NMI Holdings Inc

NASDAQ:NMIH

Earnings Call Transcript 2024-Q1

[Operator]

Good day, and welcome to the NMI Holdings First Quarter 2024 Earnings Conference Call. [Operator Instructions] 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, executive]

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 can 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.

[Bradley Shuster, executive]

Thank you, John, and good afternoon, everyone. As we talk today, I'm greatly encouraged both by the continued resilience that we see in 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 continue 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 the borrowers and our shareholders going forward.

With that, let me turn it over to Adam.

[Adam Pollitzer, executive]

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 lender 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 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, executive]

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 fourth quarter and 6.8% compared to the first quarter of 2023.

12-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 31 compared to 5,099 at December 31, 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 31 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 31, 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. Access 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, executive]

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 in 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 2.5 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]

[Operator Instructions] Your first question comes from Bose George with KBW.

[Unknown Analyst]

This is actually Alex on for Bose. To start out, it looks like your 95%-plus 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 just a reflection of some of the affordability challenges we're seeing in the market currently? Or is there anything else you would highlight there?

[Adam Pollitzer, executive]

Yes, 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 have stabilized as the market had really digested and recalibrated to elevated interest rates and house prices again begin to resume their decline toward record highs that we were going to 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, 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 '22 and early '23, 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.

[Unknown Analyst]

Okay. Great. That all makes sense. And then maybe just one more quick one. So you and your peers, both -- or all 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 at -- 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 access levels for the time being?

[Adam Pollitzer, executive]

Yes. I think there's a yes to both of those impacts. 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 ensure PMIER 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 its 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 market volatility over the last few months serves to highlight that. And so as we think about our excess capital position, we want to make sure that we're being balanced, right? We want to make sure that on the one hand, we recognize that there's value and 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, conserved 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.

[Operator]

Your next question comes from Mark Hughes with Truist.

[Mark Hughes, analyst]

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

[Adam Pollitzer, executive]

Sure. It's a good question, Mark. At the end of the day, [indiscernible], 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 moved up to their highest levels in the last 2 years, not a dramatic degree. It wasn't a seismic shift, but cure rates in the first quarter of '24 are the highest level they have been in the last 2 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. And so that allows us to obviously release the reserves that we 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. And so 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 have 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 its 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]

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

[Adam Pollitzer, executive]

Yes. So from -- I'd say it's been really, really modest. A couple of items. One, when we establish our reserves, we're going through an 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, 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 31. 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. So 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.

[Operator]

[Operator Instructions] Your next question comes from Mihir Bhatia with Bank of America.

[Mihir Bhatia, analyst]

I wanted to maybe start with -- just go back to your comments on pricing. I think you described it as constructive in your prepared remarks. And I was curious about that. Is this -- does 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 disciplined and staying steady?

[Adam Pollitzer, executive]

Yes. It's much more stability. But 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, 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 rates 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, analyst]

Got it. And 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 you said 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. Has that changed in any way you're thinking about the default cure assumptions? Is it too early to tell on that? Just trying to understand if I could tie up cure rate [indiscernible].

[Adam Pollitzer, executive]

Yes, 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 think, generally speaking, our existing borrowers remain incredibly well situated. Based on 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 there's 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're -- 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, is beneficial for us as the claim cost matter.

[Ravi Mallela, executive]

Adam, I'd just add one -- Mihir, I'd just add one additional thing. 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 quarter was a little bit of that seasonality coming through and boosting our cure rates as a result.

[Mihir Bhatia, analyst]

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

[Adam Pollitzer, executive]

Yes. its 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 -- equity position of our default population is on earnings calls in the past, and we're happy to.

So at March 31, 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 in claim.

[Mihir Bhatia, analyst]

Got it. And then my last question, and then I'll get -- let -- give someone else a chance. I just wanted to ask about -- you mentioned seasonality, obviously, seasonally entering, I guess, moving season or the seasonally stronger housing season. What are you hearing from your partners, customers, originators or as you call 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, lofty or your thoughts?

[Adam Pollitzer, executive]

Yes. Look, certainly, there was, I think, increasing optimism earlier in the year, and we saw degrees of increases in activity. I think that was for a few reasons. One, obviously, rates have 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. And so we saw a large part of the market, we think, really recalibrate.

We'll need to see. What's happening now is, obviously, rates have shifted higher over the last few months. But broadly speaking, we honestly delivered strong NIW production, growth in the insured portfolio and a heavy growth in NIW production in the first quarter. And so 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. And we shared that we expect the size, the NIW opportunity will be roughly the same size this year as it was last year. Last year, it was about $285 billion of NIW volume. And we still believe that -- and still expect that, that will be where the industry lands roughly this year.

