-in-force (IIF), including primary IIF of $136.6 billion, and $34.5 billion of gross RIF, including primary RIF of $34.4 billion.
We believe that our success in acquiring a large and diverse group of lender customers and growing a portfolio of high-quality IIF traces to our founding principles, whereby we aim to help qualified individuals achieve their homeownership goals, ensure that we remain a strong and credible counter-party, deliver a unique customer service experience, establish a differentiated risk management approach that emphasizes the individual underwriting review or validation of the vast majority of the loans we insure, utilizing our proprietary Rate GPS ® pricing platform to dynamically evaluate risk and price our policies, and foster a culture of collaboration and excellence that helps us attract and retain experienced industry leaders.
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Our common stock trades on the NASDAQ under the symbol "NMIH." Our headquarters is located in Emeryville, California.
−Removed: As of March 31, 2021, we had 250 employees.
+Added: As of June 30, 2021, we had 251 employees.
Our corporate website is located at www.nationalmi.com .
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On January 30, 2020, the WHO declared the outbreak of COVID-19 a global health emergency and subsequently characterized the outbreak as a global pandemic on March 11, 2020.
−Removed: In an effort to stem contagion and control the COVID-19 pandemic, the population at large severely curtailed day-to-day activity and local, state and federal regulators imposed a broad set
−Removed: of restrictions on personal and business conduct nationwide.
+Added: In an effort to stem contagion and control the COVID-19 pandemic, the population at large severely curtailed day-to-day activity and local, state and federal regulators imposed a broad set of restrictions on personal and business conduct nationwide.
The COVID-19 pandemic, along with the widespread public and regulatory response, caused a dramatic slowdown in U.S.
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In response to the COVID-19 outbreak and uncertainty that it introduced, we activated our disaster continuity program to ensure our employees were safe and able to manage our business without interruption.
−Removed: We pursued a broad series of capital and reinsurance transactions to bolster our balance sheet and expand our ability to serve our customers and their borrowers, and we updated our underwriting guidelines and policy pricing in consideration for the increased level of macroeconomic volatility.
+Added: We pursued a broad series of capital and reinsurance transactions to bolster our balance sheet and expand our ability to serve our customers and their borrowers, and we updated our underwriting guidelines and policy pricing in consideration of the increased level of macroeconomic volatility.
housing market demonstrated notable resiliency in the face of COVID stress, with significant purchase demand, record levels of mortgage origination activity and nationwide house price appreciation emerging shortly after the onset of the pandemic.
−Removed: More recently, the development of new vaccines and accelerating pace of the inoculation effort across the U.S.
−Removed: has allowed for the broad resumption of personal and business activity nationwide, and provided hope for a sharp economic rebound in 2021.
−Removed: While there is increased optimism that the acute health risk posed by and economic impact of COVID-19 has begun to recede, the pandemic continues to affect communities across the U.S.
+Added: More recently, the broad resumption of personal and business activity nationwide has prompted a sharp economic rebound and provided hope for a sustainable economic recovery.
+Added: While there is increased optimism that the acute economic impact of COVID-19 has begun to recede, the pandemic continues to affect communities across the U.S.
and poses significant risk globally.
−Removed: The path and pace of global economic recovery will depend, in large part, on the course of the virus, which itself remains unknown and subject to risk.
+Added: The path and pace of global economic recovery will depend, in large part, on the course of the virus (including the newly emergent Delta variant), which itself remains unknown and subject to risk.
Given this uncertainty, we are not able to fully assess or estimate the ultimate impact COVID-19 will have on the mortgage insurance market, our business performance or our financial position including our new business production, default and claims experience, and investment portfolio results at this time.
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Housing Market and Mortgage Insurance Industry
−Removed: housing market has demonstrated significant resiliency amidst the broader economic dislocation caused by the outbreak of COVID-19.
−Removed: Low interest rates have helped to support housing affordability, medical concerns and lifestyle preferences have driven people to move from densely populated urban areas to suburban communities where social distancing is more easily achieved, and shelter-in-place directives have reinforced the value of homeownership – all of which contributed to an influx of new home buyers, record levels of purchase demand, and nationwide house price appreciation.
+Added: housing market demonstrated significant resiliency amidst the broader economic dislocation caused by the outbreak of COVID-19.
+Added: Low interest rates helped to support housing affordability, medical concerns and lifestyle preferences drove people to move from densely populated urban areas to suburban communities where social distancing was more easily achieved, and shelter-in-place directives reinforced the value of homeownership – all of which contributed to an influx of new home buyers, record levels of purchase demand, and nationwide house price appreciation.
While the possibility remains that the housing market will soften, we believe the general strength of the market coming into the COVID-19 crisis and demonstrated resiliency thus far through the pandemic will help to mitigate the risk of a severe pullback.
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Purchase mortgage origination volume has increased significantly as factors related to the COVID-19 crisis have spurred significant incremental demand for homeownership.
−Removed: Refinancing origination volume has also grown dramatically as historically low mortgage rates, though rising in recent months, have created refinancing opportunities for a large number of existing borrowers.
+Added: Refinancing origination volume has also grown dramatically as historically low mortgage rates have created refinancing opportunities for a large number of existing borrowers.
Growth in total mortgage origination volume increases the addressable market for the U.S.
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Potential Impact on NMI's Business Performance and Financial Position
−Removed: We had 250 employees at March 31, 2021, including 112 who typically work at our corporate headquarters in Emeryville, CA and 138 who typically work from home in locations across the country.
+Added: We had 251 e mployees at June 30, 2021, including 86 who typically work at our corporate headquarters in Emeryville, CA and 165 who typically work from home in locations across the country.
In response to the COVID-19 outbreak, we activated our business continuity program and instituted additional work-from-home practices for our Emeryville-based staff.
We transitioned our operations seamlessly and have continued to positively engage with customers on a remote basis.
−Removed: Our IT environment, underwriting capabilities, policy servicing platform and risk architecture have continued without interruption, and our internal control environment are unchanged.
+Added: Our IT environment, underwriting capabilities, policy servicing platform and risk architecture have continued without interruption, and our internal control environment is unchanged.
We achieved this transition without incurring additional capital expenditures or operating expenses and we believe our current operating platform can continue to support our newly distributed needs for an extended period without further investment beyond that planned in the ordinary course.
−Removed: While the broad COVID vaccination effort and relaxation of local restrictions on indoor business operation may allow for a general resumption of in-office activity for our headquarters-based employees, the success of our remote work experience through the pandemic may cause us to offer increased flexibility for employees who prefer a full-time or part-time distributed engagement in the future.
−Removed: If we offer such flexibility and a large enough number of employees elect such an approach, our office and real estate needs could evolve.
+Added: While the broad COVID vaccination effort and relaxation of local restrictions on indoor business operation may allow for a general resumption of in-office activity for our headquarters-based employees, the success of our remote work experience through the pandemic has caused us to offer increased flexibility for employees who prefer a full-time or part-time distributed engagement.
+Added: If we continue to offer such flexibility and a large enough number of employees elect such an approach, our office and real estate needs could evolve.
New Business Production
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mortgage insurance market, as well as the continued expansion of our customer franchise.
−Removed: We wrote $26.4 billion of NIW during the three months ended March 31, 2021, up 134% compared to the three months ended March 31, 2020.
−Removed: While we currently expect our new business production will remain elevated, the potential onset of a new viral wave and rising case counts, reintroduction of broad-based shelter in place directives, increased unemployment or other potential outcomes related to COVID-19 could drive a moderation or decline in our volume going forward.
+Added: We wrote $22.8 billion of NIW during the three months ended June 30, 2021, up 73% compared to the three months ended June 30, 2020.
+Added: While we currently expect our new business production will remain elevated, the emergence of the Delta variant and potential onset of a new viral wave could prompt a reintroduction of broad-based shelter in place directives, increased unemployment or other potentially negative economic and societal outcomes that could cause a moderation or decline in our volume going forward.
We have broadly defined underwriting standards and loan-level eligibility criteria that are designed to limit our exposure to higher risk loans, and have used Rate GPS to actively shape the mix of our new business production and insured portfolio by, among other risk factors, borrower FICO score, debt-to-income (DTI) ratio and LTV ratio.
In the weeks following the outbreak of COVID-19, we adopted changes to our underwriting guidelines, including changes to our loan documentation requirements, asset reserve requirements, employment verification process and income continuance determinations, that further strengthened the credit risk profile of our NIW volume and IIF.
−Removed: At March 31, 2021, the weighted average FICO score of our RIF was 754 and we had a 3% mix of below 680 FICO score risk.
−Removed: Similarly, at March 31, 2021, the weighted average LTV ratio (at origination) of our insured portfolio was 92.4% and we had a 10% mix of 97% LTV risk.
−Removed: We set our premium rates based on a broad range of individual and market variables, including property type, type of loan product, borrower credit characteristics, and lender profile.
−Removed: Given the significant economic dislocation caused by the COVID-19 outbreak, and the uncertain duration and ultimate global impact of this crisis, we took action to increase the premium rates we charge on all new business production, in accordance with our filed rates and applicable rating rules, following the onset of the pandemic.
+Added: At June 30, 2021, the weighted average FICO score of our RIF was 754 and we had a 3% mix of below 680 FICO score risk.
+Added: Similarly, at June 30, 2021, the weighted average LTV ratio (at origination) of our insured portfolio was 92.4% and we had a 10% mix of 97% LTV risk.
Delinquency Trends and Claims Expense
−Removed: At March 31, 2021, we had 11,090 defaulted loans in our primary insured portfolio, which represented a 2.5% default rate against our 436,652 total policies in-force, and identified 14,805 loans that were enrolled in a forbearance program, including 9,988 of those in default status.
+Added: At June 30, 2021 we had 8,764 defaulted loans in our primary insured portfolio, which represented a 1.86% default rate against our 471,794 total policies in-force, and identified 11,889 loans that were enrolled in a forbearance program, including 7,822 of those in default status.
Our default population increased significantly following the outbreak of the pandemic as borrowers faced increased challenges related to COVID-19 and chose to access the forbearance program for federally backed loans codified under the CARES Act or other similar assistance programs made available by private lenders.
After this significant initial spike our default experience has steadily improved as an increasing number of impacted borrowers have cured their delinquencies, and fewer new defaults have emerged.
−Removed: Our total population of defaulted loans peaked in August 2020 and has since declined every month with consistency.
−Removed: As of April 30, 2021, our default population was 10,060, representing a 2.24% default rate.
+Added: Our total population of defaulted loans peaked in August 2020 and has declined every month since with consistency.
+Added: As of July 31, 2021, our default population was 8,277, representing a 1.73% default rate.
The table below highlights default and forbearance activity in our primary portfolio as of the dates indicated
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(2) Forbearance rate is calculated as the number of loans in forbearance divided by total polices in force.
−Removed: While we are encouraged by the decline in our forbearance and default populations and optimistic that we will see continued improvement as the stress of the COVID crisis recedes, a future viral wave could cause further social and economic dislocation and contribute to an increase in our forbearance and default counts in future periods.
