Company Quick10K Filing
NMI Holdings
Price26.95 EPS2
Shares70 P/E12
MCap1,890 P/FCF14
Net Debt102 EBIT211
TEV1,992 TEV/EBIT9
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-07
10-K 2019-12-31 Filed 2020-02-14
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-01
10-Q 2019-03-31 Filed 2019-05-02
10-K 2018-12-31 Filed 2019-02-14
10-Q 2018-09-30 Filed 2018-10-30
10-Q 2018-06-30 Filed 2018-08-01
10-Q 2018-03-31 Filed 2018-05-01
10-K 2017-12-31 Filed 2018-02-16
10-Q 2017-09-30 Filed 2017-11-01
10-Q 2017-06-30 Filed 2017-08-01
10-Q 2017-03-31 Filed 2017-05-04
10-K 2016-12-31 Filed 2017-02-17
10-Q 2016-09-30 Filed 2016-11-03
10-Q 2016-06-30 Filed 2016-08-08
10-Q 2016-03-31 Filed 2016-04-28
10-K 2015-12-31 Filed 2016-02-19
10-Q 2015-09-30 Filed 2015-10-30
10-Q 2015-06-30 Filed 2015-08-05
10-Q 2015-03-31 Filed 2015-05-06
10-K 2014-12-31 Filed 2015-02-20
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-14
10-K 2013-12-31 Filed 2014-03-12
10-Q 2013-09-30 Filed 2013-12-17
8-K 2020-06-01 Other Events, Exhibits
8-K 2020-05-14 Shareholder Vote
8-K 2020-05-06 Enter Agreement, Earnings, Off-BS Arrangement, Regulation FD, Other Events, Exhibits
8-K 2020-03-20 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2020-02-11 Earnings, Exhibits
8-K 2019-11-06 Earnings, Exhibits
8-K 2019-07-31 Earnings, Exhibits
8-K 2019-05-09 Shareholder Vote
8-K 2019-05-01 Earnings, Exhibits
8-K 2019-02-12 Earnings, Exhibits
8-K 2018-12-28 Officers, Exhibits
8-K 2018-10-30 Earnings, Exhibits
8-K 2018-09-27 Earnings, Regulation FD, Exhibits
8-K 2018-09-13 Officers, Exhibits
8-K 2018-08-01 Earnings, Exhibits
8-K 2018-05-24 Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K 2018-05-10 Shareholder Vote
8-K 2018-05-10 Officers, Regulation FD, Exhibits
8-K 2018-05-01 Earnings, Exhibits
8-K 2018-02-27 Enter Agreement, Other Events, Exhibits
8-K 2018-02-15 Earnings, Exhibits
8-K 2018-01-08 Earnings, Exhibits

NMIH 10Q Quarterly Report

Part I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-10.38 ex1038202010q.htm
EX-31.1 ex311q12020.htm
EX-31.2 ex312q12020.htm
EX-32.1 ex321q12020.htm

NMI Holdings Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1.41.10.80.60.30.02012201420172020
Assets, Equity
0.20.10.10.0-0.0-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.1-0.2-0.32012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedMarch 31, 2020
OR
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 StreetEmeryville,CA 94608
(Address of principal executive offices)(Zip Code)

(855) 530-6642
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.01NMIHNASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
The number of shares of common stock, $0.01 par value per share, of the registrant outstanding on May 4, 2020 was 68,874,476 shares.



TABLE OF CONTENTS
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 6.

