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, 2016 |
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 |
(Do not check if a smaller reporting company) |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 6. | ||
• | our limited operating history; |
• | our future profitability, liquidity and capital resources; |
• | developments in the world's financial and capital markets and our access to such markets, including reinsurance; |
• | 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.; |
• | changes in the business practices of Fannie Mae and Freddie Mac (collectively, the GSEs), including implementation of the new Private Mortgage Insurer Eligibility Requirements (PMIERs) or 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 PMIERs and other requirements imposed by the GSEs, which they may change at any time; |
• | actions of existing competitors, including governmental agencies like the Federal Housing Administration (FHA) and the Veterans Administration (VA), and potential market entry by new competitors or consolidation of existing competitors; |
• | adoption of new or changes to existing laws and regulations 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 reinsurance market 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; |
• | 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, 2016 and December 31, 2015 | |
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2016 and 2015 | |
Condensed Consolidated Statements of Changes in Shareholders' Equity for the nine months ended September 30, 2016 and the year ended December 31, 2015 | |
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 | |
Notes to Condensed Consolidated Financial Statements |
September 30, 2016 | December 31, 2015 | ||||||
Assets | (In Thousands, except for share data) | ||||||
Fixed maturities, available-for-sale, at fair value (amortized cost of $628,209 and $564,319 as of September 30, 2016 and December 31, 2015, respectively) | $ | 641,572 | $ | 559,235 | |||
Cash and cash equivalents | 44,522 | 57,317 | |||||
Premiums receivable | 11,378 | 5,143 | |||||
Accrued investment income | 3,615 | 2,873 | |||||
Prepaid expenses | 2,313 | 1,428 | |||||
Deferred policy acquisition costs, net | 28,911 | 17,530 | |||||
Software and equipment, net | 19,924 | 15,201 | |||||
Intangible assets and goodwill | 3,634 | 3,634 | |||||
Prepaid reinsurance premiums | 36,091 | — | |||||
Other assets | 206 | 90 | |||||
Total assets | $ | 792,166 | $ | 662,451 | |||
Liabilities | |||||||
Term loan | $ | 144,230 | $ | 143,939 | |||
Unearned premiums | 145,401 | 90,773 | |||||
Accounts payable and accrued expenses | 32,568 | 22,725 | |||||
Reserve for insurance claims and claim expenses | 2,133 | 679 | |||||
Reinsurance funds withheld | 28,963 | — | |||||
Deferred ceding commission | 6,697 | — | |||||
Warrant liability, at fair value | 1,654 | 1,467 | |||||
Current tax payable | 114 | — | |||||
Deferred tax | 137 | 137 | |||||
Total liabilities | 361,897 | 259,720 | |||||
Commitments and contingencies | |||||||
Shareholders' equity | |||||||
Common stock - class A shares, $0.01 par value; 59,138,663 and 58,807,825 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively (250,000,000 shares authorized) | 591 | 588 | |||||
Additional paid-in capital | 575,148 | 570,340 | |||||
Accumulated other comprehensive income (loss), net of tax | 10,974 | (7,474 | ) | ||||
Accumulated deficit | (156,444 | ) | (160,723 | ) | |||
Total shareholders' equity | 430,269 | 402,731 | |||||
Total liabilities and shareholders' equity | $ | 792,166 | $ | 662,451 |
For the three months ended September 30, | For the nine months ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | (In Thousands, except for share data) | ||||||||||||||
Net premiums earned | $ | 31,808 | $ | 12,834 | $ | 77,656 | $ | 28,626 | |||||||
Net investment income | 3,544 | 1,884 | 10,117 | 5,168 | |||||||||||
Net realized investment gains (losses) | 66 | (15 | ) | (758 | ) | 952 | |||||||||
Other revenues | 102 | — | 172 | — | |||||||||||
Total revenues | 35,520 | 14,703 | 87,187 | 34,746 | |||||||||||
Expenses | |||||||||||||||
Insurance claims and claims expenses | 664 | 181 | 1,592 | 279 | |||||||||||
Underwriting and operating expenses | 24,037 | 19,653 | 69,943 | 58,912 | |||||||||||
Total expenses | 24,701 | 19,834 | 71,535 | 59,191 | |||||||||||
Other (expense) income | |||||||||||||||
(Loss) gain from change in fair value of warrant liability | (797 | ) | 332 | (187 | ) | 1,473 | |||||||||
Interest expense | (3,733 | ) | — | (11,072 | ) | — | |||||||||
Total other (expense) income | (4,530 | ) | 332 | (11,259 | ) | 1,473 | |||||||||
Income (loss) before income taxes | 6,289 | (4,799 | ) | 4,393 | (22,972 | ) | |||||||||
Income tax expense | 114 | — | 114 | — | |||||||||||
Net income (loss) | $ | 6,175 | $ | (4,799 | ) | $ | 4,279 | $ | (22,972 | ) | |||||
Earnings (loss) per share | |||||||||||||||
Basic | $ | 0.10 | $ | (0.08 | ) | $ | 0.07 | $ | (0.39 | ) | |||||
Diluted | $ | 0.10 | $ | (0.08 | ) | $ | 0.07 | $ | (0.39 | ) | |||||
Weighted average common shares outstanding | |||||||||||||||
Basic | 59,130,401 | 58,741,328 | 59,047,758 | 58,650,043 | |||||||||||
Diluted | 60,284,746 | 58,741,328 | 59,861,916 | 58,650,043 | |||||||||||
Net income (loss) | $ | 6,175 | $ | (4,799 | ) | $ | 4,279 | $ | (22,972 | ) | |||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Net unrealized gains (losses) in accumulated other comprehensive gain (loss), net of tax (benefit) expense of $0 for all periods presented | (82 | ) | (483 | ) | 17,690 | (15 | ) | ||||||||
Reclassification adjustment for losses (gains) included in net loss, net of tax expense of $0 for all periods presented | (66 | ) | 15 | 758 | (952 | ) | |||||||||
Other comprehensive income (loss), net of tax | (148 | ) | (468 | ) | 18,448 | (967 | ) | ||||||||
Comprehensive income (loss) | $ | 6,027 | $ | (5,267 | ) | $ | 22,727 | $ | (23,939 | ) |
Common Stock - Class A | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total | |||||||||||||
Shares | Amount | ||||||||||||||||
(In Thousands) | |||||||||||||||||
Balances, January 1, 2015 | 58,429 | $ | 584 | $ | 562,911 | $ | (3,607 | ) | $ | (132,930 | ) | $ | 426,958 | ||||
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes | 379 | 4 | (694 | ) | — | — | (690 | ) | |||||||||
Share-based compensation expense | — | — | 8,123 | — | — | 8,123 | |||||||||||
Change in unrealized investment gains/losses, net of tax of $0 | — | — | — | (3,867 | ) | — | (3,867 | ) | |||||||||
Net loss | — | — | — | — | (27,793 | ) | (27,793 | ) | |||||||||
Balances, December 31, 2015 | 58,808 | $ | 588 | $ | 570,340 | $ | (7,474 | ) | $ | (160,723 | ) | $ | 402,731 | ||||
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes | 331 | 3 | (171 | ) | — | — | (168 | ) | |||||||||
Share-based compensation expense | — | — | 4,979 | — | — | 4,979 | |||||||||||
Change in unrealized investment gains/losses, net of tax of $0 | — | — | — | 18,448 | — | 18,448 | |||||||||||
Net income | — | — | — | — | 4,279 | 4,279 | |||||||||||
Balances, September 30, 2016 | 59,139 | $ | 591 | $ | 575,148 | $ | 10,974 | $ | (156,444 | ) | $ | 430,269 |
For the nine months ended September 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities | (In Thousands) | ||||||
Net income (loss) | $ | 4,279 | $ | (22,972 | ) | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||
Net realized investment losses (gains) | 758 | (952 | ) | ||||
Loss (gain) from change in fair value of warrant liability | 187 | (1,473 | ) | ||||
Depreciation and amortization | 4,300 | 3,646 | |||||
Net amortization of premium on investment securities | 954 | — | |||||
Amortization of debt discount and debt issuance costs | 1,416 | — | |||||
Share-based compensation expense | 4,987 | 5,895 | |||||
Changes in operating assets and liabilities: | |||||||
Current tax payable | 114 | — | |||||
Accrued investment income | (742 | ) | 28 | ||||
Premiums receivable | (6,235 | ) | (2,938 | ) | |||
Prepaid expenses | (885 | ) | 271 | ||||
Deferred policy acquisition costs, net | (11,381 | ) | (9,196 | ) | |||
Other assets | (116 | ) | 453 | ||||
Unearned premiums | 54,628 | 40,003 | |||||
Reserve for insurance claims and claims expenses | 1,454 | 275 | |||||
Reinsurance balances, net | (431 | ) | — | ||||
Accounts payable and accrued expenses | (1,075 | ) | 3,131 | ||||
Net cash provided by operating activities | 52,212 | 16,171 | |||||
Cash flows from investing activities | |||||||
Purchase of fixed-maturity investments, available-for-sale | (251,056 | ) | (111,215 | ) | |||
Proceeds from redemptions, maturities and sale of fixed-maturity investments, available-for-sale | 195,791 | 129,666 | |||||
Purchase of software and equipment | (8,449 | ) | (4,173 | ) | |||
Net cash (used in) provided by investing activities | (63,714 | ) | 14,278 | ||||
Cash flows from financing activities | |||||||
Issuance of common stock | 526 | 415 | |||||
Taxes paid related to net share settlement of equity awards | (694 | ) | (1,094 | ) | |||
Repayments of term loan | (1,125 | ) | — | ||||
Net cash used in financing activities | (1,293 | ) | (679 | ) | |||
Net (decrease) increase in cash and cash equivalents | (12,795 | ) | 29,770 | ||||
Cash and cash equivalents, beginning of period | 57,317 | 103,021 | |||||
Cash and cash equivalents, end of period | $ | 44,522 | $ | 132,791 | |||
Supplemental disclosures of cash flow information | |||||||
Noncash financing activities | |||||||
Interest paid | $ | 9,669 | $ | — |
Amortized Cost | Gross Unrealized | Fair Value | |||||||||||||
Gains | Losses | ||||||||||||||
As of September 30, 2016 | (In Thousands) | ||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 57,338 | $ | 552 | $ | (13 | ) | $ | 57,877 | ||||||
