NMI - Q1 2024

Transcript

Operator (participant)

Good day, and welcome to the NMI Holdings first quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need any assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there'll be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Mr. John Swenson. Please go ahead.

John Swenson (VP of Investor Relations and Treasury)

Thank you. Good afternoon, and welcome to the 2024 first quarter conference call for National MI. I'm John Swenson, Vice President of Investor Relations and Treasury. Joining us on the call today are Brad Shuster, Executive Chairman, Adam Pollitzer, President and Chief Executive Officer, Ravi Mallela, Chief Financial Officer, Andrew Greenberg, our Senior Vice President of Finance, and Nick Realmuto, our Controller. Financial results for the quarter were released after the close today. The press release may be accessed on NMI's website, located at nationalmi.com, under the Investors tab. During the course of this call, we may make comments about our expectations for the future. Actual results could differ materially from those contained in these forward-looking statements.

Additional information about the factors that could cause actual results or trends to differ materially from those discussed on the call may be found on our website or through our regulatory filings with the SEC. If and to the extent the company makes forward-looking statements, we do not undertake any obligation to update those statements in the future in light of subsequent developments. Further, no one should rely on the fact that the guidance of such statements is current at any time other than the time of this call. Also note that on this call, we may refer to certain non-GAAP measures. In today's press release and on our website, we've provided a reconciliation of these measures to the most comparable measures under GAAP. Now I'll turn the call over to Brad.

Brad Shuster (Executive Chairman)

Thank you, John, and good afternoon, everyone. As we talk today, I'm greatly encouraged both by the continued resilience that we see in the broader macro environment and housing market, and by the significant and consistent success we're achieving across our business. In the first quarter, National MI again delivered standout operating performance, continued growth in our insured portfolio, and record financial results. Our lenders and their borrowers continued to turn to us for critical down payment support, and in the first quarter, we generated $9.4 billion of NIW volume, ending the period with a record $199.4 billion of high quality, high-performing primary insurance in force. In Washington, our conversations remain active and constructive.

Policymakers, regulators, the FHFA, and the GSEs remain keenly focused on promoting broader access and affordability to the housing market for all borrowers, and we believe there is broad recognition of the unique and valuable role that the private mortgage insurance industry plays in this regard. At National MI, we recognize the need to provide borrowers with a fair and equitable opportunity to access the housing market, establish a community identity, and build long-term wealth through homeownership. We are actively engaged and committed to equally supporting borrowers from all communities, and are proud to have helped nearly 1.8 million borrowers to date realize their homeownership goals. Overall, we had a terrific first quarter and are well-positioned to continue to lead with impact and drive value for our people, our customers and their borrowers, and our shareholders going forward. With that, let me turn it over to Adam.

Adam Pollitzer (President and CEO)

Thank you, Brad, and good afternoon, everyone. National MI continued to outperform in the first quarter, delivering significant new business production, consistent growth in our insured portfolio, and record financial results. We generated $9.4 billion of NIW volume and ended the period with a record $199.4 billion of high quality, high-performing primary insurance in force. Total revenue in the first quarter was a record $156.3 million, and we delivered record GAAP net income of $89 million. EPS was a record $1.08 per diluted share, up 8% compared to the fourth quarter, and 24% compared to the first quarter of 2023, and we generated an 18.2% return on equity. Overall, we had an exceptionally strong quarter and are confident as we look ahead.

The macro environment and housing market in particular have remained resilient in the face of elevated interest rates. Our lenders, customers, and their borrowers continue to rely on us in size through critical down payment support, and we see an attractive and sustained new business opportunity fueled by long-term secular trends. We have an exceptionally high-quality insured portfolio, and our credit performance continues to stand ahead. Our persistency remains well above historical trend and when paired with our current NIW volume, has helped to drive consistent growth and embedded value gains in our insured book.

And we continue to manage our expenses and capital position with discipline and efficiency, building a robust balance sheet that is supported by the significant earnings power of our platform. Notwithstanding these strong positives, however, macro risks do remain, and we've maintained a proactive stance with respect to our pricing, risk selection, and reinsurance decisioning. It's an approach that has served us well and continues to be the prudent and appropriate course. More broadly, we've been encouraged by the continued discipline that we've seen across the private MI market. Underwriting standards remain rigorous, and the pricing environment remains balanced and constructive. Overall, we had a terrific quarter, delivering strong operating performance, continued growth in our insured portfolio, and record financial results.

We've started the year with significant momentum, and looking ahead, we are well-positioned to continue to serve our customers and their borrowers, invest in our employees and their success, drive growth in our high-quality insured portfolio, and deliver through the cycle growth, returns, and value for our shareholders. With that, I'll turn it over to Ravi.

