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 | 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 001-36174 |
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) | (Zip Code) |
Large accelerated filer o | Accelerated filer x | Non-accelerated filer o | Smaller reporting company o |
Emerging growth company x |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 6. | ||
• | 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; |
• | 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; |
• | 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; |
• | 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 | |
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 |
For the three months ended September 30, | For the nine months ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(In Thousands) | |||||||||||||||
Statutory net (loss) | $ | (17,274 | ) | $ | (7,688 | ) | $ | (22,022 | ) | $ | (29,394 | ) |
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 Officer (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 60th 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 60th 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 60th 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 30th 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 15th 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; |
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)) 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/ Adam Pollitzer | |
Adam S. Pollitzer | |
Chief Financial Officer | |
(Principal Financial Officer) |
October 30, 2018 | |
/s/ Bradley M. Shuster | |
Bradley M. Shuster | |
Chairman and Chief Executive Officer | |
(Principal Executive Officer) |
October 30, 2018 | |
/s/ Adam S. Pollitzer | |
Adam S. Pollitzer | |
Chief Financial Officer | |
(Principal Financial Officer) |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Oct. 26, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | NMI HOLDINGS, INC. | |
Entity Central Index Key | 0001547903 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Entity Filer Category | Accelerated Filer | |
Entity Emerging Growth Company | true | |
Entity Small Business | false | |
Entity Ex Transition Period | true | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 66,302,317 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Fixed maturities, available-for-sale, amortized cost | $ 889,794 | $ 713,859 |
Restricted cash | $ 1,406 | $ 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, issued (in shares) | 66,285,847 | 60,517,512 |
Common stock, outstanding (in shares) | 66,285,847 | 60,517,512 |
Common stock, authorized (in shares) | 250,000,000 | 250,000,000 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Income Statement [Abstract] | ||||
Net unrealized (losses) gains in accumulated other comprehensive income, tax (benefit) expense | $ (337) | $ 366 | $ (3,676) | $ 2,439 |
Reclassification adjustment for realized losses included in net income, tax expense | $ (2) | $ 24 | $ (27) | $ 69 |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
|
Statement of Stockholders' Equity [Abstract] | ||||||
Change in unrealized investment gains/losses, tax expense (benefit) | $ (335) | $ (2,891) | $ (423) | $ (390) | $ (1,454) | $ 664 |
Stock issued upon exercise of warrants (in shares) | 3,751 | 25,686 | ||||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands |
9 Months Ended | ||||
---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
||||
Cash flows from operating activities | |||||
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 | 0 | |||
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 | 0 | |||
Taxes paid related to net share settlement of equity awards | (10,113) | (3,883) | |||
Proceeds from senior note, net | 149,250 | 0 | |||
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 | |||
|
Organization, Basis of Presentation and Summary of Accounting Principles |
9 Months Ended |
---|---|
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization, Basis of Presentation and Summary of Accounting Principles | Organization, Basis of Presentation and Summary of Accounting Principles NMI Holdings, Inc. (NMIH) is a Delaware corporation, incorporated in May 2011, to provide private mortgage guaranty insurance (which we refer to as mortgage insurance or MI) through its wholly owned insurance subsidiaries, National Mortgage Insurance Corporation (NMIC) and National Mortgage Reinsurance Inc One (Re One). In April 2012, we completed a private placement of our securities, through which we offered and sold an aggregate of 55 million of our Class A common stock resulting in net proceeds of approximately $510 million (the Private Placement), and we completed the acquisition of our insurance subsidiaries for $8.5 million in cash, common stock and warrants, plus the assumption of $1.3 million in liabilities. In November 2013, we completed an initial public offering of 2.4 million shares of our common stock, and our common stock began trading on the NASDAQ exchange on November 8, 2013, under the symbol "NMIH." In March 2018, we completed the sale of an additional 4.3 million shares of common stock including a 15% option to purchase additional shares, which was exercised in full. In April 2013, NMIC, our primary insurance subsidiary, issued its first mortgage insurance policy. NMIC is licensed to write mortgage insurance in all 50 states and D.C. In August 2015, NMIH capitalized a wholly owned subsidiary, NMI Services, Inc. (NMIS), through which we offer outsourced loan review services to mortgage loan originators. Basis of Presentation The accompanying unaudited condensed consolidated financial statements, which include the results of NMIH and its wholly owned subsidiaries, have been prepared in accordance with the instructions to Form 10-Q as prescribed by the SEC for interim reporting and include other information and disclosures required by accounting principles generally accepted in the U.S. (GAAP). Our accounts are maintained in U.S. dollars. These statements should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2017, included in our 2017 10-K. All intercompany transactions have been eliminated. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities as of the balance sheet date. Estimates also affect the reported amounts of income and expenses for the reporting period. Actual results could differ from those estimates. Certain reclassifications to our previously reported financial information have been made to conform to current period presentation. The results of operations for the interim period may not be indicative of the results that may be expected for the full year ending December 31, 2018. Significant Accounting Principles There have been no changes to our significant accounting principles as described in Item 8, "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 2 - Summary of Accounting Principles" of our 2017 Form 10-K, other than as noted in "Reinsurance", "Variable interest entity" and "Recent Accounting Pronouncements - Adopted" below. Reinsurance We account for premiums, claims and claim expenses that are ceded to reinsurers on a basis consistent with those we use to account for the original policies we issue and pursuant to the terms of our reinsurance contracts. We account for premiums ceded or otherwise paid to reinsurers as reductions to premium revenue. Effective January 1, 2018, NMIC entered into a second quota share reinsurance transaction (2018 QSR Transaction) which is similar in nature to the quota share reinsurance transaction we entered into in September 2016 (2016 QSR Transaction, together with 2018 QSR Transaction, the QSR Transactions) (see Note 5, "Reinsurance"). We earn profit and ceding commissions in connection with the QSR Transactions. Profit commissions represent a percentage of the profits recognized by reinsurers that are returned to us, based on the level of claims and claim expenses that we cede. We recognize any profit commissions we earn as increases to premium revenue. Ceding commissions are calculated as a percentage of ceded written premiums under the 2016 QSR Transaction and as a percentage of ceded earned premiums under the 2018 QSR Transaction, to cover our costs to acquire and service the direct policies. We earn the ceding commissions in a manner consistent with our recognition of earnings on the underlying insurance policies, over the terms of the policies reinsured. We account for ceding commissions earned as a reduction to underwriting and operating expenses. Under the QSR Transactions, we cede a portion of claims and claim expenses reserves to our reinsurers, which are accounted for as reinsurance recoverables in "Other Assets" on the consolidated balance sheets and as reductions to claim expense on the consolidated statements of operations. We remain directly liable for all loss payments in the event we are unable to collect from any reinsurer. Variable interest entity NMIC entered into aggregate excess of loss reinsurance agreements with Oaktown Re Ltd. (Oaktown Re) and Oaktown Re II Ltd (Oaktown Re II), each a Bermuda-domiciled special purpose reinsurer, in May 2017 and August 2018, respectively. At inception of each reinsurance agreement, we determined that each of Oaktown Re and Oaktown Re II were variable interest entities (VIEs), as defined under GAAP (ASC 810), because they did not have sufficient equity at risk to finance their respective activities. We evaluated the VIEs at inception to determine whether NMIC was the primary beneficiary under each deal and, if so, whether we were required to consolidate the assets and liabilities of each VIE. The primary beneficiary of a VIE is an enterprise that (1) has the power to direct the activities of the VIE, which most significantly impact its economic performance and (2) has significant economic exposure to the VIE; i.e., the obligation to absorb losses or receive benefits that could potentially be significant. The determination of whether an entity is the primary beneficiary of a VIE is complex and requires management judgment regarding determinative factors, including the expected results of the VIE and how those results are absorbed by beneficial interest holders, as well as which party has the power to direct activities that most significantly impact the performance of the VIE. We concluded that we are not the primary beneficiary of either Oaktown Re or Oaktown Re II because NMIC does not have significant economic exposure to either Oaktown Re or Oaktown Re II, and, as such, we do not consolidate the VIEs in our consolidated financial statements. Recent Accounting Pronouncements - Adopted In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). This update is intended to provide a consistent approach in recognizing revenue. In December 2016, the FASB clarified that all contracts that are within the scope of Topic 944, Financial Services-Insurance, are excluded from the scope of ASU 2014-09. Accordingly, this update did not impact the recognition of revenue related to insurance premiums or investment income, which represent a majority of our total revenues. The update impacted our loan review services revenue, which is the only revenue stream in scope of the update. We adopted this update on January 1, 2018 using the modified-retrospective approach and the impact was immaterial to our consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10). This update requires entities to reduce the carrying amount of deferred tax assets, if necessary, by the amount of any tax benefit that is not expected to be realized. We adopted this update effective January 1, 2018. The impact was immaterial to our consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220). This update permits a company to reclassify the disproportionate income tax effects as a result of the 2017 Tax Cuts and Jobs Act (the TCJA) on items within accumulated other comprehensive income (AOCI) to retained earnings. This standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We adopted this update on January 1, 2018 and adjusted the disproportionate income tax effects, or "stranded tax effects," resulting in a $0.3 million reduction to our beginning retained earnings as of January 1, 2018. Recent Accounting Pronouncements - Not Yet Adopted In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update requires that businesses recognize rights and obligations associated with certain leases as assets and liabilities on the balance sheet. The standard also requires additional disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases. For public business entities, this update is effective for annual periods beginning after December 15, 2018 and interim periods therein. Early adoption is permitted in any period. We expect to adopt this guidance on January 1, 2019. In September 2017, ASU 2017-13 added guidance from a SEC Staff Announcement, "Transition Related to Accounting Standards Update No. 2016-02," and in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvement, which provides companies the option to apply the provisions of the new lease standard prospectively as of the effective date, without adjusting comparative periods presented. The effect of adoption will depend on our current lease portfolio at time of adoption; however, upon adoption, we anticipate that our reported assets and liabilities will increase in connection with the recognition of any right-of-use assets and lease liabilities, such as the operating lease on our corporate headquarters. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326). This update requires companies to measure all expected credit losses for financial assets held at the reporting date. The standard also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We are currently reviewing the impacts the adoption of this guidance will have, if any, on our accounting for credit losses on our investment portfolio. We do not expect it to impact our accounting for insurance claims and claims expenses as these items are not in the scope of this ASU. In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivatives and Hedging (Topic 815). This update is intended to simplify the accounting for certain equity-linked financial instruments. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The guidance must be applied using a full or modified retrospective approach. We expect to adopt this ASU in the first quarter of 2019 and have determined that it will have no impact on our consolidated financial statements. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718). This update expands the scope of Topic 718 to include share-based payments made to non-employees in connection with the acquisition of goods and services. The standard will take effect for public business entities for fiscal years, beginning after December 15, 2019, and interim periods within fiscal years, beginning after December 15, 2020. We expect to adopt this ASU in the first quarter of 2019 and have determined that it has no impact on our financial results at this time as we have not made any share-based grants to nonemployees as defined in ASC 718-10-20. In August 2018, the FASB issued ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts. This update provides guidance to the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We are currently evaluating the impact the adoption of this ASU will have, if any, on our consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). This update requires companies to make disclosures about recurring and nonrecurring fair value measurements. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We are currently evaluating the impact the adoption of this ASU will have, if any, on our fair value of financial instruments disclosures. In August 2018, the FASB issued ASU 2018 -15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40). This update applies to cloud computing arrangements hosted by a vendor and provides companies with guidance on the criteria for capitalizing implementation, set-up and other up-front costs incurred in association with these arrangements. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We are currently evaluating the impact the adoption of this ASU will have, if any, on our consolidated financial statements. |
Investments |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Investments We have designated our investment portfolio as available-for-sale and report it at fair value. The related unrealized gains and losses are, after considering the related tax expense or benefit, recognized through comprehensive income and loss, and on an accumulated basis in shareholders' equity. Net realized investment gains and losses are reported in income based upon specific identification of securities sold. Fair Values and Gross Unrealized Gains and Losses on Investments
As of September 30, 2018 and December 31, 2017, approximately $5.3 million and $7.0 million, respectively, of our cash and investments were held in the form of U.S. Treasury securities on deposit with various state insurance departments to satisfy regulatory requirements. See Note 5 "Reinsurance" for the information related to restricted cash. Scheduled Maturities The amortized cost and fair values of available-for-sale securities as of September 30, 2018 and December 31, 2017, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most asset-backed securities provide for periodic payments throughout their lives, they are listed below in a separate category.
Aging of Unrealized Losses As of September 30, 2018, the investment portfolio had gross unrealized losses of $15.9 million, $7.8 million of which has been in an unrealized loss position for a period of 12 months or greater. We did not consider these securities to be other-than-temporarily impaired as of September 30, 2018. We based our conclusion that these investments were not other-than-temporarily impaired as of September 30, 2018 on the following facts: (i) the unrealized losses were primarily caused by interest rate movements since the purchase date; (ii) we do not intend to sell these investments; and (iii) we do not believe that it is more likely than not that we will be required to sell these investments before recovery of our amortized cost basis, which may not occur until maturity. For those securities in an unrealized loss position, the length of time the securities were in such a position is as follows:
The following table presents the components of net investment income:
The following table presents the components of net realized investment gains (losses):
Investment Securities - Other-than-Temporary Impairment (OTTI) At September 30, 2018, we held no other-than-temporarily impaired securities. During the three and nine months ended September 30, 2018 and the three months ended September 30, 2017, we did not recognize any OTTI losses. During the nine months ended September 30, 2017, we recognized $0.1 million of OTTI losses in earnings. |
Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments The following describes the valuation techniques used by us to determine the fair value of our financial instruments: We established a fair value hierarchy by prioritizing the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under this standard are described below: Level 1 - Fair value measurements based on quoted prices in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments. Level 2 - Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 - Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions, which require significant management judgment or estimation about the inputs a hypothetical market participant would use to value that asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assets classified as Level 1 and Level 2 To determine the fair value of securities available-for-sale in Level 1 and Level 2 of the fair value hierarchy, independent pricing sources have been utilized. One price is provided per security based on observable market data. To ensure securities are appropriately classified in the fair value hierarchy, we review the pricing techniques and methodologies of the independent pricing sources and believe that their policies adequately consider market activity, either based on specific transactions for the issue valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded. A variety of inputs are utilized by the independent pricing sources including benchmark yields, reported trades, non-binding broker/dealer quotes, issuer spreads, two sided markets, benchmark securities, bids, offers and reference data including data published in market research publications. Inputs may be weighted differently for any security, and not all inputs are used for each security evaluation. Market indicators, industry and economic events are also considered. This information is evaluated using a multidimensional pricing model. Quality controls are performed by the independent pricing sources throughout this process, which include reviewing tolerance reports, trading information and data changes, and directional moves compared to market moves. This model combines all inputs to arrive at a value assigned to each security. We have not made any adjustments to the prices obtained from the independent pricing sources. Liabilities classified as Level 3 We calculate the fair value of outstanding warrants utilizing Level 3 inputs, including a Black-Scholes option-pricing model, in combination with a binomial model, and we value the pricing protection features within the warrants using a Monte-Carlo simulation model. Variables in the model include the risk-free rate of return, dividend yield, expected life and expected volatility of our stock price. The following tables present the level within the fair value hierarchy at which our financial instruments were measured:
There were no transfers between Level 1 and Level 2, nor any transfers in or out of Level 3, of the fair value hierarchy during the nine months ended September 30, 2018 and the year ended December 31, 2017. The following is a roll-forward of Level 3 liabilities measured at fair value:
The following table outlines the key inputs and assumptions used to calculate the fair value of the warrant liability in the Black-Scholes option-pricing model as of the dates indicated.
The changes in fair value of the warrant liability for the nine months ended September 30, 2018 and 2017 are primarily attributable to changes in the price of our common stock during the respective periods, with additional impact related to changes in the Black-Scholes model inputs and exercises of outstanding warrants. |
