FORM 10-Q
|
(Mark One)
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2018
|
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
|
Commission file number
001-36
174
|
NMI Holdings, Inc.
|
(Exact name of registrant as specified in its charter)
|
DELAWARE
|
|
45-4914248
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
2100 Powell Street, Emeryville, CA
|
|
94608
|
(Address of principal executive offices)
|
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(Zip Code)
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Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
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Smaller reporting company
o
|
|
|
|
|
Emerging growth company
x
|
|
|
|
Item 1.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 1.
|
||
Item 1A.
|
||
Item 6.
|
||
•
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changes in the business practices of Fannie Mae and Freddie Mac (collectively, the GSEs), including decisions that have the impact of decreasing or discontinuing the use of mortgage insurance as credit enhancement;
|
•
|
our ability to remain an eligible mortgage insurer under the private mortgage insurer eligibility requirements (PMIERs) and other requirements imposed by the GSEs, which they may change at any time;
|
•
|
retention of our existing certificates of authority in each state and the District of Columbia (D.C.) and our ability to remain a mortgage insurer in good standing in each state and D.C.;
|
•
|
our future profitability, liquidity and capital resources;
|
•
|
actions of existing competitors, including public mortgage insurers such as the Federal Housing Administration (FHA) and the Veterans Administration (VA), and potential market entry by new competitors or consolidation of existing competitors;
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•
|
developments in the world's financial and capital markets and our access to such markets, including reinsurance;
|
•
|
adoption of new or changes to existing laws and regulations that impact our business or financial condition directly or the mortgage insurance industry generally or their enforcement and implementation by regulators;
|
•
|
changes to the GSEs' role in the secondary mortgage market or other changes that could affect the residential mortgage industry generally or mortgage insurance in particular;
|
•
|
potential future lawsuits, investigations or inquiries or resolution of current lawsuits or inquiries;
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•
|
changes in general economic, market and political conditions and policies, interest rates, inflation and investment results or other conditions that affect the housing market or the markets for home mortgages or mortgage insurance;
|
•
|
our ability to successfully execute and implement our capital plans, including our ability to access the capital, credit and reinsurance markets and to enter into, and receive approval of, reinsurance arrangements on terms and conditions that are acceptable to us, the GSEs and our regulators;
|
•
|
our ability to implement our business strategy, including our ability to write mortgage insurance on high quality low down payment residential mortgage loans, implement successfully and on a timely basis, complex infrastructure, systems, procedures, and internal controls to support our business and regulatory and reporting requirements of the insurance industry;
|
•
|
our ability to attract and retain a diverse customer base, including the largest mortgage originators;
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•
|
failure of risk management or pricing or investment strategies;
|
•
|
emergence of unexpected claim and coverage issues, including claims exceeding our reserves or amounts we had expected to experience;
|
•
|
potential adverse impacts arising from recent natural disasters, including, with respect to the affected areas, a decline in new business, adverse effects on home prices, and an increase in notices of default on insured mortgages;
|
•
|
the inability of our counter-parties, including third party reinsurers, to meet their obligations to us;
|
•
|
our ability to utilize our net operating loss carryforwards, which could be limited or eliminated in various ways, including if we experience an ownership change as defined in Section 382 of the Internal Revenue Code;
|
•
|
failure to maintain, improve and continue to develop necessary information technology (IT) systems or the failure of technology providers to perform; and
|
•
|
ability to recruit, train and retain key personnel.
|
Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017
|
|
Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2018 and 2017
|
|
Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 30, 2018 and 2017
|
|
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017
|
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Notes to Condensed Consolidated Financial Statements
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Assets
|
(In Thousands, except for share data)
|
||||||
Fixed maturities, available-for-sale, at fair value (amortized cost of $889,794 and $713,859 as of September 30, 2018 and December 31, 2017, respectively)
|
$
|
874,435
|
|
|
$
|
715,875
|
|
Cash and cash equivalents (including restricted cash of $1,406 and $0 as of September 30, 2018 and December 31, 2017, respectively)
|
18,187
|
|
|
19,196
|
|
||
Premiums receivable
|
34,675
|
|
|
25,179
|
|
||
Accrued investment income
|
5,881
|
|
|
4,212
|
|
||
Prepaid expenses
|
3,131
|
|
|
2,151
|
|
||
Deferred policy acquisition costs, net
|
44,437
|
|
|
37,925
|
|
||
Software and equipment, net
|
22,887
|
|
|
22,802
|
|
||
Intangible assets and goodwill
|
3,634
|
|
|
3,634
|
|
||
Prepaid reinsurance premiums
|
33,058
|
|
|
40,250
|
|
||
Deferred tax asset, net
|
6,880
|
|
|
19,929
|
|
||
Other assets
|
5,276
|
|
|
3,695
|
|
||
Total assets
|
$
|
1,052,481
|
|
|
$
|
894,848
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Term loan
|
$
|
147,009
|
|
|
$
|
143,882
|
|
Unearned premiums
|
162,893
|
|
|
163,166
|
|
||
Accounts payable and accrued expenses
|
27,134
|
|
|
23,364
|
|
||
Reserve for insurance claims and claim expenses
|
10,908
|
|
|
8,761
|
|
||
Reinsurance funds withheld
|
28,953
|
|
|
34,102
|
|
||
Deferred ceding commission
|
4,161
|
|
|
5,024
|
|
||
Warrant liability, at fair value
|
10,930
|
|
|
7,472
|
|
||
Total liabilities
|
391,988
|
|
|
385,771
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
|
|
|
|
||||
Shareholders' equity
|
|
|
|
||||
Common stock - class A shares, $0.01 par value; 66,285,847 and 60,517,512 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively (250,000,000 shares authorized)
|
663
|
|
|
605
|
|
||
Additional paid-in capital
|
678,165
|
|
|
585,488
|
|
||
Accumulated other comprehensive loss, net of tax
|
(16,303
|
)
|
|
(2,859
|
)
|
||
Accumulated deficit
|
(2,032
|
)
|
|
(74,157
|
)
|
||
Total shareholders' equity
|
660,493
|
|
|
509,077
|
|
||
Total liabilities and shareholders' equity
|
$
|
1,052,481
|
|
|
$
|
894,848
|
|
|
For the three months ended September 30,
|
|
For the nine months ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenues
|
(In Thousands, except for per share data)
|
||||||||||||||
Net premiums earned
|
$
|
65,407
|
|
|
$
|
44,519
|
|
|
$
|
181,936
|
|
|
$
|
115,661
|
|
Net investment income
|
6,277
|
|
|
4,170
|
|
|
16,586
|
|
|
11,885
|
|
||||
Net realized investment (losses) gains
|
(8
|
)
|
|
69
|
|
|
51
|
|
|
198
|
|
||||
Other revenues
|
85
|
|
|
195
|
|
|
193
|
|
|
461