+Added: While we are encouraged by the decline in our forbearance and default populations and optimistic that we will see continued improvement as the economic stress of the COVID crisis recedes, the emergence of the Delta variant or future viral waves could cause further social and economic dislocation and contribute to an increase in our forbearance and default counts in future periods.
We establish reserves for claims and allocated claim expenses when we are notified that a borrower is in default.
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Our reserve setting process considers the beneficial impact of forbearance, foreclosure moratorium and other assistance programs available to defaulted borrowers.
−Removed: At March 31, 2021, we established lower reserves for defaults that we consider to be connected to the COVID-19 outbreak given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs.
+Added: At June 30, 2021, we established lower reserves for defaults that we consider to be connected to the COVID-19
+Added: outbreak given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs.
Our Master Policies require insureds to file a claim no later than 60-days after completion of a foreclosure, and in connection with the claim, the insured is generally entitled to include in the claim amount (i) up to three years of missed interest payments and (ii) certain advances, each as incurred through the date the claim is filed.
−Removed: Under our Master Policies, a national foreclosure moratorium of the type currently required will not limit the amount of accrued interest (subject to the three-year limit) or advances that may be included in the claim amount.
−Removed: In February, the GSEs extended their moratorium on the foreclosure of enterprise-backed single-family residential mortgages through June 30, 2021.
−Removed: If the duration of the current foreclosure moratorium mandated by the GSEs is further extended, loans in our default inventory, including those with defaults unrelated to the COVID-19 crisis that had not yet gone through foreclosure, may remain in a pre-foreclosure default status for a prolonged period of time, which would delay our receipt of certain claims for loans that do not cure and could increase the severity of claims we may ultimately be required to pay after the moratorium is lifted.
+Added: Under our Master Policies, a national foreclosure moratorium of the type currently required will not limit the amount of accrued interest (subject to the three-year limit) or advances that may be included in the claim amoun t.
+Added: In June, the GSEs extended their moratorium on the foreclosure of enterprise-backed single-family residential mortgages through September 30, 2021.
+Added: If the duration of the current foreclosure moratorium mandated by the GSEs is further extended, loans in our default inventory, in cluding those with defaults unrelated to the COVID-19 crisis that had not yet gone through foreclosure, may remain in a pre-foreclosure default status for a prolonged period of time, which would delay our receipt of certain claims for loans that do not cure and could increase the severity of claims we may ultimately be required to pay after the moratorium is lifted.
Regulatory Capital Position
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Under the PMIERs, we must maintain available assets that are equal to or exceed a minimum risk-based required asset amount, subject to a minimum floor of $400 million.
−Removed: At March 31, 2021, we reported $1,810 million available assets against $1,261 million risk-based required assets.
+Added: At June 30, 2021, we reported $1,887 million available assets against $1,171 million risk-based required assets.
Our “excess” funding position was $716 million.
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Non-performing loans that have missed two or more payments are generally assessed a significantly higher charge than performing loans, regardless of the underlying borrower or loan risk profile;
−Removed: however, special consideration is given under PMIERs to loans that are delinquent on homes located in an area declared by the Federal Emergency Management Agency (FEMA) to be a Major Disaster zone.
−Removed: In June 2020, the GSEs issued guidance (subsequently amended and restated in each of September and December 2020) on the risk-based treatment of loans affected by the COVID-19 crisis and the reporting of non-performing loans by aging category.
+Added: however, special consideration is given under PMIERs to loans that are delinquent on homes located in an area declared by the Federal Emergency Management Agency (FEMA) to be a Major Disaster zone eligible for Individual Assistance.
+Added: In June 2020, the GSEs issued guidance (subsequently amended and restated in each of September 2020, December 2020 and June 2021) on the risk-based treatment of loans affected by the COVID-19 crisis and the reporting of non-performing loans by aging category.
Under the guidance, non-performing loans that are subject to a forbearance program granted in response to a financial hardship related to COVID-19 will benefit from a permanent 70% risk-based required asset haircut for the duration of the forbearance period and subsequent repayment plan or trial modification period.
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To the extent our PMIERs risk-based required asset amount on RIF ceded under the ILN transactions grows, we receive increased PMIERs credit under the treaties.
−Removed: The increasing PMIERs credit we receive under the ILN treaties is further enhanced by their delinquency lockout triggers.
+Added: The increasing PMIERs credit we receive under the ILN treaties is further enhanced by their lockout triggers.
In the event of certain credit enhancement or delinquency events, the ILN notes stop amortizing and the cash held in trust is secured for our benefit (a Lock-Out Event).
As the underlying RIF continues to run-off, this has the effect of increasing the overcollateralization within, and excess PMIERs capacity provided by, each ILN structure.
−Removed: Effective June 25, 2020, a Lock-Out Event was deemed to have occurred for each of the 2017, 2018 and 2019 ILN Transactions and the amortization of reinsurance coverage, and distribution of collateral assets and amortization of insurance-linked notes was suspended for each ILN Transaction.
−Removed: The amortization of reinsurance coverage, distribution of collateral assets and amortization of insurance-linked notes will remain suspended for the duration of the Lock-Out Event for each ILN Transaction, and during such period the overcollateralization within and potential PMIERs capacity provided by each ILN Transaction will grow as assets are preserved in the applicable reinsurance trust account.
−Removed: The following table provides detail on the level of overcollateralization of each of our ILN Transactions at March 31, 2021:
+Added: A Lock-Out Event was deemed to have occurred, effective June 25, 2020 for each of the 2017, 2018 and 2019 ILN Transactions (related to the default experience of the underlying reference pools for each respective transaction) and at inception of the 2021-1 ILN Transaction (related to the initial build of its target credit enhancement), and the amortization of reinsurance coverage, and distribution of collateral assets and amortization of insurance-linked notes was suspended for each such ILN Transaction.
+Added: The amortization of reinsurance coverage, distribution of collateral assets and amortization of insurance-linked notes will remain suspended for the duration of the Lock-Out Event for each such ILN Transaction, and during such period the overcollateralization within and potential PMIERs capacity provided by each such ILN Transaction will grow as assets are preserved in the applicable reinsurance trust account.
+Added: The following table provides detail on the level of overcollateralization of each of our ILN Transactions at June 30, 2021:
($ values in thousands) 2017 ILN Transaction
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2019 ILN Transaction
−Removed: 2020-1 ILN Transaction 2020-2 ILN Transaction
+Added: 2020-1 ILN Transaction 2020-2 ILN Transaction 2021-1 ILN Transaction
Ceded RIF $ 1,409,721 $ 1,572,828 $ 1,848,885 $ 3,673,953 $ 5,133,512 $ 8,612,343
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Delinquency Trigger (3)
−Removed: (1) For the 2020-1 ILN Transaction, absent a delinquency trigger, the subordinated coverage is capped at 8%.
−Removed: For the 2020-2 ILN Transaction, absent a
−Removed: delinquency, the subordinated coverage is capped at 6.25%.
+Added: 6.0% 4.7% 4.6%
+Added: (1) Absent a delinquency trigger, the subordinated coverage is capped at 8.00%, 6.25% and 6.75% for the 2020-1, 2020-2 and 2021-1 ILN Transactions,
+Added: respectively.
(2) Overcollateralization of the 2017 ILN Transaction is equal to its current reinsurance coverage as the PMIERs required asset amount on RIF ceded under the transaction is currently below the remaining first layer retained loss.
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(4) May not be replicated based on the rounded figures presented in the table.
−Removed: At March 31, 2021, we had an aggregate $469 million of overcollateralization available across our ILN Transactions to absorb an increase in the PMIERs risk-based required asset amount on ceded RIF.
−Removed: Assuming the Lock-Out Events remain in effect for each of the 2017, 2018 and 2019 ILN Transactions and our underlying RIF continues to run-off at the same rate as it did during the three months ended March 31, 2021, we estimate that our total overcollateralization would increase by up to approximately $33.7 million per quarter.
+Added: At June 30, 2021, we had an aggregate $504 million of overcollateralization available across our ILN Transactions to absorb an increase in the PMIERs risk-based required asset amount on ceded RIF.
+Added: Assuming the Lock-Out Events remain in effect for each of the 2017, 2018 and 2019 ILN Transactions and our underlying RIF continues to run-off at the same rate as it did during the three months ended June 30, 2021, we estimate that our total overcollateralization would increase by up to approximately $29 million per quarter.
Our PMIERs funding requirement will go up in future periods based on the volume and risk profile of our new business production, and performance of our in-force insurance portfolio.
−Removed: We estimate, however, that we will remain in compliance with our PMIERs asset requirements even if the forbearance-driven default rate on our in-force portfolio materially exceeds its current level, given our $549 million excess available asset position at March 31, 2021, the nationwide applicability of the 70% haircut on delinquent policies subject to a forbearance program accessed in response to a financial hardship related to the COVID-19 crisis, the increasing PMIERs relief automatically provided under each of our quota share treaties and ILN Transactions.
+Added: We estimate, however, that we will remain in compliance with our PMIERs asset requirements even if the forbearance-driven default rate on our in-force portfolio materially exceeds its current level, given our $716 million excess available asset position at June 30, 2021, the nationwide applicability of the 70% haircut on delinquent policies subject to a forbearance program accessed in response to a financial hardship related to the COVID-19 crisis, and the increasing PMIERs relief automatically provided under each of our quota share treaties and ILN Transactions.
NMIC is also subject to state regulatory minimum capital requirements based on its RIF.
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We evaluate our liquidity position at both a holding company (NMIH) and primary operating subsidiary (NMIC) level.
−Removed: As of March 31, 2021, we had $1.9 billion of consolidated cash and investments, including $78 million of cash and investments at NMIH.
+Added: As of June 30, 2021, we had $2.1 billion of consolidated cash and investments, including $81 million of cash and investments at NMIH.
On June 8, 2020, NMIH completed the sale of 15.9 million shares of common stock, including the exercise of a 15% overallotment option, and raised proceeds of approximately $220 million, net of underwriting discounts, commissions and other direct offering expenses.
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NMIH also has access to $110 million of undrawn revolving credit capacity (through the 2020 Revolving Credit Facility) and $1.6 million of ordinary course dividend capacity available from Re One without the prior approval of the Wisconsin OCI.
−Removed: Amounts drawn under the 2020 Revolving Credit Facility are available as directed for NMIH needs or may be down-streamed to
−Removed: support the requirements of our operating subsidiaries if we so decide.
+Added: Amounts drawn under the 2020 Revolving Credit Facility are available as directed for NMIH needs or may be down-streamed to support the requirements of our operating subsidiaries if we so decide.
Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4, Debt.
NMIH's principal liquidity demands include funds for the payment of (i) certain corporate expenses, (ii) certain reimbursable expenses of our insurance subsidiaries, including NMIC, and (iii) principal and interest as due on our outstanding debt.
−Removed: NMIH generates cash interest income on its investment portfolio and benefits from tax, expense-sharing and debt service agreements with its subsidiaries.
+Added: NMIH generates cash interest income on its investment portfolio, receives cash proceeds upon the exercise of outstanding stock options, and benefits from tax, expense-sharing and debt service agreements with its subsidiaries.
Such agreements have been approved by the Wisconsin OCI and provide for the reimbursement of substantially all of NMIH's annual cash expenditures.