Debt Obligations |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Obligations | Debt Obligations On May 24, 2018, we entered into a credit agreement (2018 Credit Agreement), which provides for (i) a $150 million five-year senior secured term loan facility (2018 Term Loan) that matures on May 24, 2023; and (ii) a $85 million three-year secured revolving credit facility (2018 Revolving Credit Facility) that matures on May 24, 2021. Proceeds from the 2018 Term Loan were used to repay in full the outstanding amount due under our $150 million amended term loan due November 10, 2019 (the 2015 Term Loan), and to pay fees and expenses incurred in connection with the 2018 Credit Agreement. 2018 Term Loan The 2018 Term Loan bears interest at the Eurodollar Rate, as defined in the 2018 Credit Agreement and subject to a 1.00% floor, plus an annual margin rate of 4.75%, representing an all-in rate of 6.99% as of September 30, 2018, payable monthly based on our current interest period election. Quarterly principal payments of $375 thousand are also required. The 2018 Term Loan has a prepayment premium of 1% for any refinancing prepayments made on or prior to the date that is six months after the date of the 2018 Credit Agreement, after which there is no prepayment penalty. Interest expense for nine months ended September 30, 2018 includes amounts related to our interest payment, one-time financing costs and the amortization of issuance costs and original issue discounts. For the nine months ended September 30, 2018, we recorded $11.6 million of interest expense, including $2.2 million of costs related to the extinguishment of the 2015 Term Loan and issuance of the 2018 Term Loan. Capitalized debt issuance costs totaling $1.8 million and original issue discounts totaling $986 thousand are being amortized to interest expense using the effective interest method over the contractual life of the 2018 Term Loan. As of September 30, 2018, the remaining unamortized issuance cost and original issue discounts totaled $2.6 million, and the outstanding principal balance of the 2018 Term Loan was $149.6 million. We are subject to certain covenants under the 2018 Term Loan (as defined in the 2018 Credit Agreement), including (but not limited to) a maximum debt-to-total capitalization ratio (as defined in the 2018 Credit Agreement) of 35% under the 2018 Term Loan. We were in compliance with all covenants as of September 30, 2018. Future principal payments due under the 2018 Term Loan as of September 30, 2018 are as follows:
2018 Revolving Credit Facility Borrowings under the 2018 Revolving Credit Facility may be used for general corporate purposes and will accrue interest at a variable rate equal to, at our discretion, (i) a base rate (as defined in the 2018 Credit Agreement, subject to a floor of 1.00% per annum) plus a margin of 1.00% to 2.50% per annum, based on the applicable corporate credit rating at the time, or (ii) the Eurodollar Rate (subject to a floor of 0.00% per annum) plus a margin of 2.00% to 3.50% per annum, based on the applicable corporate credit rating at the time. As of September 30, 2018, no borrowings had been made under the 2018 Revolving Credit Facility. We are required to pay a quarterly commitment fee on the average daily undrawn amount of the 2018 Revolving Credit Facility, which ranges from 0.30% to 0.60%, based on the applicable corporate credit rating at the time. As of September 30, 2018, the applicable commitment fee was 0.50%. For the three and nine months ended September 30, 2018, we recorded $0.1 million and $0.2 million of commitment fees in interest expense, respectively. We incurred issuance costs of $1.5 million in connection with the establishment of the 2018 Revolving Credit Facility, which were deferred and recorded within Other Assets. These costs will be amortized through interest expense over the three-year life of the 2018 Revolving Credit Facility on a straight line basis. For the three and nine months ended September 30, 2018, we recognized $0.1 million and $0.2 million of interest expense from the amortization of deferred issuance costs. At September 30, 2018, the remaining issuance costs were $1.3 million, net of accumulated amortization. We are subject to certain covenants under the 2018 Revolving Credit Facility, including (but not limited to) the following: a maximum debt-to-total capitalization ratio of 35%, a minimum liquidity requirement, 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). We were in compliance with all covenants as of September 30, 2018. |
Reinsurance |
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Reinsurance Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance | Reinsurance We enter into third-party reinsurance transactions to actively manage our risk, ensure PMIERs compliance and support the growth of our business. The GSEs and the Wisconsin Office of the Commissioner of Insurance (Wisconsin OCI) have approved all such transactions (subject to certain conditions and ongoing review, including levels of approved capital credit). The effect of our reinsurance agreements on premiums written and earned is as follows:
(1) Net of profit commission Excess-of-loss reinsurance 2017 ILN Transaction In May 2017, NMIC entered into a reinsurance agreement with Oaktown Re that provides for up to $211.3 million of aggregate excess-of-loss reinsurance coverage at inception for new delinquencies on an existing portfolio of mortgage insurance policies written from 2013 through December 31, 2016. For the reinsurance coverage period, NMIC retains the first layer of $126.8 million of aggregate losses, of which $125.6 million remained at September 30, 2018, and Oaktown Re then provides second layer coverage up to the outstanding reinsurance coverage amount. NMIC will then retain losses in excess of the outstanding reinsurance coverage amount. The outstanding reinsurance coverage amount decreases from $211.3 million at inception over a ten-year period as the underlying covered mortgages are amortized or repaid, and/or the mortgage insurance coverage is canceled and was $144.1 million as of September 30, 2018. The outstanding reinsurance coverage amount will stop amortizing if certain credit enhancement or delinquency thresholds are triggered. Oaktown Re financed the coverage by issuing mortgage insurance-linked notes in an aggregate amount of $211.3 million to unaffiliated investors (the 2017 Notes). The 2017 Notes mature on April 26, 2027. All of the proceeds paid to Oaktown Re from the sale of the 2017 Notes were deposited into a reinsurance trust to collateralize and fund the obligations of Oaktown Re to NMIC under the reinsurance agreement. Funds in the reinsurance trust account are required to be invested in high credit quality money market funds at all times. We refer collectively to NMIC's reinsurance agreement with Oaktown Re and the issuance of the 2017 Notes by Oaktown Re as the 2017 ILN Transaction. Under the terms of the 2017 ILN Transaction, NMIC makes risk premium payments for the applicable outstanding reinsurance coverage amount and pays Oaktown Re for anticipated operating expenses (capped at $300 thousand per year). For the three and nine months ended September 30, 2018, NMIC ceded risk premiums of $1.5 million and $4.8 million, respectively. For the three and nine months ended September 30, 2017, NMIC ceded risk premiums of $1.9 million and $3.3 million, respectively. NMIC did not cede any losses to Oaktown Re during the three and nine month periods ended September 30, 2017 and 2018. Under the reinsurance agreement, NMIC holds an optional termination right if certain events occur, including, among others, a clean-up call if the outstanding reinsurance coverage amount amortizes to 10% or less of the reinsurance coverage amount at inception or if NMIC reasonably determines that changes to GSE or rating agency asset requirements would cause a material and adverse effect on the capital treatment afforded to NMIC under the agreement. In addition, there are certain events that will result in mandatory termination of the agreement, including NMIC's failure to pay premiums or consent to reductions in the trust account to make principal payments to noteholders, among others. 2018 ILN Transaction In July 2018, NMIC entered into a reinsurance agreement with Oaktown Re II that provides for up to $264.5 million of aggregate excess-of-loss reinsurance coverage at inception for new delinquencies on an existing portfolio of mortgage insurance policies written between January 1, 2017 and May 31, 2018. For the reinsurance coverage period, NMIC retains the first layer of $125.3 million of aggregate losses, of which all remained at September 30, 2018, and Oaktown Re II then provides second layer coverage up to the outstanding reinsurance coverage amount. NMIC retains losses in excess of the outstanding reinsurance coverage amount. The outstanding reinsurance coverage amount decreases from $264.5 million at inception over a ten-year period as the underlying covered mortgages are amortized or repaid, and/or the mortgage insurance coverage is canceled, and was $264.5 million as of September 30, 2018. The outstanding reinsurance coverage amount will begin amortizing after an initial period in which a target level of credit enhancement is obtained and will stop amortizing if certain credit enhancement or delinquency thresholds are triggered. Oaktown Re II financed the coverage by issuing mortgage insurance-linked notes in an aggregate amount of $264.5 million to unaffiliated investors (the 2018 Notes). The 2018 Notes mature on July 25, 2028. All of the proceeds paid to Oaktown Re II from the sale of the 2018 Notes were deposited into a reinsurance trust to collateralize and fund the obligations of Oaktown Re II to NMIC under the reinsurance agreement. Funds in the reinsurance trust account are required to be invested in high credit quality money market funds at all times. We refer collectively to NMIC's reinsurance agreement with Oaktown Re II and the issuance of the 2018 Notes by Oaktown Re II as the 2018 ILN Transaction, and the 2017 ILN Transaction and 2018 ILN Transaction as the ILN Transactions. Under the terms of the 2018 ILN Transaction, NMIC makes risk premium payments for the applicable outstanding reinsurance coverage amount and pays Oaktown Re II for anticipated operating expenses (capped at $250 thousand per year). For the three and nine months ended September 30, 2018, NMIC ceded risk premiums of $1.6 million. NMIC did not cede any losses to Oaktown Re II. Under the reinsurance agreement, NMIC holds an optional termination right if certain events occur, including, among others, a clean-up call if the outstanding reinsurance coverage amount amortizes to 10% or less of the reinsurance coverage amount at inception or if NMIC reasonably determines that changes to GSE or rating agency asset requirements would cause a material and adverse effect on the capital treatment afforded to NMIC under the agreement. In addition, there are certain events that will result in mandatory termination of the agreement, including NMIC's failure to pay premiums or consent to reductions in the trust account to make principal payments to noteholders, among others. Under the terms of the 2018 ILN Transaction, we are required to maintain a certain level of restricted funds in a premium deposit account with Bank of New York Mellon until the 2018 Notes have been redeemed in full. "Cash and cash equivalents" on our balance sheet includes restricted cash of $1.4 million as of September 30, 2018. We are not required to deposit additional funds into the premium deposit account and the restricted balance will decrease over time as the principal balance of the 2018 Notes declines. Quota share reinsurance 2016 QSR Transaction Effective September 1, 2016, NMIC entered into the 2016 QSR Transaction with a panel of third-party reinsurers. Each of the third-party reinsurers has an insurer financial strength rating of A- or better by Standard and Poor’s Rating Services (S&P), A.M. Best or both. Under the 2016 QSR Transaction, NMIC ceded premiums written related to: •25% of existing risk written on eligible policies as of August 31, 2016;