|
|
||||
Total revenues
|
71,761
|
|
|
48,953
|
|
|
198,766
|
|
|
128,205
|
|
||||
Expenses
|
|
|
|
|
|
|
|
||||||||
Insurance claims and claim expenses
|
1,099
|
|
|
957
|
|
|
3,311
|
|
|
2,965
|
|
||||
Underwriting and operating expenses
|
30,379
|
|
|
24,645
|
|
|
87,852
|
|
|
78,682
|
|
||||
Total expenses
|
31,478
|
|
|
25,602
|
|
|
91,163
|
|
|
81,647
|
|
||||
Other expense
|
|
|
|
|
|
|
|
||||||||
Loss from change in fair value of warrant liability
|
(5,464
|
)
|
|
(502
|
)
|
|
(4,935
|
)
|
|
(679
|
)
|
||||
Interest expense
|
(2,972
|
)
|
|
(3,352
|
)
|
|
(11,951
|
)
|
|
(10,146
|
)
|
||||
Total other expense
|
(8,436
|
)
|
|
(3,854
|
)
|
|
(16,886
|
)
|
|
(10,825
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Income before income taxes
|
31,847
|
|
|
19,497
|
|
|
90,717
|
|
|
35,733
|
|
||||
Income tax expense
|
7,036
|
|
|
7,185
|
|
|
18,310
|
|
|
11,917
|
|
||||
Net income
|
$
|
24,811
|
|
|
$
|
12,312
|
|
|
$
|
72,407
|
|
|
$
|
23,816
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.38
|
|
|
$
|
0.21
|
|
|
$
|
1.12
|
|
|
$
|
0.40
|
|
Diluted
|
$
|
0.36
|
|
|
$
|
0.20
|
|
|
$
|
1.07
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
||||||||
Basic
|
65,948
|
|
|
59,884
|
|
|
64,584
|
|
|
59,680
|
|
||||
Diluted
|
68,844
|
|
|
63,089
|
|
|
67,512
|
|
|
62,773
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
24,811
|
|
|
$
|
12,312
|
|
|
$
|
72,407
|
|
|
$
|
23,816
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Net unrealized gains (losses) in accumulated other comprehensive income, net of tax (benefit) expense of ($337) and $366 for the three months ended September 30, 2018 and 2017, respectively, and ($3,676) and $2,439 for the nine months ended September 30, 2018 and 2017
|
(1,267
|
)
|
|
768
|
|
|
(13,828
|
)
|
|
4,786
|
|
||||
Reclassification adjustment for realized losses (gains) included in net income, net of tax expense (benefit) of ($2) and $24 for the three months ended September 30, 2018 and 2017, respectively, and ($27) and $69 for the nine months ended September 30, 2018 and 2017
|
7
|
|
|
(45
|
)
|
|
102
|
|
|
(129
|
)
|
||||
Other comprehensive (loss) income, net of tax
|
(1,260
|
)
|
|
723
|
|
|
(13,726
|
)
|
|
4,657
|
|
||||
Comprehensive income
|
$
|
23,551
|
|
|
$
|
13,035
|
|
|
$
|
58,681
|
|
|
$
|
28,473
|
|
|
Common Stock - Class A
|
Additional
Paid-in Capital |
Accumulated Other Comprehensive Income (Loss)
|
Accumulated Deficit
|
Total
|
||||||||||||
|
Shares
|
Amount
|
|||||||||||||||
|
(In Thousands)
|
||||||||||||||||
Balances, January 1, 2017
|
59,145
|
|
$
|
591
|
|
$
|
576,927
|
|
$
|
(5,287
|
)
|
$
|
(96,722
|
)
|
$
|
475,509
|
|
Cumulative effect of change in accounting principle
|
—
|
|
—
|
|
—
|
|
—
|
|
515
|
|
515
|
|
|||||
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes
|
638
|
|
7
|
|
(1,117
|
)
|
—
|
|
—
|
|
(1,110
|
)
|
|||||
Share-based compensation expense
|
—
|
|
—
|
|
2,271
|
|
—
|
|
—
|
|
2,271
|
|
|||||
Change in unrealized investment gains/losses, net of tax expense of $664
|
—
|
|
—
|
|
—
|
|
1,233
|
|
—
|
|
1,233
|
|
|||||
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
5,492
|
|
5,492
|
|
|||||
Balances, March 31, 2017
|
59,783
|
|
$
|
598
|
|
$
|
578,081
|
|
$
|
(4,054
|
)
|
$
|
(90,715
|
)
|
$
|
483,910
|
|
Cumulative effect of change in accounting principle
|
—
|
|
—
|
|
388
|
|
—
|
|
—
|
|
388
|
|
|||||
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes
|
75
|
|
—
|
|
82
|
|
—
|
|
—
|
|
82
|
|
|||||
Share-based compensation expense
|
—
|
|
—
|
|
1,948
|
|
—
|
|
—
|
|
1,948
|
|
|||||
Change in unrealized investment gains/losses, net of tax benefit of $1,454
|
—
|
|
—
|
|
—
|
|
2,700
|
|
—
|
|
2,700
|
|
|||||
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
6,012
|
|
6,012
|
|
|||||
Balances, June 30, 2017
|
59,858
|
|
$
|
598
|
|
$
|
580,499
|
|
$
|
(1,354
|
)
|
$
|
(84,703
|
)
|
$
|
495,040
|
|
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes
|
70
|
|
1
|
|
234
|
|
—
|
|
—
|
|
235
|
|
|||||
Share-based compensation expense
|
—
|
|
—
|
|
2,714
|
|
—
|
|
—
|
|
2,714
|
|
|||||
Change in unrealized investment gains/losses, net of tax benefit of $390
|
—
|
|
—
|
|
—
|
|
724
|
|
—
|
|
724
|
|
|||||
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
12,312
|
|
12,312
|
|
|||||
Balances, September 30, 2017
|
59,928
|
|
$
|
599
|
|
$
|
583,447
|
|
$
|
(630
|
)
|
$
|
(72,391
|
)
|
$
|
511,025
|
|
|
Common Stock - Class A
|
Additional
Paid-in Capital |
Accumulated Other Comprehensive Income (Loss)
|
Accumulated Deficit
|
Total
|
||||||||||||
|
Shares
|
Amount
|
|||||||||||||||
|
(In Thousands)
|
||||||||||||||||
Balances, January 1, 2018
|
60,518
|
|
$
|
605
|
|
$
|
585,488
|
|
$
|
(2,859
|
)
|
$
|
(74,157
|
)
|
$
|
509,077
|
|
Cumulative effect of change in accounting principle
|
—
|
|
—
|
|
—
|
|
282
|
|
(282
|
)
|
—
|
|
|||||
Common stock: class A shares issued related to public offering
|
4,255
|
|
43
|
|
79,122
|
|
—
|
|
—
|
|
79,165
|
|
|||||
Common stock: class A shares issued related to warrants
|
26
|
|
*
|
|
489
|
|
—
|
|
—
|
|
489
|
|
|||||
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes
|
770
|
|
8
|
|
(999
|
)
|
—
|
|
—
|
|
(991
|
)
|
|||||
Share-based compensation expense
|
—
|
|
—
|
|
2,805
|
|
—
|
|
—
|
|
2,805
|
|
|||||
Change in unrealized investment gains/losses, net of tax benefit of $423
|
—
|
|
—
|
|
—
|
|
(10,956
|
)
|
—
|
|
(10,956
|
)
|
|||||
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
22,355
|
|
22,355
|
|
|||||
Balances, March 31, 2018
|
65,569
|
|
$
|
656
|
|
$
|
666,905
|
|
$
|
(13,533
|
)
|
$
|
(52,084
|
)
|
$
|
601,944
|
|
Common stock: class A shares issued related to warrants
|
3
|
|
*
|
|
63
|
|
—
|
|
—
|
|
63
|
|
|||||
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes
|
182
|
|
2
|
|
885
|
|
—
|
|
—
|
|
887
|
|
|||||
Share-based compensation expense
|
—
|
|
—
|
|
3,017
|
|
—
|
|
—
|
|
3,017
|
|
|||||
Change in unrealized investment gains/losses, net of tax benefit of $2,891
|
—
|
|
—
|
|
—
|
|
(1,510
|
)
|
—
|
|
(1,510
|
)
|
|||||
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
25,241
|
|
25,241
|
|
|||||
Balances, June 30, 2018
|
65,754
|
|
$
|
658
|
|
$
|
670,870
|
|
$
|
(15,043
|
)
|
$
|
(26,843
|
)
|
$
|
629,642
|
|
Common stock: class A shares issued related to warrants
|
57
|
|
1
|
|
1,244
|
|
—
|
|
—
|
|
1,245
|
|
|||||
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes
|
475
|
|
4
|
|
3,092
|
|
—
|
|
—
|
|
3,096
|
|
|||||
Share-based compensation expense
|
—
|
|
—
|
|
2,959
|
|
—
|
|
—
|
|
2,959
|
|
|||||
Change in unrealized investment gains/losses, net of tax benefit of $335
|
—
|
|
—
|
|
—
|
|
(1,260
|
)
|
—
|
|
(1,260
|
)
|
|||||
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
24,811
|
|
24,811
|
|
|||||
Balances, September 30, 2018
|
66,286
|
|
$
|
663
|
|
$
|
678,165
|
|
$
|
(16,303
|
)
|
$
|
(2,032
|
)
|
$
|
660,493
|
|
|
For the nine months ended September 30,
|
||||||
|
2018
|
|
2017
|
||||
Cash flows from operating activities
|
(In Thousands)
|
||||||
Net income
|
$
|
72,407
|
|
|
$
|
23,816
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
||||
Net realized investment gains
|
(51
|
)
|
|
(198
|
)
|
||
Loss from change in fair value of warrant liability
|
4,935
|
|
|
679
|
|
||
Depreciation and amortization
|
5,825
|
|
|
4,871
|
|
||
Net amortization of premium on investment securities
|
1,176
|
|
|
1,200
|
|
||
Amortization of debt discount and debt issuance costs
|
3,141
|
|
|
1,112
|
|
||
Share-based compensation expense
|
8,781
|
|
|
6,933
|
|
||
Deferred income taxes
|
16,698
|
|
|
11,340