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NMIC's principal sources of liquidity include (i) premium receipts on its insured portfolio and new business production, (ii) interest income on its investment portfolio and principal repayments on maturities therein, and (iii) existing cash and cash equivalent holdings.
−Removed: At March 31, 2021, NMIC had $1.8 billion of cash and investments, including $86 million of cash and equivalents.
+Added: At June 30, 2021, NMIC had $1.9 billion of cash and investments, including $48 million of cash and equivalents.
NMIC's principal liquidity demands include funds for the payment of (i) reimbursable holding company expenses, (ii) premiums ceded under our reinsurance transactions (iii) claims payments, and (iv) taxes as due or otherwise deferred through the purchase of tax and loss bonds.
NMIC's cash inflow is generally significantly in excess of its cash outflow in any given period.
−Removed: During the twelve-month period ended March 31, 2021, NMIC generated $283 million of cash flow from operations and received an additional $327 million of cash flow on the maturity, sale and redemption of securities held in its investment portfolio.
+Added: During the twelve-month period ended June 30, 2021, NMIC generated $300 million of cash flow from operations and received an additional $150 million of cash flow on the maturity, sale and redemption of securities held in its investment portfolio.
NMIC is not a party to any contracts (derivative or otherwise) that require it to post an increasing amount of collateral to any counterparty and NMIC's principal liquidity demands (other than claims payments) generally develop along a scheduled path ( i.e.
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Loan servicers are contractually obligated to advance mortgage insurance premiums in a timely manner, even if the underlying borrowers fail to remit their monthly mortgage payments.
−Removed: In June 2020, the GSEs issued guidance to the PMIERs (subsequently amended and restated in each of September and December 2020) that, among other items, requires us to notify them of our intent to cancel coverage on policies for which servicers have failed to make timely premium payments so that the GSEs can pay the premiums directly to us and preserve the mortgage insurance coverage.
−Removed: Through March 31, 2021, we did not see any notable changes in servicer payment practices, with servicers generally continuing to remit monthly premium payments as scheduled, including those for policies covering loans that are in a forbearance program.
+Added: In June 2020, the GSEs issued guidance to the PMIERs (subsequently amended and restated in each of September 2020, December 2020 and June 2021) that, among other items, requires us to notify them of our intent to cancel coverage on policies for which servicers have failed to make timely premium payments so that the GSEs can pay the premiums directly to us and preserve the mortgage insurance coverage.
+Added: Through June 30, 2021, we did not see any notable changes in servicer payment practices, with servicers generally continuing to remit monthly premium payments as scheduled, including those for policies covering loans that are in a forbearance program.
Investment portfolio
−Removed: At March 31, 2021, we had $1.9 billion of cash and invested assets.
+Added: At June 30, 2021, we had $2.1 billion of cash and invested assets.
Our investment strategy equally prioritizes capital preservation alongside income generation, and we have a long-established investment policy that sets conservative limits for asset types, industry sectors, single issuers and instrument credit ratings.
−Removed: At March 31, 2021, our investment portfolio was comprised of 100% fixed income assets with 100% of our holdings rated investment grade and our portfolio having an average rating of "A+." At March 31, 2021, our portfolio was in a $16 million aggregate unrealized gain position;
+Added: At June 30, 2021, our investment portfolio was comprised of 100% fixed income assets with 100% of our holdings rated investment grade and our portfolio having an average rating of "A+." At June 30, 2021, our portfolio was in a $40 million aggregate unrealized gain position;
it was highly liquid and highly diversified with no Level 3 asset positions and no single issuer concentration greater than 1.4%.
−Removed: We did not record any allowance for credit losses in the portfolio during the three months ended March 31, 2021, as we expect to recover the amortized cost basis of all securities held.
−Removed: The pre-tax book yield on our investment portfolio was 2.0% for the three months ended March 31, 2021.
+Added: We did not record any allowance for credit losses in the portfolio during the three months ended June 30, 2021, as we expect to recover the amortized cost basis of all securities held.
+Added: The pre-tax book yield on our investment portfolio was 2.0% for the three months ended June 30, 2021.
At the onset of the COVID-19 crisis, we decided to prioritize liquidity and increased our cash and equivalent holdings as a percentage of our total portfolio.
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We have since redeployed much of our excess liquidity position.
−Removed: The CARES Act, CAA and American Rescue Plan include, among other items, provisions relating to refundable payroll tax credits, deferment of social security payments, net operating loss carryback periods, alternative minimum tax credit refunds,
−Removed: modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, technical corrections to tax depreciation methods for qualified improvement property, and temporary 100% deduction for business meals.
+Added: The CARES Act, CAA and American Rescue Plan include, among other items, provisions relating to refundable payroll tax credits, deferment of social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, technical corrections to tax depreciation methods for qualified improvement property, and temporary 100% deduction for business meals.
We continue to monitor the impact that the CARES Act, CAA and American Rescue Plan may have on our business, financial condition and results of operations.
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For single premiums, we receive a single premium payment at origination, which is earned over the estimated life of the policy.
−Removed: Substantially all of our single premium policies in force as of March 31, 2021 were non-refundable under most cancellation scenarios.
+Added: Substantially all of our single premium policies in force as of June 30, 2021 were non-refundable under most cancellation scenarios.
If non-refundable single premium policies are canceled, we immediately recognize the remaining unearned premium balances as earned premium revenue.
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Prepayment speeds and the relative mix of business between single and monthly premium policies also impact our profitability.
−Removed: rates include certain assumptions regarding repayment or prepayment speeds of the mortgages underlying our policies.
+Added: Our premium rates include certain assumptions regarding repayment or prepayment speeds of the mortgages underlying our policies.
Because premiums are paid at origination on single premium policies and our single premium policies are generally non-refundable on cancellation, assuming all other factors remain constant, if single premium loans are prepaid earlier than expected, our profitability on these loans is likely to increase and, if loans are repaid slower than expected, our profitability on these loans is likely to decrease.
17 unchanged sentences
Under the terms of the 2020 QSR Transaction, NMIC cedes premiums earned related to 21% of the risk on eligible policies written from April 1, 2020 through December 31, 2020, in exchange for reimbursement of ceded claims and claim expenses on covered po licies, a 20% ceding commission, and a profit commission of up to 50% that varies directly and inversely with ceded claims.
−Removed: Under the terms of the 2021 QSR Transaction, NMIC cedes premiums earned related to 22.5% of the risk on eligible policies written in 2021, in exchange for reimbursement of ceded claims and claim expenses on covered po licies, a 20% ceding commission, and a profit commission of up to 57.5% that varies directly and inversely with ceded claims.
+Added: Under the terms of the 2021 QSR Transaction, NMIC cedes premiums earned related to 22.5% of the risk on eligible policies written in 2021 (subject to an aggregate risk written limit), in exchange for reimbursement of ceded claims and claim expenses on covered po licies, a 20% ceding commission, and a profit commission of up to 57.5% that varies directly and inversely with ceded claims.
NMIC may elect to terminate its engagement with individual reinsurers on a run-off basis ( i.e., reinsurers continue providing coverage on all risk ceded prior to the termination date, with no new cessions going forward) or cut-off basis ( i.e., the reinsurance arrangement is completely terminated with NMIC recapturing all previously ceded risk) under certain circumstances.
3 unchanged sentences
With this termination, ceded premiums written under the 2016 QSR Transaction decreased from 25% to 20.5% on eligible policies.
−Removed: The termination had no effect on the cession
−Removed: of pool risk under the 2016 QSR Transaction.
+Added: The termination had no effect on the cession of pool risk under the 2016 QSR Transaction.
Excess-of-loss reinsurance
−Removed: NMIC has secured aggregate excess-of-loss reinsurance coverage on defined portfolios of mortgage insurance policies written during discrete periods through a series of mortgage insurance-linked note offerings by the Oaktown Re Vehicles.
+Added: NMIC is party to reinsurance agreements with the Oaktown Re Vehicles that provide it with aggregate excess-of-loss reinsurance coverage on defined portfolios of mortgage insurance policies.
Under each agreement, NMIC retains a first layer of aggregate loss exposure on covered policies and the respective Oaktown Re Vehicle then provides second layer loss protection up to a defined reinsurance coverage amount.
3 unchanged sentences
The outstanding reinsurance coverage amounts stop amortizing, and the collateral distribution to ILN Transaction note-holders and amortization of insurance-linked note principal is suspended if certain credit enhancement or delinquency thresholds, as defined in each agreement, are triggered (each, a Lock-Out Event).
−Removed: Effective June 25, 2020, a Lock-Out Event was deemed to have occurred for each of the 2017, 2018 and 2019 ILN Transactions and the amortization of reinsurance coverage, and distribution of collateral assets and amortization of insurance-linked notes was suspended for each ILN Transaction.
+Added: A Lock-Out Event was deemed to have occurred, effective June 25, 2020 for each of the 2017, 2018 and 2019 ILN Transactions (related to the default experience of the underlying reference pools for each respective transaction) and at inception of the 2021-1 ILN Transaction (related to the initial build of its target credit enhancement), and the amortization of reinsurance coverage, and distribution of collateral assets and amortization of insurance-linked notes was suspended for each ILN Transaction.
The amortization of reinsurance coverage, distribution of collateral assets and amortization of insurance-linked notes will remain suspended for the duration of the Lock-Out Event for each ILN Transaction, and during such period assets will be preserved in the applicable reinsurance trust account to collateralize the excess-of-loss reinsurance coverage provided to NMIC.
The following table presents the inception date, covered production p eriod, initial and current reinsurance coverage amount, and initial and current first layer retained aggregate loss under each of the ILN Transactions.
−Removed: Current amounts are presented as of March 31, 2021.
+Added: Current amounts are presented as of June 30, 2021.
( $ values in thousands)
6 unchanged sentences
242,351 205,846 121,777 121,177
−Removed: (1) NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure, and cedes reserves for incurred claims and claims expenses to each applicable ILN Transaction and recognizes a reinsurance recoverable if such incurred claims and claims expense s exceed its current first layer retained loss.
−Removed: (2) Less than 1% of the production covered by the 2020-2 ILN Transaction has coverage reporting dates between July 1, 2019 and March 31, 2020.
+Added: 2021-1 ILN Transaction (4)
+Added: April 27, 2021 10/1/2020 - 3/31/2021 (3)
+Added: 367,238 367,238 163,708 163,708
+Added: (1) NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure, and cedes reserves for incurred claims and claims
+Added: expenses to each applicable ILN Transaction and recognizes a reinsurance recoverable if such incurred claims and claims expenses exceed its current
+Added: first layer retained loss.
+Added: (2) Approximately 1% of the production covered by the 2020-2 ILN Transaction has coverage reporting dates between July 1, 2019 and March 31, 2020.
+Added: (3) Approximately 1% of the production covered by the 2021-1 ILN Transaction has coverage reporting dates between July 1, 2019 and September 30,
+Added: (4) As of June 30, 2021, the current reinsurance coverage amount on the 2021-1 ILN transaction is equal to the initial reinsurance coverage, as the
+Added: reinsurance coverage provided by Oaktown Re will not decrease until its target credit enhancement is met.
See Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 5, Reinsurance " for further discussion of these third-party reinsurance arrangements.
−Removed: In April 27, 2021, NMIC secured $367.2 million of aggregate excess-of-loss reinsurance coverage at inception for an exi sting portfolio of policies primarily written from October 1, 2020 to March 31, 2021, through a mortgage insurance-linked notes offering by Oaktown Re VI.
−Removed: The reinsurance coverage amount under the terms of the 2021-1 ILN Transaction decreases from $367.2 million at inception over a 12.5 year period as the underlying covered mortgages are amortized or repaid, and/or the mortgage insurance coverage is canceled.
−Removed: The outstanding reinsurance coverage amount will begin amortizing after an initial period in which a target level of credit enhancement is obtained.
−Removed: For the reinsurance coverage period, NMIC retains the first layer of $163.7 million of aggregate losses and Oaktown Re VI then provides second layer coverage up to the outstanding reinsurance coverage amount.
−Removed: NMIC then retains losses in excess of the outstanding reinsurance coverage amount.
Portfolio Data
1 unchanged sentence
Unless otherwise noted, the tables below do not include the effects of our third-party reinsurance arrangements described above.
−Removed: Primary and pool IIF and NIW As of and for the three months ended
−Removed: March 31, 2021 March 31, 2020
−Removed: IIF NIW IIF NIW
+Added: Primary and pool IIF and NIW As of and for the three months ended For the six months ended
+Added: June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
+Added: IIF NIW IIF NIW NIW
(In Millions)
4 unchanged sentences
Total $ 138,058 $ 22,751 $ 101,245 $ 13,124 $ 49,148 $ 24,421
−Removed: For the three months ended March 31, 2021, NIW increased 134%, compared to the three months ended March 31, 2020, due to growth in our monthly and single premium policy production tied to growth in the size of the total mortgage insurance market, as well as the increased penetration of existing customer accounts and new customer account activations.
−Removed: For the three months ended March 31, 2021, monthly premium polices accounted for 90% of our NIW, compared to 93% for the three months ended March 31, 2020.
−Removed: As of March 31, 2021, monthly premium policies accounted for 86% of our primary IIF, compared to 83% at March 31, 2020.
−Removed: Total IIF increased 24% at March 31, 2021 compared to March 31, 2020, primarily due to the NIW generated between such measurement dates, partially offset by the run-off of in-force policies.
−Removed: Our persistency rate decreased to 52% at March 31, 2021 from 72% at March 31, 2020, reflecting the impact of increased refinancing activity tied to record low interest rates.
+Added: For the three and six months ended June 30, 2021, NIW increased 73% and 101%, respectively, compared to the three and six months ended June 30, 2020, driven by growth in our monthly and single premium policy production tied to the increased penetration of existing customer accounts and new customer account activations, as well as growth in the size of the total mortgage insurance market.
+Added: For the three months ended June 30, 2021, monthly premium polices accounted for 85% of our NIW, compared to 91% for the three months ended June 30, 2020.
+Added: As of June 30, 2021, monthly premium policies accounted for 86% of our primary IIF, compared to 84% at June 30, 2020.
+Added: Total IIF increased 36% at June 30, 2021 compared to June 30, 2020, primarily due to the NIW generated between such measurement dates, partially offset by the run-off of in-force policies.
+Added: Our persistency rate decreased to 54% at June 30, 2021 from 64% at June 30, 2020, reflecting the impact of increased refinancing activity during the intervening twelve-month period.
The following table presents net premiums written and earned for the periods indicated.
−Removed: Primary and pool premiums written and earned For the three months ended
−Removed: March 31, 2021 March 31, 2020
+Added: Primary and pool premiums written and earned For the three months ended For the six months ended
+Added: June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
(In Thousands)
1 unchanged sentence
Net premiums earned 110,888 98,944 216,767 197,661
−Removed: For the three months ended March 31, 2021, net premiums written increased 27%, and net premiums earned increased 7%, compared to the three months ended March 31, 2020.
+Added: For the three and six months ended June 30, 2021, net premiums written increased 41% and 34%, respectively, and net premiums earned increased 12% and 10%, respectively, compared to the three and six months ended June 30, 2020.
The growth in net premiums written and earned were primarily due to the growth of our IIF and increased monthly policy production, partially offset by increased cessions under the QSR and ILN Transactions.
−Removed: The accelerated rate of growth in net premiums written over growth in net premiums earned is due to increase in single policy production and increase in earnings on cancellations during the three months ended March 31, 2021.
−Removed: Pool premiums written and earned for the three months ended March 31, 2021 and 2020, were $0.5 million and $0.7 million, respectively, before giving effect to the 2016 QSR Transaction, under which all of our written and earned pool premiums are ceded.
+Added: Net premiums written grew at an accelerated rate compared to net premiums earned due to an increase in the volume and mix of our single premium policy production and decline in the contribution of single premium policy cancellations during the three and six months ended June 30, 2021.
+Added: Pool premiums written and earned for the three and six months ended June 30, 2021 and 2020, were $0.4 million and $0.9 million, and $0.7 million and $1.4 million, respectively, before giving effect to the 2016 QSR Transaction, under which all of our written and earned pool premiums are ceded.
A portion of our ceded pool premiums written and earned are recouped through profit commission.
3 unchanged sentences
Primary portfolio trends As of and for the three months ended
−Removed: March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020
+Added: June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020
($ Values In Millions, except as noted below)
34 unchanged sentences
The table below presents a summary of the change in total primary IIF for the dates and periods indicated.
−Removed: Primary IIF For the three months ended
−Removed: March 31, 2021 March 31, 2020
+Added: Primary IIF For the three months ended For the six months ended
+Added: June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
(In Millions)
7 unchanged sentences
The table below presents a summary of our primary IIF and RIF by book year as of the dates indicated.
−Removed: Primary IIF and RIF As of March 31, 2021 As of March 31, 2020
+Added: Primary IIF and RIF As of June 30, 2021 As of June 30, 2020
IIF RIF IIF RIF
(In Millions)
−Removed: March 31, 2021 $ 26,296 $ 6,508 $ — $ —
+Added: June 30, 2021 $ 48,314 $ 11,986 $ — $ —
2020 51,100 12,792 23,949 6,039
12 unchanged sentences
We calculate the LTV of a loan as the percentage of the original loan amount to the original purchase value of the property securing the loan.
−Removed: Primary NIW by FICO For the three months ended
−Removed: March 31, 2021 March 31, 2020
+Added: Primary NIW by FICO For the three months ended For the six months ended
+Added: June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
(In Millions)
7 unchanged sentences
Weighted average FICO 754 762 755 760
−Removed: Primary NIW by LTV For the three months ended
−Removed: March 31, 2021 March 31, 2020
+Added: Primary NIW by LTV For the three months ended For the six months ended
+Added: June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
(In Millions)
5 unchanged sentences
Weighted average LTV 91.3 % 90.7 % 91.1 % 91.0 %
−Removed: Primary NIW by purchase/refinance mix For the three months ended
−Removed: March 31, 2021 March 31, 2020
+Added: Primary NIW by purchase/refinance mix For the three months ended For the six months ended
+Added: June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
(In Millions)
Purchase $ 18,911 $ 7,776 $ 36,820 $ 15,767
+Added: 3,840 5,348 12,328 8,654
Total $ 22,751 $ 13,124 $ 49,148 $ 24,421
1 unchanged sentence
Primary IIF by FICO As of
−Removed: March 31, 2021 March 31, 2020
+Added: June 30, 2021 June 30, 2020
($ Values In Millions)
7 unchanged sentences
Primary RIF by FICO As of
−Removed: March 31, 2021 March 31, 2020
+Added: June 30, 2021 June 30, 2020
($ Values In Millions)
7 unchanged sentences
Primary IIF by LTV As of
−Removed: March 31, 2021 March 31, 2020
+Added: June 30, 2021 June 30, 2020
($ Values In Millions)
5 unchanged sentences
Primary RIF by LTV As of
−Removed: March 31, 2021 March 31, 2020
+Added: June 30, 2021 June 30, 2020
($ Values In Millions)
5 unchanged sentences
Primary RIF by Loan Type As of
−Removed: March 31, 2021 March 31, 2020
+Added: June 30, 2021 June 30, 2020
Fixed 99 % 98 %
3 unchanged sentences
Total 100 % 100 %
−Removed: The table below presents selected primary portfolio statistics, by book year, as of March 31, 2021.
−Removed: As of March 31, 2021
+Added: The table below presents selected primary portfolio statistics, by book year, as of June 30, 2021.
+Added: As of June 30, 2021
Book Year Original 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)
17 unchanged sentences
The following table shows the distribution by state of our primary RIF as of the periods indicated.
−Removed: The distribution of our primary RIF as of March 31, 2021 is not necessarily representative of the geographic distribution we expect in the future.
+Added: The distribution of our primary RIF as of June 30, 2021 is not necessarily representative of the geographic distribution we expect in the future.
Top 10 primary RIF by state As of
−Removed: March 31, 2021 March 31, 2020
+Added: June 30, 2021 June 30, 2020
California 10.3 % 11.3 %
28 unchanged sentences
Our reserve setting process considers the beneficial impact of forbearance, foreclosure moratorium and other assistance programs available to defaulted borrowers.
−Removed: We generally observe that forbearance programs are an effective tool to bridge
−Removed: dislocated borrowers from a time of acute stress to a future date when they can resume timely payment of their mortgage obligations.
+Added: We generally observe that forbearance programs are an effective tool to bridge dislocated borrowers from a time of acute stress to a future date when they can resume timely payment of their mortgage obligations.
The effectiveness of forbearance programs is enhanced by the availability of various repayment and loan modification options which allow borrowers to amortize or, in certain instances, outright defer payments otherwise due during the forbearance period over an extended length of time.
1 unchanged sentence
The FHFA and GSEs have offered further assistance by introducing new repayment and loan modification options to assist borrowers with their transition out of forbearance programs and default status.
−Removed: At March 31, 2021, we established lower reserves for defaults that we consider to be connected to the COVID-19 outbreak, given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs.
+Added: At June 30, 2020 and 2021, we established lower reserves for defaults that we consider to be connected to the COVID-19 outbreak, given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs.
The following table provides a reconciliation of the beginning and ending gross reserve balances for primary insurance claims and claim expenses.
−Removed: For the three months ended
−Removed: March 31, 2021 March 31, 2020
+Added: For the three months ended For the six months ended
+Added: June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
(In Thousands)
6 unchanged sentences
Current year (2)
+Added: 5,069 34,958 15,626 42,516
Prior years (3)
5 unchanged sentences
Prior years (3)
+Added: 548 1,985 1,040 3,209
Total claims and claim expenses paid 548 2,024 1,052 3,248
1 unchanged sentence
Add reinsurance recoverables (1)
+Added: 19,726 14,307 19,726 14,307
Ending balance $ 101,235 $ 69,903 $ 101,235 $ 69,903
3 unchanged sentences
For example, if a loan had defaulted in a prior year and subsequently cured and later re-defaulted in the current year, that default would be included in the current year.