The 2016 QSR Transaction is scheduled to terminate on December 31, 2027, except with respect to the ceded pool risk, which is scheduled to terminate on August 31, 2023. However, NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2020, or at the end of any calendar quarter thereafter, which would result in NMIC reassuming the related risk. 2018 QSR Transaction Effective January 1, 2018, NMIC entered into the 2018 QSR Transaction with a panel of third-party reinsurers. Each of the third-party reinsurers has an insurer financial strength rating of A- or better by S&P, A.M. Best or both. Under the 2018 QSR Transaction, NMIC cedes premiums earned related to 25% of risk on eligible policies written in 2018 and 20% to 30% (such amount to be determined by NMIC at its sole election by December 1, 2018) in 2019. The 2018 QSR Transaction is scheduled to terminate on December 31, 2029. However, NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2022, or at the end of any calendar quarter thereafter, which would result in NMIC reassuming the related risk. The following table shows the amounts related to the QSR Transactions:
Ceded premiums written under the 2016 QSR Transaction are recorded on the balance sheet as prepaid reinsurance premiums and amortized to ceded premiums earned in a manner consistent with the recognition of revenue on direct premiums. Under the 2018 QSR Transaction, premiums are ceded on an earned basis as defined in the agreement. NMIC receives a 20% ceding commission for premiums ceded under the QSR Transactions. NMIC also receives a profit commission, provided that the loss ratio on the loans covered under the 2016 QSR Transaction and 2018 QSR Transaction generally remains below 60% and 61%, respectively, as measured annually. Ceded claims and claim expenses under the QSR Transactions reduce NMIC's profit commission on a dollar-for-dollar basis. In accordance with the terms of the 2016 QSR Transaction, rather than making a cash payment or transferring investments for ceded premiums written, NMIC established a funds withheld liability, which also includes amounts due to NMIC for ceding and profit commissions. Any loss recoveries and any potential profit commission to NMIC will be realized from this account until exhausted. NMIC's reinsurance recoverable balance is further supported by trust accounts established and maintained by each reinsurer in accordance with the PMIERs funding requirements for risk ceded to non-affiliates. The reinsurance recoverable on loss reserves related to our 2016 QSR Transaction was $2.5 million as of September 30, 2018. In accordance with the terms of the 2018 QSR Transaction, cash payments for ceded premiums earned are settled on a quarterly basis, offset by amounts due to NMIC for ceding and profit commissions. Any loss recoveries and any potential profit commission to NMIC are also settled quarterly. NMIC's reinsurance recoverable balance is supported by trust accounts established and maintained by each reinsurer in accordance with the PMIERs funding requirements for risk ceded to non-affiliates. The reinsurance recoverable on loss reserves related to our 2018 QSR Transaction was $64 thousand as of September 30, 2018. |
Reserves for Insurance Claims and Claim Expenses |
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Reserves for Insurance Claims and Claim Expenses | Reserves for Insurance Claims and Claim Expenses We establish reserves to recognize the estimated liability for insurance claims and claim expenses related to defaults on insured mortgage loans. Consistent with industry practice, we establish reserves for loans that have been reported to us by servicers as having been in default for at least 60 days, referred to as case reserves, and additional loans that we estimate (based on actuarial review) have been in default for at least 60 days that have not yet been reported to us by servicers, referred to as incurred but not reported (IBNR) reserves. We also establish claims expense reserves, which represent the estimated cost of the claim administration process, including legal and other fees, as well as other general expenses of administering the claims settlement process. As of September 30, 2018, we had reserves for insurance claims and claims expenses of $10.9 million for 746 primary loans in default. During the first nine months of 2018, we paid 59 claims totaling $2.2 million, including 42 claims covered under the QSR Transactions representing $438 thousand of ceded claims and claims expenses. In 2013, we entered into a pool insurance transaction with Fannie Mae. The pool transaction includes a deductible, which represents the amount of claims to be absorbed by Fannie Mae before we are obligated to pay any claims. We only establish reserves for pool risk if we expect claims to exceed this deductible. At September 30, 2018, 53 loans in the pool were past due by 60 days or more. These 53 loans represent approximately $3.2 million of risk-in-force (RIF). Due to the size of the remaining deductible, the low level of notices of default (NODs) reported on loans in the pool through September 30, 2018 and the expected severity (all loans in the pool have loan-to-value ratios (LTV) ratios under 80%), we did not have any case or IBNR reserves for pool risks at September 30, 2018. In connection with the settlement of pool claims, we applied $0.6 million to the pool deductible through September 30, 2018. At September 30, 2018, the remaining pool deductible was $9.8 million. We have not paid any pool claims to date. 100% of our pool RIF is reinsured under the 2016 QSR Transaction. The following table provides a reconciliation of the beginning and ending reserve balances for primary insurance claims and claim expenses:
(1) Related to ceded losses recoverable on the QSR Transactions, included in "Other Assets" on the Condensed Consolidated Balance Sheets. See Note 5, "Reinsurance" for additional information. (2) Related to insured loans with their most recent defaults occurring in the current year. 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. (3) Related to insured loans with defaults occurring in prior years, which have been continuously in default since that time. The "claims incurred" section of the table above shows claims and claim expenses incurred on NODs for current and prior years, including IBNR reserves. The amount of claims incurred relating to current year NODs represents the estimated amount of claims and claims expenses to be ultimately paid on such loans in default. We recognized $1.8 million and $0.6 million of favorable prior year development during the nine months ended September 30, 2018 and 2017, respectively, due to NOD cures and ongoing analysis of recent loss development trends. We may increase or decrease our original estimates as we learn additional information about individual defaults and claims and continue to observe and analyze loss development trends in our portfolio. Gross reserves of $3.7 million related to prior year defaults remained as of September 30, 2018. |
Earnings per Share (EPS) |
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Earnings per Share (EPS) | Earnings per Share (EPS) Basic earnings per share is based on the weighted average number of shares of common stock outstanding, while diluted earnings per share is based on the weighted average number of shares of common stock outstanding and common stock equivalents that would be issuable upon the vesting of service based RSUs, and exercise of vested and unvested stock options and outstanding warrants. The following table reconciles the net income and the weighted average shares of common stock outstanding used in the computations of basic and diluted earnings per share of common stock:
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Warrants |
9 Months Ended |
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Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Warrants | Warrants We issued 992 thousand warrants in connection with the Private Placement. Each warrant gives the holder thereof the right to purchase one share of common stock at an exercise price equal to $10.00. The warrants were issued with an aggregate fair value of $5.1 million. During the nine months ended September 30, 2018, 142 thousand warrants were exercised resulting in 87 thousand common shares issued. No warrants were exercised during the nine months ended September 30, 2017. Upon exercise, we reclassified the fair value of the warrants from warrant liability to additional paid-in capital and recognized a loss of approximately $333 thousand. We account for these warrants to purchase our common shares in accordance with ASC 470-20, Debt with Conversion and Other Options and ASC 815-40, Derivatives and Hedging - Contracts in Entity's Own Equity. |
Income Taxes |
9 Months Ended |
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Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We are a U.S. taxpayer and are subject to a statutory U.S. federal corporate income tax rate of 21% for the current and all future years following the enactment of the TCJA on December 22, 2017. We were subject to a statutory U.S. federal corporate income tax rate of 35% for all prior years through December 31, 2017. NMIH files a consolidated U.S. federal and various state income tax returns on behalf of itself and its subsidiaries. Our provision for income taxes for interim reporting periods is established based on our estimated annual effective tax rates for a given year. Our effective tax rate on our pre-tax income was 22.1% and 20.2% for the three and nine months ended September 30, 2018, respectively, compared to 36.9% and 33.3% for the three and nine months ended September 30, 2017, respectively. The decrease in the effective tax rates for the three and nine months ended September 30, 2018 compared to the three and nine months ended September 30, 2017 is attributable to the decrease in the statutory U.S. federal corporate income tax rate. We currently pay no federal income tax primarily due to the forecasted utilization of our federal net operating loss carryforwards, which were $93.9 million as of December 31, 2017. As a result, the interim provision for income taxes represents changes to deferred tax assets. Provisional amounts The TCJA reduced the statutory U.S. federal corporate income tax rate from 35% to 21% and changed the tax deductibility of certain expenses for tax years beginning after December 31, 2017. We have not completed our full assessment of the tax effects of the enactment of the TCJA on our deferred tax balances as of September 30, 2018 and December 31, 2017; however, in certain cases, as described below, we have made reasonable estimates of the effects on our deferred tax balances. We recognized a $13.6 million income tax expense in the year ended December 31, 2017 for the items we could reasonably estimate. We are still analyzing the TCJA and refining our calculations, which could impact the measurement of our existing deferred tax assets including those related to share-based compensation. For tax years beginning after December 31, 2017, the TCJA expanded the number of individuals whose compensation is subject to a $1 million cap on tax deductibility and includes performance-based compensation in the calculation. As a result, we recorded a provisional amount to reduce the future tax benefit related to share-based compensation. We will continue to make and refine our calculations as additional analysis is completed. In addition, our estimates may also be affected as we incorporate additional guidance that may be issued by the U.S. Treasury Department, the IRS, or other standard-setting bodies. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220). This update permits a company to reclassify the disproportionate income tax effects as a result of the TCJA on items within AOCI to retained earnings. We adopted this update on January 1, 2018 and adjusted the disproportionate income tax effects, or "stranded tax effects," resulting in a $0.3 million reduction to our beginning retained earnings as of January 1, 2018. The disproportionate tax effects that remain in AOCI of $4.2 million were not related to the TCJA and will remain in AOCI until certain events occur. Our elected accounting policy for available-for-sale debt securities is the "aggregate portfolio" approach. |