2


CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
        This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), and the U.S. Private Securities Litigation Reform Act of 1995. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward looking. These statements are often, but not always, made through the use of words or phrases such as "anticipate," "believe," "can," "could," "may," "predict," "potential," "should," "will," "estimate," "plan," "project," "continuing," "ongoing," "expect," "intend" or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. All forward looking statements are necessarily only estimates of future results, and actual results may differ materially from expectations. You are, therefore, cautioned not to place undue reliance on such statements which should be read in conjunction with the other cautionary statements that are included elsewhere in this report. Further, any forward looking statement speaks only as of the date on which it is made and we undertake no obligation to update or revise any forward looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. We have based these forward looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, operating results, business strategy and financial needs. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward looking statements including, but not limited to:
uncertainty relating to the coronavirus (COVID-19) pandemic and the measures taken by governmental authorities and other third parties to combat it, including their impact on the global economy, the U.S. housing, real estate, housing finance and mortgage insurance markets, and our business, operations and personnel;
changes in the business practices of Fannie Mae and Freddie Mac (collectively, the GSEs), including decisions that have the impact of decreasing or discontinuing the use of mortgage insurance as credit enhancement generally, or with first time homebuyers or on very high loan-to-value mortgages;
our ability to remain an eligible mortgage insurer under the private mortgage insurer eligibility requirements (PMIERs) and other requirements imposed by the GSEs, which they may change at any time;
retention of our existing certificates of authority in each state and the District of Columbia (D.C.) and our ability to remain a mortgage insurer in good standing in each state and D.C.;
our future profitability, liquidity and capital resources;
actions of existing competitors, including other private mortgage insurers and government mortgage insurers like the Federal Housing Administration (FHA), the U.S. Department of Agriculture's Rural Housing Service (USDA) and the Veterans Affairs (VA) (collectively, government MIs), and potential market entry by new competitors or consolidation of existing competitors;
developments in the world's financial and capital markets and our access to such markets, including reinsurance;
adoption of new or changes to existing laws and regulations that impact our business or financial condition directly or the mortgage insurance industry generally or their enforcement and implementation by regulators, including any action by the Consumer Financial Protection Bureau to address the planned expiration of the "QM Patch" under the Dodd-Frank Act Ability to Repay/Qualified Mortgage rule;
legislative or regulatory changes to the GSEs' role in the secondary mortgage market or other changes that could affect the residential mortgage industry generally or mortgage insurance in particular;
potential future lawsuits, investigations or inquiries or resolution of current lawsuits or inquiries;
changes in general economic, market and political conditions and policies, interest rates, inflation and investment results or other conditions that affect the housing market or the markets for home mortgages or mortgage insurance;
our ability to successfully execute and implement our capital plans, including our ability to access the capital, credit and reinsurance markets and to enter into, and receive approval of, reinsurance arrangements on terms and conditions that are acceptable to us, the GSEs and our regulators;
our ability to implement our business strategy, including our ability to write mortgage insurance on high quality low down payment residential mortgage loans, implement successfully and on a timely basis, complex infrastructure, systems, procedures, and internal controls to support our business and regulatory and reporting requirements of the insurance industry;
3


our ability to attract and retain a diverse customer base, including the largest mortgage originators;
failure of risk management or pricing or investment strategies;
emergence of unexpected claim and coverage issues, including claims exceeding our reserves or amounts we had expected to experience;
potential adverse impacts arising from natural disasters, including, with respect to affected areas, a decline in new business, adverse effects on home prices, and an increase in notices of default on insured mortgages;
the inability of our counter-parties, including third party reinsurers, to meet their obligations to us;
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.
For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report on Form 10-Q, including the exhibits hereto. In addition, for additional discussion of those risks and uncertainties that have the potential to affect our business, financial condition, results of operations, cash flows or prospects in a material and adverse manner, you should review the Risk Factors in Part II, Item 1A of this Report and in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2019 (2019 10-K), as subsequently updated in other reports we file from time to time with the U.S. Securities and Exchange Commission (SEC).
Unless expressly indicated or the context requires otherwise, the terms "we," "our," "us" and the "Company" in this document refer to NMI Holdings, Inc., a Delaware corporation, and its wholly-owned subsidiaries on a consolidated basis.