−Removed: Amounts are presented net of reinsurance and included $5.3 million attributed to net case reserves and $5.3 million attributed to net IBNR reserves for the three months ended March 31, 2021 and $6.0 million attributed to net case reserves and $1.6 million attributed to net IBNR reserves for the three months ended March 31, 2020.
+Added: Amounts are presented net of reinsurance and included $9.8 million attributed to net case reserves and $5.6 million attributed to net IBNR reserves for the six months ended June 30, 2021 and $34.7 million attributed to net case reserves and $7.1 million attributed to net IBNR reserves for the six months ended June 30, 2020.
(3) Related to insured loans with defaults occurring in prior years, which have been continuously in default before the start of the current year.
−Removed: Amounts are presented net of reinsurance.and included $0.6 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the three months ended March 31, 2021 and $0.6 million attributed to net case reserves and $1.3 million attributed to net IBNR reserves for the three months ended March 31, 2020
+Added: Amounts are presented net of reinsurance and included $1.1 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the six months ended June 30, 2021 and $1.1 million attributed to net case reserves and $1.3 million attributed to net IBNR reserves for the six months ended June 30, 2020.
The "claims incurred" section of the table above shows claims and claim expenses incurred on defaults occurring in current and prior years, including IBNR reserves and is presented net of reinsurance.
We may increase or decrease our claim estimates and reserves as we learn additional information about individual defaulted loans, and continue to observe and analyze loss development trends in our portfolio.
−Removed: Gross reserves of $83.0 million related to prior year defaults remained as of March 31, 2021.
+Added: Gross reserves of $81.8 million related to prior year defaults remained as of June 30, 2021.
The following table provides a reconciliation of the beginning and ending count of loans in default.
−Removed: For the three months ended
−Removed: March 31, 2021 March 31, 2020
+Added: For the three months ended For the six months ended
+Added: June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Beginning default inventory 11,090 1,449 12,209 1,448
4 unchanged sentences
Ending default inventory 8,764 10,816 8,764 10,816
−Removed: The increase in the ending default inventory at March 31, 2021 compared to March 31, 2020, is primarily attributable to the COVID-19 outbreak as borrowers have faced increasing challenges and chosen to access the forbearance program for federally backed loans codified under the CARES Act and other similar assistance programs made available by private lenders.
−Removed: At March 31, 2021, 9,988 of our 11,090 ending default inventory were in a COVID-19 related forbearance program.
+Added: Ending default inventory declined from June 30, 2020 to June 30, 2021 as an increased number of borrowers impacted by the COVID-19 pandemic cured their delinquencies, and fewer new defaults emerged as the acute economic stress of the pandemic crisis began to recede.
+Added: While our default population declined from June 30, 2020 to June 30, 2021, our default inventory remains elevated compared to historical experience due to the continued challenges certain borrowers are facing related to the COVID-19 outbreak and their decision to access the forbearance program for federally backed loans codified under the Coronavirus Aid, Relief and Economic Security (CARES) Act or similar programs made available by private lenders.
+Added: As of June 30, 2021, 7,822 of our 8,764 defaulted loans were in a COVID-19 related forbearance program.
The following table provides details of our claims paid, before giving effect to claims ceded under the QSR Transactions and ILN Transactions, for the periods indicated.
−Removed: For the three months ended
−Removed: March 31, 2021 March 31, 2020
+Added: For the three months ended For the six months ended
+Added: June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
($ In Thousands)
2 unchanged sentences
Average amount paid per claim
−Removed: (1) Count include s one claim settled without payment in each of the three months ended March 31, 2021 and 2020.
+Added: $ 37 $ 53 $ 37 $ 49
+Added: 66 % 89 % 64 % 87 %
+Added: (1) Count include s three and four claims settled without payment during the three and six months ended June 30, 2021, respectively, and one and two claims settled without payment during the three and six months ended 2020, 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.
−Removed: The number of claims paid for the three months ended March 31, 2021 decreased compared to the three months ended March 31, 2020, despite the growth and seasoning of our insured portfolio, and significant increase in our default population, primarily as a result of the forbearance program and foreclosure moratorium implemented by the GSEs in response to the COVID outbreak and codified under the CARES Act.
+Added: The number of claims paid during the three and six months ended June 30, 2021 decreased compared to the three and six months ended June 30, 2020, despite the growth and seasoning of our insured portfolio, and elevated level of defaults (compared to pre-COVID historical experience), primarily as a result of the forbearance program and foreclosure moratorium implemented by the GSEs in response to the COVID outbreak and codified under the CARES Act.
Such forbearance and foreclosure programs have extended, and may ultimately interrupt, the timeline over which loans would otherwise progress through the default cycle to a paid claim.
−Removed: Our claims severity for the three months ended March 31, 2021 was 61%, compared to 83% for the three months ended March 31, 2020.
−Removed: Claims severity for the three months ended March 31, 2021 benefited from the resiliency of the housing market and broad national house price appreciation.
+Added: Our claims severity for the three and six months ended June 30, 2021 was 66% and 64%, respectively, compared to 89% and 87% for the three and six months ended June 30, 2020, respectively.
+Added: Claims severity for the three and six months ended June 30, 2021 benefited from the resiliency of the housing market and broad national house price appreciation.
An increase in the value of the homes collateralizing the mortgages we insure provides additional equity support to our risk exposure and raises the prospect of a third-party sale of a foreclosed property, which can mitigate the severity of our settled claims.
1 unchanged sentence
Average reserve per default:
−Removed: As of March 31, 2021 As of March 31, 2020
+Added: As of June 30, 2021 As of June 30, 2020
(In Thousands)
2 unchanged sentences
(2) Amount includes claims adjustment expenses.
−Removed: The average reserve per default at March 31, 2021 decreased from March 31, 2020, primarily due to new COVID-19 related defaults.
−Removed: At March 31, 2021, we established lower reserves that we consider to be connected to the COVID-19 outbreak given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs.
−Removed: While we established lower reserves per defaulted loan at March 31, 2021, our total reserve position increased substantially due to the increase in the size of our default population.
+Added: Average reserve per default increased from June 30, 2020 to June 30, 2021, primarily due to the “aging” of early COVID-related defaults.
+Added: While we have established lower reserves for defaults that we consider to be connected to the COVID-19 outbreak given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs, we have generally increased such reserves over time as individual defaults remain outstanding or “age.” The growth in our average reserve per default from June 30, 2020 to June 30, 2021 far exceeded the growth in our aggregate gross reserve position in the intervening period as the impact of the increase in our average reserve per default was largely offset by the decline in our total default inventory.
GSE Oversight
13 unchanged sentences
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.
−Removed: March 31, 2021 March 31, 2020
+Added: June 30, 2021 June 30, 2020
(In Thousands)
1 unchanged sentence
Risk-based required assets 1,170,854 1,047,619
−Removed: Available assets were $1.8 billion at March 31, 2021, compared to $1.1 billion at March 31, 2020.
−Removed: In June 2020, NMIH completed the sale of 15.9 million shares of common stock raising net proceeds of approximately $220 million and the sale of the $400 million aggregate principal amount of senior secured notes.
−Removed: N MIH contributed approximately $445 million of capital to NMIC following completion of the Notes and equity offerings.
−Removed: The $740 million increase in NMIC's available assets between the dates presented was driven by the NMIH capital contribution and NMIC's positive cash flow from operations during the intervening period.
−Removed: The increase in the risk-based required asset amount between the dates presented was primarily due to the growth of our gross RIF, and increase in our default inventory related to the onset of the COVID-19 pandemic, p artially offset by the increased cession of risk under our third-party reinsurance agreements.
−Removed: See " - COVID-19 Developments, " above.
+Added: Available assets were $1.9 billion at June 30, 2021, compared to $1.7 billion at June 30, 2020.
+Added: The $231 million increase in available assets between the dates presented was primarily driven by NMIC's positive cash flow from operations during the intervening period.
+Added: The increase in the risk-based required asset amount between the dates presented was primarily due to the growth of our gross RIF, p artially offset by an increase in the risk ceded under our third-party reinsurance agreements.
The MI industry is highly competitive and currently consists of six private mortgage insurers, including NMIC, as well as government MIs such as the FHA, USDA or VA.
2 unchanged sentences
The private MI industry overall competes more broadly with government MIs who significantly increased their share in the MI market following the 2008 Financial Crisis.
−Removed: Although there has been broad policy consensus toward the need for
−Removed: increasing private capital participation and decreasing government exposure to credit risk in the U.S.
+Added: Although there has been broad policy consensus toward the need for increasing private capital participation and decreasing government exposure to credit risk in the U.S.
housing finance system, it remains difficult to predict whether the combined market share of government MIs will recede to pre-2008 levels.
8 unchanged sentences
Consolidated Results of Operations
−Removed: Consolidated statements of operations Three months ended
−Removed: March 31, 2021 March 31, 2020
+Added: Consolidated statements of operations Three months ended Six months ended
+Added: June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Revenues ($ in thousands, except for per share data)
1 unchanged sentence
Net investment income 9,382 7,070 18,196 15,174
−Removed: Net realized investment losses — (72)
+Added: Net realized investment gains 12 711 12 639
Other revenues 483 1,223 984 2,123
4 unchanged sentences
Interest expense 7,922 5,941 15,837 8,685
−Removed: Loss (gain) from change in fair value of warrant liability 205 (5,959)
+Added: (Gain) loss from change in fair value of warrant liability (658) 1,236 (453) (4,723)
Total expenses 47,110 72,971 94,848 108,464
5 unchanged sentences
Loss ratio (1)
+Added: 4.2 % 34.7 % 4.4 % 20.3 %
Expense ratio (2)
1 unchanged sentence
Combined ratio (3)
−Removed: Three months ended
+Added: 35.5 % 65.4 % 36.2 % 51.9 %
+Added: Three months ended Six months ended
Non-GAAP financial measures (4)
−Removed: March 31, 2021 March 31, 2020
+Added: June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
($ in thousands, except for per share data)
4 unchanged sentences
(2) Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
+Added: (3) Combined ratio may not foot due to rounding
(4) See " Explanation and Reconciliation of Our Use of Non-GAAP Financial Measures, " below.
−Removed: Net premiums earned were $105.9 million for the three months ended March 31, 2021 compared to $98.7 million for the three months ended March 31, 2020.
−Removed: The increase from period-to-period was primarily due to the growth of our IIF, a rise in our monthly policy production and higher single premium policy cancellations, partially offset by increased cessions under our QSR and ILN Transactions.
−Removed: Net investment income was $8.8 million for the three months ended March 31, 2021 compared to $8.1 million for the three months ended March 31, 2020.
−Removed: The increase was driven by growth in the size of our total investment portfolio, partially
−Removed: offset by a decline in book yield tied to the prevailing interest rate and credit spread environment.
−Removed: Other revenues were $0.5 million for the three months ended March 31, 2021, compared to $0.9 million for the three months ended March 31, 2020.
+Added: Net premiums earned were $110.9 million and $216.8 million for the three and six months ended June 30, 2021, respectively, compared to $98.9 million and $197.7 million for the three and six months ended June 30, 2020, respectively.
