Logo of jester cap with thought bubble.

Image source: The Motley Fool.

NMI Holdings (NASDAQ:NMIH)
Q1 2019 Earnings Call
May. 01, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, ladies and gentlemen, and welcome to the NMI Holdings, Inc. first-quarter 2019 earnings call. [Operator instructions] As a reminder, today's conference will be recorded. I would now like to turn the call over to John Swenson of National MI.

Sir, you may begin.

John Swenson -- Vice President, Investor Relations, and Treasury

Thank you. Good afternoon, and welcome to the 2019 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; Claudia Merkle, CEO; Adam Pollitzer, our chief financial officer; and Julie Norberg, our controller.

Financial results for the quarter were released after the close of the market today. The press release may be accessed on NMI's website located at www.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 the 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 interested parties 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 refer to certain non-GAAP measures.

In today's press release and on our website, we have provided a reconciliation of these measures to the most comparable measures under GAAP. Now to our conference call. Brad will make some introductory remarks. Claudia will provide an update on the business and then Adam will discuss the financial results in detail.

After some closing remarks from Claudia, we will take your questions. With that, let me turn the call over to Brad.

Brad Shuster -- Executive Chairman

Thank you, John, and good afternoon, everyone. I'm pleased to report that in the first-quarter National MI again delivered record performance, including exceptionally strong financial results and continued momentum in customer development and portfolio growth. We also continue to differentiate with our current performance, leveraging our broad-based risk management framework, which spans Rate GPS, individual risk underwriting and our comprehensive reinsurance program to deliver industry-leading results. Our conversations in Washington remain positive, signaling a constructive posture from regulators around the MI industry.

In April, Mark Calabria was sworn in as the new Director of the FHFA. We were highly supportive of his nomination and believe that we are aligned in our perspectives about the valuable role private mortgage insurance plays in both expanding access to homeownership for qualified borrowers and protecting taxpayers against private market losses. We're looking forward to the opportunity to work with Director Calabria and the new FHFA leadership team, as well as members of the administration and Congress in the months ahead. Overall, I'm delighted about what we achieved in the first quarter.

And with that, I'll turn it over to Claudia.

Claudia Merkle -- Chief Executive Officer

Thank you, Brad. We delivered record performance across every key metric in the first quarter. GAAP net income for the quarter was $32.9 million or $0.48 per diluted share, and our adjusted net income was $38.5 million or $0.56 per diluted share. Adjusted return on equity for the quarter was a record 21.2% and GAAP ROE was 18.1%.

We remain focused on delivering strong, consistent results, and expect to continue building significant shareholder value across the cycle. We generated record first-quarter NIW of $6.9 billion, including monthly NIW of $6.2 billion. Primary insurance-in-force was $73.2 billion, up 7% compared to the fourth quarter and 37% over the first quarter of last year. We're proud of our ability to continue delivering record NIW volume and industry-leading growth in insurance-in-force while maintaining our risk-return discipline.

The performance that we achieved in the quarter was organic, driven by strong customer engagement from our sales force, lender recognition of our value proposition and continued excitement about Rate GPS in the market. We have always aimed to engage with our customers on a consultative basis, to earn their trust and business by focusing on how we at NMI can help them succeed day by day. Often, our consultative sales engagement extends beyond the discussion about mortgage insurance, and this is particularly true today as the lender community seeks to navigate a rapidly evolving digital landscape. Rate GPS has become a launching point for a new and impactful line of discussion with our customers about their digital road maps; how they can utilize emerging technology to more directly engage with borrowers, capture workflow and cost efficiencies and improve underwriting accuracy and credit performance.

We are seeing these conversations pay dividends in terms of customer engagement and NIW volume. In the first quarter, we activated 24 new customers. We are now doing business with a broadly diverse group of over 1,000 high-quality originators. Equally as important, we continue to grow with our existing customers, leveraging our consultative service approach to deepen our engagement quarter over quarter and capture an increasing share of their mortgage insurance business.

Rate GPS continues to be a standout success. More than 95% of our customers are currently using the platform, and over 90% of our first-quarter NIW volume was delivered through Rate GPS. We focus from the outset on transitioning all of our customers to the platform and away from rate cards as quickly as possible. We believe that consistency of our approach has been a key to the traction we have established with Rate GPS in the market.