Municipal debt securities | 40,057 | 919 | (43 | ) | 40,933 | ||||||||||
Corporate debt securities | 336,113 | 10,443 | (227 | ) | 346,329 | ||||||||||
Asset-backed securities | 120,429 | 1,706 | (66 | ) | 122,069 | ||||||||||
Total bonds | 553,937 | 13,620 | (349 | ) | 567,208 | ||||||||||
Short-term investments | 74,272 | 93 | (1 | ) | 74,364 | ||||||||||
Total investments | $ | 628,209 | $ | 13,713 | $ | (350 | ) | $ | 641,572 |
Amortized Cost | Gross Unrealized | Fair Value | |||||||||||||
Gains | Losses | ||||||||||||||
As of December 31, 2015 | (In Thousands) | ||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 84,968 | $ | 4 | $ | (490 | ) | $ | 84,482 | ||||||
Municipal debt securities | 20,209 | 44 | (174 | ) | 20,079 | ||||||||||
Corporate debt securities | 337,273 | 431 | (4,377 | ) | 333,327 | ||||||||||
Asset-backed securities | 101,320 | 76 | (603 | ) | 100,793 | ||||||||||
Total bonds | 543,770 | 555 | (5,644 | ) | 538,681 | ||||||||||
Short-term investments | 20,549 | 5 | — | 20,554 | |||||||||||
Total investments | $ | 564,319 | $ | 560 | $ | (5,644 | ) | $ | 559,235 |
As of September 30, 2016 | Amortized Cost | Fair Value | |||||
(In Thousands) | |||||||
Due in one year or less | $ | 100,443 | $ | 100,556 | |||
Due after one through five years | 158,761 | 161,063 | |||||
Due after five through ten years | 238,559 | 248,040 | |||||
Due after ten years | 10,017 | 9,844 | |||||
Asset-backed securities | 120,429 | 122,069 | |||||
Total investments | $ | 628,209 | $ | 641,572 |
As of December 31, 2015 | Amortized Cost | Fair Value | |||||
(In Thousands) | |||||||
Due in one year or less | $ | 62,745 | $ | 62,743 | |||
Due after one through five years | 187,633 | 186,629 | |||||
Due after five through ten years | 193,379 | 190,055 | |||||
Due after ten years | 19,242 | 19,015 | |||||
Asset-backed securities | 101,320 | 100,793 | |||||
Total investments | $ | 564,319 | $ | 559,235 |
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, 2016 | (Dollars in Thousands) | |||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | 10 | $ | 6,915 | $ | (13 | ) | — | $ | — | $ | — | 10 | $ | 6,915 | $ | (13 | ) | |||||||||
Municipal debt securities | 4 | 3,582 | (18 | ) | 1 | 1,725 | (25 | ) | 5 | 5,307 | (43 | ) | ||||||||||||||
Corporate debt securities | 5 | 11,183 | (24 | ) | 8 | 14,085 | (203 | ) | 13 | 25,268 | (227 | ) | ||||||||||||||
Asset-backed securities | 10 | 14,481 | (59 | ) | 4 | 2,192 | (7 | ) | 14 | 16,673 | (66 | ) | ||||||||||||||
Total investments | 29 | $ | 36,161 | $ | (114 | ) | 13 | $ | 18,002 | $ | (235 | ) | 42 | $ | 54,163 | $ | (349 | ) |
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, 2015 | (Dollars in Thousands) | |||||||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | 14 | $ | 50,558 | $ | (397 | ) | 4 | $ | 10,194 | $ | (93 | ) | 18 | $ | 60,752 | $ | (490 | ) | ||||||||
Municipal debt securities | 4 | 11,293 | (165 | ) | 1 | 3,242 | (9 | ) | 5 | 14,535 | (174 | ) | ||||||||||||||
Corporate debt securities | 83 | 244,128 | (4,124 | ) | 4 | 9,220 | (253 | ) | 87 | 253,348 | (4,377 | ) | ||||||||||||||
Asset-backed securities | 27 | 69,878 | (498 | ) | 4 | 9,208 | (105 | ) | 31 | 79,086 | (603 | ) | ||||||||||||||
Total investments | 128 | $ | 375,857 | $ | (5,184 | ) | 13 | $ | 31,864 | $ | (460 | ) | 141 | $ | 407,721 | $ | (5,644 | ) |
For the three months ended September 30, | For the nine months ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(In Thousands) | |||||||||||||||
Investment income | $ | 3,727 | $ | 2,012 | $ | 10,672 | $ | 5,537 | |||||||
Investment expenses | (183 | ) | (128 | ) | (555 | ) | (369 | ) | |||||||
Net investment income | $ | 3,544 | $ | 1,884 | $ | 10,117 | $ | 5,168 |
For the three months ended September 30, | For the nine months ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(In Thousands) | |||||||||||||||
Gross realized investment gains | $ | 66 | $ | 266 | $ | 683 | $ | 1,526 | |||||||
Gross realized investment losses | — | (281 | ) | (1,441 | ) | (574 | ) | ||||||||
Net realized investment gains (losses) | $ | 66 | $ | (15 | ) | $ | (758 | ) | $ | 952 |
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, 2016 | (In Thousands) | ||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 45,398 | $ | 12,479 | $ | — | $ | 57,877 | |||||||
Municipal debt securities | — | 40,933 | — | 40,933 | |||||||||||
Corporate debt securities | — | 346,329 | — | 346,329 | |||||||||||
Asset-backed securities | — | 122,069 | — | 122,069 | |||||||||||
Cash, cash equivalents and short-term investments | 118,886 | — | — | 118,886 | |||||||||||
Total assets | $ | 164,284 | $ | 521,810 | $ | — | $ | 686,094 | |||||||
Warrant liability | — | — | 1,654 | 1,654 | |||||||||||
Total liabilities | $ | — | $ | — | $ | 1,654 | $ | 1,654 |
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, 2015 | (In Thousands) | ||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 65,185 | $ | 19,297 | $ | — | $ | 84,482 | |||||||
Municipal debt securities | — | 20,079 | — | 20,079 | |||||||||||
Corporate debt securities | — | 333,327 | — | 333,327 | |||||||||||
Asset-backed securities | — | 100,793 | — | 100,793 | |||||||||||
Cash, cash equivalents and short-term investments | 77,872 | — | — | 77,872 | |||||||||||
Total assets | $ | 143,057 | $ | 473,496 | $ | — | $ | 616,553 | |||||||
Warrant liability | — | — | 1,467 | 1,467 | |||||||||||
Total liabilities | $ | — | $ | — | $ | 1,467 | $ | 1,467 |
For the nine months ended September 30, | |||||||
Warrant Liability | 2016 | 2015 | |||||
(In Thousands) | |||||||
Balance, January 1 | $ | 1,467 | $ | 3,372 | |||
Change in fair value of warrant liability included in earnings | 187 | (1,473 | ) | ||||
Balance, September 30 | $ | 1,654 | $ | 1,899 |
As of September 30, 2016 | Principal | |||
(In thousands) | ||||
2016 | $ | 375 | ||
2017 | 1,500 | |||
2018 | 146,625 | |||
Total | $ | 148,500 | ||
• | 100% of our 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 nine months ended | |||||||
September 30, 2016 | September 30, 2015 | ||||||
(In Thousands) | |||||||
Net premiums written (1) | $ | 96,190 | $ | 68,629 | |||
Increase in unearned premiums | (18,534 | ) | (40,003 | ) | |||
Net premiums earned | $ | 77,656 | $ | 28,626 |
For the nine months ended | |||||||
September 30, 2016 | September 30, 2015 | ||||||
(In Thousands) | |||||||
Net premiums written | |||||||
Direct | $ | 133,526 | $ | 68,629 | |||
Ceded | (37,336 | ) | — | ||||
Net premiums written | $ | 96,190 | $ | 68,629 | |||
Net premiums earned | |||||||
Direct | $ | 78,900 | $ | 28,626 | |||
Ceded | (1,244 | ) | — | ||||
Net premiums earned | $ | 77,656 | $ | 28,626 |
For the nine months ended | |||||||
September 30, 2016 | September 30, 2015 | ||||||
(In Thousands) | |||||||
Ceded risk-in-force | $ | 1,685,145 | $ | — | |||
Ceded premiums written | (37,336 | ) | — | ||||
Ceded premiums earned | (1,244 | ) | — | ||||
Ceding commission written | 7,795 | — | |||||
Ceding commission earned | (530 | ) | — |
For the nine months ended September 30, | |||||||
2016 | 2015 | ||||||
(In Thousands) | |||||||
Beginning balance | $ | 679 | $ | 83 | |||
Less reinsurance recoverables (1) | — | ||||||
Beginning balance, net of reinsurance recoverables | 679 | 83 | |||||
Add claims incurred: | |||||||
Claims and claim expenses incurred: | |||||||
Current year (2) | 1,803 | 358 | |||||
Prior years (3) | (214 | ) | (79 | ) | |||
Total claims and claims expenses incurred | 1,589 | 279 | |||||
Less claims paid: | |||||||
Claims and claim expenses paid: | |||||||
Current year (2) | — | — | |||||
Prior years (3) | 225 | 4 | |||||
Total claims and claim expenses paid | 225 | 4 | |||||
Reserve at end of period, net of reinsurance recoverables | 2,043 | 358 | |||||
Add reinsurance recoverables (1) | 90 | — | |||||
Balance, September 30 | $ | 2,133 | $ | 358 |
For the three months ended September 30, | For the nine months ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(In Thousands, except for per share data) | |||||||||||||||
Net income (loss) | $ | 6,175 | $ | (4,799 | ) | $ | 4,279 | $ | (22,972 | ) | |||||
Basic earnings (loss) per share | $ | 0.10 | $ | (0.08 | ) | $ | 0.07 | $ | (0.39 | ) | |||||
Basic weighted average shares outstanding | 59,130,401 | 58,741,328 | 59,047,758 | 58,650,043 | |||||||||||
Dilutive effect of non-vested shares | 1,154,345 | — | 814,158 | — | |||||||||||
Dilutive weighted average shares outstanding | 60,284,746 | 58,741,328 | 59,861,916 | 58,650,043 | |||||||||||
Diluted earnings (loss) per share | $ | 0.10 | $ | (0.08 | ) | $ | 0.07 | $ | (0.39 | ) |
As of and for the nine months and year ended | September 30, 2016 | December 31, 2015 | |||||
(In Thousands) | |||||||
Statutory net loss | $ | (23,808 | ) | $ | (52,322 | ) | |
Statutory surplus | 367,987 | 391,422 | |||||
Contingency reserve | 72,014 | 32,564 | |||||
Risk-to-Capital | 11.7:1 | 8.7:1 |
• | We cede a fixed percentage of premiums on insurance covered by the agreement. |
• | We receive the benefit of a profit commission through a reduction in the premiums we cede. The profit commission varies directly and inversely with the level of losses on a dollar for dollar basis and is eliminated at levels of losses that we do not expect to occur. This means that lower levels of losses result in a higher profit commission and less benefit from ceded losses; higher levels of losses result in more benefit from ceded losses and a lower profit commission (or for levels of losses we do not expect, its elimination). |
• | We receive the benefit of a ceding commission equal to 20% of premiums ceded. The ceding commission is deferred and recognized as a reduction in underwriting expenses over the expected life of the risk associated with the reinsured policies. |
• | We cede a fixed percentage of losses incurred on insurance covered by the agreement. |