4


PART I
Item 1. Financial Statements



INDEX TO FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of March 31, 2020 (Unaudited) and December 31, 2019
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2020 and 2019 (Unaudited)
Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2020 and 2019 (Unaudited)
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (Unaudited)
Notes to Condensed Consolidated Financial Statements (Unaudited)

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NMI HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

March 31, 2020December 31, 2019
Assets(In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $1,059,143 and $1,113,779 as of March 31, 2020 and December 31, 2019, respectively)$1,070,072  $1,140,940  
Cash and cash equivalents (including restricted cash of $2,505 and $2,662 as of March 31, 2020 and December 31, 2019, respectively)109,821  41,089  
Premiums receivable46,872  46,085  
Accrued investment income7,192  6,831  
Prepaid expenses4,750  3,512  
Deferred policy acquisition costs, net62,634  59,972  
Software and equipment, net25,667  26,096  
Intangible assets and goodwill3,634  3,634  
Prepaid reinsurance premiums13,100  15,488  
Other assets44,085  21,171  
Total assets$1,387,827  $1,364,818  
Liabilities
Term loan$145,521  $145,764  
Unearned premiums126,908  136,642  
Accounts payable and accrued expenses20,745  39,904  
Reserve for insurance claims and claim expenses29,479  23,752  
Reinsurance funds withheld12,735  14,310  
Warrant liability, at fair value1,461  7,641  
Deferred tax liability, net66,831  56,360  
Other liabilities 9,257  10,025  
Total liabilities412,937  434,398  
Commitments and contingencies
Shareholders' equity
Common stock - class A shares, $0.01 par value; 68,873,540 and 68,358,074 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively (250,000,000 shares authorized)689  684  
Additional paid-in capital706,021  707,003  
Accumulated other comprehensive income, net of tax4,464  17,288  
Retained earnings 263,716  205,445  
Total shareholders' equity974,890  930,420  
Total liabilities and shareholders' equity$1,387,827  $1,364,818  

See accompanying notes to condensed consolidated financial statements (unaudited).
6

NMI HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

For the three months ended March 31,
20202019
Revenues(In Thousands, except for per share data)
Net premiums earned$98,717  $73,868  
Net investment income8,104  7,383  
Net realized investment losses(72) (187) 
Other revenues900  42  
Total revenues107,649  81,106  
Expenses
Insurance claims and claim expenses5,697  2,743  
Underwriting and operating expenses(1)
32,277  30,800  
Service expenses(1)
734  49  
Interest expense2,744  3,061  
(Gain) loss from change in fair value of warrant liability(5,959) 5,479  
Total expenses35,493  42,132  
Income before income taxes72,156  38,974  
Income tax expense 13,885  6,075  
Net income $58,271  $32,899  
Earnings per share
Basic$0.85  $0.49  
Diluted$0.74  $0.48  
Weighted average common shares outstanding
Basic68,563  66,692  
Diluted70,401  68,996  
Net income $58,271  $32,899  
Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains in accumulated other comprehensive income, net of tax (benefit) expense of ($3,424) and $3,953 for the quarters ended March 31, 2020 and 2019, respectively(12,881) 14,868  
Reclassification adjustment for realized losses included in net income, net of tax (benefit) of ($15) and ($39) for the quarters ended March 31, 2020 and 2019, respectively57  148  
Other comprehensive (loss) income, net of tax(12,824) 15,016  
Comprehensive income $45,447  $47,915  
(1) Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
See accompanying notes to condensed consolidated financial statements (unaudited).
7

NMI HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

Common Stock - Class AAdditional
Paid-in Capital
Accumulated Other Comprehensive Income (Loss)Retained EarningsTotal
SharesAmount
(In Thousands)
Balances, December 31, 201968,358  $684  $707,003  $17,288  $205,445  $930,420  
Common stock: class A shares issued related to warrant exercises6   221  —  —  221  
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes510  5  (3,755) —  —  (3,750) 
Share-based compensation expense—  —  2,552  —  —  2,552  
Change in unrealized investment gains/losses, net of tax benefit of $3,409—  —  —  (12,824) —  (12,824) 
Net income—  —  —  —  58,271  58,271  
Balances, March 31, 202068,874  $689  $706,021  $4,464  $263,716  $974,890  

During the three months ended March 31, 2020, we issued 6,474 common shares with a par value of $0.01 in connection with the exercise of warrants, which is not identifiable in this schedule due to rounding.