We continue to believe the transition toward integrative risk-based pricing engines and away from rate cards is a positive for the long-term health of the MI industry and reinforces our decision to be a leader in the development of this technology. The introduction of risk-based pricing engines across the sector signals an increased commitment to credit selection and a prioritization of risk-adjusted return industrywide. We use Rate GPS to actively manage the credit mix of our new production. Over the long term, we expect that Rate GPS will provide us with an enhanced ability to react as market conditions evolve and in doing so will bolster our ability to deliver consistent, strong results across the cycle.

The underwriting environment remains favorable, and loss development in our portfolio continues to be better-than-expected. Nonetheless, we continue to prioritize our broad-based risk management approach, which spans individual risk underwriting, Rate GPS and our comprehensive reinsurance program. More broadly, private MI market conditions are healthy in terms of volume, industry competition, credit quality and the regulatory environment. Against this backdrop, we are executing our business plan and are well-positioned to continue to win with customers, drive growth in our high-quality insured portfolio and deliver strong results for our shareholders.

We are enjoying strong performance across our platform and trace our success to the steady, disciplined manner in which we built our business. The consistency of our efforts over the past seven years is now translating to industry-leading growth in returns. With that, let me turn it over to Adam.

Adam Pollitzer -- Chief Financial Officer

Thank you, Claudia. And good afternoon, everyone. We had another strong quarter and achieved record results across a number of key financial metrics. We generated record first-quarter NIW of $6.9 billion and continued the rapid growth of our high-quality insured portfolio.

This drove record net premiums earned of $73.9 million, record adjusted net income of $38.5 million or $0.56 per diluted share and record adjusted return on equity of 21.2%. Now to the details. Primary insurance-in-force was $73.2 billion at quarter end, up 7% from $68.6 billion at the end of the fourth quarter and up 37% compared to the fourth quarter of 2018. At quarter end, monthly product represented 76% of our primary insurance-in-force.

12-month persistency in the primary portfolio was 87.2%, roughly flat compared to 87.1% in the fourth quarter. Strong persistency remains a positive for us given the pricing and credit profile of our in force portfolio. Total NIW volume was $6.9 billion. Monthly product represented 90% of NIW, consistent with our mix in the fourth quarter and up from 84% in the first quarter of 2018.

Purchase originations represented 92% of our volume in the quarter, down slightly from 95% in the fourth quarter and consistent with our expectations, given the drop in rates during the quarter and corresponding uptick in overall refinancing origination volume. Net premiums earned for the quarter were $73.9 million, up 7% from the fourth quarter and up 35% compared to the first quarter of 2018. We earned $2.3 million from the cancellation of single premium policies in the quarter, compared to $2.1 million in the fourth quarter. Reported yield for the quarter was 42 basis points, consistent with 42 basis points in the fourth quarter and modestly ahead of our guidance of 40 to 41 basis points for the full year.

Any variability from our previous guidance through the remainder of the year will be tied to our NIW volume and credit mix, the persistency of our in-force portfolio, cancellation activity and the timing of our next ILN issuance. Weighted average rate on NIW in the first quarter was approximately 41 basis points, reflecting the high-quality credit mix of our production in the period. Overall, we continue to capture business at rates that are supportive of our strong mid-teens return objective. We continue to use Rate GPS to actively shape the credit mix of our new production.

In the first quarter, our mix of greater than 45 DTI volume declined to 8% from 9% in the fourth quarter. Our concentration of 97 LTV and below 680 FICO volume remained consistent at 8% and 4%, respectively, both well below the overall market. Investment income was $7.4 million, up from $7 million in the fourth quarter. Underwriting and operating expenses were $30.8 million in the first quarter, compared to $29.4 million in the fourth quarter.

Our GAAP expense ratio was 41.8% in the first quarter, compared to 42.4% in the fourth quarter and 51.8% in the first quarter of 2018. We had 940 notices of default in the primary book at the end of the first quarter, up from 877 at the end of the fourth quarter. Claims expense was $2.7 million in the quarter. Our first-quarter loss ratio, defined as claims expense divided by net premiums earned, was 3.7%.

The underwriting environment remains healthy, and our in-force portfolio continues to perform better than initially expected and priced. Interest expense in the quarter was $3.1 million, and we had a $5.5 million loss from the change in the fair value of our warrant liability. Moving to the bottom line. GAAP net income for the first quarter was $32.9 million or $0.48 per diluted share.