Ravi Mallela (CFO)

Thank you, Adam. We delivered record financial results in the first quarter, with significant new business production, consistent growth in our high-quality insured portfolio, record top-line performance, favorable credit experience, continued expense efficiency, and record net income and earnings per share. Total revenue in the first quarter was a record $156.3 million. GAAP net income was a record $89 million. EPS was a record $1.08 per diluted share, and our return on equity was 18.2%.

We generated $9.4 billion of NIW, and our primary insurance in force grew to $199.4 billion, up 1.2% from the end of the fourth quarter and 6.8% compared to the first quarter of 2023. Twelve-month persistency was 85.8% in the first quarter, compared to 86.1% in the fourth quarter. Persistency remains well above historical trend and continues to serve as an important driver of the growth and embedded value of our insured portfolio. Net premiums earned in the first quarter were a record $136.7 million, compared to $132.9 million in the fourth quarter.

We earned $586,000 from the cancellation of single premium policies in the first quarter, compared to $983,000 in the fourth quarter. Net yield for the quarter was 27.6 basis points, up from 27.1 basis points in the fourth quarter. Core yield, which excludes the cost of our reinsurance coverage and the contribution from cancellation earnings, was 34.1 basis points, up from 33.8 basis points in the fourth quarter. Investment income was $19.4 million in the first quarter, compared to $18.2 million in the fourth quarter. We saw continued growth in investment income during the quarter as we deployed new cash flows and reinvested rolling maturities at favorable new money rates.

Total revenue was a record $156.3 million in the first quarter, up 3.2% compared to the fourth quarter, and 14.2% compared to the first quarter of 2023. Underwriting and operating expenses were $29.8 million in the first quarter, compared to $29.7 million in the fourth quarter. Our expense ratio was 21.8%, compared to 22.4% in the fourth quarter. We had 5,109 defaults at March 31st, compared to 5,099 at December 31st, and our default rate declined to 80 basis points at quarter end. Claims expense in the first quarter was $3.7 million, compared to $8.2 million in the fourth quarter.

We have a uniquely high-quality insured portfolio, and our claims experience continues to benefit from the discipline with which we've shaped our book and the strong position of our existing borrowers, as well as the broad resiliency we've seen in the housing market. Interest expense in the quarter was $8 million. Net income was a record $89 million, up 6.8% compared to the fourth quarter, and 19.6% compared to the first quarter of 2023. Diluted EPS was a record $1.08 per share, up 7.5% compared to the fourth quarter and 23.5% compared to the first quarter of 2023. Total cash and investments were $2.5 billion at quarter end, including $92 million of cash and investments at the holding company.

Shareholders' equity as of March 31st was $2 billion, and book value per share was $24.56. Book value per share, excluding the impact of net unrealized gains and losses in the investment portfolio, was $26.42, up 3.4% compared to the fourth quarter and 17.1% compared to the first quarter of last year. In the first quarter, we repurchased $25.2 million of common stock, retiring 840,000 shares at an average price of $29.98. As of March 31st, we had $152 million of repurchase capacity remaining under our existing program. At quarter end, we reported total available assets under PMIERs of $2.8 billion and risk-based required assets of $1.6 billion. Excess available assets were $1.3 billion.

Overall, we delivered standout financial results during the quarter, with consistent growth in our high-quality insured portfolio and record top-line performance, favorable credit experience, and continued expense efficiency, driving record bottom line profitability and strong returns. With that, let me turn it back to Adam.

Adam Pollitzer (President and CEO)

Thank you, Ravi. We had a terrific quarter, once again, delivering significant new business production, continued growth in our insured portfolio, and record financial performance. Looking forward, we're encouraged by the continued resiliency that we see in the macro environment and housing market, and we are well-positioned to continue delivering differentiated growth, returns, and value for our shareholders. We are leading the market with discipline and distinction. Sustainable secular trends are fueling the long-term private MI industry opportunity, and we are well-positioned with a strong customer franchise, a talented team that's driving us forward every day, an exceptionally high-quality book covered by a comprehensive set of risk transfer solutions, a robust balance sheet, and the significant earnings power of our platform. Taken together, we're confident as we look forward.

Before closing, I also want to take a moment to acknowledge Ravi and thank him for the important contributions he's made to National MI's success over the past two and a half years. Ravi has brought a valuable strategic perspective to our management team, and he's been an important business partner for me. Under his leadership as CFO, we've delivered standout operating performance and record financial results quarter after quarter. We've continued to lead with innovation in the risk transfer markets, have successfully introduced our share repurchase program, and have made the right investments to position National MI for continued long-term success. So thank you, Ravi. Our new CFO, Aurora Swithenbank, will be joining us in May, and we're excited to welcome her at a time when we have such significant momentum across our business.