Common Stock - Class AAdditional
Paid-in Capital
Accumulated Other Comprehensive Income (Loss)Retained Earnings Total
SharesAmount
(In Thousands)
Balances, December 31, 201866,319  $663  $682,181  $(14,832) $33,488  $701,500  
Common stock: class A shares issued related to warrant exercises39   944  —  —  944  
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes1,144  12  (1,471) —  —  (1,459) 
Share-based compensation expense—  —  2,981  —  —  2,981  
Change in unrealized investment gains/losses, net of tax expense of $3,992—  —  —  15,016  —  15,016  
Net income—  —  —  —  32,899  32,899  
Balances, March 31, 201967,502  $675  $684,635  $184  $66,387  $751,881  

* During the three months ended March 31, 2019, we issued 39,195 common shares with a par value of $0.01 in connection with the exercise of warrants, which is not identifiable in this schedule due to rounding.
See accompanying notes to condensed consolidated financial statements (unaudited).



8

NMI HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the three months ended March 31,
20202019
Cash flows from operating activities(In Thousands)
Net income $58,271  $32,899  
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment losses72  187  
(Gain) loss from change in fair value of warrant liability(5,959) 5,479  
Depreciation and amortization2,441  2,103  
Net amortization of premium on investment securities318  314  
Amortization of debt discount and debt issuance costs258  248  
Deferred income taxes13,880  6,038  
Share-based compensation expense2,552  2,981  
Changes in operating assets and liabilities:
Premiums receivable(787) (2,472) 
Accrued investment income(361) (859) 
Prepaid expenses(1,238) (1,407) 
Deferred policy acquisition costs, net(2,662) (1,980) 
Other assets (157) 191  
Unearned premiums(9,734) (4,568) 
Reserve for insurance claims and claim expenses5,727  2,726  
Reinsurance balances, net (691) (148) 
Accounts payable and accrued expenses(14,078) (13,453) 
Net cash provided by operating activities47,852  28,279  
Cash flows from investing activities
Purchase of short-term investments(41,872) (47,994) 
Purchase of fixed-maturity investments, available-for-sale(58,427) (72,586) 
Proceeds from maturity of short-term investments81,207  81,311  
Proceeds from redemptions, maturities and sale of fixed-maturity investments, available-for-sale46,368  29,043  
Software and equipment(1,493) (1,751) 
Net cash provided by used in investing activities25,783  (11,977) 
Cash flows from financing activities
Proceeds from issuance of common stock related to employee equity plans3,367  11,017  
Taxes paid related to net share settlement of equity awards(7,117) (12,477) 
Repayments of term loan(375) (375) 
Payments of debt issuance/modification costs(778)   
Net cash (used in) financing activities(4,903) (1,835) 
Net increase in cash, cash equivalents and restricted cash68,732  14,467  
Cash, cash equivalents and restricted cash, beginning of period41,089  25,294  
Cash, cash equivalents and restricted cash, end of period$109,821  $39,761  
Supplemental disclosures of cash flow information
Interest paid$2,403  $2,617  
Income taxes refunded$  $209  

See accompanying notes to condensed consolidated financial statements (unaudited).
9

NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Organization, Basis of Presentation and Summary of Accounting Principles
        NMI Holdings, Inc. (NMIH) is a Delaware corporation, incorporated in May 2011, to provide private mortgage guaranty insurance (which we refer to as mortgage insurance or MI) through its wholly-owned insurance subsidiaries, National Mortgage Insurance Corporation (NMIC) and National Mortgage Reinsurance Inc One (Re One). Our common stock is listed on the NASDAQ exchange under the ticker 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 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, 2019, included in our 2019 10-K. All intercompany transactions have been eliminated. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities as of the balance sheet date. Estimates also affect the reported amounts of income and expenses for the reporting period. Actual results could differ from those estimates. Certain reclassifications to previously reported financial information have been made to conform to current period presentation. The results of operations for the interim period may not be indicative of the results that may be expected for the full year ending December 31, 2020.
        Significant Accounting Principles
        There have been no changes to our significant accounting principles as described in Item 8, "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 2 - Summary of Accounting Principles" of our 2019 10-K, other than as noted in "Investments," "Premium Receivables," "Reinsurance" and "Recent Accounting Pronouncements - Adopted" below.
Investments
We evaluate our investments each quarter to determine whether declines in fair value are below amortized cost. For any impaired debt security we evaluate if we either intend to sell the security or it is more likely than not that we will be required to sell the security before recovery. If our intent is to sell a security and its fair value is below amortized cost, the securities amortized cost basis is written down to fair value and a loss is recognized in earnings.
For available for sale debt securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider several factors including, but not limited to:
the severity of the decline in fair value;
the financial condition of the issuer;
the failure of the issuer to make scheduled interest or principal payments;
recent credit downgrades of the applicable security or the issuer; and
adverse conditions specifically related to the security, an industry, or a geographic area.
If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through the allowance for credit losses is recognized in other comprehensive income.
Changes in allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance for credit losses when management believes the uncollectibility of a security is met.
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NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
We have elected to present accrued interest receivable separately from available for sale securities on the consolidated balance sheet in "Accrued Investment Income." Accrued interest receivable was $7.2 million as of March 31, 2020 relating almost entirely to available for sale debt securities. We have also elected not to measure an allowance for credit losses for accrued interest receivable on available for sale securities. For all classes of available for sale securities, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due and write-off of accrued interest receivable is recognized by reversing interest income. We did not write off any accrued interest receivable during the three months ended March 31, 2020.
Premiums Receivable
        Premiums receivable consists of premiums due on our mortgage insurance policies. If a mortgage insurance premium is unpaid for more than 120 days, the receivable is written off against earned premium and the related insurance policy is canceled. We recognize an allowance for credit losses for premiums receivable based on credit losses expected to arise over the life of the receivable. Due to the nature of our insurance policies and the short-term duration of the related receivables an allowance for credit loss was not required at March 31, 2020.
Reinsurance
        NMIC has entered into quota share reinsurance treaties effective September 1, 2016 (the 2016 QSR Transaction) and January 1, 2018 (the 2018 QSR Transaction), which we refer to collectively as the QSR Transactions. Under the QSR Transactions, we cede a portion of claims and claim expense reserves to our reinsurers, and account for such ceded reserves as reinsurance recoverables in "Other Assets" on the consolidated balance sheets and as reductions to claims expenses on the consolidated statements of operations. The company actively manages and monitors its credit risk associated with its reinsurance recoverables and recognizes an allowance for credit losses based on losses expected to arise over the life of the asset.
As it relates to its QSR transactions, each of the third-party reinsurance providers has an insurer financial strength rating of A- or better by Standard & Poor's Rating Service (S&P), A.M. Best Company, Inc. (A.M.Best) or both. 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. In accordance with the terms of the 2018 QSR Transaction, cash payments for ceded premiums earned are settled on a quarterly basis, offset by amounts due to NMIC for ceding and profit commissions. Any loss recoveries and any potential profit commission to NMIC are also settled quarterly. NMIC's reinsurance recoverable balances are further supported by trust accounts established and maintained by each reinsurer in accordance with the private mortgage insurer eligibility requirements (PMIERs) funding requirements for risk ceded to non-affiliates. The reinsurance recoverable on loss reserves related to our QSR Transactions was $6.2 million as of March 31, 2020 and an allowance for credit losses was not required.
Recent Accounting Pronouncements - Adopted 
In June 2016, the Financial Accounting Standard Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326) and subsequently issued amendments to the initial guidance: ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses (Topic 815), Derivatives and Hedging, and Topic 825, Financial Instruments, ASU 2019-05, Financial Instruments-Credit Losses: Targeted Transition Relief, and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses. These updates will require companies to measure and establish reserves for lifetime expected credit losses on many financial assets held at a given reporting date. Under the guidance, the methodology for measuring lifetime credit losses shifts from an incurred loss model, whereby losses are only recognized once probable and estimable, to a current expected credit loss (CECL) model, whereby losses are recognized upfront based on a future economic forecast. Credit losses relating to available-for-sale fixed maturity securities are recorded through an allowance for credit losses, rather than a write-down of the asset as was required, with the amount of the allowance limited to the amount by which fair value is less than amortized cost. The length of time an available-for sale fixed maturity security has been held in an unrealized loss position will no longer impact its credit loss determination. We adopted these updates on January 1, 2020. Adoption of the updated standards did not have a material impact on our consolidated financial statements, and had no impact on our accounting for insurance claims and claim expenses as these items are not in scope of the guidance.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). This update modifies the fair value measurement disclosure requirements of ASC 820. We adopted this ASU on January 1, 2020 and determined it did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40). This update applies to cloud computing arrangements structured as service contracts, and provides companies with
11

NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
guidance on the criteria for capitalizing implementation, set-up and other up-front costs incurred in association with these arrangements. We adopted this ASU on January 1, 2020 and applied it on a prospective basis for eligible costs incurred after the effective date. The adoption of this ASU did not have a material impact on our consolidated financial statements.
Recent Accounting Pronouncements - Not Yet Adopted
In August 2018, the FASB issued ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts. This update provides guidance to the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. The FASB subsequently issued ASU 2019-09 in November 2019, which amended the effective date for this standard. The standard will now take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. We are currently evaluating the impact the adoption of this ASU will have, if any, on our consolidated financial statements.
In November 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740). This update eliminates certain exceptions for recognizing deferred taxes for investments, performing intra-period allocations and calculating income taxes in interim periods. The ASU also includes guidance to reduce complexity in certain income tax areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We are currently evaluating the impact the adoption of this ASU will have, if any, on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This update provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting. Reference rate reform refers to the global transition away from referencing the London Interbank Offered Rate (LIBOR) in financial contracts, which is expected to be discontinued in 2021. The ASU includes optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The standard is effective immediately through December 31, 2022 for all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. We are currently evaluating the impact the adoption of this ASU would have, if any, to our contract modifications that are affected by the discontinuation of LIBOR.


2. Investments
        We have designated our investment portfolio as available-for-sale and report it at fair value. The related unrealized gains and losses are, after considering the related tax expense or benefit, recognized through comprehensive income and loss, and on an accumulated basis in shareholders' equity. Net realized investment gains and losses are reported in earnings based on specific identification of securities sold or any impairment that has been recorded through the allowance for credit losses. If our intent is to sell a security and its fair value is below amortized cost, the security's amortized cost basis is written down to fair value and a loss is recognized in earnings.
        Fair Values and Gross Unrealized Gains and Losses on Investments
Amortized
Cost
Gross UnrealizedFair
Value
GainsLosses
As of March 31, 2020(In Thousands)
U.S. Treasury securities and obligations of U.S. government agencies$48,207  $3,519  $  $51,726  
Municipal debt securities196,750  3,853  (668) 199,935  
Corporate debt securities628,834  18,272  (6,658) 640,448  
Asset-backed securities180,514  404  (7,811) 173,107  
Total bonds1,054,305  26,048  (15,137) 1,065,216  
Short-term investments4,838  18    4,856  
Total investments$1,059,143  $26,066  $(15,137) $1,070,072  