+Added: The year-on-year increase in net premiums earned in each respective period was primarily driven by the growth of our IIF, partially offset by an increase in cessions made under our QSR and ILN Transactions, and a decline in the contribution from single premium policy cancellations.
+Added: Net investment income was $9.4 million and $18.2 million for the three and six months ended June 30, 2021,
+Added: respectively, compared to $7.1 million and $15.2 million for the three and six months ended June 30, 2020, respectively.
+Added: The year-on-year increase in net investment income in each respective period was driven by growth in the size of our total investment portfolio, partially offset by a decline in book yield tied to the prevailing interest rate and credit spread environment.
+Added: Other revenues were $483 thousand and $1.0 million for the three and six months ended June 30, 2021, respectively, compared to $1.2 million and $2.1 million for the three and six months ended June 30, 2020, respectively.
Other revenues represent underwriting fee revenue generated by our subsidiary, NMIS, which provides outsourced loan review services to mortgage loan originators.
−Removed: The decline in other revenues relates to a decrease in NMIS' outsourced loan review volume.
+Added: The year-on-year decline in other revenues in each respective period relates to a decrease in NMIS' outsourced loan review volume.
Amounts recognized in other revenues generally correspond with amounts incurred as service expenses for outsourced loan review activities in the same periods.
1 unchanged sentence
We also incur service expenses in connection with NMIS' outsourced loan review activities.
−Removed: Insurance claims and claim expenses were $5.0 million for the three months ended March 31, 2021, compared to $5.7 million for the three months ended March 31, 2020.
−Removed: Insurance claims and claim expenses decreased period-to-period despite an increase in the number of new defaults reported during the three months ended March 31, 2021, primarily because we established lower reserves per default for loans that we consider to be impaired in connection with the COVID pandemic given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs.
−Removed: Insurance claims and claim expenses during the three months ended March 31, 2021 also benefited from cure activity and a release of reserves previously held against certain loans that defaulted prior to the onset of the COVID pandemic.
−Removed: Underwriting and operating expenses were $34.1 million for the three months ended March 31, 2021, compared to $32.3 million for the three months ended March 31, 2020.
−Removed: The increase primarily relates to the recognition of previously deferred policy acquisition costs taken in connection with in-force portfolio run-off, partially offset by reductions in payroll, travel and entertainment, and office administrative expenses as a result of the COVID-19 outbreak.
−Removed: Underwriting and operating expenses included capital market reinsurance transaction costs of $0.4 million and $0.5 million, for the three months ended March 31, 2021 and 2020, respectively.
−Removed: Service expenses were $0.6 million for the three months ended March 31, 2021, compared to $0.7 million for the three months ended March 31, 2020.
+Added: Insurance claims and claim expenses were $4.6 million and $9.6 million for the three and six months ended June 30, 2021, respectively, compared to $34.3 million and $40.0 million for the three and six months ended June 30, 2020, respectively.
+Added: The year-on-year decline in insurance claims and claim expenses in each respective period primarily reflects a significant decrease in the number of new defaults emerging on loans impacted by the COVID-19 outbreak.
+Added: Insurance claims and claim expenses during the three and six months ended June 30, 2021 also benefited from cure activity and a release of reserves previously held against certain loans that defaulted prior to the onset of the COVID pandemic.
+Added: Underwriting and operating expenses were $34.7 million and $68.8 million for the three and six months ended June 30, 2021, respectively, compared to $30.4 million and $62.6 million for the three and six months ended June 30, 2020.
+Added: The year-on-year increase in underwriting and operating expenses in each respective period primarily relates to the recognition of previously deferred policy acquisition costs taken in connection with in-force portfolio run-off, partially offset by reductions in payroll, travel and entertainment, and office administrative expenses as a result of the COVID-19 outbreak.
+Added: Underwriting and operating expenses included capital market reinsurance transaction costs of $1.6 million and $2.0 million, respectively, for the three months and six months ended June 30, 2021, and $2.8 million and $3.3 million, respectively, for the three and six months ended June 30, 2020.
+Added: Service expenses were $481 thousand and $1.1 million for the three and six months ended June 30, 2021, respectively, compared to $1.1 million and $1.8 million for the three and six months ended June 30, 2020, respectively.
Service expenses represent third-party costs incurred by NMIS in connection with the services it provides.
−Removed: The decline in service expenses was driven by a decrease in NMIS' outsourced loan review volume.
+Added: The year-on-year decline in service expenses in each respective period was driven by a decrease in NMIS' outsourced loan review volume.
Amounts incurred as service expenses generally correspond with amounts recognized in other revenues in the same periods.
−Removed: Interest expense was $7.9 million for the three months ended March 31, 2021 compared to $2.7 million for the three months ended March 31, 2020.
−Removed: Interest expense increased due to the increased amount and cost of our outstanding debt following the issuance of the $400 million Notes and retirement of the $150 million 2018 Term Loan in June 2020.
+Added: Interest expense was $7.9 million and $15.8 million for the three and six months ended June 30, 2021, respectively, compared to $5.9 million and $8.7 million for the three and six months ended June 30, 2020, respectively.
+Added: The year-on-year increase in interest expense in each respective period is due to the increased amount and cost of our outstanding debt following the issuance of the $400 million Notes and retirement of the $150 million 2018 Term Loan in June 2020.
See Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4, Debt.
−Removed: Income tax expense was $14.6 million for the three months ended March 31, 2021 compared to $13.9 million for the three months ended March 31, 2020.
−Removed: The increase in income tax expense was primarily driven by an increase in our effective tax rate.
+Added: Income tax expense was $16.1 million and $30.7 million for the three and six months ended June 30, 2021, respectively, compared to $8.1 million and $22.0 million for the three and six months ended June 30, 2020, respectively.
+Added: The year-on-year increase in income tax expense in each respective period was primarily driven by growth in our pre-tax income.
+Added: Our effective tax rate on pre-tax income was 21.9% and 21.8% for the three and six months ended June 30, 2021, respectively, compared to 23.2% and 20.5% for the three and six months ended June 30, 2020, respectively.
taxpayer, we are subject to a U.S.
1 unchanged sentence
Our provision for income taxes for interim periods is established based on our estimated annual effective tax rate for a given year and reflects the impact of discrete tax effects in the period in which they occur.
−Removed: Our effective tax rate on pre-tax income was 21.6% for the three months ended March 31, 2021, compared to 19.2% for the three months ended March 31, 2020.
−Removed: The increase in our effective tax rate period-to-period reflects a decrease in the discrete tax benefits realized during the three months ended March 31, 2021 from the change in the fair value of our warrant liability, and excess share-based compensation realized upon the vesting of RSUs and exercise of stock options.
+Added: Our effective tax rates for the three and six months ended June 30, 2021 and 2020 reflect the discrete tax effects of the vesting of RSUs and exercise of options, and the change in fair value of our warrant liability in each period.
See Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 9, Income Taxes."
−Removed: Net income was $52.9 million for the three months ended March 31, 2021 compared to $58.3 million for the three months ended March 31, 2020.
−Removed: Adjusted net income was $53.4 million for the three months ended March 31, 2021 compared to $52.7 million for the three months ended March 31, 2020.
−Removed: The decreases in net income from period-to-period was primarily driven by a shift in the impact of the change in the fair value of our warrant liability from a gain during the three months ended March 31, 2020 to a loss during the three months ended March 31, 2021.
−Removed: Our adjusted net income, which excludes the gain or
−Removed: loss associated with the change in the fair value of the warrant liability, increased during the three months ended March 31, 2021, driven by an increase in total revenues and decline in insurance claim and claim expenses, partially offset by an increase in our interest expense and effective tax rate.
−Removed: Diluted EPS was $0.61 for the three months ended March 31, 2021, compared to $0.74 for the three months ended March 31, 2020.
−Removed: Adjusted diluted EPS was $0.62 for the three months ended March 31, 2021, compared to $0.75 for the three months ended March 31, 2020.
−Removed: Diluted and adjusted diluted EPS decreased primarily due to an increase in weighted average diluted shares outstanding in connection with the issuance of 15.9 million shares of common stock we completed in June 2020.
+Added: Net income was $57.5 million and $110.4 million for the three and six months ended June 30, 2021, respectively, compared to $26.8 million and $85.1 million for the three and six months ended June 30, 2020, respectively.
+Added: Adjusted net income was $58.1 million and $111.5 million for the three and six months ended June 30, 2021, respectively, compared to $29.7 million and $82.5 million for the three and six months ended June 30, 2020, respectively.
+Added: The year-on-year increases in net income and adjusted net income in each respective period were primarily driven by growth in our total revenues and decrease in insurance claims and claim expenses, partially offset by an increase in our interest expense, underwriting and operating expenses and income tax expense.
+Added: Diluted EPS was $0.65 and $1.27 for the three and six months ended June 30, 2021, respectively, compared to $0.36 and $1.11 for the three and six months ended June 30, 2020, respectively.
+Added: Adjusted diluted EPS was $0.67 and $1.29 for the three and six months ended June 30, 2021, respectively, compared to $0.40 and $1.14 for the three and six months ended June 30, 2020, respectively.
+Added: Diluted and adjusted diluted EPS increased due to growth in net income and adjusted net income, respectively, partially offset by an increase in weighted average diluted shares outstanding in connection with the issuance of 15.9 million shares of common stock we completed in June 2020, and, to a lesser extent, stock awards made under our share-based compensation plans.
The non-GAAP financial measures adjusted income before tax, adjusted net income and adjusted diluted EPS are presented to enhance the comparability of financial results between periods.
−Removed: Non-GAAP Financial Measure Reconciliations For the three months ended March 31,
+Added: Non-GAAP Financial Measure Reconciliations For the three months ended June 30, For the six months ended June 30,
+Added: 2021 2020 2021 2020
As reported ($ in thousands, except for per share data)
2 unchanged sentences
Net income $ 57,522 $ 26,848 $ 110,414 $ 85,119
−Removed: Net realized investment losses — 72
−Removed: Loss (gain) from change in fair value warrant liability 205 (5,959)
+Added: Net realized investment gain (12) (711) (12) (639)
+Added: (Gain) loss from change in fair value warrant liability (658) 1,236 (453) (4,723)
Capital market transaction costs 1,615 2,790 1,993 3,264
11 unchanged sentences
their measures may not be comparable to those we calculate and present.
−Removed: Adjusted income before tax is defined as GAAP income before tax, excluding the pre-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains or losses from our investment portfolio, and discrete, non-recurring and non-operating items in the periods in which such items are incurred.
+Added: 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,
+Added: net realized gains or losses from our investment portfolio, and discrete, non-recurring and non-operating items in the periods in which such items are incurred.
Adjusted net income is defined as GAAP net income, excluding the after-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains or losses from our investment portfolio, and discrete, non-recurring and non-operating items in the periods in which such items are incurred.
20 unchanged sentences
We believe such items are non-recurring in nature, are not part of our primary operating activities and do not reflect our current period operating results.
−Removed: Consolidated balance sheets March 31, 2021 December 31, 2020
+Added: Consolidated balance sheets June 30, 2021 December 31, 2020
(In Thousands)
19 unchanged sentences
Total liabilities and shareholders' equity $ 2,305,878 $ 2,166,666
−Removed: Total cash and investments were $1.9 billion as of March 31, 2021 and December 31, 2020.