Primary and pool IIF and NIW | As of and for the quarter ended | For the nine months ended | |||||||||||||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | ||||||||||||||||||||
IIF | NIW | IIF | NIW | NIW | |||||||||||||||||||
(In Millions) | (In Millions) | ||||||||||||||||||||||
Monthly | $ | 16,038 | $ | 4,162 | $ | 5,087 | $ | 1,582 | $ | 10,354 | $ | 3,960 | |||||||||||
Single | 12,190 | 1,695 | 5,514 | 2,051 | 5,595 | 3,917 | |||||||||||||||||
Primary | 28,228 | 5,857 | 10,601 | 3,633 | 15,949 | 7,877 | |||||||||||||||||
Pool | 3,826 | — | 4,340 | — | — | — | |||||||||||||||||
Total | $ | 32,054 | $ | 5,857 | $ | 14,941 | $ | 3,633 | $ | 15,949 | $ | 7,877 |
Primary and pool premiums written and earned | For the quarter ended | ||||||
September 30, 2016 | September 30, 2015 | ||||||
(In Thousands) | |||||||
Net premiums written (1) | $ | 9,199 | $ | 35,360 | |||
Net premiums earned (1) | 31,808 | 12,834 |
Primary portfolio trends | As of and for the quarter ended | ||||||||||||||||||
September 30, 2016 | June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | |||||||||||||||
($ Values In Millions) | |||||||||||||||||||
New insurance written | $ | 5,857 | $ | 5,838 | $ | 4,254 | $ | 4,547 | $ | 3,633 | |||||||||
New risk written | 1,415 | 1,411 | 1,016 | 1,105 | 887 | ||||||||||||||
Insurance in force (1) | 28,228 | 23,624 | 18,564 | 14,824 | 10,601 | ||||||||||||||
Risk in force (1) | 6,847 | 5,721 | 4,487 | 3,586 | 2,553 | ||||||||||||||
Policies in force (count) (1) | 119,002 | 100,547 | 79,700 | 63,948 | 46,175 | ||||||||||||||
Weighted-average coverage (2) | 24.3 | % | 24.2 | % | 24.2 | % | 24.2 | % | 24.1 | % | |||||||||
Loans in default (count) | 115 | 79 | 55 | 36 | 20 | ||||||||||||||
Percentage of loans in default | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | — | % | |||||||||
Risk in force on defaulted loans | $ | 6 | $ | 4 | $ | 3 | $ | 2 | $ | 1 | |||||||||
Average premium yield (3) | 0.48 | % | 0.47 | % | 0.45 | % | 0.49 | % | 0.52 | % | |||||||||
Annual persistency (4) | 81.8 | % | 83.3% | 82.7 | % | 79.6 | % | 71.6 | % |
(1) | Reported as of the end of the period. |
(2) | End of period RIF divided by IIF. |
(3) | Average premium yield is calculated by dividing primary net premiums earned, net of reinsurance, by average gross IIF for the period, annualized. |
(4) | Defined as the percentage of IIF that remains on our books after any 12-month period. |
Primary IIF | Three months ended | Nine months ended | |||||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | ||||||||||||
(In Millions) | |||||||||||||||
IIF, beginning of period | $ | 23,624 | $ | 7,190 | $ | 14,824 | $ | 3,370 | |||||||
NIW | 5,857 | 3,633 | 15,949 | 7,877 | |||||||||||
Cancellations and other reductions | (1,253 | ) | (222 | ) | (2,545 | ) | (646 | ) | |||||||
IIF, end of period | $ | 28,228 | $ | 10,601 | $ | 28,228 | $ | 10,601 |
Primary IIF and RIF | As of September 30, 2016 | As of September 30, 2015 | |||||||||||||
IIF | RIF | IIF | RIF | ||||||||||||
(In Millions) | |||||||||||||||
September 30, 2016 | $ | 15,433 | $ | 3,719 | $ | — | $ | — | |||||||
2015 | 10,679 | 2,610 | 7,725 | 1,862 | |||||||||||
2014 | 2,062 | 505 | 2,800 | 673 | |||||||||||
2013 | 54 | 13 | 76 | 18 | |||||||||||
Total | $ | 28,228 | $ | 6,847 | $ | 10,601 | $ | 2,553 |
Primary NIW by FICO | Three months ended | Nine months ended | |||||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | ||||||||||||
(In Millions) | |||||||||||||||
>= 760 | $ | 2,975 | $ | 1,755 | $ | 8,418 | $ | 3,795 | |||||||
740-759 | 934 | 583 | 2,606 | 1,201 | |||||||||||
720-739 | 725 | 505 | 1,870 | 1,156 | |||||||||||
700-719 | 588 | 376 | 1,540 | 770 | |||||||||||
680-699 | 387 | 271 | 940 | 613 | |||||||||||
<=679 | 248 | 143 | 575 | 342 | |||||||||||
Total | $ | 5,857 | $ | 3,633 | $ | 15,949 | $ | 7,877 |
Primary NIW by LTV | Three months ended | Nine months ended | |||||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | ||||||||||||
(In Millions) | |||||||||||||||
95.01% and above | $ | 347 | $ | 162 | $ | 918 | $ | 272 | |||||||
90.01% to 95.00% | 2,557 | 1,656 | 7,005 | 3,463 | |||||||||||
85.01% to 90.00% | 1,844 | 1,208 | 4,996 | 2,677 | |||||||||||
85.00% and below | 1,109 | 607 | 3,030 | 1,465 | |||||||||||
Total | $ | 5,857 | $ | 3,633 | $ | 15,949 | $ | 7,877 |
Primary NIW by purchase/refinance mix | Three months ended | Nine months ended | |||||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | ||||||||||||
(In Millions) | |||||||||||||||
Purchase | $ | 4,400 | $ | 2,604 | $ | 11,518 | $ | 5,023 | |||||||
Refinance | 1,457 | 1,029 | 4,431 | 2,854 | |||||||||||
Total | $ | 5,857 | $ | 3,633 | $ | 15,949 | $ | 7,877 |
Weighted Average FICO | For the three months ended | ||
September 30, 2016 | September 30, 2015 | ||
Monthly | 748 | 742 | |
Single | 763 | 758 |
Weighted Average LTV | For the three months ended | ||||
September 30, 2016 | September 30, 2015 | ||||
Monthly | 91 | % | 92 | % | |
Single | 90 | % | 91 | % |
Primary IIF by FICO | As of | ||||||||||||
September 30, 2016 | September 30, 2015 | ||||||||||||
($ Values In Millions) | |||||||||||||
>= 760 | $ | 14,258 | 50 | % | $ | 4,969 | 47 | % | |||||
740-759 | 4,612 | 16 | 1,703 | 16 | |||||||||
720-739 | 3,648 | 13 | 1,582 | 15 | |||||||||
700-719 | 2,813 | 10 | 1,063 | 10 | |||||||||
680-699 | 1,863 | 7 | 848 | 8 | |||||||||
<=679 | 1,034 | 4 | 436 | 4 | |||||||||
Total | $ | 28,228 | 100 | % | $ | 10,601 | 100 | % |
Primary RIF by FICO | As of | ||||||||||||
September 30, 2016 | September 30, 2015 | ||||||||||||
($ Values In Millions) | |||||||||||||
>= 760 | $ | 3,470 | 51 | % | $ | 1,174 | 46 | % | |||||
740-759 | 1,130 | 17 | 413 | 16 | |||||||||
720-739 | 887 | 13 | 391 | 16 | |||||||||
700-719 | 680 | 10 | 260 | 10 | |||||||||
680-699 | 443 | 6 | 209 | 8 | |||||||||
<=679 | 237 | 3 | 106 | 4 | |||||||||
Total | $ | 6,847 | 100 | % | $ | 2,553 | 100 | % |
Primary Average Loan Size by FICO | As of | ||||||
September 30, 2016 | September 30, 2015 | ||||||
(In Thousands) | |||||||
>= 760 | $ | 250 | $ | 244 | |||
740-759 | 240 | 234 | |||||
720-739 | 235 | 227 | |||||
700-719 | 233 | 225 | |||||
680-699 | 224 | 218 | |||||
<=679 | 209 | 207 |
Primary IIF by LTV | As of | ||||||||||||
September 30, 2016 | September 30, 2015 | ||||||||||||
($ Values In Millions) | |||||||||||||
95.01% and above | $ | 1,363 | 5 | % | $ | 282 | 3 | % | |||||
90.01% to 95.00% | 12,644 | 45 | 4,710 | 44 | |||||||||
85.01% to 90.00% | 9,157 | 32 | 3,658 | 35 | |||||||||
85.00% and below | 5,064 | 18 | 1,951 | 18 | |||||||||
Total | $ | 28,228 | 100 | % | $ | 10,601 | 100 | % |
Primary RIF by LTV | As of | ||||||||||||
September 30, 2016 | September 30, 2015 | ||||||||||||
($ Values In Millions) | |||||||||||||
95.01% and above | $ | 380 | 6 | % | $ | 80 | 3 | % | |||||
90.01% to 95.00% | 3,725 | 54 | 1,392 | 55 | |||||||||
85.01% to 90.00% | 2,174 | 32 | 866 | 34 | |||||||||
85.00% and below | 568 | 8 | 215 | 8 | |||||||||
Total | $ | 6,847 | 100 | % | $ | 2,553 | 100 | % |
Primary RIF by Loan Type | As of | ||||
September 30, 2016 | September 30, 2015 | ||||
Fixed | 98 | % | 97 | % | |
Adjustable rate mortgages: | |||||
Less than five years | — | — | |||
Five years and longer | 2 | 3 | |||
Total | 100 | % | 100 | % |
As of September 30, 2016 | ||||||||||||||||||||||||||||
Origination 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 | $ | 54 | 33 | % | 655 | 264 | — | 1 | — | % | 0.2 | % | ||||||||||||||
2014 | 3,451 | 2,062 | 60 | % | 14,786 | 9,824 | 46 | 2 | 2.7 | % | 0.3 | % | ||||||||||||||||
2015 | 12,422 | 10,678 | 86 | % | 52,550 | 46,902 | 61 | 5 | 1.7 | % | 0.1 | % | ||||||||||||||||
2016 (through September 30) | 15,949 | 15,434 | 97 | % | 63,519 | 62,012 | 8 | — | 0.3 | % | — | % | ||||||||||||||||
Total | $ | 31,984 | $ | 28,228 | 131,510 | 119,002 | 115 | 8 |
(1) | The ratio of total losses incurred (paid and reserved) divided by cumulative premiums earned, without the effects of reinsurance. |
(2) | The sum of claims paid ever to date and notices of default as of the end of the period divided by policies ever in force. |
Top 10 primary RIF by state as of September 30, 2016 | As of | ||||
September 30, 2016 | September 30, 2015 | ||||
California | 13.2 | % | 13.2 | % | |
Texas | 6.8 | 7.1 | |||
Virginia | 6.6 | 3.9 | |||
Florida | 4.7 | 5.4 | |||
Colorado | 4.0 | 4.3 | |||
Michigan | 3.9 | 4.6 | |||
Arizona | 3.8 | 3.6 | |||
Maryland | 3.6 | 3.5 | |||
Pennsylvania | 3.6 | 3.9 | |||
Utah | 3.6 | 2.6 | |||
Total | 53.8 | % | 52.1 | % |
• | the typical distribution of claims over the life of a book results in fewer defaults during the first two years after loans are originated, usually peaking in years three through six and declining thereafter; |
• | under the pool insurance agreement between NMIC and Fannie Mae, NMIC is responsible for claims only to the extent they exceed a deductible; and |
• | low NIW in our early years of operations. |
For the three months ended September 30, | For the nine months ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(In Thousands) | |||||||||||||||
Beginning balance | $ | 1,475 | $ | 181 | $ | 679 | $ | 83 | |||||||
Less reinsurance recoverables (1) | — | — | — | — | |||||||||||
Beginning balance, net of reinsurance recoverables | 1,475 | 181 | 679 | 83 | |||||||||||
Add claims incurred: | |||||||||||||||
Claims and claim expenses incurred: | |||||||||||||||
Current year (2) | 690 | 219 | 1,803 | 358 | |||||||||||
Prior years (3) | (29 | ) | (38 | ) | (214 | ) | (79 | ) | |||||||
Total claims and claims expenses incurred | 661 | 181 | 1,589 | 279 | |||||||||||
Less claims paid: | |||||||||||||||
Claims and claim expenses paid: | |||||||||||||||
Current year (2) | — | — | — | — | |||||||||||