Common Stock Offerings |
9 Months Ended |
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Sep. 30, 2018 | |
Equity [Abstract] | |
Common Stock Offerings | Common Stock Offerings In March 2018, we completed the sale of 3.7 million shares of common stock and granted the underwriters on the transaction a 15% overallotment option to purchase additional shares. The overallotment option was exercised in full, resulting in a total of 4.3 million shares of common stock issued. The common stock offering generated total proceeds of approximately $79.2 million, net of underwriting discounts, commissions and other direct offering expenses. |
Regulatory Information |
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Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Regulatory Information | Regulatory Information Our insurance subsidiaries, NMIC and Re One, file financial statements in conformity with statutory accounting principles (SAP) prescribed or permitted by the Wisconsin OCI, NMIC's principal regulator. Prescribed SAP includes state laws, regulations and general administrative rules, as well as a variety of publications of the National Association of Insurance Commissioners. The Wisconsin OCI recognizes only statutory accounting practices prescribed or permitted by the state of Wisconsin for determining and reporting the financial condition and results of operations of an insurance company and for determining its solvency under Wisconsin insurance laws. NMIC and Re One's combined statutory net income (loss) was as follows:
NMIC and Re One's statutory surplus, contingency reserve and risk-to-capital (RTC) ratios were as follows:
NMIH is not subject to any limitations on its ability to pay dividends except those generally applicable to corporations that are incorporated in Delaware. Delaware corporate law provides that dividends are only payable out of a corporation's surplus or, subject to certain limitations, recent net profits. NMIC and Re One's ability to pay dividends to NMIH is subject to Wisconsin OCI notice or approval. Certain other states in which NMIC is licensed also have statutes or regulations that restrict its ability to pay dividends. Since inception, NMIC and Re One have not paid any dividends to NMIH. |
Organization, Basis of Presentation and Summary of Accounting Principles (Policies) |
9 Months Ended |
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Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements, which include the results of NMIH and its wholly owned subsidiaries, have been prepared in accordance with the instructions to Form 10-Q as prescribed by the SEC for interim reporting and include other information and disclosures required by accounting principles generally accepted in the U.S. (GAAP). Our accounts are maintained in U.S. dollars. These statements should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2017, included in our 2017 10-K. All intercompany transactions have been eliminated. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities as of the balance sheet date. Estimates also affect the reported amounts of income and expenses for the reporting period. Actual results could differ from those estimates. Certain reclassifications to our previously reported financial information have been made to conform to current period presentation. The results of operations for the interim period may not be indicative of the results that may be expected for the full year ending December 31, 2018. |
Reinsurance | Reinsurance We account for premiums, claims and claim expenses that are ceded to reinsurers on a basis consistent with those we use to account for the original policies we issue and pursuant to the terms of our reinsurance contracts. We account for premiums ceded or otherwise paid to reinsurers as reductions to premium revenue. Effective January 1, 2018, NMIC entered into a second quota share reinsurance transaction (2018 QSR Transaction) which is similar in nature to the quota share reinsurance transaction we entered into in September 2016 (2016 QSR Transaction, together with 2018 QSR Transaction, the QSR Transactions) (see Note 5, "Reinsurance"). We earn profit and ceding commissions in connection with the QSR Transactions. Profit commissions represent a percentage of the profits recognized by reinsurers that are returned to us, based on the level of claims and claim expenses that we cede. We recognize any profit commissions we earn as increases to premium revenue. Ceding commissions are calculated as a percentage of ceded written premiums under the 2016 QSR Transaction and as a percentage of ceded earned premiums under the 2018 QSR Transaction, to cover our costs to acquire and service the direct policies. We earn the ceding commissions in a manner consistent with our recognition of earnings on the underlying insurance policies, over the terms of the policies reinsured. We account for ceding commissions earned as a reduction to underwriting and operating expenses. Under the QSR Transactions, we cede a portion of claims and claim expenses reserves to our reinsurers, which are accounted for as reinsurance recoverables in "Other Assets" on the consolidated balance sheets and as reductions to claim expense on the consolidated statements of operations. We remain directly liable for all loss payments in the event we are unable to collect from any reinsurer. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements - Adopted In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). This update is intended to provide a consistent approach in recognizing revenue. In December 2016, the FASB clarified that all contracts that are within the scope of Topic 944, Financial Services-Insurance, are excluded from the scope of ASU 2014-09. Accordingly, this update did not impact the recognition of revenue related to insurance premiums or investment income, which represent a majority of our total revenues. The update impacted our loan review services revenue, which is the only revenue stream in scope of the update. We adopted this update on January 1, 2018 using the modified-retrospective approach and the impact was immaterial to our consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10). This update requires entities to reduce the carrying amount of deferred tax assets, if necessary, by the amount of any tax benefit that is not expected to be realized. We adopted this update effective January 1, 2018. The impact was immaterial to our consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220). This update permits a company to reclassify the disproportionate income tax effects as a result of the 2017 Tax Cuts and Jobs Act (the TCJA) on items within accumulated other comprehensive income (AOCI) to retained earnings. This standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We adopted this update on January 1, 2018 and adjusted the disproportionate income tax effects, or "stranded tax effects," resulting in a $0.3 million reduction to our beginning retained earnings as of January 1, 2018. Recent Accounting Pronouncements - Not Yet Adopted In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update requires that businesses recognize rights and obligations associated with certain leases as assets and liabilities on the balance sheet. The standard also requires additional disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases. For public business entities, this update is effective for annual periods beginning after December 15, 2018 and interim periods therein. Early adoption is permitted in any period. We expect to adopt this guidance on January 1, 2019. In September 2017, ASU 2017-13 added guidance from a SEC Staff Announcement, "Transition Related to Accounting Standards Update No. 2016-02," and in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvement, which provides companies the option to apply the provisions of the new lease standard prospectively as of the effective date, without adjusting comparative periods presented. The effect of adoption will depend on our current lease portfolio at time of adoption; however, upon adoption, we anticipate that our reported assets and liabilities will increase in connection with the recognition of any right-of-use assets and lease liabilities, such as the operating lease on our corporate headquarters. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326). This update requires companies to measure all expected credit losses for financial assets held at the reporting date. The standard also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We are currently reviewing the impacts the adoption of this guidance will have, if any, on our accounting for credit losses on our investment portfolio. We do not expect it to impact our accounting for insurance claims and claims expenses as these items are not in the scope of this ASU. In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivatives and Hedging (Topic 815). This update is intended to simplify the accounting for certain equity-linked financial instruments. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The guidance must be applied using a full or modified retrospective approach. We expect to adopt this ASU in the first quarter of 2019 and have determined that it will have no impact on our consolidated financial statements. |
Earnings Per Share | Basic earnings per share is based on the weighted average number of shares of common stock outstanding, while diluted earnings per share is based on the weighted average number of shares of common stock outstanding and common stock equivalents that would be issuable upon the vesting of service based RSUs, and exercise of vested and unvested stock options and outstanding warrants. |
Investments (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Values and Gross Unrealized Gains and Losses | Fair Values and Gross Unrealized Gains and Losses on Investments
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Schedule of Investments by Maturity | The amortized cost and fair values of available-for-sale securities as of September 30, 2018 and December 31, 2017, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most asset-backed securities provide for periodic payments throughout their lives, they are listed below in a separate category.
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Schedule of Aging Unrealized Losses | For those securities in an unrealized loss position, the length of time the securities were in such a position is as follows:
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Schedule of Net Investment Income | The following table presents the components of net investment income:
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Schedule of Net Realized Investment Gains (Losses) | The following table presents the components of net realized investment gains (losses):
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value Measurements of Financial Instruments | The following tables present the level within the fair value hierarchy at which our financial instruments were measured:
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Roll-Forward of Level 3 Liabilities Measured at Fair Value | The following is a roll-forward of Level 3 liabilities measured at fair value:
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Schedule of Key Inputs and Assumptions in Option-Pricing Model | The following table outlines the key inputs and assumptions used to calculate the fair value of the warrant liability in the Black-Scholes option-pricing model as of the dates indicated.