With that, I'll ask the operator to come back on so we can take your questions.

Operator (participant)

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Your first question comes from Bose George with KBW. Please go ahead.

Speaker 11

Hey, good afternoon, everyone. This is actually Alex on for Bose. To start out, it looks like your 95%+ LTV bucket increased on a year-over-year basis to 11% of total NIW from 4% in last year's first quarter. And it looks like that bucket has been in the low double digits over the last couple of quarters as well. Could you just talk through some of the drivers of that increase? Is that just a reflection of some of the affordability challenges we're seeing in the market currently, or is there anything else you'd highlight there?

Adam Pollitzer (President and CEO)

Yeah, sure, Alex. I'd guide you to go back and look at some of our transcripts from earlier calls last year. We made a conscious decision in late 2022 and early 2023, as house prices were declining and the outlook was a little bit less certain for the path going forward, to curtail the flow of 97 LTV volume coming into the portfolio. It's one of the benefits that we have with Rate GPS, where we can very actively and precisely manage the flow of risk coming into our portfolio at any point in time.

Beginning on our first quarter call last year, we talked about, though, as things had stabilized, as the market had really digested and recalibrated to elevated interest rates and house prices again began to resume their climb toward record highs, that we were gonna be comfortable accepting a modest amount of incremental 97 LTV volume into the portfolio, and that's really what you see. We've been at this, I think we're 11% this quarter, at roughly that level for the last several quarters. The other item that I would note, though, is that even though our volume has increased for that risk cohort year-on-year, very deliberately, we feel good about having curtailed it in late 2022 and early 2023, and we feel good about having taken an incremental amount of volume over the last several quarters.

We still meaningfully under index the broader MI market for 97 LTV concentrations. The rest of the market last quarter was at around 15% compared to our 11% this quarter.

Speaker 11

Okay, great. Thanks for that. That all makes sense. Then maybe just one more quick one. So you and your peers, both are, or all of the peers, have kind of meaningful, a meaningful level of PMIERs excess capital. Currently, I believe, NMI is now around 80% of the minimum required level, or 80% above the minimum required level at quarter end. When we think about excess capital moving forward, is PMIERs still the best metric to consider, or do you think the industry will continue to run with meaningful excess levels for the time being?

Adam Pollitzer (President and CEO)

Yes, I think there's a yes to both of those, in fact. So I think PMIERs still sets the binding capital constraint for us and others in the industry to a significant extent. On almost every policy that we insure, PMIERs sets the binding capital constraint. There may be a few policies where our internal view of economic capital, but in the main, it is PMIERs that drives our needs, and it's PMIERs that we manage against. Broadly speaking, though, in terms of the excess that we're carrying relative to the PMIERs' minimum requirements, look, capital is key for us, and we're obviously in a terrific position today. We've got a strong liquidity and funding position. We benefit from the broad protection of our comprehensive reinsurance program, which not only provides us with risk transfer benefits, but also with real capital efficiency and benefit.

We've got a conservative investment portfolio, and we have ready access to capital across the funding spectrum. And when we look at it, today, even though the macro environment has proven to be remarkably resilient in the face of elevated interest rates, risks certainly remain. I think, you know, market volatility over the last few months serves to highlight that. And so as we think about our excess capital position, we wanna make sure that we're being balanced, right? We wanna make sure that on the one hand, we recognize that there's value in conservatism, that we're prudently managing our needs and building that access and that excess in an appropriate way.

But there's obviously a cost associated with that, that we need to be mindful of, and carrying too much excess, what we really think about as an excessive amount of capital at any given point in time, can serve as a tax on our return potential. We think we're really striking that right balance now. We've just delivered record financial results. We posted an 18.2% ROE, and we've also been able to return a significant amount of capital to shareholders under our repurchase program. As we look going forward, the sizing of that excess capital position, the line between a prudent amount of excess and something beyond that, that we would think of as excessive, will naturally move depending on the risk environment that we're in.

Speaker 11

Great, that makes sense. Thanks for taking the questions, Adam.

Operator (participant)

The next question comes from Mark Hughes with Truist. Please go ahead.

Mark Hughes (Analyst)

Yeah, thank you. Good afternoon. Adam, I wonder if you could just expand a little bit on what you saw transpire during the quarter that gave you confidence to release those prior accident year reserves. You know, what in the housing market, the aging of the book, what are the key factors?