Adjusted net income was $38.5 million or $0.56 per diluted share, up 20% compared to $32.1 million or $0.46 per diluted share in the fourth quarter and up 75% compared to $22 million or $0.34 per diluted share in the first quarter of 2018. Effective tax rate for the quarter was 15.6%, reflecting our stock price performance in the quarter and its impact on our warrant and the tax treatment for RSU vestings and option exercises in the period. We expect that our quarterly effective tax rate through the remainder of the year will be approximately 23%. Cash and investments were $980 million at quarter end, up from $937 million at the end of the fourth quarter.

As of quarter end, we have $44 million of cash in investments at the holding company. The revised PMIERs framework took effect on March 31. At quarter end, total available assets under the revised standard grew to $818 million, which compares to risk-based required assets of $607 million. Excess available assets at quarter end were $210 million.

Shareholders' equity at the end of the first quarter was $752 million, equal to $11.14 per share, which compares to $701 million or $10.58 per share at the end of the fourth quarter and $602 million or $9.18 per share at the end of the first quarter of 2018. Year over year, our book value per share grew by over 21%. GAAP return on equity was 18.1% in the first quarter. Our adjusted return on equity was 21.2%.

Looking forward, we believe that we are well-positioned to continue delivering strong mid-teen returns that are significantly in excess of our cost of capital. We expect that the growing size, attractive credit profile and strong persistency of our insured portfolio along with our broadly disciplined approach to risk management, expenses and capital optimization will continue to drive our performance. With that, I'll turn it over to Claudia for her closing remarks.

Claudia Merkle -- Chief Executive Officer

Thank you, Adam. We are excited about our record performance in the first quarter. Our success with customers continues to drive industry-leading growth in our insured portfolio, and our commitment to a broad-based risk management program continues to drive our best-in-class credit performance. We are confident in our ability to deliver strong returns and create significant shareholder value going forward.

I'm also proud to note that we were once again recognized as a great place to work by Fortune magazine, the third consecutive year that we've received this honor. Our culture is a key part of what makes us unique and helps drive our success. Our team comes in every day energized and excited to help our customers and their borrowers. Lenders feel this and respond to it.

They trust us and help us grow our franchise day by day. With that, I'll ask the operator to come back on so we can take your questions.

Questions & Answers:


Operator

[Operator instructions] And our first question comes from Rick Shane with J.P. Morgan. Your line is now open.

Rick Shane -- J.P. Morgan -- Analyst

Hi, guys. Thanks for taking my questions this afternoon. Really, two things. One, when we look at the operating expense and the leverage built there, I'm just curious what we should be thinking about sort of as a run rate through the remainder of the year.

There's obviously a lot of sensitivity around the models there and want to make sure we have that dialed in the best we can?

Adam Pollitzer -- Chief Financial Officer

Sure. Rick, I think the guidance that I provided on our fourth-quarter call still holds. In 2019, for the full year, we expect the rate of growth in our operating expenses will continue to moderate, but we do anticipate that we'll be making some investments in our people and systems. And then, overall, we'll see operating expenses grow by up to 10% compared to our adjusted expenses in 2018.

In terms of how that plays out through the year, quarter to quarter, we don't expect significant swings period to period. But we may see modest growth as we progress through the year.

Rick Shane -- J.P. Morgan -- Analyst

Got it. Because it appears after the first quarter you're ahead of that. You're on the favorable side in terms of spending.

Adam Pollitzer -- Chief Financial Officer

Yeah. Right. If you kind of map it out, the run rate, assuming the high end of that 10% guidance would be a little bit above where we came in, in the first quarter. And so we do expect some modest growth, not a significant amount, but some modest growth as we sort of trend through the year.

Rick Shane -- J.P. Morgan -- Analyst

Got it. Great. And then just curious from a competitive, as your peers are moving more in line with Rate GPS, if you're seeing any distortions there that we should be thinking about in terms of pricing or in terms of how it's driving different risk?

Claudia Merkle -- Chief Executive Officer

Sure, Rick. Overall, we think it's a positive for the MI market. It really cements an important change in the area that we've tried to lead, focusing on risk-adjust returns first and foremost. So we believe the market is generally very stable and the introduction of the increasingly granular and selective pricing strategies across our industry is a real positive for the long term.