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Debt Obligations (Tables) |
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Principal Payments | Future principal payments due under the 2018 Term Loan as of September 30, 2018 are as follows:
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Reinsurance (Tables) |
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effects of Reinsurance | The effect of our reinsurance agreements on premiums written and earned is as follows:
(1) Net of profit commission The following table shows the amounts related to the QSR Transactions:
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Reserves for Insurance Claims and Claim Expenses (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Liability for Insurance Claims and Claims Expenses | The following table provides a reconciliation of the beginning and ending reserve balances for primary insurance claims and claim expenses:
(1) Related to ceded losses recoverable on the QSR Transactions, included in "Other Assets" on the Condensed Consolidated Balance Sheets. See Note 5, "Reinsurance" for additional information. (2) Related to insured loans with their most recent defaults occurring in the current year. 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. (3) Related to insured loans with defaults occurring in prior years, which have been continuously in default since that time. |
Earnings per Share (EPS) (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings per Share, Basic and Diluted | The following table reconciles the net income and the weighted average shares of common stock outstanding used in the computations of basic and diluted earnings per share of common stock:
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Regulatory Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Statutory Net Income (Loss), Surplus, Contingency Reserve and Risk-to-Capital Ratio | NMIC and Re One's combined statutory net income (loss) was as follows:
NMIC and Re One's statutory surplus, contingency reserve and risk-to-capital (RTC) ratios were as follows:
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Organization, Basis of Presentation and Summary of Accounting Principles - Narrative (Details) $ in Millions |
1 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2018
shares
|
Nov. 30, 2013
shares
|
Apr. 30, 2012
USD ($)
shares
|
Sep. 30, 2018
state
|
|
Business Acquisition [Line Items] | ||||
Common stock offered and sold (in shares) | shares | 4,300,000 | |||
Number of states in which the entity operates | state | 50 | |||
Private Placement | ||||
Business Acquisition [Line Items] | ||||
Proceeds from issuance of common stock, net of stock issuance costs | $ | $ 510.0 | |||
IPO | ||||
Business Acquisition [Line Items] | ||||
Common stock offered and sold (in shares) | shares | 2,400,000 | |||
Overallotment Option | ||||
Business Acquisition [Line Items] | ||||
Overallotment option included in sale of stock (percent) | 15.00% | |||
MAC Financial Holding Corporation and Subsidiaries | ||||
Business Acquisition [Line Items] | ||||
Cash, common stock and warrants issued for acquisition | $ | 8.5 | |||
Liabilities assumed in acquisition | $ | $ 1.3 | |||
Common Stock - Class A | Private Placement | ||||
Business Acquisition [Line Items] | ||||
Common stock offered and sold (in shares) | shares | 55,000,000 |
Organization, Basis of Presentation and Summary of Accounting Principles - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|---|
New Accounting Pronouncements [Line Items] | |||
Decrease in cumulative effect of change in accounting principle | $ 0 | $ (388) | $ (515) |
Retained Earnings | |||
New Accounting Pronouncements [Line Items] | |||
Decrease in cumulative effect of change in accounting principle | 282 | $ (515) | |
ASU No. 2018-02 | Retained Earnings | |||
New Accounting Pronouncements [Line Items] | |||
Decrease in cumulative effect of change in accounting principle | $ 300 |
Investments - Fair Values and Gross Unrealized Gains and Losses (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | $ 889,794 | $ 713,859 |
Gross Unrealized Gains | 510 | 5,739 |
Gross Unrealized Losses | (15,869) | (3,723) |
Fair value of securities | 874,435 | 715,875 |
U.S. Treasury securities and obligations of U.S. government agencies | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 48,292 | 65,669 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | (2,483) | (981) |
Fair value of securities | 45,809 | 64,688 |
Municipal debt securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 93,945 | 89,973 |
Gross Unrealized Gains | 20 | 534 |
Gross Unrealized Losses | (1,933) | (659) |
Fair value of securities | 92,032 | 89,848 |
Corporate debt securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 536,240 | 435,562 |
Gross Unrealized Gains | 323 | 4,231 |
Gross Unrealized Losses | (10,217) | (1,958) |
Fair value of securities | 526,346 | 437,835 |
Asset-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 169,061 | 100,153 |
Gross Unrealized Gains | 113 | 916 |
Gross Unrealized Losses | (1,236) | (125) |
Fair value of securities | 167,938 | 100,944 |
Total bonds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 847,538 | 691,357 |
Gross Unrealized Gains | 456 | 5,681 |
Gross Unrealized Losses | (15,869) | (3,723) |
Fair value of securities | 832,125 | 693,315 |
Long-term investment – other | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 353 | |
Gross Unrealized Gains | 0 | |
Gross Unrealized Losses | 0 | |
Fair value of securities | 353 | |
Short-term investments | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 42,256 | 22,149 |
Gross Unrealized Gains | 54 | 58 |
Gross Unrealized Losses | 0 | 0 |
Fair value of securities | $ 42,310 | $ 22,207 |
Investments - Scheduled Maturities (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Amortized Cost | ||
Due in one year or less | $ 63,314 | $ 97,406 |
Due after one through five years | 335,262 | 195,795 |
Due after five through ten years | 318,357 | 305,798 |
Due after ten years | 3,800 | 14,707 |
Asset-backed securities | 169,061 | 100,153 |
Amortized Cost | 889,794 | 713,859 |
Fair Value | ||
Due in one year or less | 63,368 | 97,394 |
Due after one through five years | 330,603 | 195,626 |
Due after five through ten years | 308,759 | 306,930 |
Due after ten years | 3,767 | 14,981 |
Asset-backed securities | 167,938 | 100,944 |
Fair Value | $ 874,435 | $ 715,875 |
Investments - Narrative (Details) - USD ($) $ in Thousands |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2018 |
Dec. 31, 2017 |
|
Debt Securities, Available-for-sale [Line Items] | |||
Unrealized loss position, accumulated loss | $ 15,869 | $ 3,723 | |
Unrealized loss position, 12 months or greater | 7,825 | 2,173 | |
Other-than-temporary impairment | $ 100 | ||
U.S. Treasury securities and obligations of U.S. government agencies | |||
Debt Securities, Available-for-sale [Line Items] | |||
Cash and investments held with various state insurance departments | 5,300 | 7,000 | |
Unrealized loss position, accumulated loss | 2,483 | 981 | |
Unrealized loss position, 12 months or greater | $ 2,423 | $ 587 |
Investments - Aging of Unrealized Losses (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
security
|
Dec. 31, 2017
USD ($)
security
|
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Number of securities, less than 12 months | security | 262 | 153 |
Fair value, less than 12 months | $ 513,448 | $ 224,694 |
Unrealized losses, less than 12 months | $ (8,044) | $ (1,550) |
Number of securities,12 months or greater | security | 85 | 64 |
Fair value, 12 months or greater | $ 158,508 | $ 114,243 |
Unrealized losses, 12 months or greater | $ (7,825) | $ (2,173) |
Number of securities, total | security | 347 | 217 |
Fair value | $ 671,956 | $ 338,937 |
Unrealized Losses | $ (15,869) | $ (3,723) |
U.S. Treasury securities and obligations of U.S. government agencies | ||
Debt Securities, Available-for-sale [Line Items] | ||
Number of securities, less than 12 months | security | 5 | 16 |
Fair value, less than 12 months | $ 5,033 | $ 29,806 |
Unrealized losses, less than 12 months | $ (60) | $ (394) |
Number of securities,12 months or greater | security | 18 | 26 |
Fair value, 12 months or greater | $ 40,776 | $ 34,882 |
Unrealized losses, 12 months or greater | $ (2,423) | $ (587) |
Number of securities, total | security | 23 | 42 |
Fair value | $ 45,809 | $ 64,688 |
Unrealized Losses | $ (2,483) | $ (981) |
Municipal debt securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Number of securities, less than 12 months | security | 26 | 21 |
Fair value, less than 12 months | $ 53,431 | $ 38,628 |
Unrealized losses, less than 12 months | $ (885) | $ (264) |
Number of securities,12 months or greater | security | 18 | 10 |
Fair value, 12 months or greater | $ 30,580 | $ 17,945 |
Unrealized losses, 12 months or greater | $ (1,048) | $ (395) |
Number of securities, total | security | 44 | 31 |
Fair value | $ 84,011 | $ 56,573 |
Unrealized Losses | $ (1,933) | $ (659) |
Corporate debt securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Number of securities, less than 12 months | security | 180 | 94 |
Fair value, less than 12 months | $ 343,602 | $ 128,313 |
Unrealized losses, less than 12 months | $ (6,123) | $ (829) |
Number of securities,12 months or greater | security | 43 | 23 |
Fair value, 12 months or greater | $ 76,589 | $ 48,978 |
Unrealized losses, 12 months or greater | $ (4,094) | $ (1,129) |
Number of securities, total | security | 223 | 117 |
Fair value | $ 420,191 | $ 177,291 |
Unrealized Losses | $ (10,217) | $ (1,958) |
Asset-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Number of securities, less than 12 months | security | 51 | 22 |
Fair value, less than 12 months | $ 111,382 | $ 27,947 |
Unrealized losses, less than 12 months | $ (976) | $ (63) |
Number of securities,12 months or greater | security | 6 | 5 |
Fair value, 12 months or greater | $ 10,563 | $ 12,438 |
Unrealized losses, 12 months or greater | $ (260) | $ (62) |
Number of securities, total | security | 57 | 27 |
Fair value | $ 121,945 | $ 40,385 |
Unrealized Losses | $ (1,236) | $ (125) |
Investments - Net Investment Income (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Investment Income, Net [Abstract] | ||||
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 |
Investments - Net Realized Investment Gains (Losses) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Investments, Debt and Equity Securities [Abstract] | ||||
Gross realized investment gains | $ 461 | $ 69 | $ 520 | $ 536 |