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Premiums receivable
|
(9,496
|
)
|
|
(7,328
|
)
|
||
Accrued investment income
|
(1,669
|
)
|
|
(1,177
|
)
|
||
Prepaid expenses
|
(980
|
)
|
|
(660
|
)
|
||
Deferred policy acquisition costs, net
|
(6,512
|
)
|
|
(5,992
|
)
|
||
Other assets
(1)
|
927
|
|
|
(273
|
)
|
||
Unearned premiums
|
(273
|
)
|
|
8,439
|
|
||
Reserve for insurance claims and claim expenses
|
2,147
|
|
|
3,122
|
|
||
Reinsurance balances, net
(1)
|
565
|
|
|
(259
|
)
|
||
Accounts payable and accrued expenses
|
1,728
|
|
|
(3,847
|
)
|
||
Net cash provided by operating activities
|
99,349
|
|
|
41,778
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Purchase of short-term investments
|
(168,751
|
)
|
|
(111,551
|
)
|
||
Purchase of fixed-maturity investments, available-for-sale
|
(310,286
|
)
|
|
(166,640
|
)
|
||
Proceeds from maturity of short-term investments
|
148,997
|
|
|
142,722
|
|
||
Proceeds from redemptions, maturities and sale of fixed-maturity investments, available-for-sale
|
154,438
|
|
|
75,785
|
|
||
Additions to software and equipment
|
(5,326
|
)
|
|
(6,869
|
)
|
||
Net cash used in investing activities
|
(180,928
|
)
|
|
(66,553
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Proceeds from issuance of common stock related to public offering, net of issuance costs
|
79,165
|
|
|
—
|
|
||
Proceeds from issuance of common stock related to employee equity plans
|
12,557
|
|
|
3,105
|
|
||
Proceeds from issuance of common stock related to warrants
|
320
|
|
|
—
|
|
||
Taxes paid related to net share settlement of equity awards
|
(10,113
|
)
|
|
(3,883
|
)
|
||
Proceeds from senior note, net
|
149,250
|
|
|
—
|
|
||
Repayments of term loan
|
(147,000
|
)
|
|
(1,125
|
)
|
||
Payments of debt issuance/modification costs
|
(3,609
|
)
|
|
(370
|
)
|
||
Net cash provided by (used in) financing activities
|
80,570
|
|
|
(2,273
|
)
|
||
|
|
|
|
||||
Net decrease in cash, cash equivalents and restricted cash
|
(1,009
|
)
|
|
(27,048
|
)
|
||
Cash, cash equivalents and restricted cash, beginning of period
|
19,196
|
|
|
47,746
|
|
||
Cash, cash equivalents and restricted cash, end of period
|
$
|
18,187
|
|
|
$
|
20,698
|
|
|
|
|
|
||||
Supplemental disclosures of cash flow information
|
|
|
|
||||
Interest paid
|
$
|
9,233
|
|
|
$
|
10,350
|
|
Income tax paid
|
687
|
|
|
802
|
|
|
Amortized
Cost |
|
Gross Unrealized
|
|
Fair
Value |
||||||||||
|
|
Gains
|
|
Losses
|
|
||||||||||
As of September 30, 2018
|
(In Thousands)
|
||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
$
|
48,292
|
|
|
$
|
—
|
|
|
$
|
(2,483
|
)
|
|
$
|
45,809
|
|
Municipal debt securities
|
93,945
|
|
|
20
|
|
|
(1,933
|
)
|
|
92,032
|
|
||||
Corporate debt securities
|
536,240
|
|
|
323
|
|
|
(10,217
|
)
|
|
526,346
|
|
||||
Asset-backed securities
|
169,061
|
|
|
113
|
|
|
(1,236
|
)
|
|
167,938
|
|
||||
Total bonds
|
847,538
|
|
|
456
|
|
|
(15,869
|
)
|
|
832,125
|
|
||||
Short-term investments
|
42,256
|
|
|
54
|
|
|
—
|
|
|
42,310
|
|
||||
Total investments
|
$
|
889,794
|
|
|
$
|
510
|
|
|
$
|
(15,869
|
)
|
|
$
|
874,435
|
|
|
Amortized
Cost |
|
Gross Unrealized
|
|
Fair
Value |
||||||||||
|
|
Gains
|
|
Losses
|
|
||||||||||
As of December 31, 2017
|
(In Thousands)
|
||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
$
|
65,669
|
|
|
$
|
—
|
|
|
$
|
(981
|
)
|
|
$
|
64,688
|
|
Municipal debt securities
|
89,973
|
|
|
534
|
|
|
(659
|
)
|
|
89,848
|
|
||||
Corporate debt securities
|
435,562
|
|
|
4,231
|
|
|
(1,958
|
)
|
|
437,835
|
|
||||
Asset-backed securities
|
100,153
|
|
|
916
|
|
|
(125
|
)
|
|
100,944
|
|
||||
Total bonds
|
691,357
|
|
|
5,681
|
|
|
(3,723
|
)
|
|
693,315
|
|
||||
Long-term investments - other
|
353
|
|
|
—
|
|
|
—
|
|
|
353
|
|
||||
Short-term investments
|
22,149
|
|
|
58
|
|
|
—
|
|
|
22,207
|
|
||||
Total investments
|
$
|
713,859
|
|
|
$
|
5,739
|
|
|
$
|
(3,723
|
)
|
|
$
|
715,875
|
|
As of September 30, 2018
|
Amortized
Cost |
|
Fair
Value |
||||
|
(In Thousands)
|
||||||
Due in one year or less
|
$
|
63,314
|
|
|
$
|
63,368
|
|
Due after one through five years
|
335,262
|
|
|
330,603
|
|
||
Due after five through ten years
|
318,357
|
|
|
308,759
|
|
||
Due after ten years
|
3,800
|
|
|
3,767
|
|
||
Asset-backed securities
|
169,061
|
|
|
167,938
|
|
||
Total investments
|
$
|
889,794
|
|
|
$
|
874,435
|
|
As of December 31, 2017
|
Amortized
Cost |
|
Fair
Value |
||||
|
(In Thousands)
|
||||||
Due in one year or less
|
$
|
97,406
|
|
|
$
|
97,394
|
|
Due after one through five years
|
195,795
|
|
|
195,626
|
|
||
Due after five through ten years
|
305,798
|
|
|
306,930
|
|
||
Due after ten years
|
14,707
|
|
|
14,981
|
|
||
Asset-backed securities
|
100,153
|
|
|
100,944
|
|
||
Total investments
|
$
|
713,859
|
|
|
$
|
715,875
|
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|||||||||||||||||||||
|
# of Securities
|
Fair Value
|
Unrealized Losses
|
|
# of Securities
|
Fair Value
|
Unrealized Losses
|
|
# of Securities
|
Fair Value
|
Unrealized Losses
|
|||||||||||||||
As of September 30, 2018
|
|
(Dollars in Thousands)
|
||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
5
|
|
$
|
5,033
|
|
$
|
(60
|
)
|
|
18
|
|
$
|
40,776
|
|
$
|
(2,423
|
)
|
|
23
|
|
$
|
45,809
|
|
$
|
(2,483
|
)
|
Municipal debt securities
|
26
|
|
53,431
|
|
(885
|
)
|
|
18
|
|
30,580
|
|
(1,048
|
)
|
|
44
|
|
84,011
|
|
(1,933
|
)
|
||||||
Corporate debt securities
|
180
|
|
343,602
|
|
(6,123
|
)
|
|
43
|
|
76,589
|
|
(4,094
|
)
|
|
223
|
|
420,191
|
|
(10,217
|
)
|
||||||
Asset-backed securities
|
51
|
|
111,382
|
|
(976
|
)
|
|
6
|
|
10,563
|
|
(260
|
)
|
|
57
|
|
121,945
|
|
(1,236
|
)
|
||||||
Total
|
262
|
|
$
|
513,448
|
|
$
|
(8,044
|
)
|
|
85
|
|
$
|
158,508
|
|
$
|
(7,825
|
)
|
|
347
|
|
$
|
671,956
|
|
$
|
(15,869
|
)
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|||||||||||||||||||||
|
# of Securities
|
Fair Value
|
Unrealized Losses
|
|
# of Securities
|
Fair Value
|
Unrealized Losses
|
|
# of Securities
|
Fair Value
|
Unrealized Losses
|
|||||||||||||||
As of December 31, 2017
|
|
(Dollars in Thousands)
|
||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
16
|
|
$
|
29,806
|
|
$
|
(394
|
)
|
|
26
|
|
$
|
34,882
|
|
$
|
(587
|
)
|
|
42
|
|
$
|
64,688
|
|
$
|
(981
|
)
|
Municipal debt securities
|
21
|
|
38,628
|
|
(264
|
)
|
|
10
|
|
17,945
|
|
(395
|
)
|
|
31
|
|
56,573
|
|
(659
|
)
|
||||||
Corporate debt securities
|
94
|
|
128,313
|
|
(829
|
)
|
|
23
|
|
48,978
|
|
(1,129
|
)
|
|
117
|
|
177,291
|
|
(1,958
|
)
|
||||||
Asset-backed securities
|
22
|
|
27,947
|
|
(63
|
)
|
|
5
|
|
12,438
|
|
(62
|
)
|
|
27
|
|
40,385
|
|
(125
|
)
|
||||||
Total
|
153
|
|
$
|
224,694
|
|
$
|
(1,550
|
)
|
|
64
|
|
$
|
114,243
|
|
$
|
(2,173
|
)
|
|
217
|
|
$
|
338,937
|
|
$
|
(3,723
|
)
|
|
For the three months ended September 30,
|
|
For the nine months ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(In Thousands)
|
||||||||||||||
Investment income
|
$
|
6,473
|
|
|
$
|
4,363
|
|
|
$
|
17,192
|
|
|
$
|
12,455
|
|
Investment expenses
|
(196
|
)
|
|
(193
|
)
|
|
(606
|
)
|
|
(570
|
)
|
||||
Net investment income
|
$
|
6,277
|
|
|
$
|
4,170
|
|
|
$
|
16,586
|
|
|
$
|
11,885
|
|
|
For the three months ended September 30,
|
|
For the nine months ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(In Thousands)
|
||||||||||||||
Gross realized investment gains
|
$
|
461
|
|
|
$
|
69
|
|
|
$
|
520
|
|
|
$
|
536
|
|
Gross realized investment losses
|
(469
|
)
|
|
—
|
|
|
(469
|
)
|
|
(338
|
)
|
||||
Net realized investment gains (losses)
|
$
|
(8
|
)
|
|
$
|
69
|
|
|
$
|
51
|
|
|
$
|
198
|
|
|
Fair Value Measurements Using