For us, most importantly, for NMI, we continue achieve pricing that supports our strong mid-teens return objectives.

Rick Shane -- J.P. Morgan -- Analyst

OK. Claudia, Adam, thank you very much, guys.

Adam Pollitzer -- Chief Financial Officer

Thanks, Rick.

Claudia Merkle -- Chief Executive Officer

Sure.

Operator

Thank you. And our next question comes from Mark DeVries with Barclays. Your line is now open.

Mark DeVries -- Barclays -- Analyst

Yeah. Thanks. Maybe just a follow-up on the last point. Are you seeing any change in where you view the most attractive risk-adjusted returns to be based on any system pricing through the use of more discrete risk-based pricing engines?

Adam Pollitzer -- Chief Financial Officer

No. It's Adam. If you look at obviously our production in the mix of business that we wrote in the first quarter, we're still seeing -- and are still able to capture the targeted risk adjusted returns focusing on what we would characterize as higher-quality risk bands, and so if you look at -- they're very high level cohorts, but if you look at our concentration of greater than 45 DTI volume, 97 LTV volume and below 680 FICO volume, we continue to de-emphasize those risk bands and focus on higher-quality credit. And right now, that's where we see the best opportunity to capture risk-adjusted returns that are in line with our expectations and to do so in a way that we think will limit volatility as we roll forward through the cycle.

Mark DeVries -- Barclays -- Analyst

OK. Got it. With -- not all MIs having reported yet, still not clearly what your share is for the quarter, but it seems pretty clear you continued to gain. Can we get an update on how much more opportunity you see both to sign up new customers, ramp existing customers and also kind of where you think the end point could be realistically on market share, particularly relevant to kind of what you guided to coming out of the gates when you took the company public?

Claudia Merkle -- Chief Executive Officer

Sure, Mark. We've always said that we're going to activate new customers and build wallet share with our current customers, and that's exactly what we've been doing. What really matters to us around market share, we don't run the business that way. But what matters to us is writing high-quality NIW and building quality insurance-in-force and importantly doing this with discipline and an eye toward the longer term.

As far as the activations and where we're heading, the way to kind of think about it is just an example is, if you think about our largest lenders and you think about the top 200 largest lenders, we have 20 lenders where we have a master policy, but we haven't activated them and we expect that a portion of those are -- we're going to convert in the near term. So there's plenty of upside to activations going forward.

Adam Pollitzer -- Chief Financial Officer

There's still wide space for us to tackle. And then, importantly, a bigger driver of our growth period to period is not just the activations, but it's once we're activated and activated for a while, capturing incremental wallet share, so to speak, within each account. And what drives that is different, but there's real significant opportunity for us to continue to do that with the existing customer franchise, as well as add new customers. And broadly speaking, we don't manage the market share, but in this environment where we can capture what we believe is really high-quality risk, that attractive risk-adjusted return, we'd like to be writing as much business as we can.

We're going to get there and we're going to find that business and attract it in a responsible way.

Mark DeVries -- Barclays -- Analyst

OK. Fair enough. Although presumably I think as you've articulated, you're doing that today, right? You're not shooting for market share, you're looking for best risk-adjusted returns and yet I think you're already pretty close to 10% market share, which I think, Brad, correct me if I'm wrong, was kind of the upper end of what you guided to out of the gates and yet there's still this opportunity. Do you -- assuming the same type of pricing from you and your competitors, how much more upside do you see from where you are today?

Brad Shuster -- Executive Chairman

So Mark, if I remember the guidance correctly, and I think I do, we always said high single digit, low double digit share would be what we would be targeting, and we'd have a great business if we did that. So obviously, I think we were well within that range at last quarter and I think we had a great quarter this quarter, so there may be some growth there. But you may recall, Mark, that when we were making those initial comments, there were seven competitors in the industry, which would put pro rata share at a lower or a different number than where we are now with six competitors. So we feel really good about the results as we said several times and think there's huge opportunity ahead.

Claudia Merkle -- Chief Executive Officer

And Mark, I would just add to that that we wrote $6.9 billion of NIW, we do believe we outperform the industry in the quarter. So we feel really good about our results in -- and our -- in gaining our traction.

Mark DeVries -- Barclays -- Analyst

OK. Got it. Thank you.

Brad Shuster -- Executive Chairman

Thanks.