[Operator]

Next question comes from Soham Bhonsle with BTIG.

[Soham Bhonsle, analyst]

I guess first one just on ROE, Adam. It 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, executive]

Yes. Look, I think it's a good question. Soham, it's nice to have you back on our calls. We always appreciate you spending time with you.

And so look, we understand the question. We understand the focus on, we'd 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 disciplined 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 going to 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 we'll be having this conversation 1, 2 and 3 years forward from where we are now from a successively higher, stronger and more valuable perch regardless of how ROE develops, say, over a 12-month period.

[Soham Bhonsle, analyst]

Got it. And Adam, you mentioned sort of this secular trend in the industry a few times now. And so I'm just wondering, 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 you were focusing to put 20% down. So just curious if you try to sort of size that opportunity like incremental opportunity as we think long term?

[Adam Pollitzer, executive]

Yes. So a good question. And in fact, it is one of the secular drivers. And so if we tally those -- but we expect that the housing market broadly will expand in 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 [indiscernible] 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 we have highlighted this for some time. We candidly think it's a bit underappreciated, but the long-term growth opportunity.

And let's put it into very real practical terms, right? 2023 was the 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-90s. The data gets a little bit hazy earlier than 2,000, 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 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.

[Operator]

Your next question comes from Rick Shane with JPMorgan.

[Richard Shane, analyst]

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 were 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, executive]

Rick, it's a great question, and you're spot on. And so if we put some numbers to it, in the first quarter, the average reserve -- net reserves, 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 2.

We are seeing a lot of consistency quarter-to-quarter in terms of the profile of borrowers that are emerging default status and also those that are curing out. And so it's not just -- as you know, it's not just that the size of the default population is staying roughly constant. The 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 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 in March towards claim, those book years and the borrowers who are in default aren't different their profile or their performance other than the fact that they have less embedded equity than borrowers who purchase 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.

[Richard Shane, analyst]

Got it. Okay. And it's funny, I had the number of defaults up 10 loans [ a night ]. And I sort of had this mental picture 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, executive]

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

[Operator]

The next question comes from Doug Harter with UBS.

[Douglas Harter, analyst]

Can you talk about 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 introducing a dividend?

[Adam Pollitzer, executive]

Sure. Why don't I cover those 2. 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 repurchases away for shareholders to directly participate in the value that we're creating. And 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 case as we have been. 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.

[Douglas Harter, analyst]

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

[Adam Pollitzer, executive]

Yes. Look, we have found significant success in the ILN market in the past. But I'd also say we found real success in the traditional reinsurance market with our XOL execution. We value the credit risk [ transfer ] benefits and the PMIERs efficiency and funding that we achieve in each. We have been skewed more towards the XOL market more recently.

I think we've done 6 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 market. But right now, we're finding a lot of success in the XOL market.

[Operator]

Next question is a follow-up question from Mark Hughes with Truist.

[Mark Hughes, analyst]

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 stable from here, maybe a little bit more improvement?

[Adam Pollitzer, executive]

Yes. Good question. Really, we reiterate the general perspective that we had shared last quarter, which is we've obviously enjoyed some degree of 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 impacted movements of our reinsurance costs and the cancellation earnings will remain generally stable through the remainder of the year.

We'll see benefit 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. And our net yield is more difficult to forecast, obviously, because it's also going to be impacted by 2 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.

And 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.

[Mark Hughes, analyst]

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

[Ravi Mallela, executive]

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

[Operator]

Next question comes from Scott Heleniak with RBC.

[Scott Heleniak, analyst]

Yes. 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 kind of increasing that wallet share with the existing customers that you had talked about and maybe some of those new accounts, but can you just talk about what's driving that in the quarter? It seemed like it accelerated. [indiscernible]

[Adam Pollitzer, executive]

Absolutely. Also, as you noted, it's difficult to measure because there's only us in one other company that are out. So we don't 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 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 want to 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 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. And all in, it's really that the basic building blocks of on-the-ground execution that are driving our success.

[Scott Heleniak, analyst]

All right. That's helpful. And then just another question, too, on just risk-in-force. When you look at the table and they're the top 10 states, it looked like you had a lower share of the top 10 states year-over-year. Is there any states that you want to 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, executive]

No, we've got a -- at this point, we've been at this for quite some time. Our customer -- 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 had 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, analyst]

Okay. Great. And then just the last one on persistency. It's kind of held stable. Is there any expectation and change, or you expect it to kind of be around a similar range for the rest of the year?

[Adam Pollitzer, executive]

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

[Operator]

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

[John Swenson, executive]

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 22. We look forward to speaking with you again soon.

[Operator]

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