|
|
|
||||||||||||
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
|
Significant Other
Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
|
Fair Value
|
||||||||
As of September 30, 2018
|
(In Thousands)
|
||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
$
|
45,809
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
45,809
|
|
Municipal debt securities
|
—
|
|
|
92,032
|
|
|
—
|
|
|
92,032
|
|
||||
Corporate debt securities
|
—
|
|
|
526,346
|
|
|
—
|
|
|
526,346
|
|
||||
Asset-backed securities
|
—
|
|
|
167,938
|
|
|
—
|
|
|
167,938
|
|
||||
Long-term investment – other
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|||||
Cash, cash equivalents and short-term investments
|
60,497
|
|
|
|
|
|
|
|
60,497
|
|
|||||
Total assets
|
$
|
106,306
|
|
|
$
|
786,316
|
|
|
$
|
—
|
|
|
$
|
892,622
|
|
Warrant liability
|
—
|
|
|
—
|
|
|
10,930
|
|
|
10,930
|
|
||||
Total liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,930
|
|
|
$
|
10,930
|
|
|
Fair Value Measurements Using
|
|
|
||||||||||||
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
|
Significant Other
Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
|
Fair Value
|
||||||||
As of December 31, 2017
|
(In Thousands)
|
||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies
|
$
|
59,844
|
|
|
$
|
4,844
|
|
|
$
|
—
|
|
|
$
|
64,688
|
|
Municipal debt securities
|
—
|
|
|
89,848
|
|
|
—
|
|
|
89,848
|
|
||||
Corporate debt securities
|
—
|
|
|
437,835
|
|
|
—
|
|
|
437,835
|
|
||||
Asset-backed securities
|
—
|
|
|
100,944
|
|
|
—
|
|
|
100,944
|
|
||||
Long-term investment - other
|
353
|
|
|
—
|
|
|
—
|
|
|
353
|
|
||||
Cash, cash equivalents and short-term investments
|
41,403
|
|
|
—
|
|
|
—
|
|
|
41,403
|
|
||||
Total assets
|
$
|
101,600
|
|
|
$
|
633,471
|
|
|
$
|
—
|
|
|
$
|
735,071
|
|
Warrant liability
|
—
|
|
|
—
|
|
|
7,472
|
|
|
7,472
|
|
||||
Total liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,472
|
|
|
$
|
7,472
|
|
|
For the nine months ended September 30,
|
||||||
Warrant Liability
|
2018
|
|
2017
|
||||
|
(In Thousands)
|
||||||
Balance, January 1
|
$
|
7,472
|
|
|
$
|
3,367
|
|
Change in fair value of warrant liability included in earnings
|
4,935
|
|
|
679
|
|
||
Issuance of common stock on warrant exercise
|
(1,477
|
)
|
|
—
|
|
||
Balance, September 30
|
$
|
10,930
|
|
|
$
|
4,046
|
|
|
As of September 30,
|
|
||||||
|
2018
|
|
2017
|
|
||||
Common stock price
|
$
|
22.65
|
|
|
$
|
12.40
|
|
|
Risk free interest rate
|
2.86 - 2.90%
|
|
|
1.66
|
%
|
|
||
Expected life
|
2.50 - 3.56 Years
|
|
|
3.25 years
|
|
|
||
Expected volatility
|
39.9 - 41.5%
|
|
|
30.6
|
%
|
|
||
Dividend yield
|
0%
|
|
|
0%
|
|
|
As of September 30, 2018
|
|
Principal
|
|
||
|
|
(In thousands)
|
|
||
2018
|
|
$
|
375
|
|
|
2019
|
|
1,500
|
|
|
|
2020
|
|
1,500
|
|
|
|
2021
|
|
1,500
|
|
|
|
2022
|
|
1,500
|
|
|
|
2023
|
|
143,250
|
|
|
|
Total
|
|
$
|
149,625
|
|
|
|
For the three months ended
|
For the nine months ended
|
||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
September 30, 2018
|
|
September 30, 2017
|
||||||||
|
(In Thousands)
|
|||||||||||||
Net premiums written
|
|
|
|
|
|
|
||||||||
Direct
|
$
|
73,748
|
|
|
$
|
56,217
|
|
$
|
210,452
|
|
|
$
|
142,134
|
|
Ceded
(1)
|
(8,367
|
)
|
|
(8,501
|
)
|
(21,598
|
)
|
|
(20,029
|
)
|
||||
Net premiums written
|
$
|
65,381
|
|
|
$
|
47,716
|
|
$
|
188,854
|
|
|
$
|
122,105
|
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
|
|
|
|
|
|
||||||||
Direct
|
$
|
76,513
|
|
|
$
|
52,024
|
|
$
|
210,725
|
|
|
$
|
133,696
|
|
Ceded
(1)
|
(11,106
|
)
|
|
(7,505
|
)
|
(28,789
|
)
|
|
(18,035
|
)
|
||||
Net premiums earned
|
$
|
65,407
|
|
|
$
|
44,519
|
|
$
|
181,936
|
|
|
$
|
115,661
|
|
•
|
100%
of existing risk under our pool agreement with Fannie Mae; and
|
•
|
25%
of risk on eligible policies written from September 1, 2016 through December 31, 2017.
|
|
For the three months ended
|
|
For the nine months ended
|
||||||||
|
September 30, 2018
|
|
September 30, 2017
|
|
September 30, 2018
|
|
September 30, 2017
|
||||
|
(In Thousands)
|
||||||||||
Ceded risk-in-force
|
3,960,461
|
|
|
2,682,982
|
|
|
3,960,461
|
|
|
2,682,982
|
|
Ceded premiums written
|
(16,546
|
)
|
|
(14,389
|
)
|
|
(46,389
|
)
|
|
(36,715
|
)
|
Ceded premiums earned
|
(19,286
|
)
|
|
(13,393
|
)
|
|
(53,581
|
)
|
|
(34,721
|
)
|
Ceded claims and claims expenses
|
337
|
|
|
277
|
|
|
1,053
|
|
|
887
|
|
Ceding commission written
|
3,320
|
|
|
2,878
|
|
|
9,289
|
|
|
7,343
|
|
Ceding commission earned
|
3,814
|
|
|
2,581
|
|
|
10,501
|
|
|
6,921
|
|
Profit commission
|
11,272
|
|
|
7,758
|
|
|
31,180
|
|
|
19,945
|
|
|
For the nine months ended September 30,
|
||||||
|
2018
|
|
2017
|
||||
|
(In Thousands)
|
||||||
Beginning balance
|
$
|
8,761
|
|
|
$
|
3,001
|
|
Less reinsurance recoverables
(1)
|
(1,902
|
)
|
|
(297
|
)
|
||
Beginning balance, net of reinsurance recoverables
|
6,859
|
|
|
2,704
|
|
||
|
|
|
|
||||
Add claims incurred:
|
|
|
|
||||
Claims and claim expenses incurred:
|
|
|
|
||||
Current year
(2)
|
5,090
|
|
|
3,546
|
|
||
Prior years
(3)
|
(1,779
|
)
|
|
(581
|
)
|
||
Total claims and claims expenses incurred
|
3,311
|
|
|
2,965
|
|
||
|
|
|
|
||||
Less claims paid:
|
|
|
|
||||
Claims and claim expenses paid:
|
|
|
|
||||
Current year
(2)
|
37
|
|
|
—
|
|
||
Prior years
(3)
|
1,742
|
|
|
720
|
|
||
Total claims and claim expenses paid
|
1,779
|
|
|
720
|
|
||
|
|
|
|
||||
Reserve at end of period, net of reinsurance recoverables
|
8,391
|
|
|
4,949
|
|
||
Add reinsurance recoverables
(1)
|
2,517
|
|
|
1,174
|
|
||
Ending balance
|
$
|
10,908
|
|
|
$
|
6,123
|
|
|
For the three months ended September 30,
|
|
For the nine months ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(In Thousands, except for per share data)
|
||||||||||||||
Net income
|
$
|
24,811
|
|
|
$
|
12,312
|
|
|
$
|
72,407
|
|
|
$
|
23,816
|
|
Basic weighted average shares outstanding
|
65,948
|
|
|
59,884
|
|
|
64,584
|
|
|
59,680
|
|
||||
Basic earnings per share
|
$
|
0.38
|
|
|
$
|
0.21
|
|
|
$
|
1.12
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
24,811
|
|
|
$
|
12,312
|
|
|
$
|
72,407
|
|
|
$
|
23,816
|
|
Warrant gain, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Diluted net income
|
$
|
24,811
|
|
|
$
|
12,312
|
|
|
$
|
72,407
|
|
|
$
|
23,816
|
|
|
|
|
|
|
|
|
|
||||||||
Basic weighted average shares outstanding
|
65,948
|
|
|
59,884
|
|
|
64,584
|
|
|
59,680
|
|
||||
Dilutive effect of issuable shares
|
2,896
|
|
|
3,205
|
|
|
2,928
|
|
|
3,093
|
|
||||
Diluted weighted average shares outstanding
|
68,844
|
|
|
63,089
|
|
|
67,512
|
|
|
62,773
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per share
|
$
|
0.36
|
|
|
$
|
0.20
|
|
|
$
|
1.07
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
||||||||
Anti-dilutive shares
|
—
|
|
|
830
|
|
|
252
|
|
|
832
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
|
(Dollars In Thousands)
|
||||||
Statutory surplus
|
$
|
440,697
|
|
|
$
|
371,084
|
|
Contingency reserve
|
292,030
|
|
|
186,641
|
|
||
RTC Ratio
|
13.3:1
|
|
|
13.2:1
|
|
•
|
NIW;
|
•
|
premium rates and the mix of premium payment type, which are either single, monthly or annual premiums, as described below;
|
•
|
cancellation rates of our insurance policies, which are impacted by payments or prepayments on mortgages, refinancings (which are affected by prevailing mortgage interest rates as compared to interest rates on loans underpinning our in force policies), levels of claims payments and home prices;
|
•
|
cession of premiums under third-party reinsurance arrangements.