−Removed: Cash and investments at March 31, 2021 included $78.2 million held by NMIH.
−Removed: The increase in total cash and investments between the respective measurement dates reflects cash generated from operations, partially offset by a decrease in the unrealized gain position of our fixed income portfolio caused by a rise in interest rates.
−Removed: Net deferred policy acquisition costs were $62.3 million as of March 31, 2021, compared to $62.2 million as of December 31, 2020.
−Removed: The increase was primarily driven by growth in the number of policies written during the period and the deferral of certain costs associated with the origination of those policies, partially offset by the amortization of previously deferred acquisition costs.
−Removed: Prepaid reinsurance premiums were $4.8 million as of March 31, 2021, compared to $6.2 million as of December 31, 2020.
+Added: Total cash and investments were $2.1 billion as of June 30, 2021, compared to $1.9 billion as of December 31, 2020.
+Added: Cash and investments at June 30, 2021 included $80.5 million held by NMIH.
+Added: The increase in total cash and investments between the respective measurement dates reflects cash generated from operations, partially offset by a decrease in the unrealized gain position of our fixed income portfolio tied to the prevailing interest rate and credit spread environment.
+Added: Premiums receivable was $55.9 million as of June 30, 2021, compared to $49.8 million as December 31, 2020.
+Added: The increase was primarily driven by growth in our monthly premium policies in force, where premiums are generally paid one month in arrears.
+Added: Net deferred policy acquisition costs were $62.1 million as of June 30, 2021, compared to $62.2 million as of December 31, 2020.
+Added: The decrease was primarily driven by the recognition of previously deferred policy acquisition costs taken in connection with in-force portfolio run-off, and was largely offset by the deferral of certain costs associated with the origination of new policies between the respective balance sheet dates.
+Added: Prepaid reinsurance premiums were $3.8 million as of June 30, 2021, compared to $6.2 million as of December 31, 2020.
Prepaid reinsurance premiums, which represent the unearned premiums on single premium policies ceded under the 2016 QSR Transaction, decreased due to the continued amortization of previously ceded unearned premiums.
−Removed: Reinsurance recoverable was $18.7 million as of March 31, 2021, compared to $17.6 million as of December 31, 2020.
+Added: Reinsurance recoverable was $19.7 million as of June 30, 2021, compared to $17.6 million as of December 31, 2020.
The increase was driven by an increase in ceded losses recoverable associated with our QSR Transactions.
−Removed: Other assets increased to $71.5 million as of March 31, 2021, compared to $70.0 million as of December 31, 2020, primarily driven by a $1.6 million increase in software and equipment.
−Removed: Included in other assets are $46.4 million of tax and loss bonds held by the Company at both March 31, 2021 and December 31, 2020.
+Added: Other assets increased to $70.4 million as of June 30, 2021, compared to $70.0 million as of December 31, 2020.
+Added: Other assets included $46.4 million of tax and loss bonds held by the Company at both June 30, 2021 and December 31, 2020.
See Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 9, Income Taxes.
−Removed: Unearned premiums were $127.4 million as of March 31, 2021, compared to $118.8 million as of December 31, 2020.
−Removed: The increase was driven by single premium policy originations during the three months ended March 31, 2021, partially offset by the cancellation of other single premium policies and the amortization of existing unearned premiums through earnings in accordance with the expiration of risk on related single premium policies.
−Removed: Accounts payable and accrued expenses were $57.1 million as of March 31, 2021, compared to $61.7 million as of December 31, 2020.
−Removed: The decrease was primarily driven by the payment of an unsettled trade payable related to the purchase of
−Removed: investment securities at year-end 2020 and the settlement of previously accrued compensation during the three months ended March 31, 2021, partially offset by an increase in accrued and unpaid interest on the Notes.
−Removed: Reserve for insurance claims and claim expenses was $96.1 million as of March 31, 2021, compared to $90.6 million as of December 31, 2020.
−Removed: Reserve for insurance claims and claim expenses increased at March 31, 2021 despite a decline in the total size of our default population because of an increase in the average case reserve held against previously defaulted loans and the establishment of initial reserves newly defaulted loans during the period.
+Added: Unearned premiums were $142.1 million as of June 30, 2021, compared to $118.8 million as of December 31, 2020.
+Added: The increase was driven by single premium policy originations during the six months ended June 30, 2021, partially offset by the cancellation of other single premium policies and the amortization of existing unearned premiums through earnings in accordance with the expiration of risk on related single premium policies.
+Added: Accounts payable and accrued expenses were $56.8 million as of June 30, 2021, compared to $61.7 million as of December 31, 2020.
+Added: The decrease was primarily driven by the payment of an unsettled trade payable related to the purchase of investment securities at year-end 2020 and the settlement of previously accrued compensation during the six months ended June 30, 2021, partially offset by an increase in reinsurance premiums payable.
+Added: Reserve for insurance claims and claim expenses was $101.2 million as of June 30, 2021, compared to $90.6 million as of December 31, 2020.
+Added: Reserve for insurance claims and claim expenses increased at June 30, 2021, despite a decline in the total size of our default population because of an increase in the average case reserve held against previously defaulted loans and the establishment of initial reserves on newly defaulted loans during the period.
While we have generally established lower reserves per default for loans that we consider to be impaired in connection with the COVID pandemic, we have increased the initial reserves held for such loans as they have aged in default status.
−Removed: The increase in the reserves for insurance claims and claim expenses at March 31, 2021 was partially offset by the release of prior year reserves tied to the curing of certain loans that had defaulted prior to the onset of the COVID pandemic.
+Added: The increase in the reserves for insurance claims and claim expenses at June 30, 2021 was partially offset by the release of prior year reserves tied to the curing of certain loans that had defaulted prior to the onset of the COVID pandemic.
See " - Insurance Claims and Claim Expenses ," above for further details.
−Removed: Reinsurance funds withheld, which represents our ceded reinsurance premiums written, less our profit and ceding commission receivables related to the 2016 QSR Transaction was $7.6 million as of March 31, 2021, compared to $8.7 million as of December 31, 2020.
+Added: Reinsurance funds withheld, which represents our ceded reinsurance premiums written, less our profit and ceding commission receivables related to the 2016 QSR Transaction was $6.9 million as of June 30, 2021, compared to $8.7 million as of December 31, 2020.
The decrease relates to the continued decline in ceded premiums written on single premium policies, due to the end of the reinsurance coverage period for new business under the 2016 QSR Transaction at December 31, 2017.
See Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 5, Reinsurance ."
−Removed: Warrant liability was $4.2 million at March 31, 2021, compared to $4.4 million at December 31, 2020.
−Removed: The decrease was primarily driven by the exercise of outstanding warrants during the three months ended March 31, 2021, partially offset by the change in Black-Scholes pricing model inputs between the respective measurement dates.
+Added: Warrant liability was $3.4 million at June 30, 2021, compared to $4.4 million at December 31, 2020.
+Added: The decrease was driven by the exercise of outstanding warrants, and changes in the price of our common stock and other Black-Scholes model inputs between the respective measurement dates.
For further information regarding the valuation of our warrant liability and its impact on our results of operations and financial position, see Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 3, Fair Value of Financial Instruments.
−Removed: Net deferred tax liability was $115.2 million at March 31, 2021 compared to $112.6 million at December 31, 2020.
−Removed: The increase was primarily due to an increase in the claimed deductibility of our statutory contingency reserve, offset by the change in unrealized gains recorded in other comprehensive income.
+Added: Net deferred tax liability was $136.3 million at June 30, 2021 compared to $112.6 million at December 31, 2020.
+Added: The increase was primarily due to an increase in the claimed deductibility of our statutory contingency reserve, partially offset by the change in unrealized gains recorded in other comprehensive income.
For further information regarding income taxes and their impact on our results of operations and financial position, see Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 9, Income Taxes.
The following table summarizes our consolidated cash flows from operating, investing and financing activities.
−Removed: Consolidated cash flows For the three months ended March 31,
+Added: Consolidated cash flows For the six months ended June 30,
Net cash provided by (used in):
3 unchanged sentences
Financing activities (722) 461,312
−Removed: Net increase in cash and cash equivalents $ (11,420) $ 68,732
−Removed: Net cash provided by operating activities was $85.5 million for the three months ended March 31, 2021, compared to $47.9 million for the three months ended March 31, 2020.
−Removed: The increase in cash generated from operating activities was primarily driven by growth in premiums written, with further increase tied to a decline in claims and cash interest paid from period-to-period.
−Removed: Cash used in investing activities for the three months ended March 31, 2021 was driven by the purchase of fixed and short-term maturities, with cash provided by operating activities, and the reinvestment of coupon payments, maturities and sale proceeds within our investment portfolio.
−Removed: Cash provided by investing activities for the three months ended March 31, 2020 represent the net cash proceeds from maturities of fixed maturity investments and the sales of short-term investments, partially offset by purchases.
−Removed: We paused reinvestment activities at the onset of the COVID-19 pandemic in the first quarter of 2020 to bolster liquidity within our investment portfolio.
−Removed: Cash used in financing activities was $0.4 million for the three months ended March 31, 2021, compared to cash used in financing activities of $4.9 million for the three months ended March 31, 2020.
−Removed: The cash used in financing activities primarily relates to taxes paid on the net share settlement of equity awards for certain employees.
−Removed: The cash used in financing activities for the three months ended March 31, 2020 also includes cash paid for debt issuance costs in connection with the 2020 Revolving Credit Facility.
+Added: Net (decrease) increase in cash and cash equivalents $ (58,857) $ 474,361
+Added: Net cash provided by operating activities was $182.5 million for the six months ended June 30, 2021, compared to $127.4 million for the six months ended June 30, 2020.
+Added: The increase in cash generated from operating activities year-on-year was primarily driven by growth in premiums written, with further increase tied to a decline in claims paid from period-to-period.
+Added: Cash used in investing activities for the six months ended June 30, 2021 and 2020 reflects the purchase of fixed and short-term maturities with cash provided by operating and, as available, financing activities, and the reinvestment of coupon payments, maturities and sale proceeds within our investment portfolio.
+Added: Cash used in investing activities for the six months ended June 30, 2020, further reflects the investment of net cash proceeds provided by financing activities.
+Added: Cash used in financing activities was $0.7 million for the six months ended June 30, 2021, compared to cash provided by financing activities of $461.3 million for the six months ended June 30, 2020.
+Added: Cash used in financing activities during the six months ended June 30, 2021 primarily relates to taxes paid on the net share settlement of equity awards for certain employees.
+Added: Cash provided by financing activities for the six months ended June 30, 2020 primarily reflects $220.3 million net cash proceeds raised in connection with our 2020 equity offering and $245.9 million net cash proceeds raised in connection with our 2020 Notes offering.
Liquidity and Capital Resources
8 unchanged sentences
Delaware law provides that dividends are only payable out of a corporation's surplus or recent net profits (subject to certain limitations).
−Removed: As of March 31, 2021, NMIH had $78.2 million of cash and investments.
+Added: As of June 30, 2021, NMIH had $80.5 million of cash and investments.
NMIH's principal source of net cash is investment income.