Adam Pollitzer (President and CEO)

Sure. It's, it's a good question, Mark. Look, at the end of the day, right, it, it is really, it's first and foremost about how the defaults that we had on the balance sheet or in our portfolio at the end of the prior quarter, how they performed. We actually saw our cure rates during the quarter move up to their highest levels in the last two years. Not a dramatic degree, it wasn't a seismic shift, but cure rates in the first quarter of 2024 are the highest level they've been in the last two years. So we came into the quarter with 5,099 defaults. We had over 35% of those defaults cure out, and for borrowers to resume timely payment of principal and interest on their loans.

That allows us to obviously release the reserves that we'd held against that population of defaults. We've also talked about in prior quarters that our general bias when we're establishing our reserves is to anchor more towards downside scenarios. We continue to do that at each quarter end. As you roll forward then with another quarter of actual, macro development, actual development in the housing market, while we're not necessarily changing that anchoring to downside scenarios, the actual experience over the last quarter ended up coming in better than what our embedded assumptions had been at the time we established reserves at year-end, and it's both of those items that drove the release.

It's the really strong cure activity that we saw within the default population, and it's continued strength and resiliency in the macro environment and housing market relative to the assumptions that we had embedded in our year-end reserve position.

Mark Hughes (Analyst)

Could you talk in that context, severity was up a bit. I know you've spoken to the idea that the you know, you thought the claims that you did get might have more more merit. But I wonder if you could just discuss the increase in severity?

Adam Pollitzer (President and CEO)

Yeah. So, I'd say it's been really, really modest. A couple of items. One, when we establish our reserves, we're going through and individually modeling, in this case, each of the 5,109 loans that are in default in the portfolio. And based on our view and set of assumptions around macro, but also the individual characteristics of the loan, the borrower, our estimation of a current mark-to-market equity position for the loan, we're applying individual default to claim rate assumptions and individual severity assumptions for each of those loans. We're not applying a broad, homogeneous peanut butter spread assumption across the entire default population. So every loan has its own individual risk characteristics. Things didn't actually move in a consequential way from year-end through March 31st.

The weighted average severity assumption underpinning our reserves at the end of the first quarter was 65%, and that compares to 66% at year-end. It is evaluated on a real-time basis for the new population at any given point in time, but it actually didn't move in a consequential way from year-end.

Mark Hughes (Analyst)

Appreciate that. Thank you.

Adam Pollitzer (President and CEO)

Mm-hmm.

Operator (participant)

Once again, if you wish to ask a question, please press star then one. The next question comes from Mihir Bhatia with Bank of America. Please go ahead.

Mihir Bhatia (Director and Senior Equity Research)

Hi, thanks, for taking my question, and good afternoon. I wanted to maybe start with just a little, go back to your comments on pricing. I think you described it as constructive in your prepared remarks. I was curious about that. Is that meaning to suggest that you guys are still taking price and the industry is still taking price? Or is it just more discipline and staying steady?

Adam Pollitzer (President and CEO)

Yeah, it's, it's much more stability. Look, the industry pricing, we've used the phrase, through sort of the second half of 2022 and into the earlier part of 2023 on our calls, that pricing was laddering higher in view of emerging risks in the market. And that was necessary at the time, and we were pleased to see that the industry was able to achieve that. For the last several quarters, though, we've noted that the, industry pricing is at, a point of balance and stability, and that's what we see today. It's stable, it's rational. We continue to be encouraged by the broad discipline that we see across the sector. And I think most importantly, we're where we should be, right?

What a point of balance means is that we're fully and fairly supporting our customers and their borrowers, but at the same time, we're using rate among other tools to appropriately protect our balance sheet, our returns, and our ability to deliver long-term value for shareholders. So today, the rate environment, we would say is constructive because it's stable, and also price allows us to strike that right balance between making sure that we first and foremost keep our customers and their borrowers in mind and prioritize them, but also don't lose sight of the need for us to deliver value, balance sheet stability, and returns for shareholders.

Mihir Bhatia (Director and Senior Equity Research)

Got it. Thank you. Then maybe just switching for a second. I wanted to follow up on the cure rate discussion from a couple of answers ago. What is driving, I mean, I understand what you said, you know, it's a little bit higher than past, but it is still a pretty high rate. And I just wanted to understand, do you know what is driving the cure rate higher? Is it the new GSE programs post-pandemic? Is that changed in any way you're thinking about the default to cure assumptions? Is it too early to tell on that? Just trying to understand.

Adam Pollitzer (President and CEO)

Yeah, I think.

Mihir Bhatia (Director and Senior Equity Research)

If like, the higher cure rate is structured.