|
Primary and pool IIF and NIW
|
As of and for the three months ended
|
|
For the nine months ended
|
||||||||||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
|
September 30, 2018
|
|
September 30, 2017
|
||||||||||||||||
|
IIF
|
|
NIW
|
|
IIF
|
|
NIW
|
|
NIW
|
||||||||||||||
|
|
|
(In Millions)
|
||||||||||||||||||||
Monthly
|
$
|
46,967
|
|
|
$
|
6,675
|
|
|
$
|
28,707
|
|
|
$
|
4,833
|
|
|
$
|
17,827
|
|
|
$
|
11,824
|
|
Single
|
16,560
|
|
|
686
|
|
|
14,552
|
|
|
1,282
|
|
|
2,507
|
|
|
2,887
|
|
||||||
Primary
|
63,527
|
|
|
7,361
|
|
|
43,259
|
|
|
6,115
|
|
|
20,334
|
|
|
14,711
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pool
|
2,974
|
|
|
—
|
|
|
3,330
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
66,501
|
|
|
$
|
7,361
|
|
|
$
|
46,589
|
|
|
$
|
6,115
|
|
|
$
|
20,334
|
|
|
$
|
14,711
|
|
Primary and pool premiums written and earned
|
For the three months ended
|
|
For the nine months ended
|
||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
|
September 30, 2018
|
|
September 30, 2017
|
||||||||
|
(In Thousands)
|
||||||||||||||
Net premiums written
(1)
|
$
|
65,381
|
|
|
$
|
47,716
|
|
|
$
|
188,854
|
|
|
$
|
122,105
|
|
Net premiums earned
(1)
|
65,407
|
|
|
44,519
|
|
|
181,936
|
|
|
115,661
|
|
Primary portfolio trends
|
As of and for the three months ended
|
||||||||||||||||||
|
September 30, 2018
|
|
June 30, 2018
|
|
March 31, 2018
|
|
December 31, 2017
|
|
September 30, 2017
|
||||||||||
|
($ Values In Millions)
|
||||||||||||||||||
New insurance written
|
$
|
7,361
|
|
|
$
|
6,513
|
|
|
$
|
6,460
|
|
|
$
|
6,876
|
|
|
$
|
6,115
|
|
Percentage of monthly premium
|
91
|
%
|
|
88
|
%
|
|
84
|
%
|
|
83
|
%
|
|
79
|
%
|
|||||
Percentage of single premium
|
9
|
%
|
|
12
|
%
|
|
16
|
%
|
|
17
|
%
|
|
21
|
%
|
|||||
New risk written
|
$
|
1,883
|
|
|
$
|
1,647
|
|
|
$
|
1,580
|
|
|
$
|
1,665
|
|
|
$
|
1,496
|
|
Insurance in force
(IIF)
(1)
|
63,527
|
|
|
58,089
|
|
|
53,434
|
|
|
48,465
|
|
|
43,259
|
|
|||||
Percentage of monthly premium
|
74
|
%
|
|
72
|
%
|
|
70
|
%
|
|
69
|
%
|
|
66
|
%
|
|||||
Percentage of single premium
|
26
|
%
|
|
28
|
%
|
|
30
|
%
|
|
31
|
%
|
|
34
|
%
|
|||||
Risk in force
(1)
|
$
|
15,744
|
|
|
$
|
14,308
|
|
|
$
|
13,085
|
|
|
$
|
11,843
|
|
|
$
|
10,572
|
|
Policies in force (count)
(1)
|
262,485
|
|
|
241,993
|
|
|
223,263
|
|
|
202,351
|
|
|
180,089
|
|
|||||
Average loan size
(1)
|
$
|
0.242
|
|
|
$
|
0.240
|
|
|
$
|
0.239
|
|
|
$
|
0.240
|
|
|
$
|
0.240
|
|
Average coverage
(2)
|
24.8
|
%
|
|
24.6
|
%
|
|
24.5
|
%
|
|
24.4
|
%
|
|
24.4
|
%
|
|||||
Loans in default (count)
|
746
|
|
|
768
|
|
|
1,000
|
|
|
928
|
|
|
350
|
|
|||||
Percentage of loans in default
|
0.3
|
%
|
|
0.3
|
%
|
|
0.5
|
%
|
|
0.5
|
%
|
|
0.2
|
%
|
|||||
Risk in force on defaulted loans
|
$
|
42
|
|
|
$
|
43
|
|
|
$
|
57
|
|
|
$
|
53
|
|
|
$
|
19
|
|
Average premium yield
(3)
|
0.43
|
%
|
|
0.44
|
%
|
|
0.43
|
%
|
|
0.44
|
%
|
|
0.43
|
%
|
|||||
Earnings from cancellations
|
$
|
2.6
|
|
|
$
|
3.1
|
|
|
$
|
2.8
|
|
|
$
|
4.2
|
|
|
$
|
4.3
|
|
Annual persistency
(4)
|
86.1
|
%
|
|
85.5
|
%
|
|
85.7
|
%
|
|
86.1
|
%
|
|
85.1
|
%
|
|||||
Quarterly run-off
(5)
|
3.3
|
%
|
|
3.5
|
%
|
|
3.1
|
%
|
|
3.9
|
%
|
|
3.8
|
%
|
(1)
|
Reported as of the end of the period.
|
(2)
|
Calculated as end of period RIF divided by IIF.
|
(3)
|
Calculated as net primary and pool premiums earned, net of reinsurance, divided by average gross primary IIF for the period, annualized.
|
(4)
|
Defined as the percentage of IIF that remains on our books after any 12-month period.
|
(5)
|
Defined as the percentage of IIF that is no longer on our books after any 3-month period.
|
Primary IIF
|
For the three months ended
|
|
For the nine months ended
|
||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
|
September 30, 2018
|
|
September 30, 2017
|
||||||||
|
(In Millions)
|
||||||||||||||
IIF, beginning of period
|
$
|
58,089
|
|
|
$
|
38,629
|
|
|
$
|
48,465
|
|
|
$
|
32,168
|
|
NIW
|
7,361
|
|
|
6,115
|
|
|
20,334
|
|
|
14,711
|
|
||||
Cancellations and other reductions
|
(1,923
|
)
|
|
(1,485
|
)
|
|
(5,272
|
)
|
|
(3,620
|
)
|
||||
IIF, end of period
|
$
|
63,527
|
|
|
$
|
43,259
|
|
|
$
|
63,527
|
|
|
$
|
43,259
|
|
Primary IIF and RIF
|
As of September 30, 2018
|
|
As of September 30, 2017
|
||||||||||||
|
IIF
|
|
RIF
|
|
IIF
|
|
RIF
|
||||||||
|
(In Millions)
|
||||||||||||||
September 30, 2018
|
$
|
19,804
|
|
|
$
|
4,980
|
|
|
$
|
—
|
|
|
$
|
—
|
|
2017
|
19,317
|
|
|
4,731
|
|
|
14,315
|
|
|
3,508
|
|
||||
2016
|
16,086
|
|
|
3,948
|
|
|
18,684
|
|
|
4,520
|
|
||||
2015
|
7,144
|
|
|
1,790
|
|
|
8,742
|
|
|
2,167
|
|
||||
2014
|
1,145
|
|
|
288
|
|
|
1,479
|
|
|
368
|
|
||||
2013
|
31
|
|
|
7
|
|
|
39
|
|
|
9
|
|
||||
Total
|
$
|
63,527
|
|
|
$
|
15,744
|
|
|
$
|
43,259
|
|
|
$
|
10,572
|
|
Primary NIW by FICO
|
For the three months ended
|
|
For the nine months ended
|
||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
|
September 30, 2018
|
|
September 30, 2017
|
||||||||
|
($ In Millions)
|
||||||||||||||
>= 760
|
$
|
3,191
|
|
|
$
|
2,806
|
|
|
$
|
8,617
|
|
|
$
|
6,865
|
|
740-759
|
1,228
|
|
|
934
|
|
|
3,431
|
|
|
2,277
|
|
||||
720-739
|
1,095
|
|
|
807
|
|
|
2,973
|
|
|
1,889
|
|
||||
700-719
|
878
|
|
|
697
|
|
|
2,435
|
|
|
1,662
|
|
||||
680-699
|
632
|
|
|
456
|
|
|
1,668
|
|
|
1,088
|
|
||||
<=679
|
337
|
|
|
415
|
|
|
1,210
|
|
|
930
|
|
||||
Total
|
$
|
7,361
|
|
|
$
|
6,115
|
|
|
$
|
20,334
|
|
|
$
|
14,711
|
|
Weighted average FICO
|
747
|
|
|
747
|
|
|
746
|
|
|
748
|
|
Primary NIW by LTV
|
For the three months ended
|
|
For the nine months ended
|
||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
|
September 30, 2018
|
|
September 30, 2017
|
||||||||
|
($ In Millions)
|
||||||||||||||
95.01% and above
|
$
|
676
|
|
|
$
|
722
|
|
|
$
|
2,644
|
|
|
$
|
1,470
|
|
90.01% to 95.00%
|
3,553
|
|
|
2,714
|
|
|
9,249
|
|
|
6,623
|
|
||||
85.01% to 90.00%
|
2,373
|
|
|
1,765
|
|
|
6,017
|
|
|
4,372
|
|
||||
85.00% and below
|
759
|
|
|
914
|
|
|
2,424
|
|
|
2,246
|
|
||||
Total
|
$
|
7,361
|
|
|
$
|
6,115
|
|
|
$
|
20,334
|
|
|
$
|
14,711
|
|
Weighted average LTV
|
92.5
|
%
|
|
92.3
|
%
|
|
92.6
|
%
|
|
92.2
|
%
|
Primary NIW by purchase/refinance mix
|
For the three months ended
|
|
For the nine months ended
|
||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
|
September 30, 2018
|
|
September 30, 2017
|
||||||||
|
(In Millions)
|
||||||||||||||
Purchase
|
$
|
7,022
|
|
|
$
|
5,387
|
|
|
$
|
18,584
|
|
|
$
|
12,889
|
|
Refinance
|
339
|
|
|
728
|
|
|
1,750
|
|
|
1,822
|
|
||||
Total
|
$
|
7,361
|
|
|
$
|
6,115
|
|
|
$
|
20,334
|
|
|
$
|
14,711
|
|
Primary IIF by FICO
|
As of
|
||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
||||||||||
|
($ In Millions)
|
||||||||||||
>= 760
|
$
|
29,627
|
|
|
47
|
%
|
|
$
|
21,329
|
|
|
49
|
%
|
740-759
|
10,386
|
|
|
16
|
|
|
6,983
|
|
|
16
|
|
||
720-739
|
8,566
|
|
|
14
|
|
|
5,547
|
|
|
13
|
|
||
700-719
|
7,008
|
|
|
11
|
|
|
4,505
|
|
|
10
|
|
||
680-699
|
4,655
|