Prior years (3) | 93 | 4 | 225 | 4 | |||||||||||
Total claims and claim expenses paid | 93 | 4 | 225 | 4 | |||||||||||
Reserve at end of period, net of reinsurance recoverables | 2,043 | 358 | 2,043 | 358 | |||||||||||
Add reinsurance recoverables (1) | 90 | — | 90 | — | |||||||||||
Balance, September 30 | $ | 2,133 | $ | 358 | $ | 2,133 | $ | 358 |
Three months ended | Nine months ended | ||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | ||||||||
Beginning default inventory | 79 | 9 | 36 | 4 | |||||||
Plus: new defaults | 69 | 21 | 158 | 24 | |||||||
Less: cures | (30 | ) | (9 | ) | (73 | ) | (7 | ) | |||
Less: claims paid | (3 | ) | (1 | ) | (6 | ) | (1 | ) | |||
Ending default inventory | 115 | 20 | 115 | 20 |
Three months ended | Nine months ended | ||||||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | ||||||||||||
($ Values In Thousands) | |||||||||||||||
Number of claims paid | 3 | 1 | 6 | 1 | |||||||||||
Total amount paid for claims | $ | 93 | $ | 4 | $ | 225 | $ | 4 | |||||||
Average amount paid per claim | $ | 31 | $ | 4 | $ | 32 | $ | 4 | |||||||
Severity(1) | 53 | % | 5 | % | 62 | % | 5 | % |
Average reserve per default: | As of September 30, 2016 | As of September 30, 2015 | |||||
(In Thousands) | |||||||
Case (1) | $ | 17 | $ | 17 | |||
IBNR | 1 | 1 | |||||
Total | $ | 18 | $ | 18 |
As of | |||||||||||||||
September 30, 2016 | June 30, 2016 | March 31, 2016 | December 31, 2015 | ||||||||||||
(In thousands) | |||||||||||||||
Available Assets | $ | 488,635 | $ | 432,074 | $ | 434,138 | $ | 431,411 | |||||||
Net Risk-Based Required Assets | 320,609 | 377,468 | 302,852 | 249,805 | |||||||||||
Asset charge % (1) | 6.14 | % | 6.10 | % | 6.12 | % | 6.17 | % |
Consolidated statements of operations | Three months ended | Nine months ended | |||||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | ||||||||||||
Revenues | (In Thousands) | ||||||||||||||
Net premiums earned | $ | 31,808 | $ | 12,834 | $ | 77,656 | $ | 28,626 | |||||||
Net investment income | 3,544 | 1,884 | 10,117 | 5,168 | |||||||||||
Net realized investment gains (losses) | 66 | (15 | ) | (758 | ) | 952 | |||||||||
Other revenues | 102 | — | 172 | — | |||||||||||
Total revenues | 35,520 | 14,703 | 87,187 | 34,746 | |||||||||||
Expenses | |||||||||||||||
Insurance claims and claims expenses | 664 | 181 | 1,592 | 279 | |||||||||||
Underwriting and operating expenses | 24,037 | 19,653 | 69,943 | 58,912 | |||||||||||
Total expenses | 24,701 | 19,834 | 71,535 | 59,191 | |||||||||||
Other (expense) income | |||||||||||||||
(Loss) gain from change in fair value of warrant liability | (797 | ) | 332 | (187 | ) | 1,473 | |||||||||
Interest expense | (3,733 | ) | — | (11,072 | ) | — | |||||||||
Income (loss) before income taxes | 6,289 | (4,799 | ) | 4,393 | (22,972 | ) | |||||||||
Income tax expense | 114 | — | 114 | — | |||||||||||
Net income (loss) | $ | 6,175 | $ | (4,799 | ) | $ | 4,279 | $ | (22,972 | ) | |||||
Loss ratio(1) | 2 | % | 1 | % | 2 | % | 1 | % | |||||||
Expense ratio(2) | 76 | % | 153 | % | 90 | % | 206 | % | |||||||
Combined ratio | 78 | % | 155 | % | 92 | % | 207 | % |
Consolidated balance sheets | September 30, 2016 | December 31, 2015 | |||||
(In Thousands) | |||||||
Total investment portfolio | $ | 641,572 | $ | 559,235 | |||
Cash and cash equivalents | 44,522 | 57,317 | |||||
Deferred policy acquisition costs, net | 28,911 | 17,530 | |||||
Software and equipment, net | 19,924 | 15,201 | |||||
Prepaid reinsurance premiums | 36,091 | — | |||||
Other assets | 21,146 | 13,168 | |||||
Total assets | $ | 792,166 | $ | 662,451 | |||
Term loan | $ | 144,230 | $ | 143,939 | |||
Unearned premiums | 145,401 | 90,773 | |||||
Accounts payable and accrued expenses | 32,568 | 22,725 | |||||
Reserve for insurance claims and claims expenses | 2,133 | 679 | |||||
Reinsurance funds withheld | 28,963 | — | |||||
Deferred ceding commission | 6,697 | — | |||||
Warrant liability | 1,654 | 1,467 | |||||
Current tax payable | 114 | — | |||||
Deferred tax liability | 137 | 137 | |||||
Total liabilities | 361,897 | 259,720 | |||||
Total shareholders' equity | 430,269 | 402,731 | |||||
Total liabilities and shareholders' equity | $ | 792,166 | $ | 662,451 |
Consolidated cash flows | For the nine months ended September 30, | ||||||
2016 | 2015 | ||||||
Net cash provided by (used in): | (In Thousands) | ||||||
Operating activities | $ | 52,212 | $ | 16,171 | |||
Investing activities | (63,714 | ) | 14,278 | ||||
Financing activities | (1,293 | ) | (679 | ) | |||
Net decrease in cash and cash equivalents | $ | (12,795 | ) | $ | 29,770 |
Percentage of portfolio's fair value | September 30, 2016 | December 31, 2015 | ||||
1. | Corporate debt securities | 51 | % | 56 | % | |
2. | U.S. treasury securities and obligations of U.S. government agencies | 8 | 14 | |||
3. | Asset-backed securities | 18 | 17 | |||
4. | Cash, cash equivalents, and short-term investments | 17 | 10 | |||
5. | Municipal debt securities | 6 | 3 | |||
Total | 100 | % | 100 | % |
Investment portfolio ratings | September 30, 2016 | December 31, 2015 | |||
AAA | 25 | % | 25 | % | |
AA | 18 | 11 | |||
A | 44 | 51 | |||
BBB | 13 | 13 | |||
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 the Company's 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. |
NMI HOLDINGS, INC. | |
November 2, 2016 | By: /s/ Glenn M. Farrell |
Name: Glenn M. Farrell Title: Chief Financial Officer and Duly Authorized Signatory |
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) | |
4.7 | Credit Agreement, dated November 10, 2015, between NMI Holdings, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 4.1 to our Form 8-K, filed on November 10, 2015) | |
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 ~ | 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) | |
10.9 ~ | Offer Letter by and between NMI Holdings, Inc. and Glenn Farrell, effective December 4, 2014 (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on December 9, 2014) |
Exhibit Number | Description | |
10.10 ~ | Offer Letter by and between NMI Holdings, Inc. and William Leatherberry, dated July 11, 2014 (incorporated herein by reference to Exhibit 10.10 to our Form 10-Q, filed on April 28, 2016) | |
10.11 ~ | Form of Indemnification Agreement between NMI Holdings, Inc. and its directors and certain executive officers (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on November 25, 2014) | |
10.12 + | Commitment Letter dated July 12, 2013 for Bulk Fannie Mae-Paid Loss-on-Sale Mortgage Insurance on the Portfolio of approximately $5.46 billion Purchased by Fannie Mae and Identified by Fannie Mae as Deal No. 2013 MIRT 01 and by the Company as Policy No. P-0001-01 (incorporated herein by reference to Exhibit 10.14 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013) | |
10.13 ~ | NMI Holdings, Inc. 2014 Omnibus Incentive Plan (incorporated herein by reference to Appendix A to our 2014 Annual Proxy Statement, filed on March 26, 2014) | |
10.14 ~ | Form of NMI Holdings, Inc. 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Chief Executive Officer and President (incorporated herein by reference to Exhibit 10.16 to our Form 10-K, filed on February 19, 2016) | |
10.15 ~ | Form of NMI Holdings, Inc. 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Executive Officers (incorporated herein by reference to Exhibit 10.16 to our Form 10-K, filed on February 19, 2016) | |
10.16 ~ | Form of NMI Holdings, Inc. 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Employees (incorporated herein by reference to Exhibit 10.19 to our Form 10-K, filed on February 20, 2015) | |
10.17 ~ | Form of NMI Holdings, Inc. 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Independent Directors (incorporated herein by reference to Exhibit 10.20 to our Form 10-K, filed on February 20, 2015) | |
10.18 ~ | Form of NMI Holdings, Inc. 2014 Omnibus Incentive Plan Nonqualified Stock Option Award Agreement for Chief Executive Officer and President (incorporated herein by reference to Exhibit 10.21 to our Form 10-K, filed on February 20, 2015) | |
10.19 ~ | Form of NMI Holdings, Inc. 2014 Omnibus Incentive Plan Nonqualified Stock Option Award Agreement for Employees (incorporated herein by reference to Exhibit 10.22 to our Form 10-K, filed on February 20, 2015) | |
10.20 ~ | Form of NMI Holdings, Inc. 2014 Omnibus Incentive Plan Phantom Unit Award Agreement for Independent Directors (incorporated herein by reference to Exhibit 10.21 to our Form 10-Q, filed on August 5, 2015) | |
10.21 ~ | NMI Holdings, Inc. Severance Benefit Plan (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on February 17, 2016) | |
21.1 | Subsidiaries of NMI Holdings, Inc. (incorporated herein by reference to Exhibit 21.1 to our Form 10-Q, filed on October 30, 2015) | |
31.1 | Principal Executive Officer's Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Principal Financial Officer's Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 # | Certifications of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101 * | The following financial information from NMI Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015 (ii) Consolidated Statements of Comprehensive Income (Loss) for the three months ended September 30, 2016 and 2015 (iii) Consolidated Statements of Changes in Shareholders' Equity for the three months ended September 30, 2016 and the year ended December 31, 2015 (iv) Consolidated Statements of Cash Flows for the three months ended September 30, 2016 and 2015, and (v) Notes to 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 Securities and Exchange Commission. |
# | 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. |
* | In accordance with Rule 406T of Regulation S-T, the information furnished in these exhibits will not be deemed "filed" for purposes of Section 18 of the Exchange Act. Such exhibits will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act except to the extent that the registrant specifically incorporates it by reference. |