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NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Amortized
Cost
Gross UnrealizedFair
Value
GainsLosses
As of December 31, 2019(In Thousands)
U.S. Treasury securities and obligations of U.S. government agencies$48,203  $784  $(58) $48,929  
Municipal debt securities189,530  1,721  (1,035) 190,216  
Corporate debt securities661,719  23,373  (211) 684,881  
Asset-backed securities170,153  2,603  (114) 172,642  
Total bonds1,069,605  28,481  (1,418) 1,096,668  
Short-term investments44,174  98    44,272  
Total investments$1,113,779  $28,579  $(1,418) $1,140,940  
We did not own any mortgage-backed securities in our asset-backed securities portfolio at March 31, 2020 or December 31, 2019.
The following table presents a breakdown of the fair value of our corporate debt securities by issuer industry group as of March 31, 2020 and December 31, 2019:
March 31, 2020December 31, 2019
Financial40 %38 %
Consumer23  26  
Communications11  10  
Utilities10  9  
Industrial9  8  
Technology 7  7  
Energy  2  
Total100 %100 %
As of March 31, 2020 and December 31, 2019, approximately $5.7 million and $5.5 million, respectively, of our cash and investments were held in the form of U.S. Treasury securities on deposit with various state insurance departments to satisfy regulatory requirements.
        Scheduled Maturities
        The amortized cost and fair values of available-for-sale securities as of March 31, 2020 and December 31, 2019, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most asset-backed securities provide for periodic payments throughout their lives, they are listed below in a separate category.
As of March 31, 2020Amortized
Cost
Fair
Value
(In Thousands)
Due in one year or less$83,740  $83,736  
Due after one through five years408,063  415,419  
Due after five through ten years373,220  383,838  
Due after ten years13,606  13,972  
Asset-backed securities180,514  173,107  
Total investments$1,059,143  $1,070,072  

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NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
As of December 31, 2019Amortized
Cost
Fair
Value
(In Thousands)
Due in one year or less$138,776  $139,113  
Due after one through five years406,986  417,208  
Due after five through ten years380,737  394,180  
Due after ten years17,127  17,797  
Asset-backed securities170,153  172,642  
Total investments$1,113,779  $1,140,940  
        Aging of Unrealized Losses
        We evaluate our investments each quarter to determine whether declines in fair value are below amortized costs. As of March 31, 2020, the investment portfolio had gross unrealized losses of $15.1 million, of which $0.1 million had been in an unrealized loss position for a period of 12 months or greater. For any impaired security we evaluate if we either intend to sell the security or it is more likely than not that we will be required to sell the security before recovery of its amortized cost. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through earnings. For securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the securities by a rating agency, and any adverse condition specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, and an allowance for credit losses is recorded. Any impairment that has not been recorded through an allowance for credit loss is recognized in other comprehensive income. The following table summarizes the investment portfolio in an unrealized loss position for which an allowance is not recorded, aggregated by major security type and length of time in a continuous unrealized loss position:
Less Than 12 Months12 Months or GreaterTotal
# of SecuritiesFair ValueUnrealized Losses# of SecuritiesFair ValueUnrealized Losses# of SecuritiesFair ValueUnrealized Losses
As of March 31, 2020(Dollars in Thousands)
U.S. Treasury securities and obligations of U.S. government agencies  $  $    $  $    $  $  
Municipal debt securities14  46,936  (668)       14  46,936  (668) 
Corporate debt securities87  178,776  (6,630) 5  3,294  (28) 92  182,070  (6,658) 
Asset-backed securities60  133,997  (7,745) 1  2,934  (66) 61  136,931  (7,811) 
Total 161  $359,709  $(15,043) 6  $6,228  $(94) 167  $365,937  $(15,137) 

Less Than 12 Months12 Months or GreaterTotal
# of SecuritiesFair ValueUnrealized Losses# of SecuritiesFair ValueUnrealized Losses# of SecuritiesFair ValueUnrealized Losses
As of December 31, 2019(Dollars in Thousands)
U.S. Treasury securities and obligations of U.S. government agencies4  $12,001  $(58)   $  $  4  $12,001  $(58) 
Municipal debt securities26  92,844  (1,034) 1  999  (1) 27  93,843  (1,035)