Operator

Thank you. And our following question comes from Bose George with KBW. Your line is open.

Bose George -- KBW -- Analyst

Good afternoon. So I just wanted to ask about the Insurance-Link Note market. Going forward, is there a percentage of your portfolio you'd like to cover with ILN reinsurance or just how do you think about it from a risk-management perspective?

Adam Pollitzer -- Chief Financial Officer

Yeah. Bose, we see great value in really broadly utilizing the reinsurance markets and that includes what's available in capital markets format in the ILN industry but also what's available in traditional -- in the traditional market both from a risk-management perspective but also from a capital optimization and efficiency standpoint. We don't have a formal target for what portion of the book should be covered or by what format. But broadly speaking, we do have a bias to be a bit more conservative in terms of the breadth of coverage that we secure on the portfolio and that will translate to even probably a marginal bias toward besides the PMIERs cushion that we look to carry.

And we'll look to be -- we need to be opportunistic, right? We'll balanced today, the ILN market is available what we think as attracted terms and pricing. And so that will influence where we look to transact and when we look to transact at points going forward. That may not be the case. That market may be less desirable versus other risk transfer markets that are available at a future date.

Bose George -- KBW -- Analyst

OK, great. Thanks. And then I don't if you gave this, but can I get the dollar amount for the ILN expense this quarter?

Adam Pollitzer -- Chief Financial Officer

Sure. Bear with me a moment. The -- so the ILN -- with ILN expense, it comes through. Recall it's a reinsurance transaction, so it comes through with seated premium.

In total, the seated premium on the two ILN transactions in the quarter was just under -- just over $3 million.

Bose George -- KBW -- Analyst

OK. Great. Thanks.

Operator

Thank you. And our following question comes from the line of Mackenzie Aron. Your line is now open.

Mackenzie Aron -- Zelman and Associates -- Analyst

Thanks. Good afternoon. Congrats on another great quarter. First question, just in terms of the losses, not surprising to see the loss ratio starting to grind higher, but was just curious if you could provide some color around what you're assuming when you reserve the new default in terms of claim rates and severities?

Adam Pollitzer -- Chief Financial Officer

Yeah. Mackenzie, it's Adam. We don't disclose our -- the claim rate on new notices, right? It's -- that's a component of our reserving process, and I think as you're alluding to, it's the frequency together with our severity assumption that drives our loss pick. I would note that I think some of -- some others in our industry do provide that disclosure, and our assumptions will not align with theirs in totality because all of our notices relate to business written in the postcrisis era.

And this is written in before the crisis that are sterilely new defaults and repeat defaulters, there'll be very different assumptions around the frequency of what portion of those claims ultimately progress or defaults ultimately progress to claims. We haven't seen a meaningful move in those underlying assumptions that are embedded in our reserving process, but we don't disclose them.

Mackenzie Aron -- Zelman and Associates -- Analyst

OK. That's fair enough. But I guess just thinking about over the next year, two years in terms of that loss ratio and how we should be modeling out, dare to assume it'll continue to grind higher or will there be an offsetting benefit from the fact that the newer books are growing so much quicker?

Adam Pollitzer -- Chief Financial Officer

No. That's -- we would expect it to, call it, grind higher, to move higher in a slow and steady format. We do think that both the quality of the portfolio and then as you've referenced, the vintage stacking dynamic of putting new business on before it sort of ages into its deglossing currents period. We'll keep our loss ratio relatively low for the next several years.

But the portfolio is just growing, right? It's growing, so our default population will increase and it's aging, so our default experience will increase. And both of those are national developments that we've talked about in the past, but those will cause the loss ratio to trend mostly higher as we go forward.

Mackenzie Aron -- Zelman and Associates -- Analyst

Makes sense. Thank you.

Operator

Thank you. And our next question comes from Geoffrey Dunn. Your line is now open.

Geoffrey Dunn -- Dowling and Partners -- Analyst

Thanks. Good afternoon. Just a couple of number questions. Adam, did you say holdco cash was $44 million?

Adam Pollitzer -- Chief Financial Officer

That's correct.

Geoffrey Dunn -- Dowling and Partners -- Analyst

All right. Did you guys downstream money this quarter or was there another sequential expense?