Date: November 2, 2016 | |
/s/ Bradley M. Shuster | |
Bradley M. Shuster | |
Chairman and Chief Executive Officer | |
(Principal Executive Officer) |
Date: November 2, 2016 | |
/s/ Glenn M. Farrell | |
Glenn M. Farrell | |
Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
Date: November, 2, 2016 | |
/s/ Bradley M. Shuster | |
Bradley M. Shuster | |
Chairman and Chief Executive Officer | |
(Principal Executive Officer) |
Date: November 2, 2016 | |
/s/ Glenn M. Farrell | |
Glenn M. Farrell | |
Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
Document and Entity Information - shares |
9 Months Ended | |
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Sep. 30, 2016 |
Oct. 31, 2016 |
|
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, 2016 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 59,138,663 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Fixed maturities, amortized cost | $ 628,209 | $ 564,319 |
Common Stock - Class A | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued (in shares) | 59,138,663 | 58,807,825 |
Common stock, shares outstanding (in shares) | 59,138,663 | 58,807,825 |
Common stock, shares authorized (in shares) | 250,000,000 | 250,000,000 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) (Parentheticals) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Statement [Abstract] | ||||
Net unrealized investment gains in AOCI, tax amount | $ 0 | $ 0 | $ 0 | $ 0 |
Reclassification adjustment for losses (gains) included in net loss, tax amount | $ 0 | $ 0 | $ 0 | $ 0 |
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Statement of Stockholders' Equity [Abstract] | |||||
Change in unrealized investment gains/losses, tax | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 |
Organization and Basis of Presentation |
9 Months Ended |
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Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Basis of Presentation | Organization and Basis of Presentation 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 55,000,000 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 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 on a limited basis 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, 2015, included in our 2015 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. 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, 2016. Deferred Policy Acquisition Costs Costs directly associated with the successful acquisition of mortgage insurance policies, consisting of certain selling expenses and other policy issuance and underwriting expenses, are initially deferred and reported as deferred policy acquisition costs (DAC). DAC is reviewed periodically to determine that it does not exceed recoverable amounts and is adjusted as appropriate for policy cancellations to be consistent with our revenue recognition policy. We estimate the rate of amortization to reflect actual experience and any changes to persistency or loss development. For each book year of business, these costs are amortized to expense in proportion to estimated gross profits over the estimated life of the policies. Total amortization of DAC for the nine months ended September 30, 2016 and 2015, net of a portion of ceding commission related to the 2016 QSR Transaction (see Note 5), was $3.4 million and $1.8 million, respectively. Premium Deficiency Reserves We consider whether a premium deficiency exists at each fiscal quarter using best estimate assumptions as of the testing date. Per Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 944, a premium deficiency reserve shall be recognized if the sum of expected claim costs and claim adjustment expenses, expected dividends to policyholders, unamortized acquisition costs and maintenance costs exceeds related unearned premiums and anticipated investment income. We have determined that no premium deficiency reserves were necessary for the nine months ended September 30, 2016 or 2015. Reinsurance We account for premiums, losses and loss expenses that are ceded to reinsurers on bases 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 to reinsurers as reductions to premium revenue. We earn profit commissions, which represent a percentage of the profits recognized by the reinsurers that are returned to us, based on the level of losses ceded. We recognize any profit commissions we earn as increases in net premium revenue. We receive ceding commissions, calculated as a percentage of ceded written premiums, which are intended 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 as reductions to underwriting and operating expenses. We cede a portion of loss reserves, paid losses and loss expenses, which are accounted for as reductions to loss expense and as reinsurance recoverables. We remain directly liable for all loss payments in the event we are unable to collect from any reinsurer. Recent Accounting Pronouncements In May 2014, the 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 accordance with the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, ASU 2015-14 deferred the provisions of ASU 2014-09 to be effective for interim and annual periods beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of this ASU will have, if any, on the consolidated financial statements. In August 2014, the FASB issued an update that requires an entity's management to evaluate whether there is substantial doubt about that entity's ability to continue as a going concern and, if so, disclose that fact. An entity's management will also be required to evaluate and disclose whether its plans alleviate that doubt. The guidance is effective for annual periods ending after December 15, 2016 and for interim and annual periods thereafter. We do not expect the adoption of this update to have a material effect on the presentation of our financial statements and notes therein. In May 2015, the FASB issued ASU 2015-09, Disclosures about Short-Duration Contracts (Topic 944), which requires insurance entities to disclose additional information related to the liability for unpaid claims and claims adjustment expenses. These disclosures include the nature, amount, timing and uncertainty of cash flows related to those liabilities and the effects of those cash flows on comprehensive income. This update is effective for annual periods beginning after December 15, 2015 and interim periods within annual periods beginning after December 15, 2016. We do not expect the adoption of this update to have a material effect on the presentation of our financial statements and notes therein. 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. The Company is currently evaluating the impact the adoption of this ASU will have on the consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718). This update is intended to provide improvements to employee share-based payment accounting. The areas for simplification in the update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any period. The Company is currently evaluating the impact the adoption of this ASU will have on the consolidated financial statements. 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 accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration also is amended in the standard. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact the adoption of this ASU will have on the presentation of the consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). This update is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of this ASU will have on the presentation of the 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 as a component of accumulated other comprehensive income and loss 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, 2016 and December 31, 2015, there were approximately $6.9 million and $7.0 million, respectively, of cash and investments in the form of U.S. Treasury securities on deposit with various state insurance departments to satisfy regulatory requirements. Scheduled Maturities The amortized cost and fair values of available for sale securities as of September 30, 2016 and December 31, 2015, 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 separate categories.
Aging of Unrealized Losses As of September 30, 2016, the investment portfolio had gross unrealized losses of $0.3 million, $0.2 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, 2016. We based our conclusion that these investments were not other-than-temporarily impaired as of September 30, 2016 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:
Net Investment Income
Net Realized Investment Gains (Losses)
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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 is a list of those assets and liabilities that are measured at fair value by hierarchy level:
The following is a roll-forward of Level 3 liabilities measured at fair value:
We revalue the warrant liability quarterly using 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. As of September 30, 2016, the assumptions used in the option-pricing model were as follows: a common stock price as of September 30, 2016 of $7.62, risk free interest rate of 1.15%, expected life of 5.08 years, expected volatility of 33.1% and a dividend yield of 0%. The change in fair value is primarily attributable to an increase in the price of our common stock from December 31, 2015 to September 30, 2016. |