Adam Pollitzer (President and CEO)

Yeah, Mihir, it's a great question. In fact, we would view there as being perhaps opportunity going forward. We really don't have a rich historical data set to understand how some of the new programs, the new modification waterfall, the codification of the Payment Deferral program, will ultimately impact long-term credit performance. We're optimistic, but that's not explicitly factored in or even implicitly factored into our reserving. And so what we're seeing. Look, I'd say, generally speaking, our existing borrowers remain incredibly well situated. They've got strong credit profiles. They're in loans that were originated under a rigorous underwriting review. Those loans were used to fund the purchase of a primary residence, and many borrowers, including those in default, benefit from having significant embedded equity positions.

They're in homes that, on a relative basis, have really manageable debt service obligations because they've got historically low 30-year fixed note rates. And there's, I would say, real value in them curing out, right? Because curing out of their default allows them to retain that historically low 30-year fixed note rate, and to obviously stay in a house today with significant embedded equity. And so we're seeing borrowers, even when they run into challenges, they've generally been able to recover and cure their defaults before we see claims develop. And that's obviously a real positive, because anything that keeps a borrower in their homes, we think is valuable for the borrower, certainly. We think it's valuable as a social matter, we think it's valuable from an economic standpoint, and ultimately, it's beneficial for us as a claim cost matter.

Ravi Mallela (CFO)

Adam, I'd just add one additional, Mihir, I'd just add one additional thing. You know, we've talked about it in the previous quarter, that there's a degree of seasonality that tends to come through. And so in Q1, we typically see a bit of improvement. And so what we saw in this quarter as we got through the end of the quarter, was a little bit of that seasonality coming through and boosting our cure rates as a result.

Mihir Bhatia (Director and Senior Equity Research)

Got it. Have you disclosed how much embedded equity is in, like, the default population or, you know, in force population?

Adam Pollitzer (President and CEO)

Yeah, it's meaningful. So we don't disclose it for the in force population. We obviously do a mark to market ourselves. We have shared what the default, the equity position of our default population is on earnings calls in the past, and we're happy to. So at March 31st, 91% of our default population had at least 10% equity, 77% had at least 15% equity, and 65% had at least 20% equity underpinning their mortgages. And obviously, equity provides both a significant incentive for them to cure out of their defaults, and it also provides them the ability to sell their way out of a default without ultimately progressing to a foreclosure and claim.

Mihir Bhatia (Director and Senior Equity Research)

Got it. Thank you. And then my last question, and then I'll get, like, give someone else a chance. I just wanted to ask about, you know, you mentioned seasonality, obviously seasonally entering, I guess, moving season or the seasonally stronger housing season. You know, what are you hearing from your partners, customers, originators, or as you travel around, are you hearing more optimism this year? Just curious on what you're hearing. If there's particular markets where you're more excited, less excited, love to hear your thoughts. Thank you.

Adam Pollitzer (President and CEO)

Yeah. Look, so, certainly there was, I think, increasing optimism earlier in the year, and we saw, you know, degrees of increases in activity. I think that was for a few reasons. One, obviously, rates had dipped from their highs late last year, and that brought some new activity to the market. A big part of it, though, is I think also prospective buyers have recalibrated, right? This is the new reality. Higher for longer is the new reality, and at some point, they're not staying paused with the need for them to the decision to buy a house is really driven by life events, first and foremost. There's obviously a heavy financial aspect to it, but it's life events that drive the borrowers and the buyers' decisioning, and those life events don't pause simply because interest rates have moved higher.

We saw a large part of the market, we think, really recalibrate. We'll need to see what's happening now. It's obviously rates have shifted higher over the last few months. But broadly speaking, we obviously delivered strong NIW production growth in the insured portfolio and had heavy growth in NIW production in the first quarter. We're still optimistic. When we had our call last quarter, we shared some perspective on our outlook for market size, MI market size this year. We shared that we expect the MI market size, the NIW opportunity, will be roughly the same size this year as it was last year. Last year was about $285 billion of NIW volume.

And we still believe that and still expect that that'll be where the industry lands roughly this year.

Mihir Bhatia (Director and Senior Equity Research)

Got it. Thank you so much for taking my questions.

Operator (participant)

The next question comes from Soham Bhonsle with BTIG. Please go ahead.

Soham Bhonsle (Housing Services Analyst)

Hey, guys, good afternoon. Hope you're all doing well. I guess first one, just on ROE, Adam. You know, looks like you've been putting up sort of high teens over the last few quarters and 18.2% again this quarter. Can you just maybe talk about the sustainability of that ROE over the next year or so? And how should we be thinking about upside, downside ranges going forward?

Adam Pollitzer (President and CEO)

Yeah, look, I think it's a good question, Soham. It's nice to have you back on our calls. We always appreciate.

Soham Bhonsle (Housing Services Analyst)

Thank you.