|
|
7
|
|
|
2,942
|
|
|
7
|
|
||
<=679
|
3,285
|
|
|
5
|
|
|
1,953
|
|
|
5
|
|
||
Total
|
$
|
63,527
|
|
|
100
|
%
|
|
$
|
43,259
|
|
|
100
|
%
|
Primary RIF by FICO
|
As of
|
||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
||||||||||
|
($ In Millions)
|
||||||||||||
>= 760
|
$
|
7,361
|
|
|
47
|
%
|
|
$
|
5,251
|
|
|
50
|
%
|
740-759
|
2,592
|
|
|
16
|
|
|
1,713
|
|
|
16
|
|
||
720-739
|
2,131
|
|
|
14
|
|
|
1,349
|
|
|
13
|
|
||
700-719
|
1,732
|
|
|
11
|
|
|
1,092
|
|
|
10
|
|
||
680-699
|
1,145
|
|
|
7
|
|
|
707
|
|
|
7
|
|
||
<=679
|
783
|
|
|
5
|
|
|
460
|
|
|
4
|
|
||
Total
|
$
|
15,744
|
|
|
100
|
%
|
|
$
|
10,572
|
|
|
100
|
%
|
Primary IIF by LTV
|
As of
|
||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
||||||||||
|
($ In Millions)
|
||||||||||||
95.01% and above
|
$
|
6,309
|
|
|
10
|
%
|
|
$
|
3,038
|
|
|
7
|
%
|
90.01% to 95.00%
|
28,879
|
|
|
45
|
|
|
19,562
|
|
|
45
|
|
||
85.01% to 90.00%
|
19,074
|
|
|
30
|
|
|
13,437
|
|
|
31
|
|
||
85.00% and below
|
9,265
|
|
|
15
|
|
|
7,222
|
|
|
17
|
|
||
Total
|
$
|
63,527
|
|
|
100
|
%
|
|
$
|
43,259
|
|
|
100
|
%
|
Primary RIF by LTV
|
As of
|
||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
||||||||||
|
($ In Millions)
|
||||||||||||
95.01% and above
|
$
|
1,670
|
|
|
11
|
%
|
|
$
|
822
|
|
|
8
|
%
|
90.01% to 95.00%
|
8,416
|
|
|
53
|
|
|
5,722
|
|
|
54
|
|
||
85.01% to 90.00%
|
4,590
|
|
|
29
|
|
|
3,205
|
|
|
30
|
|
||
85.00% and below
|
1,068
|
|
|
7
|
|
|
823
|
|
|
8
|
|
||
Total
|
$
|
15,744
|
|
|
100
|
%
|
|
$
|
10,572
|
|
|
100
|
%
|
Primary RIF by Loan Type
|
As of
|
||||
|
September 30, 2018
|
|
September 30, 2017
|
||
|
|
|
|
||
Fixed
|
98
|
%
|
|
98
|
%
|
Adjustable rate mortgages:
|
|
|
|
||
Less than five years
|
—
|
|
|
—
|
|
Five years and longer
|
2
|
|
|
2
|
|
Total
|
100
|
%
|
|
100
|
%
|
|
As of September 30, 2018
|
|||||||||||||||||||||||||||
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)
|
|
Cumulative default rate
(2)
|
|||||||||||
|
($ Values in Millions)
|
|||||||||||||||||||||||||||
2013
|
$
|
162
|
|
|
$
|
31
|
|
|
19
|
%
|
|
655
|
|
|
166
|
|
|
—
|
|
|
1
|
|
|
0.2
|
%
|
|
0.2
|
%
|
2014
|
3,451
|
|
|
1,145
|
|
|
33
|
%
|
|
14,786
|
|
|
5,944
|
|
|
53
|
|
|
23
|
|
|
3.6
|
%
|
|
0.5
|
%
|
||
2015
|
12,422
|
|
|
7,144
|
|
|
58
|
%
|
|
52,548
|
|
|
33,093
|
|
|
197
|
|
|
47
|
|
|
2.9
|
%
|
|
0.5
|
%
|
||
2016
|
21,187
|
|
|
16,086
|
|
|
76
|
%
|
|
83,626
|
|
|
66,849
|
|
|
248
|
|
|
25
|
|
|
2.0
|
%
|
|
0.3
|
%
|
||
2017
|
21,582
|
|
|
19,317
|
|
|
90
|
%
|
|
85,897
|
|
|
79,147
|
|
|
215
|
|
|
2
|
|
|
2.3
|
%
|
|
0.3
|
%
|
||
2018
|
20,334
|
|
|
19,804
|
|
|
97
|
%
|
|
78,829
|
|
|
77,286
|
|
|
33
|
|
|
—
|
|
|
0.8
|
%
|
|
—
|
%
|
||
Total
|
$
|
79,138
|
|
|
$
|
63,527
|
|
|
|
|
316,341
|
|
|
262,485
|
|
|
746
|
|
|
98
|
|
|
|
|
|
(1)
|
The ratio of total claims incurred (paid and reserved) divided by cumulative premiums earned, net of reinsurance.
|
(2)
|
The sum of the number of claims paid ever to date and number of loans in default as of the end of the period divided by policies ever in force.
|
Top 10 primary RIF by state
|
As of
|
||||
|
September 30, 2018
|
|
September 30, 2017
|
||
California
|
13.3
|
%
|
|
13.6
|
%
|
Texas
|
8.1
|
|
|
7.6
|
|
Arizona
|
5.0
|
|
|
4.4
|
|
Florida
|
4.9
|
|
|
4.3
|
|
Virginia
|
4.9
|
|
|
5.6
|
|
Michigan
|
3.7
|
|
|
3.7
|
|
Pennsylvania
|
3.6
|
|
|
3.6
|
|
Colorado
|
3.4
|
|
|
3.8
|
|
Illinois
|
3.3
|
|
|
3.4
|
|
Utah
|
3.2
|
|
|
3.6
|
|
Total
|
53.4
|
%
|
|
53.6
|
%
|
|
For the three months ended
|
|
For the nine months ended
|
||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
|
September 30, 2018
|
|
September 30, 2017
|
||||||||
|
(In Thousands)
|
||||||||||||||
Beginning balance
|
$
|
10,601
|
|
|
$
|
5,048
|
|
|
$
|
8,761
|
|
|
$
|
3,001
|
|
Less reinsurance recoverables
(1)
|
(2,382
|
)
|
|
(899
|
)
|
|
(1,902
|
)
|
|
(297
|
)
|
||||
Beginning balance, net of reinsurance recoverables
|
8,219
|
|
|
4,149
|
|
|
6,859
|
|
|
2,704
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Add claims incurred:
|
|
|
|
|
|
|
|
||||||||
Claims and claim expenses incurred:
|
|
|
|
|
|
|
|
||||||||
Current year
(2)
|
1,938
|
|
|
1,215
|
|
|
5,090
|
|
|
3,546
|
|
||||
Prior years
(3)
|
(839
|
)
|
|
(258
|
)
|
|
(1,779
|
)
|
|
(581
|
)
|
||||
Total claims and claims expenses incurred
|
1,099
|
|
|
957
|
|
|
3,311
|
|
|
2,965
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Less claims paid:
|
|
|
|
|
|
|
|
||||||||
Claims and claim expenses paid:
|
|
|
|
|
|
|
|
||||||||
Current year
(2)
|
37
|
|
|
—
|
|
|
37
|
|
|
—
|
|
||||
Prior years
(3)
|
890
|
|
|
157
|
|
|
1,742
|
|
|
720
|
|
||||
Total claims and claim expenses paid
|
927
|
|
|
157
|
|
|
1,779
|
|
|
720
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Reserve at end of period, net of reinsurance recoverables
|
8,391
|
|
|
4,949
|
|
|
8,391
|
|
|
4,949
|
|
||||
Add reinsurance recoverables
(1)
|
2,517
|
|
|
1,174
|
|
|
2,517
|
|
|
1,174
|
|
||||
Ending balance
|
$
|
10,908
|
|
|
$
|
6,123
|
|
|
$
|
10,908
|
|
|
$
|
6,123
|
|
|
For the three months ended
|
|
For the nine months ended
|
||||||||
|
September 30, 2018
|
|
September 30, 2017
|
|
September 30, 2018
|
|
September 30, 2017
|
||||
Beginning default inventory
|
768
|
|
|
249
|
|
|
928
|
|
|
179
|
|
Plus: new defaults
|
380
|
|
|
208
|
|
|
1,080
|
|
|
479
|
|
Less: cures
|
(378
|
)
|
|
(103
|
)
|
|
(1,203
|
)
|
|
(292
|
)
|
Less: claims paid
|
(24
|
)
|
|
(4
|
)
|
|
(59
|
)
|
|
(16
|
)
|
Ending default inventory
|
746
|
|
|
350
|
|
|
746
|
|
|
350
|
|
|
For the three months ended
|
|
For the nine months ended
|
||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
|
September 30, 2018
|
|
September 30, 2017
|
||||||||
|
($ In Thousands)
|
||||||||||||||
Number of claims paid
(1)
|
24
|
|
|
4
|
|
|
59
|
|
|
16
|
|
||||
Total amount paid for claims
|
$
|
1,128
|
|
|
$
|
160
|
|
|
$
|
2,217
|
|
|
$
|
731
|
|
Average amount paid per claim
(2)
|
$
|
49
|
|
|
$
|
40
|
|
|
$
|
41
|
|
|
$
|
46
|
|
Severity
(3)
|
80
|
%
|
|
73
|
%
|
|
76
|
%
|
|
83
|
%
|
Average reserve per default:
|
As of September 30, 2018
|
|
As of September 30, 2017
|
||||
|
(In Thousands)
|
||||||
Case
(1)
|
$
|
14
|
|
|
$
|
16
|
|
IBNR
|
1
|
|
|
1
|
|
||
Total
|
$
|
15
|
|
|
$
|
17
|
|
|
As of
|
|||||
|
September 30, 2018
|
September 30, 2017
|
||||
|
(In Thousands)
|
|||||
Available assets
|
$
|
702,020
|
|
$
|
495,182
|
|
Risk-based required assets
|
398,975
|
|
356,207
|
|
Consolidated statements of operations
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
September 30, 2018
|
|
September 30, 2017
|
|
September 30, 2018
|
|
September 30, 2017
|
||||||||
Revenues
|
(In Thousands)
|
||||||||||||||
Net premiums earned
|
$
|
65,407
|
|
|
$
|
44,519
|
|
|
$
|
181,936
|
|
|
$
|
115,661
|
|
Net investment income
|
6,277
|
|
|
4,170
|
|
|
16,586
|
|
|
11,885
|
|
||||
Net realized investment (losses) gains
|
(8
|
)
|
|
69
|
|
|
51
|
|
|
198
|
|
||||
Other revenues
|
85
|
|
|
195
|
|
|
193
|
|
|
461
|
|
||||
Total revenues
|