Term Loan |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Term Loan | Term Loan On November 10, 2015, we entered into a credit agreement (the Credit Agreement) to obtain a three-year senior secured term loan B (the Term Loan) for $150 million. The Term Loan bears interest at the Eurodollar Rate, as defined in the Credit Agreement, (1% floor) plus an annual margin rate of 7.5% (an all-in rate of 8.5% from inception through September 30, 2016), payable quarterly. Quarterly principal payments of $375 thousand are also required. The outstanding balance as of September 30, 2016 was $148.5 million. Debt issuance costs totaling $4.4 million and a 1% debt discount are being amortized to interest expense, using the effective interest method, over the contractual life of the Term Loan. Effective interest rate for the Term Loan includes interest, amortization of issuance cost and the discount. For the nine months ended September 30, 2016, the Company recorded $11.1 million of interest expense, including amortization of the issuance cost and discount. NMIH is subject to certain quarterly covenants under the Credit Agreement. These covenants include, but are not limited to the following: a maximum debt-to-total capitalization ratio (as defined) of 35%, maximum risk-to-capital (RTC) ratio of 22.0:1.0, liquidity (as defined) of $28.4 million as of September 30, 2016, compliance with the PMIERs financial requirements (subject to any GSE-approved waivers), and equity requirements. This description is not intended to be complete in all respects and is qualified in its entirety by the terms of the Credit Agreement, including its covenants and events of default. We were in compliance with all covenants as of September 30, 2016. Future principal payments for the Company's Term Loan as of September 30, 2016 are as follows:
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Reinsurance |
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Reinsurance | Reinsurance In September 2016, in order to continue to grow our business and manage insurance risk and our minimum required assets under PMIERs financial requirements, the Company entered into a quota-share reinsurance transaction with a panel of third-party reinsurers, subject to certain conditions (2016 QSR Transaction). 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. The GSEs and the Wisconsin Office of the Commissioner of Insurance (Wisconsin OCI) approved the 2016 QSR Transaction (subject to certain conditions), giving full capital credit under PMIERs and statutory accounting principles, respectively, for the risk ceded under the agreement. The credit that we receive under PMIERs is subject to periodic review by the GSEs. Under the 2016 QSR Transaction, effective September 1, 2016, NMIC ceded premiums related to: •25% of existing risk written on eligible policies as of August 31, 2016;
Net premiums written and earned, net of reinsurance, is as follows:
(1) Net of ceded premiums written under the 2016 QSR Transaction. The effect of reinsurance on net premiums written and earned is as follows:
The following tables show the amounts ceded related to the 2016 QSR Transaction:
NMIC receives a 20% ceding commission for premiums ceded pursuant to this transaction. NMIC will also receive a profit commission, provided that the loss ratio on the loans covered under the agreement generally remains below 60%, as measured annually. Losses on the ceded risk 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. Ceded premiums written are recorded on the balance sheet as prepaid reinsurance premiums and amortized to ceded premiums earned in a manner consistent with the recognition of income on direct premiums. The reinsurance recoverable on loss reserves related to our 2016 QSR Transaction was $90 thousand as of September 30, 2016. The reinsurance recoverable balance is further secured by trust accounts established and maintained by each reinsurer in accordance with the PMIERs funding requirements that address ceded risk. The agreement 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. |
Reserves for Insurance Claims and Claim Expenses |
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Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserves for Insurance Claims and Claim Expenses | Reserves for Insurance Claims and Claims Expenses We establish claim reserves to recognize the estimated liability for insurance claims and claim expenses related to defaults on insured mortgage loans. Our method, consistent with industry practice, is to establish claim reserves only for loans that have been reported to us as having been in default for at least 60 days. Our claim reserves also include amounts for estimated claims incurred on loans that have been in default for at least 60 days that have not yet been reported to us by the servicers, often referred to as IBNR. As of September 30, 2016, we have established reserves for insurance claims and claims expenses of $2.1 million for 115 primary loans in default. We paid 3 claims totaling $93 thousand during the quarter ended September 30, 2016. In 2013, we entered into a pool insurance transaction with Fannie Mae. We only establish claim or IBNR reserves for pool risk if we expect claims to exceed the deductible under the pool agreement, which represents the amount of claims absorbed by Fannie Mae before we are obligated to pay any claims. At September 30, 2016, 46 loans in the pool were past due by 60 days or more. These 46 loans represent approximately $3.2 million in risk-in-force (RIF). Due to the size of the remaining deductible of $10.2 million, the low level of notices of default (NODs) reported through September 30, 2016 and the expected severity (all loans in the pool have loan-to-value ratios (LTVs) under 80%), we have not established any pool reserves for claims or IBNR for the three and nine months ended September 30, 2016 and 2015. In connection with settlement of pool claims, we applied $165 thousand to the pool deductible through September 30, 2016. We have not paid any pool claims to date. The following table provides a reconciliation of the beginning and ending reserve balances for primary insurance claims and claims expenses:
(1) Related to ceded losses recoverable on the 2016 QSR Transaction. To date, ceded losses have been immaterial. See Note 5 for additional information. (2) Related to defaults occurring in the current year. (3) Related to defaults occurring in prior years. There was a $214 thousand favorable prior year development during the nine months ended September 30, 2016 as a result of 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. There were $240 thousand of reserves remaining for defaults occurring in prior years as of September 30, 2016 as a result of the aforementioned favorable prior year development and claim payments. |
Earnings (Loss) Per Share (EPS) |
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Earnings (Loss) Per Share (EPS) | Earnings (Loss) per Share (EPS) Basic earnings (loss) per share is based on the weighted average number of shares of common stock outstanding, while diluted earning (loss) 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 exercise of stock options, other share-based compensation arrangements, and the dilutive effect of 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 (loss) per share of common stock:
For the three and nine months ended September 30, 2016, 4,012,046 of our common stock equivalents we issued under share-based compensation arrangements and warrants were not included in the calculation of diluted earnings (loss) per share because they were anti-dilutive. Non-vested shares of 1,154,345 and 814,158 were included in our weighted average number of common shares outstanding for the three and nine months ended September 30, 2016, respectively. As a result of our net losses for the three and nine months ended September 30, 2015, 6,823,234 of our common stock equivalents we issued under share-based compensation arrangements and warrants were not included in the calculation of diluted earnings (loss) per share as of such dates because they were anti-dilutive. |
Warrants |
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Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Warrants | Warrants We issued 992,000 warrants in connection with our 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. Upon exercise of these warrants, the amounts will be treated as additional paid-in capital. During the first quarter of 2014, 7,790 warrants were exercised, and we issued 1,115 Class A common shares via a cashless exercise. Upon exercise we recognized a gain of approximately $37 thousand. No warrants were exercised during the nine months ended September 30, 2016 and 2015. 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 |
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Sep. 30, 2016 | |
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 35%. Our holding company 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 the interim reporting periods are based on an estimated effective tax rate for the year ending December 31, 2016, after the consideration of expected usage of net operating losses. Our effective tax rate on our pre-tax income was 1.8% and 2.6% for the three and nine months ended September 30, 2016, respectively, compared to 0.0% for the comparable 2015 periods. The increase in the effective tax rates for the three and nine months ended September 30, 2016, against the comparable 2015 period was the result of income reported in the current year periods. |
Statutory Information |