Adam Pollitzer (President and CEO)

Spending time with you. And so, look, we understand the question. We understand the focus on, we say, return and earnings development patterns. What I would instead focus you on, though, is the fact that we have a large, high-quality insured portfolio with massive embedded value. We've got a terrific team that's helping us to lead with discipline, innovation, and efficiency. And most importantly, we see a tremendous long-term need from our customers and their borrowers for continued down payment support. We just delivered record profitability, another quarter of 18.2% ROE, and we're growing book value and book value per share on an accelerated pace. As we look out over the next year, where things trend, as you noted, we'll see natural fluctuations, period to period. That's normal, right?

Our volume, pricing, persistency, claims, expenses, capital, all of these items are never gonna be static. But over the long term, we expect that we'll be able to continue to grow book value at an accelerated pace, and that, you know, we'll be having this conversation one, two, and three years forward from where we are now, from a successively higher, stronger, and more valuable perch, regardless of how ROE develops, you know, say, over a 12-month period.

Soham Bhonsle (Housing Services Analyst)

Got it. And Adam, you know, you've mentioned sort of this secular trend in the industry a few times now, and so I'm just wondering, you know, it seems like. Look, housing affordability continues to be an issue in the U.S., right? And obviously, that's not great for homeownership, but it could be an interesting opportunity for MI, right? Where you could just continue to penetrate the market even further if fewer folks can put 20% down. So just curious if you tried to sort of size that opportunity, like incremental opportunity, as we think long term.

Adam Pollitzer (President and CEO)

Yeah. So again, a good question, and in fact, it is one of the secular drivers. And so if we tally those, look, we expect that the housing market broadly will expand and origination volume overall will rebound. We've got the underlying drivers, right, of population growth serving as a demographic tailwind. There's also the practical and emotional pull towards homeownership, right? So headship rates are increasing. The supply-demand imbalance that we see across almost all markets nationally is driving long-term house price appreciation. And for our industry and for us, because ratable exposure is not based on the number of homes, the number of loans that we insure, rather, it's based on the dollar value and size of those loans, rising house prices, which drag loan sizes higher, also provide a tailwind to growth.

And then, as you noted, we do think that, we will see an increasing number of borrowers going forward who need down payment support and who will find success and value in turning to the private MI industry. And so, you know, we have highlighted this for some time. We candidly think it's a bit underappreciated, but the long-term growth opportunity. And, and let's put it into very real practical terms, right? 2023 was a year in which the private MI industry delivered $284 billion of NIW volume. Almost all of that was purchase activity. Obviously, with rates moving where they had, there was very, very little refinancing volume. That $284 billion of NIW volume, if you scope out the peak pandemic years, represents the second or third largest private MI market ever.

And at the same time, the origination environment, right, was quite stressed, and there was the smallest number of loans originated in the U.S. since sometime in the mid-1990s. The data gets a little bit hazy earlier than 2000, but sometime between 1995 and 1997 is the last time that we had that few number of transactions, number of loans originated in the U.S. And if you pair those together, what we had is one of the largest MI markets ever, while at the same time we had one of the smallest origination markets ever. And from our vantage point, we think that that sets a very high floor for where MI industry NIW volume will go rolling forward.

Soham Bhonsle (Housing Services Analyst)

Yep, all good points. Thanks for the thoughts.

Operator (participant)

Your next question comes from Rick Shane with JPMorgan. Please go ahead.

Rick Shane (Managing Director and Senior Equity Research Analyst)

Hey, guys. Thanks for taking my question this afternoon. Look, when we look at the reserve coverage as a function of defaults, or risk in force, it's actually been very steady, quarter-over-quarter. That suggests that as you're experiencing cures within the portfolio, that they're sort of relatively evenly distributed in terms of aging, because otherwise, you would sort of see some seasoning, you might see an increase or decrease in the reserve rate otherwise. Is that the right way to think about it? And the other part of that question is, are there certain cohorts, or vintages where you were seeing underperformance in terms of roll rates?

Adam Pollitzer (President and CEO)

Mm-hmm. Rick, it's, it's a great question, and, and you're spot on. And so if we put some numbers to it, in the first quarter, the average reserve, net reserve, so it takes into account reinsurance. The average net reserve that we established against each of our new notices that came through in the period was $15,200. In the fourth quarter, it was $15,500, right? These are inconsequential marginal difference between the two. We are seeing a lot of consistency quarter to quarter in terms of the profile of borrowers that are emerging in default status and also those that are curing out. And so it's not just, as you noted, it's not just that the size of the default population is staying roughly constant. It was a 20-count move from year-end through the end of the first quarter.