9 unchanged sentences
Under the 2020 Revolving Credit Facility, NMIH is required to pay a quarterly commitment fee on the average daily undrawn amount of 0.175% to 0.525%, based on the applicable corporate credit rating at the time.
−Removed: As of March 31, 2021, the applicable commitment fee was 0.35%.
−Removed: We are subject to certain covenants under the Notes and the 2020 Revolving Credit Facility (as defined in the Credit Agreement).
−Removed: Under the Notes (as defined in the Indenture), we are subject to a maximum debt-to-total capitalization ratio of 35%.
−Removed: Under the 2020 Revolving Credit Facility (as defined in the Credit Agreement), we are subject to a maximum debt-to-total capitalization ratio of 35%, a minimum liquidity requirement, a requirement to maintain compliance with the PMIERs financial requirements (subject to any GSE-approved waivers), and minimum consolidated net worth and statutory capital requirements (respectively, as defined therein).
−Removed: We were in compliance with all covenants as of March 31, 2021.
+Added: As of June 30, 2021, the applicable commitment fee was 0.35%.
+Added: We are subject to certain covenants under the 2020 Revolving Credit Facility (as defined in the Credit Agreement), including a maximum debt-to-total capitalization ratio of 35%, a minimum liquidity requirement, a requirement to maintain compliance with the PMIERs financial requirements (subject to any GSE-approved waivers), and minimum consolidated net worth and statutory capital requirements (respectively, as defined therein).
+Added: We were in compliance with all covenants as of June 30, 2021.
NMIC and Re One are subject to certain capital and dividend rules and regulations prescribed by jurisdictions in which they are authorized to operate and the GSEs.
8 unchanged sentences
In response to the COVID-19 pandemic, the GSEs issued temporary PMIERs guidance, effective for the period from June 30, 2020 to June 30, 2021, that requires approved insurers to secure approval from the GSEs, even if the approved insurer otherwise satisfies the financial requirements prescribed by PMIERs, prior to taking any of the following actions:
−Removed: (i) pay dividends, make payments of principal or increase payments of
−Removed: interest beyond those commitments made prior to the guidance effective date associated with surplus notes issued by the approved insurer , make any other payments, unless related to expenses incurred in the normal course of business or to commitments made prior to the guidance effective date, or pledge or transfer asset(s) to any affiliate or investor, or (ii) enter into any new arrangements or alter any existing arrangements under tax sharing and intercompany expense-sharing agreements other than renewals and extensions of agreements in effect prior to the guidance effective date.
−Removed: We cannot be certain that the GSEs will not amend the terms, or extend the duration, of this prior approval requirement beyond its current expiration of June 30, 2021.
+Added: (i) pay dividends, make payments of principal or increase payments of interest beyond those commitments made prior to the guidance effective date associated with surplus notes issued by
+Added: the approved insurer , make any other payments, unless related to expenses incurred in the normal course of business or to commitments made prior to the guidance effective date, or pledge or transfer asset(s) to any affiliate or investor, or (ii) enter into any new arrangements or alter any existing arrangements under tax sharing and intercompany expense-sharing agreements other than renewals and extensions of agreements in effect prior to the guidance effective date.
+Added: On June 30, 2021, the GSEs updated the temporary PMIERs guidance to permit approved insurers to pay dividends or undertake other actions described in (i) and (ii) above without securing prior approval if certain prescribed financial requirements are met during the period from July 1, 2021 to December 31, 2021.
NMIH may require liquidity to fund the capital needs of its insurance subsidiaries.
3 unchanged sentences
Under the PMIERs, NMIC must maintain available assets that are equal to or exceed a minimum risk-based required asset amount, subject to a minimum floor of $400 million.
−Removed: At March 31, 2021, we reported $1,810 million available assets against $1,261 million risk-based required assets for a $549 million of "excess" funding position
+Added: At June 30, 2021, we reported $1,887 million available assets against $1,171 million risk-based required assets for a $716 million of "excess" funding position.
The risk-based required asset amount under PMIERs is determined at an individual policy-level based on the risk characteristics of each insured loan.
1 unchanged sentence
Non-performing loans that have missed two or more payments are generally assessed a significantly higher charge than performing loans, regardless of the underlying borrower or loan risk profile;
−Removed: however, special consideration is given under PMIERs to loans that are delinquent on homes located in an area declared by FEMA to be a Major Disaster zone.
−Removed: In June 2020, the GSEs issued guidance restated in each of September and December 2020) on the risk-based treatment of loans affected by the COVID-19 crisis.
+Added: however, special consideration is given under PMIERs to loans that are delinquent on homes located in an area declared by FEMA to be a Major Disaster zone eligible for Individual Assistance.
+Added: In June 2020, the GSEs issued guidance (amended and restated in each of September 2020, December 2020 and June 2021) on the risk-based treatment of loans affected by the COVID-19 crisis.
Under the guidance, non-performing loans that are subject to a forbearance program granted in response to a financial hardship related to COVID-19 will benefit from a permanent 70% risk-based required asset haircut for the duration of the forbearance period and subsequent repayment plan or trial modification period.
8 unchanged sentences
As such, the PMIERs generally imposes a stricter financial requirement than the state RTC standard.
−Removed: As of March 31, 2021, NMIC's performing primary RIF, net of reinsurance, was approximately $22.8 billion.
+Added: As of June 30, 2021, NMIC's performing primary RIF, net of reinsurance, was approximately $21.3 billion.
NMIC ceded 100% of its pool RIF pursuant to the 2016 QSR Transaction.
−Removed: Based on NMIC's total statutory capital of $1.7 billion (including contingency reserves) as of March 31, 2021, NMIC's RTC ratio was 13.4:1 Re One had total statutory capital of $37.3 million as of March 31, 2021 and a RTC ratio of 1.8:1
+Added: Based on NMIC's total statutory capital of $1.8 billion (including contingency reserves) as of June 30, 2021, NMIC's RTC ratio was 12:1 Re One had total statutory capital of $37.7 million as of June 30, 2021 and a RTC ratio of 1.9:1.
NMIC's principal sources of liquidity include (i) premium receipts on its insured portfolio and new business production, (ii) interest income on its investment portfolio and principal repayments on maturities therein, and (iii) existing cash and cash equivalent holdings.
−Removed: At March 31, 2021, NMIC had $1.8 billion of cash and investments, including $86 million of cash and equivalents.
+Added: At June 30, 2021, NMIC had $1.9 billion of cash and investments, including $48 million of cash and equivalents.
NMIC's principal liquidity demands include funds for the payment of (i) reimbursable holding company expenses, (ii) premiums ceded under our reinsurance transactions (iii) claims payments, and (iv) taxes as due or otherwise deferred through the purchase of tax and loss bonds.
NMIC's cash inflow is generally significantly in excess of its cash outflow in any given period.
−Removed: During the twelve-month period ended March 31, 2021, NMIC generated $283 million of cash flow from operations and received an additional $327 million of cash flow on the maturity, sale and redemption of securities held in its investment portfolio.
+Added: During the twelve-month period ended June 30, 2021, NMIC generated $300 million of cash flow from operations and received an additional $150 million of cash flow on the maturity, sale and redemption of securities held in its investment portfolio.
NMIC is not a party to any contracts (derivative or otherwise) that require it to post an increasing amount of collateral to any counterparty and NMIC's principal liquidity demands (other than claims payments) generally develop along a scheduled path ( i.e.
1 unchanged sentence
NMIC's only use of cash that develops along an unscheduled path is claims payments.
−Removed: Given the breadth and duration of forbearance programs available to
−Removed: borrowers, separate foreclosure moratoriums that have been enacted at a local, state and federal level, and the general duration of the default to foreclosure to claim cycle, we do not expect NMIC to use a meaningful amount of cash to settle claims in the near-term.
+Added: Given the breadth and duration of forbearance programs available to borrowers, separate foreclosure moratoriums that have been enacted at a local, state and federal level, and the general duration of the default to foreclosure to claim cycle, we do not expect NMIC to use a meaningful amount of cash to settle claims in the near-term.
Debt and Financial Strength Ratings
11 unchanged sentences
Our investment portfolio is comprised entirely of fixed maturity instruments.
−Removed: As of March 31, 2021, the fair value of our investment portfolio was $1.8 billion and we held an additional $115.5 million of cash and equivalents.
−Removed: Pre-tax book yield on the investment portfolio for the three months ended March 31, 2021 was 2.0%.
+Added: As of June 30, 2021, the fair value of our investment portfolio was $2.0 billion and we held an additional $68.1 million of cash and equivalents.
+Added: Pre-tax book yield on the investment portfolio for the six months ended June 30, 2021 was 2.0%.
Book yield is calculated as period-to-date net investment income divided by the average amortized cost of the investment portfolio.
1 unchanged sentence
The following tables present a breakdown of our investment portfolio and cash and cash equivalents by investment type and credit rating:
−Removed: Percentage of portfolio's fair value March 31, 2021 December 31, 2020
+Added: Percentage of portfolio's fair value June 30, 2021 December 31, 2020
Corporate debt securities 64 % 63 %
6 unchanged sentences
Investment portfolio ratings at fair value (1)
−Removed: March 31, 2021 December 31, 2020
+Added: June 30, 2021 December 31, 2020
AAA 10 % 12 %
5 unchanged sentences
Investment Securities - Allowance for credit losses
−Removed: We did not recognize an allowance for credit loss for any security in the investment portfolio as of March 31, 2021 or December 31, 2020, and we did not record any provision for credit loss for investment securities during the three months ended March 31, 2021, and March 31, 2020.
−Removed: As of March 31, 2021, the investment portfolio had gross unrealized losses of $25.5 million, none of which had been in an unrealized loss position for a period of twelve months or longer.
−Removed: As of December 31, 2020, the investment portfolio had gross unrealized losses of $0.5 million, of which $8 thousand had been in an unrealized loss position for a period of twelve months or longer.
−Removed: The increase in the number of securities in and the aggregate size of the unrealized loss position as of March 31, 2021, was primarily driven by interest rate movements following the purchase date of certain securities.
−Removed: Based on current facts and circumstances, we believe the unrealized losses as of March 31, 2021 are not indicative of the ultimate collectability of the current amortized cost of the securities.
+Added: We did not recognize an allowance for credit loss for any security in the investment portfolio as of June 30, 2021 or December 31, 2020, and we did not record any provision for credit loss for investment securities during the three or six month periods ended June 30, 2021 or June 30, 2020.
+Added: As of June 30, 2021, the investment portfolio had gross unrealized losses of $9.0 million, none of which had been in an unrealized loss position for a period of twelve months or longer.
+Added: As of December 31, 2020, the investment portfolio had gross unrealized losses of $512 thousand, of which $8 thousand had been in an unrealized loss position for a period of twelve months or longer.
+Added: The increase in the number of securities in and the aggregate size of the unrealized loss position as of June 30, 2021, was primarily driven by interest rate movements following the purchase date of certain securities.
+Added: Based on current facts and circumstances, we believe the unrealized losses as of June 30, 2021 are not indicative of the ultimate collectability of the current amortized cost of the securities.
Critical Accounting Estimates
8 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.