Gross realized investment losses | (469) | 0 | (469) | (338) |
Net realized investment gains (losses) | $ (8) | $ 69 | $ 51 | $ 198 |
Fair Value of Financial Instruments - Assets and Liabilities at Fair Value (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | $ 874,435 | $ 715,875 |
U.S. Treasury securities and obligations of U.S. government agencies | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 45,809 | 64,688 |
Municipal debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 92,032 | 89,848 |
Corporate debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 526,346 | 437,835 |
Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 167,938 | 100,944 |
Long-term investment – other | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 353 | |
Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash, cash equivalents and short-term investments | 60,497 | 41,403 |
Total assets | 892,622 | 735,071 |
Warrant liability | 10,930 | 7,472 |
Total liabilities | 10,930 | 7,472 |
Recurring | U.S. Treasury securities and obligations of U.S. government agencies | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 45,809 | 64,688 |
Recurring | Municipal debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 92,032 | 89,848 |
Recurring | Corporate debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 526,346 | 437,835 |
Recurring | Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 167,938 | 100,944 |
Recurring | Long-term investment – other | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 0 | 353 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash, cash equivalents and short-term investments | 60,497 | 41,403 |
Total assets | 106,306 | 101,600 |
Warrant liability | 0 | 0 |
Total liabilities | 0 | 0 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Treasury securities and obligations of U.S. government agencies | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 45,809 | 59,844 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Municipal debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 0 | 0 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 0 | 0 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 0 | 0 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Long-term investment – other | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 0 | 353 |
Recurring | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash, cash equivalents and short-term investments | 0 | |
Total assets | 786,316 | 633,471 |
Warrant liability | 0 | 0 |
Total liabilities | 0 | 0 |
Recurring | Significant Other Observable Inputs (Level 2) | U.S. Treasury securities and obligations of U.S. government agencies | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 0 | 4,844 |
Recurring | Significant Other Observable Inputs (Level 2) | Municipal debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 92,032 | 89,848 |
Recurring | Significant Other Observable Inputs (Level 2) | Corporate debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 526,346 | 437,835 |
Recurring | Significant Other Observable Inputs (Level 2) | Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 167,938 | 100,944 |
Recurring | Significant Other Observable Inputs (Level 2) | Long-term investment – other | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 0 | 0 |
Recurring | Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash, cash equivalents and short-term investments | 0 | |
Total assets | 0 | 0 |
Warrant liability | 10,930 | 7,472 |
Total liabilities | 10,930 | 7,472 |
Recurring | Significant Unobservable Inputs (Level 3) | U.S. Treasury securities and obligations of U.S. government agencies | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 0 | 0 |
Recurring | Significant Unobservable Inputs (Level 3) | Municipal debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 0 | 0 |
Recurring | Significant Unobservable Inputs (Level 3) | Corporate debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 0 | 0 |
Recurring | Significant Unobservable Inputs (Level 3) | Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | 0 | 0 |
Recurring | Significant Unobservable Inputs (Level 3) | Long-term investment – other | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of securities | $ 0 |
Fair Value of Financial Instruments - Rollforward of Level 3 Liabilities (Details) - Significant Unobservable Inputs (Level 3) - Warrant Liability - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Beginning balance | $ 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) | 0 |
Ending balance | $ 10,930 | $ 4,046 |
Fair Value of Financial Instruments - Valuation Assumptions for Warrant Liabilities (Details) - Significant Unobservable Inputs (Level 3) - Valuation Technique, Option Pricing Model |
Sep. 30, 2018
$ / shares
|
Sep. 30, 2017
$ / shares
|
---|---|---|
Common stock price | ||
Key Inputs and Assumptions, Valuation Techniques | ||
Warrant liability, measurement input | 22.65 | 12.40 |
Risk free interest rate | ||
Key Inputs and Assumptions, Valuation Techniques | ||
Warrant liability, measurement input | 0.0166 | |
Risk free interest rate | Minimum | ||
Key Inputs and Assumptions, Valuation Techniques | ||
Warrant liability, measurement input | 0.0286 | |
Risk free interest rate | Maximum | ||
Key Inputs and Assumptions, Valuation Techniques | ||
Warrant liability, measurement input | 0.0290 | |
Expected life | ||
Key Inputs and Assumptions, Valuation Techniques | ||
Warrant liability, expected life (in years) | 3 years 3 months | |
Expected life | Minimum | ||
Key Inputs and Assumptions, Valuation Techniques | ||
Warrant liability, expected life (in years) | 2 years 6 months | |
Expected life | Maximum | ||
Key Inputs and Assumptions, Valuation Techniques | ||
Warrant liability, expected life (in years) | 3 years 6 months 21 days | |
Expected volatility | ||
Key Inputs and Assumptions, Valuation Techniques | ||
Warrant liability, measurement input | 0.306 | |
Expected volatility | Minimum | ||
Key Inputs and Assumptions, Valuation Techniques | ||
Warrant liability, measurement input | 0.399 | |
Expected volatility | Maximum | ||
Key Inputs and Assumptions, Valuation Techniques | ||
Warrant liability, measurement input | 0.415 | |
Dividend yield | ||
Key Inputs and Assumptions, Valuation Techniques | ||
Warrant liability, measurement input | 0.00 | 0.00 |
Debt Obligations - Narrative (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|---|
May 24, 2018 |
Jun. 30, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Nov. 10, 2015 |
|
Debt Instrument [Line Items] | |||||||
Interest expense | $ 2,972,000 | $ 3,352,000 | $ 11,951,000 | $ 10,146,000 | |||
Term loan | 149,625,000 | 149,625,000 | |||||
Secured Debt | 2018 Term Loan | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument face amount | $ 150,000,000 | ||||||
Debt instrument term (years) | 5 years | ||||||
Interest rate during period (percent) | 6.99% | ||||||
Frequency of periodic payment | Quarterly | ||||||
Periodic payment of principal | $ 375,000 | ||||||
Prepayment premium (percent) | 1.00% | ||||||
Prepayment penalty time period (months) | 6 months | ||||||
Interest expense | 11,600,000 | ||||||
Debt issuance costs | $ 1,800,000 | ||||||
Original issue discount | $ 986,000 | ||||||
Unamortized issuance cost and original issue discount | 2,600,000 | 2,600,000 | |||||
Term loan | 149,600,000 | 149,600,000 | |||||
Debt instrument covenant, maximum debt-to-total capitalization ratio | 35.00% | ||||||
Secured Debt | 2018 Term Loan | Eurodollar | |||||||
Debt Instrument [Line Items] | |||||||
Variable rate floor (percent) | 1.00% | ||||||
Basis spread on variable rate (percent) | 4.75% | ||||||
Senior Secured Debt | 2015 Term Loan | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument face amount | $ 150,000,000 | ||||||
Costs related to extinguishment of debt | 2,200,000 | ||||||
Revolving Credit Facility | 2018 Revolving Credit Facility | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument term (years) | 3 years | ||||||
Credit facility borrowing capacity | $ 85,000,000 | ||||||
Debt issuance costs | $ 1,500,000 | ||||||
Debt instrument covenant, maximum debt-to-total capitalization ratio | 35.00% | ||||||
Borrowings outstanding | 0 | 0 | |||||
Commitment fee (percent) | 0.50% | ||||||
Commitment fees in interest expense | 100,000 | 200,000 | |||||
Interest expense from amortization of debt issuance costs | 100,000 | 200,000 | |||||
Remaining net debt issuance costs | $ 1,300,000 | $ 1,300,000 | |||||
Revolving Credit Facility | 2018 Revolving Credit Facility | Minimum | |||||||
Debt Instrument [Line Items] | |||||||
Commitment fee (percent) | 0.30% | ||||||
Revolving Credit Facility | 2018 Revolving Credit Facility | Maximum | |||||||
Debt Instrument [Line Items] | |||||||
Commitment fee (percent) | 0.60% | ||||||
Revolving Credit Facility | 2018 Revolving Credit Facility | Base Rate | |||||||
Debt Instrument [Line Items] | |||||||
Variable rate floor (percent) | 1.00% | ||||||
Revolving Credit Facility | 2018 Revolving Credit Facility | Base Rate | Minimum | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate (percent) | 1.00% | ||||||
Revolving Credit Facility | 2018 Revolving Credit Facility | Base Rate | Maximum | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate (percent) | 2.50% | ||||||
Revolving Credit Facility | 2018 Revolving Credit Facility | Eurodollar | |||||||
Debt Instrument [Line Items] | |||||||
Variable rate floor (percent) | 0.00% | ||||||
Revolving Credit Facility | 2018 Revolving Credit Facility | Eurodollar | Minimum | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate (percent) | 2.00% | ||||||
Revolving Credit Facility | 2018 Revolving Credit Facility | Eurodollar | Maximum | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate (percent) | 3.50% |
Debt Obligations - Schedule of Future Principal Payments (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Future Principal Payments [Abstract] | |
2018 | $ 375 |
2019 | 1,500 |
2020 | 1,500 |
2021 | 1,500 |
2022 | 1,500 |
2023 | 143,250 |
Total | $ 149,625 |
Reinsurance - Narrative (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jul. 31, 2018 |
May 31, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Ceded Credit Risk [Line Items] | |||||||||
Restricted cash | $ 1,406 | $ 1,406 | $ 1,406 | $ 0 | |||||
Reinsurance recoverable on unpaid claims | $ 2,517 | $ 2,517 | $ 1,174 | $ 2,517 | $ 1,174 | $ 1,902 | $ 297 | ||