But also, the underlying profile and characteristics of the borrowers and the loans, the properties, are all staying very consistent. In terms of a particular vintage where we might be seeing worse performance, no. I, I think, though, what we are seeing is, as the newer production years age, our 2022 and 2023 books age, and those borrowers, naturally, some subset of them unfortunately progress into default status and march towards claim. Those book years and the borrowers who are in default aren't different in their profile or their performance, other than the fact that they have less embedded equity than borrowers who purchased their homes in 2020, 2021, and obviously benefited from the significant rally in home prices that we saw through the course of the pandemic. That's the real item that we watch for.

That is factored in, though, into our reserves, because we're establishing reserves based on the mark-to-market and assessment for each loan individually.

Rick Shane (Managing Director and Senior Equity Research Analyst)

Got it. Okay. And it's funny, I had the number of defaults up 10 loans, and I sort of had this mental picture of you guys waiting around on the last day of the quarter, hoping that 11 would come in, so it would be down sequentially.

Adam Pollitzer (President and CEO)

Yep. Rick, you've helped me there. I think I said 20, but you're right, it's 10. The default count increased by 10.

Rick Shane (Managing Director and Senior Equity Research Analyst)

Fair enough. Thanks, guys.

Operator (participant)

The next question comes from Doug Harter with UBS. Please go ahead.

Doug Harter (Equity Research Analyst)

Thanks, and good afternoon. Can you talk about, you know, kind of how you're thinking about the pace of capital return for the course of the year, and just any updates around the thoughts around, you know, introducing a dividend?

Adam Pollitzer (President and CEO)

Sure. Why don't I cover those? I'll cover the dividend first. Look, right now, we're focused on our repurchase program and deploying the remaining $152 million of capacity that we have. We see repurchase as a way for shareholders to directly participate in the value that we're creating. And it also is really helpful for us to maintain the right funding balance, optimizing between our equity, debt, and reinsurance usage, and also it's obviously supportive of future EPS and ROE outcomes. We're really pleased with the execution that we've achieved to date. We've repurchased to date $174 million of stock at 7.3 million shares at a weighted average price to book multiple of roughly 1x. And so that really is our focus today.

We don't have any other plans right now, but over time, as we continue to perform and grow the dividend stream that's available to the holding company from our primary operating subsidiary, we may have an ability to introduce a common dividend. But for right now, repurchase is our, it's our primary focus. In terms of the pace of activity, I'd expect that we'll continue to execute on a roughly similar pace as we have been. You know, we've talked about how the existing program runs through year-end 2025, and there's no hard and fast rule. We execute according to a pricing grid that we establish and share with the banks that assist us with the repurchase activity. And so in periods where stock price is higher, we may buy back a little bit less.

In periods where stock price dips, we may be more active. But generally speaking, we've guided to assume that we'll be roughly ratable in our execution through the remaining time and the remaining dollars on the program, and that continues to be the case.

Doug Harter (Equity Research Analyst)

Appreciate that. And then, just one more. How are you thinking about, you know, kind of going back into the ILN market, to kind of, you know, as another form of reinsurance?

Adam Pollitzer (President and CEO)

Yeah, look, we have found significant success in the ILN market in the past. But I'd also say we've found real success in the traditional reinsurance market with our XOL execution. We value the credit risk transfer benefits and the premiums efficiency in funding that we achieve in each. We have been skewed more towards the XOL market more recently. I think we've done six deals since the beginning of 2022, and those deals in the traditional markets really help us compress the cycle time between transactions. We're able to secure forward flow coverage, so we have forward flow XOL coverage in place for all production that we generate this year from the traditional market. That's not something that's available in the ILN market. And so there's a lot of value, I'd say, in both.

We do expect that at some point in the future, we'll be back in the ILN markets, but right now we're finding a lot of success in the XOL market.

Doug Harter (Equity Research Analyst)

Great. Thanks, Adam.

Operator (participant)

Your next question is a follow-up question from Mark Hughes with Truist. Please go ahead. Pardon me, Mark, you're live on the call.

Mark Hughes (Analyst)

Sorry about that. I was on the mute. Last quarter, you had talked about the premium yield. I think your outlook was for relative stability. You're obviously up a little bit. When you look at the current pricing on the business that you're writing, how do you. Do you have an update on that? Is it stable from here, maybe a little bit more improvement?

Adam Pollitzer (President and CEO)

Yeah. A good question. Look, really, we'd reiterate the general perspective that we had shared last quarter, which is, we've obviously enjoyed some degree of, you know, premium yield inflecting higher for a few quarters running now, which is a real positive for us. But as we model it going forward, we do expect that our core yield, which strips away the impact and movements of our reinsurance costs and the cancellation earnings, will remain generally stable through the remainder of the year. We'll see benefit, you know, from strong persistency in the pricing gains that we've achieved over the past year. Those will provide us with the real support for that stability.