71,761
|
|
|
48,953
|
|
|
198,766
|
|
|
128,205
|
|
||||
Expenses
|
|
|
|
|
|
|
|
||||||||
Insurance claims and claim expenses
|
1,099
|
|
|
957
|
|
|
3,311
|
|
|
2,965
|
|
||||
Underwriting and operating expenses
|
30,379
|
|
|
24,645
|
|
|
87,852
|
|
|
78,682
|
|
||||
Total expenses
|
31,478
|
|
|
25,602
|
|
|
91,163
|
|
|
81,647
|
|
||||
Other expense
|
|
|
|
|
|
|
|
||||||||
Loss from change in fair value of warrant liability
|
(5,464
|
)
|
|
(502
|
)
|
|
(4,935
|
)
|
|
(679
|
)
|
||||
Interest expense
|
(2,972
|
)
|
|
(3,352
|
)
|
|
(11,951
|
)
|
|
(10,146
|
)
|
||||
Income before income taxes
|
31,847
|
|
|
19,497
|
|
|
90,717
|
|
|
35,733
|
|
||||
Income tax expense
|
7,036
|
|
|
7,185
|
|
|
18,310
|
|
|
11,917
|
|
||||
Net income
|
$
|
24,811
|
|
|
$
|
12,312
|
|
|
$
|
72,407
|
|
|
$
|
23,816
|
|
|
|
|
|
|
|
|
|
||||||||
Loss ratio
(1)
|
1.7
|
%
|
|
2.1
|
%
|
|
1.8
|
%
|
|
2.6
|
%
|
||||
Expense ratio
(2)
|
46.4
|
%
|
|
55.4
|
%
|
|
48.3
|
%
|
|
68.0
|
%
|
||||
Combined ratio
|
48.1
|
%
|
|
57.5
|
%
|
|
50.1
|
%
|
|
70.6
|
%
|
Consolidated balance sheets
|
September 30, 2018
|
|
December 31, 2017
|
||||
|
(In Thousands)
|
||||||
Total investment portfolio
|
$
|
874,435
|
|
|
$
|
715,875
|
|
Cash and cash equivalents
|
18,187
|
|
|
19,196
|
|
||
Premiums receivable
|
34,675
|
|
|
25,179
|
|
||
Deferred policy acquisition costs, net
|
44,437
|
|
|
37,925
|
|
||
Software and equipment, net
|
22,887
|
|
|
22,802
|
|
||
Prepaid reinsurance premiums
|
33,058
|
|
|
40,250
|
|
||
Deferred tax asset, net
|
6,880
|
|
|
19,929
|
|
||
Other assets
|
17,922
|
|
|
13,692
|
|
||
Total assets
|
$
|
1,052,481
|
|
|
$
|
894,848
|
|
Term loan
|
$
|
147,009
|
|
|
$
|
143,882
|
|
Unearned premiums
|
162,893
|
|
|
163,166
|
|
||
Accounts payable and accrued expenses
|
27,134
|
|
|
23,364
|
|
||
Reserve for insurance claims and claims expenses
|
10,908
|
|
|
8,761
|
|
||
Reinsurance funds withheld
|
28,953
|
|
|
34,102
|
|
||
Deferred ceding commission
|
4,161
|
|
|
5,024
|
|
||
Warrant liability
|
10,930
|
|
|
7,472
|
|
||
Total liabilities
|
391,988
|
|
|
385,771
|
|
||
Total shareholders' equity
|
660,493
|
|
|
509,077
|
|
||
Total liabilities and shareholders' equity
|
$
|
1,052,481
|
|
|
$
|
894,848
|
|
Consolidated cash flows
|
For the nine months ended September 30,
|
||||||
|
2018
|
|
2017
|
||||
Net cash provided by (used in) :
|
(In Thousands)
|
||||||
Operating activities
|
$
|
99,349
|
|
|
$
|
41,778
|
|
Investing activities
|
(180,928
|
)
|
|
(66,553
|
)
|
||
Financing activities
|
80,570
|
|
|
(2,273
|
)
|
||
Net decrease in cash and cash equivalents
|
$
|
(1,009
|
)
|
|
$
|
(27,048
|
)
|
Percentage of portfolio's fair value
|
September 30, 2018
|
|
December 31, 2017
|
||
Corporate debt securities
|
59
|
%
|
|
59
|
%
|
Asset-backed securities
|
19
|
|
|
14
|
|
Cash, cash equivalents, and short-term investments
|
7
|
|
|
6
|
|
Municipal debt securities
|
10
|
|
|
12
|
|
U.S. treasury securities and obligations of U.S. government agencies
|
5
|
|
|
9
|
|
Total
|
100
|
%
|
|
100
|
%
|
Investment portfolio ratings at fair value
(1)
|
September 30, 2018
|
|
December 31, 2017
|
||
AAA
|
22
|
%
|
|
21
|
%
|
AA
(2)
|
17
|
|
|
19
|
|
A
(2)
|
43
|
|
|
46
|
|
BBB
(2)
|
18
|
|
|
14
|
|
Total
|
100
|
%
|
|
100
|
%
|
•
|
Changes to the level of interest rates
. Increasing interest rates may reduce the value of certain fixed-rate bonds held in the investment portfolio. Higher rates may cause variable rate assets to generate additional income. Decreasing rates will have the reverse impact. Significant changes in interest rates can also affect persistency and claim rates of our insurance portfolio, and as a result we may determine that our investment portfolio needs to be restructured to better align it with future liabilities and claim payments. Such restructuring may cause investments to be liquidated when market conditions are adverse. Additionally, the changes in Eurodollar based interest rates affect the interest expense related to our debt.
|
•
|
Changes to the term structure of interest rates
. Rising or falling rates typically change by different amounts along the yield curve. These changes may have unforeseen impacts on the value of certain assets.
|
•
|
Market volatility/changes in the real or perceived credit quality of investments
. Deterioration in the quality of investments, identified through changes to our own or third party (
e.g.
, rating agency) assessments, will reduce the value and potentially the liquidity of investments.
|
•
|
Concentration Risk
. If the investment portfolio is highly concentrated in one asset, or in multiple assets whose values are highly correlated, the value of the total portfolio may be greatly affected by the change in value of just one asset or a group of highly correlated assets.
|
•
|
Prepayment Risk
. Bonds may have call provisions that permit debtors to repay prior to maturity when it is to their advantage. This typically occurs when rates fall below the interest rate of the debt.
|
Exhibit Number
|
|
Description
|
|
|
|
2.1
|
|
Stock Purchase Agreement, dated November 30, 2011
, between NMI Holdings, Inc. and MAC Financial Ltd. (incorporated herein by reference to Exhibit 2.1 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
2.2
|
|
Amendment to Stock Purchase Agreement, dated April 6, 2012
, between NMI Holdings, Inc. and MAC Financial Ltd. (incorporated herein by reference to Exhibit 2.2 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
3.1
|
|
Second Amended and Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 3.1 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
3.2
|
|
Third Amended and Restated By-Laws
(incorporated herein by reference to Exhibit 3.1 to our Form 8-K, filed on December 9, 2014)
|
4.1
|
|
Specimen Class A common stock certificate
(incorporated herein by reference to Exhibit 4.1 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
4.2
|
|
Registration Rights Agreement between NMI Holdings, Inc. and FBR Capital Markets & Co., dated April 24, 2012
(incorporated herein by reference to Exhibit 4.2 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
4.3
|
|
Registration Rights Agreement by and between MAC Financial Ltd. and NMI Holdings, Inc., dated April 24, 2012
(incorporated herein by reference to Exhibit 4.3 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
4.4
|
|
Registration Rights Agreement between FBR & Co., FBR Capital Markets LT, Inc., FBR Capital Markets & Co., FBR Capital Markets PT, Inc. and NMI Holdings, Inc., dated April 24, 2012
(incorporated herein by reference to Exhibit 4.4 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
4.5
|
|
Warrant No. 1 to Purchase Common Stock of NMI Holdings, Inc. issued to FBR Capital Markets & Co., dated June 13, 2013
(incorporated herein by reference to Exhibit 4.5 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
4.6
|
|
Form of Warrant to Purchase Common Stock of NMI Holdings, Inc. issued to former stockholders of MAC Financial Ltd.