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Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Statutory Information | Statutory Information Our insurance subsidiaries, NMIC and Re One, file financial statements in conformity with statutory basis 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 loss, 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, such as NMIH. Delaware corporation law provides that dividends are only payable out of a corporation's capital surplus or recent net profits (subject to certain limitations). Since inception, NMIC has not paid any dividends to NMIH. As NMIC had a statutory net loss for the year ended December 31, 2015, NMIC cannot pay any dividends to NMIH through December 31, 2016, without the prior approval of the Wisconsin OCI. |
Organization and Basis of Presentation (Policies) |
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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, 2015, included in our 2015 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. 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, 2016. |
Deferred Policy Acquisition Costs | Deferred Policy Acquisition Costs Costs directly associated with the successful acquisition of mortgage insurance policies, consisting of certain selling expenses and other policy issuance and underwriting expenses, are initially deferred and reported as deferred policy acquisition costs (DAC). DAC is reviewed periodically to determine that it does not exceed recoverable amounts and is adjusted as appropriate for policy cancellations to be consistent with our revenue recognition policy. We estimate the rate of amortization to reflect actual experience and any changes to persistency or loss development. For each book year of business, these costs are amortized to expense in proportion to estimated gross profits over the estimated life of the policies. |
Premium Deficiency Reserves | Premium Deficiency Reserves We consider whether a premium deficiency exists at each fiscal quarter using best estimate assumptions as of the testing date. Per Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 944, a premium deficiency reserve shall be recognized if the sum of expected claim costs and claim adjustment expenses, expected dividends to policyholders, unamortized acquisition costs and maintenance costs exceeds related unearned premiums and anticipated investment income. |
Reinsurance | Reinsurance We account for premiums, losses and loss expenses that are ceded to reinsurers on bases 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 to reinsurers as reductions to premium revenue. We earn profit commissions, which represent a percentage of the profits recognized by the reinsurers that are returned to us, based on the level of losses ceded. We recognize any profit commissions we earn as increases in net premium revenue. We receive ceding commissions, calculated as a percentage of ceded written premiums, which are intended 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 as reductions to underwriting and operating expenses. We cede a portion of loss reserves, paid losses and loss expenses, which are accounted for as reductions to loss expense and as reinsurance recoverables. 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 In May 2014, the 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 accordance with the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, ASU 2015-14 deferred the provisions of ASU 2014-09 to be effective for interim and annual periods beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of this ASU will have, if any, on the consolidated financial statements. In August 2014, the FASB issued an update that requires an entity's management to evaluate whether there is substantial doubt about that entity's ability to continue as a going concern and, if so, disclose that fact. An entity's management will also be required to evaluate and disclose whether its plans alleviate that doubt. The guidance is effective for annual periods ending after December 15, 2016 and for interim and annual periods thereafter. We do not expect the adoption of this update to have a material effect on the presentation of our financial statements and notes therein. In May 2015, the FASB issued ASU 2015-09, Disclosures about Short-Duration Contracts (Topic 944), which requires insurance entities to disclose additional information related to the liability for unpaid claims and claims adjustment expenses. These disclosures include the nature, amount, timing and uncertainty of cash flows related to those liabilities and the effects of those cash flows on comprehensive income. This update is effective for annual periods beginning after December 15, 2015 and interim periods within annual periods beginning after December 15, 2016. We do not expect the adoption of this update to have a material effect on the presentation of our financial statements and notes therein. 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. The Company is currently evaluating the impact the adoption of this ASU will have on the consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718). This update is intended to provide improvements to employee share-based payment accounting. The areas for simplification in the update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any period. The Company is currently evaluating the impact the adoption of this ASU will have on the consolidated financial statements. 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 accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration also is amended in the standard. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact the adoption of this ASU will have on the presentation of the consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). This update is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of this ASU will have on the presentation of the consolidated financial statements. |
Earnings Per Share | Basic earnings (loss) per share is based on the weighted average number of shares of common stock outstanding, while diluted earning (loss) 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 exercise of stock options, other share-based compensation arrangements, and the dilutive effect of 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, 2016 and December 31, 2015, 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 separate categories.
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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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Net Investment Income | Net Investment Income
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Net Realized Investments Gains (Losses) | Net Realized Investment Gains (Losses)
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements, Recurring and Nonrecurring | The following is a list of those assets and liabilities that are measured at fair value by hierarchy level:
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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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Term Loan (Tables) |
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Principal Payments | Future principal payments for the Company's Term Loan as of September 30, 2016 are as follows:
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Reinsurance (Tables) |
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Reinsurance Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effects of Reinsurance | Net premiums written and earned, net of reinsurance, is as follows:
(1) Net of ceded premiums written under the 2016 QSR Transaction. The effect of reinsurance on net premiums written and earned is as follows:
The following tables show the amounts ceded related to the 2016 QSR Transaction:
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Reserves for Insurance Claims and Claim Expenses (Tables) |
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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 claims expenses:
(1) Related to ceded losses recoverable on the 2016 QSR Transaction. To date, ceded losses have been immaterial. See Note 5 for additional information. (2) Related to defaults occurring in the current year. (3) Related to defaults occurring in prior years. |
Earnings (Loss) Per Share (EPS) (Tables) |
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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 (loss) per share of common stock:
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Statutory Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Statutory Net Loss, Surplus, Contingency Reserve and Risk-to-Capital Ratio | NMIC and Re One's combined statutory net loss, statutory surplus, contingency reserve and risk-to-capital (RTC) ratios were as follows:
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Organization and Basis of Presentation (Details) |
1 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Nov. 30, 2013
shares
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Apr. 30, 2012
USD ($)
shares
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Sep. 30, 2016
USD ($)
state
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Sep. 30, 2015
USD ($)
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Business Acquisition [Line Items] | ||||
Proceeds from issuance of common stock, net of stock issuance costs | $ 510,000,000 | |||
Number of states in which the entity operates | state | 50 | |||
Deferred policy acquisition cost, amortization expense | $ 3,400,000 | $ 1,800,000 | ||
Premium deficiency reserve | $ 0 | $ 0 | ||
IPO | ||||
Business Acquisition [Line Items] | ||||
Stock issued during period, shares, net issues (in shares) | shares | 2,400,000 | |||
MAC Financial Holding Corporation and Subsidiaries | ||||
Business Acquisition [Line Items] | ||||
Consideration transferred, cash and equity interests issued and issuable | 8,500,000 | |||
Consideration transferred, liabilities incurred | $ 1,300,000 | |||
Common Stock - Class A | ||||
Business Acquisition [Line Items] | ||||
Stock issued during period, shares, net issues (in shares) | shares | 55,000,000 |