Then our net yield is more difficult to forecast, obviously, because it's also gonna be impacted by two things: by any decisions that we make with respect to further reinsurance execution through the year, and more importantly, by our loss experience as the profit commission on our quota shares fluctuates with changes in our ceded claims expense. So obviously, that one will really depend on how the default population develop, how the macro environment develops. But core yield, we expect continued stability, as we roll forward.

Doug Harter (Equity Research Analyst)

Then on the investment portfolio, what was the yield on the portfolio overall, and then can you share new money yields?

Ravi Mallela (CFO)

Yeah. The investment portfolio yield overall for Q1 was 2.9%. And from a new investment perspective, we're seeing, you know, rates, new money rates around 5%-5.5%. Obviously, that, that'll depend on the duration, the bond type, ratings, and just demand in the market. You know, nothing's really changed about the profile of, of our investment portfolio or the new purchases we're making, but that's what we're seeing.

Doug Harter (Equity Research Analyst)

Thank you very much.

Operator (participant)

Your next question comes from Scott Heleniak with RBC. Please go ahead.

Scott Heleniak (Equity Analyst)

Yeah. The NIW showed year-over-year growth. One of your competitors that had reported showed a decline. I'm just curious if you can talk about. I know it's too early to talk about market share, but do you feel like you're you know kind of increasing that wallet share with the existing customers that you had talked about and maybe some of those new accounts? But just talk about what's driving that in the quarter. It seemed like it accelerated just over the years.

Adam Pollitzer (President and CEO)

Yeah, absolutely. But also, as you noted, it's difficult to measure 'cause there's only us and one other company that are out, so we don't know, you know, until we get through earnings season, how things will ultimately land. I'd say first and foremost, we're delighted with the results that we achieved in the quarter. We wrote $9.4 billion of high quality, high return new business. We're working hard to support our customers and their borrowers, and we're driving continued growth quarter on quarter in our insured portfolio. As for share and what's driving it, I'll give the standard disclaimer, which is, we've said many times, we do not manage to market share. We are focused on serving our customers, deploying capital in a risk-responsible manner.

We wanna make sure that we're writing as large a volume of high quality, high return, and high value business that we can, and ultimately doing so in a way that allows us to drive profitable growth in our insured portfolio. The success that we had in the quarter really traces to the same reasons that we've been successful for quite some time. It's really about on-the-ground execution. We're adding more customers. We're providing value-added input away from price to our existing accounts, so that we can win an increasing share of their wallet. We're proactively managing our mix, our mix of business, our NIW flow by borrower, by geography, by product risk dimensions. And we're just generally showing up in the market for lenders and borrowers with consistency every day.

All in, it's really that, the basic building blocks of on-the-ground execution that are driving our success.

Scott Heleniak (Equity Analyst)

All right. That's helpful. And then just another question, too, on just insurance in force. When you look at the table in there, the top 10 states, it looked like you had a lower share of the top 10 states year-over-year. And is there any states that you wanna call out that you're growing as a percent of the book year-over-year, that are kind of becoming more significant? Anything to call out there?

Adam Pollitzer (President and CEO)

No, we've got a. At this point, you know, we've been at this for quite some time. Our customer franchise, our sales team does a phenomenal job of obviously adding customers, making sure that we maintain strong and active dialogues and access to existing accounts that we've worked hard to penetrate in the past. And we have access at this point to basically the entire addressable MI NIW opportunity. And so we have a broadly diversified national customer franchise, which helps us obviously achieve a broadly diversified geographic or a portfolio that is broadly diversified by geography.

Scott Heleniak (Equity Analyst)

Okay, great. And then just the last one on persistency. It's kinda held stable. Is there any expectation and change there expected to kinda be around the similar range, you know, for the rest of the year?

Adam Pollitzer (President and CEO)

Yeah. Look, in terms of. We'll likely continue to see, I would say, some natural trending off of, you know, peaks, right? I think we were a little north of 86% late last year. We're 85.8% this year. We do expect, though, certainly with rates where they are relative to the embedded note rates in the portfolio, that persistency will remain well above historical trend as we progress through 2024. Even if we see a little bit of movement, it'll be up or down by degrees.

Scott Heleniak (Equity Analyst)

Great. Thanks.

Operator (participant)

This concludes our question-and-answer session. I would like to turn the conference back to Mr. Swenson to closing remarks.

John Swenson (VP of Investor Relations and Treasury)

Well, thank you again for joining us. We'll be participating in the BTIG Housing Finance Conference on May 7, and the Truist Financial Services Conference on May 22nd. We look forward to speaking with you again soon.

Operator (participant)

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.