2017 ILN Transaction | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Optional termination right, percent of reinsurance coverage threshold | 10.00% | 10.00% | 10.00% | ||||||
Mortgage-linked Debt | 2017 ILN Notes | Oaktown Re Ltd | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Proceeds from issuance of notes | $ 211,300 | ||||||||
Mortgage-linked Debt | 2018 ILN Notes | Oaktown Re Ltd | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Proceeds from issuance of notes | $ 264,500 | ||||||||
Third-Party Reinsurers | 2017 ILN Transaction | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Aggregate excess of loss reinsurance coverage | $ 144,100 | ||||||||
Aggregate excess of loss reinsurance retained by company | 125,600 | 126,800 | |||||||
Risk premiums paid | $ 1,500 | $ 1,900 | $ 4,800 | $ 3,300 | |||||
Third-Party Reinsurers | 2017 ILN Transaction | Maximum | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Aggregate excess of loss reinsurance coverage | $ 211,300 | ||||||||
Reinsurance coverage, term of underlying mortgage amortization (in years) | 10 years | ||||||||
Anticipated payment related to annual operating expenses | 300 | ||||||||
Third-Party Reinsurers | 2018 ILN Transaction | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Aggregate excess of loss reinsurance coverage | 264,500 | ||||||||
Aggregate excess of loss reinsurance retained by company | 125,300 | ||||||||
Risk premiums paid | 1,600 | 1,600 | |||||||
Third-Party Reinsurers | 2018 ILN Transaction | Maximum | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Aggregate excess of loss reinsurance coverage | $ 264,500 | ||||||||
Reinsurance coverage, term of underlying mortgage amortization (in years) | 10 years | ||||||||
Anticipated payment related to annual operating expenses | $ 250 | ||||||||
Third-Party Reinsurers | QSR Transactions | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Ceding commissions under 2016 QSR Transaction | 20.00% | ||||||||
Third-Party Reinsurers | 2018 QSR Transaction | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Threshold for loss ratio on loans to qualify for profit commission | 61.00% | ||||||||
Reinsurance recoverable on unpaid claims | 64 | 64 | $ 64 | ||||||
Third-Party Reinsurers | Risk Written Policies in 2018 | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Percent of premiums earned under 2018 QSR Transaction | 25.00% | ||||||||
Third-Party Reinsurers | Risk Written Policies in 2019 | Maximum | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Percent of premiums earned under 2018 QSR Transaction | 30.00% | ||||||||
Third-Party Reinsurers | Risk Written Policies in 2019 | Minimum | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Percent of premiums earned under 2018 QSR Transaction | 20.00% | ||||||||
Third-Party Reinsurers | 2016 QSR Transaction | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Threshold for loss ratio on loans to qualify for profit commission | 60.00% | ||||||||
Reinsurance recoverable on unpaid claims | $ 2,500 | $ 2,500 | $ 2,500 | ||||||
Third-Party Reinsurers | Existing Risk Written Policies | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Percent of premiums ceded under 2016 QSR Transaction | 25.00% | ||||||||
Third-Party Reinsurers | Fannie Mae | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Percent of premiums ceded under 2016 QSR Transaction | 100.00% | ||||||||
Third-Party Reinsurers | Risk Written Policies from September 1, 2016 through December 31, 2017 | |||||||||
Ceded Credit Risk [Line Items] | |||||||||
Percent of premiums ceded under 2016 QSR Transaction | 25.00% |
Reinsurance - Effect of Reinsurance on Net Premiums Written and Earned (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Net premiums written | ||||
Direct | $ 73,748 | $ 56,217 | $ 210,452 | $ 142,134 |
Ceded | (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 | (11,106) | (7,505) | (28,789) | (18,035) |
Net premiums earned | $ 65,407 | $ 44,519 | $ 181,936 | $ 115,661 |
Reinsurance - Amounts Ceded Related to QSR Transactions (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Ceded Credit Risk [Line Items] | ||||
Ceded premiums written | $ (8,367) | $ (8,501) | $ (21,598) | $ (20,029) |
Ceded premiums earned | (11,106) | (7,505) | (28,789) | (18,035) |
Third-Party Reinsurers | ||||
Ceded Credit Risk [Line Items] | ||||
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 |
Reserves for Insurance Claims and Claim Expenses - Narrative (Details) $ in Thousands |
9 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2018
USD ($)
loan
claim
|
Sep. 30, 2017
USD ($)
|
Dec. 31, 2017
USD ($)
|
Dec. 31, 2016
USD ($)
|
|
Liability for Claims and Claims Adjustment Expense [Line Items] | ||||
IBNR, default period (at least) | 60 days | |||
Total gross liability for unpaid claims and claim adjustment expenses | $ 10,908 | $ 6,123 | $ 8,761 | $ 3,001 |
Primary loans in default | loan | 746 | |||
Number of claims paid | claim | 59 | |||
Claims paid, including amounts covered by insurance | $ 2,200 | |||
Favorable prior year development | 1,779 | $ 581 | ||
Reserve for prior year insurance claims and claim expenses | $ 3,700 | |||
Fannie Mae | ||||
Liability for Claims and Claims Adjustment Expense [Line Items] | ||||
Number of loans in pool past due 60 days or more | loan | 53 | |||
Risk-in-Force of loans in pool past due 60 days or more | $ 3,200 | |||
Loan-to-value ratio (less than) | 0.8 | |||
Claims applied to pool deductible | $ 600 | |||
Deductible on policy | 9,800 | |||
QSR Transactions | ||||
Liability for Claims and Claims Adjustment Expense [Line Items] | ||||
Component of claims paid covered under QSR Transaction | $ 438 | |||
2016 QSR Transaction | ||||
Liability for Claims and Claims Adjustment Expense [Line Items] | ||||
Number of covered claims included in number of claims paid | claim | 42 | |||
2016 QSR Transaction | Fannie Mae | ||||
Liability for Claims and Claims Adjustment Expense [Line Items] | ||||
Percent of pool RIF reinsured | 100.00% |
Reserves for Insurance Claims and Claim Expenses - Reconciliation of Reserve Balances for Insurance Claims Expense (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | ||
Beginning balance | $ 8,761 | $ 3,001 |
Less reinsurance recoverables | 1,902 | 297 |
Beginning balance, net of reinsurance recoverables | 6,859 | 2,704 |
Claims incurred: | ||
Current year | 5,090 | 3,546 |
Prior years | (1,779) | (581) |
Total claims and claims expenses incurred | 3,311 | 2,965 |
Claims and claim expenses paid: | ||
Current year | 37 | 0 |
Prior years | 1,742 | 720 |
Total claims and claim expenses paid | 1,779 | 720 |
Ending balance, net of reinsurance recoverables | 8,391 | 4,949 |
Add reinsurance recoverables | 2,517 | 1,174 |
Ending balance | $ 10,908 | $ 6,123 |
Earnings per Share (EPS) - Computation of Basic and Diluted Earnings (Loss) per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Earnings per Share, Basic [Abstract] | ||||||||
Net income | $ 24,811 | $ 25,241 | $ 22,355 | $ 12,312 | $ 6,012 | $ 5,492 | $ 72,407 | $ 23,816 |
Basic weighted average shares outstanding (in shares) | 65,948 | 59,884 | 64,584 | 59,680 | ||||
Basic earnings per share (in dollars per share) | $ 0.38 | $ 0.21 | $ 1.12 | $ 0.40 | ||||
Earnings per Share, Diluted [Abstract] | ||||||||
Net income | $ 24,811 | $ 25,241 | $ 22,355 | $ 12,312 | $ 6,012 | $ 5,492 | $ 72,407 | $ 23,816 |
Warrant gain, net of tax | 0 | 0 | 0 | 0 | ||||
Diluted net income | $ 24,811 | $ 12,312 | $ 72,407 | $ 23,816 | ||||
Basic weighted average shares outstanding (in shares) | 65,948 | 59,884 | 64,584 | 59,680 | ||||
Dilutive effect of issuable shares (in shares) | 2,896 | 3,205 | 2,928 | 3,093 | ||||
Dilutive weighted average shares outstanding (in shares) | 68,844 | 63,089 | 67,512 | 62,773 | ||||
Diluted earnings per share (in dollars per share) | $ 0.36 | $ 0.20 | $ 1.07 | $ 0.38 | ||||
Antidilutive securities excluded from EPS calculation (in shares) | 0 | 830 | 252 | 832 |
Warrants - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2018 |
Mar. 31, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
Apr. 30, 2012 |
|
Debt Disclosure [Abstract] | ||||||
Warrants issued (in shares) | 992,000 | |||||
Right to purchase, number of shares per warrant | 1 | |||||
Exercise price of warrants (in dollars per warrant) | $ 10.00 | |||||
Warrant liability, at fair value | $ 10,930 | $ 7,472 | $ 5,100 | |||
Warrants exercised (in shares) | 142,000 | 0 | ||||
Stock issued upon exercise of warrants (in shares) | 3,751 | 25,686 | 87,000 | |||
Loss of exercise of warrants | $ 333 |
Income Taxes - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||||||
Effective income tax rate on pre-tax income or loss | 22.10% | 36.90% | 20.20% | 33.30% | |||
Net operating loss carryforwards | $ 93,900 | ||||||
Provisional income tax expense related to Tax Cuts and Jobs Act of 2017 | 13,600 | ||||||
Disproportionate tax effects in AOCI | $ 4,200 | $ 4,200 | |||||
New Accounting Pronouncements [Line Items] | |||||||
Cumulative effect of change in accounting principle | 0 | $ (388) | $ (515) | ||||
Retained Earnings | |||||||
New Accounting Pronouncements [Line Items] | |||||||
Cumulative effect of change in accounting principle | 282 | $ (515) | |||||
ASU No. 2018-02 | Retained Earnings | |||||||
New Accounting Pronouncements [Line Items] | |||||||
Cumulative effect of change in accounting principle | $ 300 |
Common Stock Offerings - Narrative (Details) - USD ($) $ in Thousands, shares in Millions |
1 Months Ended | 9 Months Ended | |
---|---|---|---|
Mar. 31, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Class of Stock [Line Items] | |||
Common stock sold excluding overallotment shares (in shares) | 3.7 | ||
Common stock offered and sold (in shares) | 4.3 | ||
Proceeds from issuance of common stock | $ 79,200 | $ 79,165 | $ 0 |
Overallotment Option | |||
Class of Stock [Line Items] | |||
Overallotment option included in sale of stock (percent) | 15.00% |
Regulatory Information - Statutory Net Income (Loss) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Combined | ||||
Statutory Accounting Practices [Line Items] | ||||
Statutory net (loss) | $ (17,274) | $ (7,688) | $ (22,022) | $ (29,394) |
Regulatory Information - Schedule of Statutory Surplus, Contingency Reserve and RTC Ratio (Details) - Combined $ in Thousands |
Sep. 30, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
---|---|---|
Statutory Accounting Practices [Line Items] | ||
Statutory surplus | $ 440,697 | $ 371,084 |
Contingency reserve | $ 292,030 | $ 186,641 |
RTC Ratio | 13.3 | 13.2 |
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