(incorporated herein by reference to Exhibit 4.6 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.1 ~
|
|
NMI Holdings Inc. 2012 Stock Incentive Plan
(incorporated herein by reference to Exhibit 10.1 to our Form S-1 Registration Statement (registration No. 333-191635), filed on October 9, 2013)
|
10.2 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Restricted Stock Unit Award Agreement for Chief Executive Officer and Chief Financial Officer
(incorporated herein by reference to Exhibit 10.2 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.3 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Restricted Stock Unit Award Agreement for Management
(incorporated herein by reference to Exhibit 10.3 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.4 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Restricted Stock Unit Award Agreement for Directors
(incorporated herein by reference to Exhibit 10.4 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.5 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Chief Executive Officer and Chief Financial Officer
(incorporated herein by reference to Exhibit 10.5 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.6 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Management
(incorporated herein by reference to Exhibit 10.6 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.7 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Directors
(incorporated herein by reference to Exhibit 10.7 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
|
10.8 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Chief Executive Officer and Chief Financial Office
r (incorporated herein by reference to Exhibit 10.8 to our Form 10-K, filed on February 17, 2017)
|
10.9 ~
|
|
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Employees
(incorporated herein by reference to Exhibit 10.9 to our Form 10-K, filed on February 17, 2017)
|
10.10 ~
|
|
Amended and Restated Employment Agreement by and between NMI Holdings, Inc. and Bradley M. Shuster, dated December 23, 2015
(incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on December 29, 2015)
|
32.1 #
|
|
|
101
|
|
The following financial information from NMI Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 formatted in XBRL (eXtensible Business Reporting Language):
(i) Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (ii) Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2018 and 2017
(iii) Condensed Consolidated Statements of Changes in Shareholders' Equity for the nine months ended September 30, 2018 and the year ended December 31, 2017
(iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017, and (v) Notes to Condensed Consolidated Financial Statements. |
~
|
Indicates a management contract or compensatory plan or contract.
|
+
|
Confidential treatment granted as to certain portions, which portions have been filed separately with the SEC.
|
#
|
In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibit 32 hereto are deemed to accompany this Form 10-Q and will not be deemed "filed" for purposes of Section 18 of the Exchange Act or deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act except to the extent that the registrant specifically incorporates it by reference.
|
|
NMI HOLDINGS, INC.
|
Date: October 30, 2018
|
|
|
|
|
By:
/s/ Adam S. Pollitzer
|
|
Name:Adam S. Pollitzer
|
|
Title:Chief Financial Officer and Duly Authorized Signatory
|
I.
|
PURPOSE
|
II.
|
PLAN TERM
|
III.
|
AMENDMENT; TERMINATION
|
IV.
|
ADMINISTRATION
|
V.
|
ELIGIBILITY
|
VI.
|
SEVERANCE BENEFITS
|
1.
|
A lump sum cash payment in an amount equal to (a) the Severance Multiple multiplied by (b) the sum of (i) the Participant’s annual base salary in effect as of the date of termination and (ii) the Participant’s target annual bonus for the year in which the date of termination occurs (the “
Severance Amount
”), which, subject to Section VII, shall be paid on the 60
th
day following the Participant’s date of termination. For purposes of determining the Severance Amount, the amount of the Participant’s annual base salary and target annual bonus will be determined without regard to any reduction if such reduction is the reason for the Participant’s termination of employment under the Plan under clause (a) or (b) of the definition of Good Reason.
|
2.
|
A lump sum cash payment in an amount equal to the cost of (a) the monthly premiums for medical coverage for the Participant and his or her eligible dependents pursuant to Section 4980B(f) of the Code (or any successor provision thereof) in effect as of the date of termination, less the active employee rate for such coverage, multiplied by (b) the number of months in the COBRA Period, which amount, subject to Section VII, shall be paid on the 60
th
day following the Participant’s date of termination (the “
COBRA Amount
”). For avoidance of doubt, the COBRA Period will be set to align with the Severance Multiple, but stated on a monthly basis (e.g., a 2.0 multiple would be 24 months, while a 1.5 multiple would be 18 months).
|
3.
|
A lump sum cash payment in an amount equal to (a) the greater of (x) Participant’s target annual bonus for the fiscal year of termination or (y) the amount being accrued on the books and records of the Company in respect of the Participant’s annual bonus for the fiscal year of termination, multiplied by (b) a fraction, the numerator of which is the number of days that have elapsed through the date of termination during the fiscal year of the Company in which the date of termination occurs, and the denominator of which is the total number of days in such fiscal year, which amount, subject to Section VII, shall be paid on the 60
th
day following the Participant’s date of termination. The amount of the Participant’s target annual bonus will be determined without regard to any reduction if such reduction is the reason for the Participant’s termination of employment under the Plan under clause (b) of the definition of Good Reason (the “
Prorated Bonus
”).
|
4.
|
A lump sum cash payment consisting of the Participant’s earned annual base salary through the date of his or her termination of employment, which shall be paid no later than the 30
th
day following the date of the Participant’s termination of employment.
|
5.
|
Any annual incentive payment for any prior award period that has ended but not yet paid to the Participant as of his or her date of termination (other than any portion of such annual incentive payment that was previously deferred, which shall be paid in accordance with the applicable deferral arrangement and any election thereunder), which shall be paid no later than the 15
th
day of the third month following the last day of the fiscal year with respect to which such incentive payment is attributed to.
|
6.
|
To the extent not paid or provided prior to the Participant’s date of termination, any other amounts or benefits required to be paid or provided, or which the Participant is eligible to receive under any plan, program, policy, practice, contract or agreement of the Company or its affiliates through the date of termination, including unreimbursed expenses due and owing to the Participant under the Company’s expense reimbursement policy as of the date of termination.
|
VII.
|
RELEASE REQUIREMENT
|
VIII.
|
SEVERANCE BENEFITS REQUIRED BY OTHER AGREEMENT
|
IX.
|
LIMITATION ON CERTAIN PAYMENTS
|
1.
|
“
Accounting Firm
” means a nationally recognized certified public accounting firm that is selected by the Company for purposes of making the applicable determinations hereunder and is reasonably acceptable to the Participant, which firm shall not, without the Participant's consent, be a firm serving as accountant or auditor for the individual, entity or group effecting the Change in Control.
|
2.
|
“
Net After-Tax Receipt
” means the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on the Participant with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to the Participant's taxable income for the immediately preceding taxable year, or such other rate(s) as the Accounting Firm determined to be likely to apply to the Participant in the relevant tax year(s).
|
3.
|
“
Parachute Value
” of a Payment means the present value as of the date of the Change in Control
|
4.
|
“
Payment
” means any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Participant, whether paid or payable pursuant to the Plan or otherwise.
|
5.
|
“
Safe Harbor Amount
” means (x) 3.0 times the Participant's “base amount,” within the meaning of Section 280G(b)(3) of the Code, minus (y) $1.00.
|
X.
|
SECTION 409A
|
XI.
|
OTHER TERMS AND CONDITIONS
|
XII.
|
CERTAIN DEFINITIONS
|
(a)
|
An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended from time to time (the “
Exchange Act
”)) (a “
Person
”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the then outstanding shares of common stock of the Company (the “
Outstanding Company Common Stock
”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “
Outstanding Company Voting Securities
”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (D) any acquisition by any entity pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this definition; or
|
(b)
|
A change in the composition of the Board of Directors of the Company (the “
Board
”
) such that the individuals who, as of the Effective Date, constitute the Board (the “
Incumbent Board
”) cease for any reason to constitute at least a majority of the Board; provided, however, that, for purposes of this definition, any individual who becomes a member of the Board subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be considered as a member of the Incumbent Board; or
|
(c)
|
The consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries or sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or securities of another entity by the Company or any of its subsidiaries (a “
Business Combination
”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent securities), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent body or committee) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
|
(d)
|
The approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of NMI Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
October 30, 2018
|
/s/ Bradley M. Shuster
|
|
Bradley M. Shuster
|
|
Chairman and Chief Executive Officer
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of NMI Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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October 30, 2018
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/s/ Adam Pollitzer
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Adam S. Pollitzer
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Chief Financial Officer
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(Principal Financial Officer)
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October 30, 2018
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/s/ Bradley M. Shuster
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Bradley M. Shuster
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Chairman and Chief Executive Officer
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(Principal Executive Officer)
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October 30, 2018
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/s/ Adam S. Pollitzer
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Adam S. Pollitzer
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Chief Financial Officer
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(Principal Financial Officer)
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