Investments - Scheduled Maturities (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Amortized Cost | ||
Due in one year or less | $ 100,443 | $ 62,745 |
Due after one through five years | 158,761 | 187,633 |
Due after five through ten years | 238,559 | 193,379 |
Due after ten years | 10,017 | 19,242 |
Asset-backed securities | 120,429 | 101,320 |
Amortized Cost | 628,209 | 564,319 |
Fair Value | ||
Due in one year or less | 100,556 | 62,743 |
Due after one through five years | 161,063 | 186,629 |
Due after five through ten years | 248,040 | 190,055 |
Due after ten years | 9,844 | 19,015 |
Asset-backed securities | 122,069 | 100,793 |
Fair Value | $ 641,572 | $ 559,235 |
Investments - Narrative (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Schedule of Available-for-sale Securities [Line Items] | ||
Unrealized loss position, accumulated loss | $ 349 | $ 5,644 |
Unrealized losses, 12 months or greater | 235 | 460 |
U.S. Treasury securities and obligations of U.S. government agencies | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Cash and investments held with various state insurance departments | 6,900 | 7,000 |
Unrealized loss position, accumulated loss | 13 | 490 |
Unrealized losses, 12 months or greater | $ 0 | $ 93 |
Investments Investments - Net Investment Income (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Investment Income, Net [Abstract] | ||||
Investment income | $ 3,727 | $ 2,012 | $ 10,672 | $ 5,537 |
Investment expenses | (183) | (128) | (555) | (369) |
Net investment income | $ 3,544 | $ 1,884 | $ 10,117 | $ 5,168 |
Investments - Net Realized Investment Gains (Losses) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Investments, Debt and Equity Securities [Abstract] | ||||
Gross realized investment gains | $ 66 | $ 266 | $ 683 | $ 1,526 |
Gross realized investment losses | 0 | (281) | (1,441) | (574) |
Net realized investment gains (losses) | $ 66 | $ (15) | $ (758) | $ 952 |
Fair Value of Financial Instruments - Rollforward of Level 3 (Details) - Significant Unobservable Inputs (Level 3) - Warrant Liability - USD ($) $ in Thousands |
9 Months Ended | |
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Sep. 30, 2016 |
Sep. 30, 2015 |
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Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Beginning balance | $ 1,467 | $ 3,372 |
Change in fair value of warrant liability included in earnings | 187 | (1,473) |
Ending balance | $ 1,654 | $ 1,899 |
Fair Value of Financial Instruments - Narrative (Details) - Warrant Liability - Significant Unobservable Inputs (Level 3) |
9 Months Ended |
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Sep. 30, 2016
$ / shares
| |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Share Price (in dollars per share) | $ 7.62 |
Risk free rate | 1.15% |
Expected term | 5 years 29 days |
Volatility assumption | 33.10% |
Expected dividend rate | 0.00% |
Term Loan - Narrative (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 11 Months Ended | |||
---|---|---|---|---|---|---|
Nov. 10, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
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Debt Instrument [Line Items] | ||||||
Term loan | $ 148,500,000 | $ 148,500,000 | $ 148,500,000 | |||
Interest expense | 3,733,000 | $ 0 | 11,072,000 | $ 0 | ||
Senior Secured Debt | Credit Agreement | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument term | 3 years | |||||
Debt instrument, face amount | $ 150,000,000 | |||||
Periodic payment of principal | 375,000 | |||||
Term loan | $ 148,500,000 | $ 148,500,000 | $ 148,500,000 | |||
Debt issuance cost | $ 4,400,000 | |||||
Percentage of debt discount | 1.00% | |||||
Debt instrument covenant, maximum debt-to-total capitalization ratio | 35.00% | |||||
Debt instrument covenant, maximum risk-to-capital ratio | 22.0 | |||||
Debt instrument covenant, minimum liquidity requirement | $ 28,400,000.0 | |||||
Senior Secured Debt | Credit Agreement | Eurodollar | ||||||
Debt Instrument [Line Items] | ||||||
Variable rate floor | 1.00% | |||||
Basis spread on variable rate | 7.50% | |||||
Interest rate during period | 8.50% |
Term Loan - Schedule of Future Principal Payments (Details) $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Future Principal Payments [Abstract] | |
2016 | $ 375 |
2017 | 1,500 |
2018 | 146,625 |
Total | $ 148,500 |
Reinsurance - Net Premium Written and Earned (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Reinsurance Disclosures [Abstract] | ||||
Net premiums written | $ 96,190 | $ 68,629 | ||
Increase in unearned premiums | (18,534) | (40,003) | ||
Net premiums earned | $ 31,808 | $ 12,834 | $ 77,656 | $ 28,626 |
Reinsurance - Effect of Reinsurance on Net Premiums Written and Earned (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Net premiums written | ||||
Direct | $ 133,526 | $ 68,629 | ||
Ceded | (37,336) | 0 | ||
Net premiums written | 96,190 | 68,629 | ||
Net premiums earned | ||||
Direct | 78,900 | 28,626 | ||
Ceded | (1,244) | 0 | ||
Net premiums earned | $ 31,808 | $ 12,834 | $ 77,656 | $ 28,626 |
Reinsurance - Amounts Ceded Related to 2016 QSR Transaction (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Ceded Credit Risk [Line Items] | ||
Ceded premiums written | $ (37,336) | $ 0 |
Ceded premiums earned | (1,244) | $ 0 |
Third-Party Reinsurers | ||
Ceded Credit Risk [Line Items] | ||
Ceded risk-in-force | 1,685,145 | |
Ceded premiums written | (37,336) | |
Ceded premiums earned | (1,244) | |
Ceding commission written | 7,795 | |
Ceding commission earned | $ (530) |
Reserves for Insurance Claims and Claim Expenses - Narrative (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016
USD ($)
loan
claim
|
Sep. 30, 2016
USD ($)
loan
|
Sep. 30, 2015
USD ($)
|
Dec. 31, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
|
Liability for Claims and Claims Adjustment Expense [Line Items] | |||||
IBNR, default period (at least) | 60 days | ||||
Liability for insurance claims | $ 2,133 | $ 2,133 | $ 358 | $ 679 | $ 83 |
Primary loans in default | loan | 115 | 115 | |||
Number of claims paid | claim | 3 | ||||
Claims paid | $ 93 | $ 0 | 0 | ||
Claims applied to deductible | 165 | ||||
Favorable prior year development | 214 | $ 79 | |||
Reserve for prior year insurance claims and claim expenses | $ 240 | $ 240 | |||
Fannie Mae | |||||
Liability for Claims and Claims Adjustment Expense [Line Items] | |||||
Number of loans in pool past due 60 days or more | loan | 46 | 46 | |||
Risk in Force of loans in pool past due 60 days or more | $ 3,200 | $ 3,200 | |||
Deductible on policy | $ 10,200 | ||||
Loan-to-value ratio (less than) | 0.8 |
Reserves for Insurance Claims and Claim Expenses - Reconciliation of Reserve Balances for Insurance Claims Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | |||
Beginning balance | $ 679 | $ 83 | |
Less reinsurance recoverables | 0 | ||
Beginning balance, net of reinsurance recoverables | 679 | 83 | |
Claims incurred: | |||
Current year | 1,803 | 358 | |
Prior years | (214) | (79) | |
Total claims and claims expenses incurred | 1,589 | 279 | |
Claims and claim expenses paid: | |||
Current year | $ 93 | 0 | 0 |
Prior years | 225 | 4 | |
Total claims and claim expenses paid | 225 | 4 | |
Ending balance, net of reinsurance recoverables | 2,043 | 2,043 | 358 |
Add reinsurance recoverables | 90 | 90 | 0 |
Reserve at end of period, net of reinsurance recoverables | $ 2,133 | $ 2,133 | $ 358 |
Earnings (Loss) Per Share (EPS) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Earnings Per Share [Abstract] | |||||
Net income (loss) | $ 6,175 | $ (4,799) | $ 4,279 | $ (22,972) | $ (27,793) |
Basic earnings (loss) per share (in dollars per share) | $ 0.10 | $ (0.08) | $ 0.07 | $ (0.39) | |
Basic weighted average shares outstanding (in shares) | 59,130,401 | 58,741,328 | 59,047,758 | 58,650,043 | |
Dilutive effect of non-vested shares (in shares) | 1,154,345 | 0 | 814,158 | 0 | |
Dilutive weighted average shares outstanding (in shares) | 60,284,746 | 58,741,328 | 59,861,916 | 58,650,043 | |
Diluted earnings (loss) per share (in dollars per share) | $ 0.10 | $ (0.08) | $ 0.07 | $ (0.39) |
Earnings (Loss) Per Share (EPS) - Narrative (Details) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Dilutive effect of non-vested shares (in shares) | 1,154,345 | 0 | 814,158 | 0 |
Stock Compensation Plan and Warrant | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from EPS calculation (in shares) | 4,012,046 | 6,823,234 | 4,012,046 | 6,823,234 |
Warrants (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2014 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Apr. 30, 2012 |
|
Line of Credit Facility [Line Items] | ||||
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 | |||
Warrants value | $ 5,100 | |||
Number of warrants exercised during period | 7,790 | 0 | 0 | |
Gain from settlement of warrants | $ 37 | |||
Common Stock - Class A | Common Stock - Class A | ||||
Line of Credit Facility [Line Items] | ||||
Issuance of Class A shares of common stock as part of cashless exercise of warrants, shares | 1,115 |
Income Taxes - Narrative (Details) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Tax Disclosure [Abstract] | ||||
Federal statutory income tax rate | 35.00% | |||
Effective income tax rate on pre-tax loss | 1.80% | 0.00% | 2.60% | 0.00% |
Statutory Information - Schedule of Statutory Net Loss, Surplus, Contingency Reserve and Risk-to-Capital Ratio (Details) - Combined $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
|
Statutory Accounting Practices [Line Items] | ||
Statutory net loss | $ (23,808) | $ (52,322) |
Statutory surplus | 367,987 | 391,422 |
Contingency reserve | $ 72,014 | $ 32,564 |
Risk-to-Capital | 11.7 | 8.7 |
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