Adam Pollitzer -- Chief Financial Officer

No, we didn't. It just relates to the timing, so we paid -- we build the whole holdco cash position through the course of the year based on certain accruals from the operating company, and we have significant cash outlay in the first quarter of the year related to the payment of certain compensation programs.

Geoffrey Dunn -- Dowling and Partners -- Analyst

Gotcha. OK. And then I understand you don't disclose your incidence assumption, but can you I guess confirm, there was no adverse move in the incidence assumption this quarter? And the reason I'm asking is, it looks like the average provision was up again for the second quarter in a row. I'm guessing, given your small numbers, that's more geography mix, but can you just confirm if there was no adverse movement in the incidence assumption?

Adam Pollitzer -- Chief Financial Officer

Yeah. So the assumptions that we use are -- it's actually on a loan-by-loan basis, and so we have 940 NODs in the portfolio at quarter end, and we go through a process of estimating the frequency and severity assumption for each of them individually based on their risk characteristics. Broadly speaking, there was nothing different or new or significant that we were taking into account. The population of loans is larger.

The population of the loans that we have related to some of those -- the 2017 storm events continues to run off and there's a few storm events in 2018 that runs off and those had a lower reserving factor assigned against them for reasons that we've covered in the past. So that contributed to some of it. And then the other amount is just the natural aging of the default population itself. So as loans progress from a D60 to a D90, a D90 to a D20, we do assign different reserving factors not because there's been a change in the underlying assumption but because the default itself has aged.

And so it's both of those really that came through in the quarter.

Geoffrey Dunn -- Dowling and Partners -- Analyst

OK. And then I just want to clarify, on the tax rate, you expect the effective tax rate for the year to be 23% or for the remaining quarters to be 23%?

Adam Pollitzer -- Chief Financial Officer

For the remaining quarters to be 23%.

Geoffrey Dunn -- Dowling and Partners -- Analyst

OK. Thank you.

Operator

Thank you. And our following question comes from Jack Micenko with SIG. Your line is now open.

Jack Micenko -- Susquehanna International Group -- Analyst

Close enough. Good afternoon, everybody. First question, bigger picture, how big do you think the industry in NIW market can be this year? And do you have a sense you can share with us on business volume you think you can write this year relative to the 27 we did last year?

Claudia Merkle -- Chief Executive Officer

Yeah. First off, I'll just give you some highlights around the overall market. We feel good about the underlying drivers of the MI. We see an increasing number of Americans who are reaching the age where they typically buy their first home.

So our view of the 2019 MI market has strengthened a bit over the last several years. The drop in the 30-year-old note rate seems to have driven an uptick in demand and therefore buyers' sentiment is strong. So ultimately, if the current trends hold, we expect the market to grow modestly compared to 2018, which was $291 billion. As far as our NIW, we don't provide formal guidance on NIW, but we continue to see a really strong response at our customer levels, and we have a great momentum both in terms of adding new customers and broadly growing with existing customers.

As we mentioned, we also have great traction in the marketplace with Rate GPS. And we're seeing real engagement around the digital road map conversation, so it's become an important differentiator for us.

Jack Micenko -- Susquehanna International Group -- Analyst

OK. That's helpful. And then kind of touching on a number of the prior questions. The old rule of thumb, on average, over time 20% loss ratio, and I'm curious what you think of that because, obviously, you've got a book that was written postcrisis.

I think your highest loss ratio to date has been not even 5%. I mean we've kind of ring fenced the tail risk on ILN and now you can price the business for what you want, what you don't want. So I guess the long-winded question there is, is 20% the right loss ratio rule of thumb to think about in the industry given the changes we've seen over the last year that have been pretty significant in the way the forward view looks for these companies?

Adam Pollitzer -- Chief Financial Officer

Yeah. Jack, I think about it. The loss ratio is simply the output, right? Of the pricing assumption in the lost experience and the lost estimation going in. And what we focus on and what I'd focus you on instead is, what's the risk-adjusted return target that we are pricing our business to achieve? And we're pricing our business still to achieve a strong mid-teen to the plus side of 15% on an unlevered PMIERs basis.

And so that filters through, right? In order to know that and to target that, we've got to establish rate, but we established rate hand in hand with our views as to the anticipated loss performance for a piece of business. The expense loading on that piece of business, the capital requirement that that risk will attract on a PMIERs basis. And when you put all of those things together, the loss ratio is just one of those outputs. It doesn't -- we don't target a loss ratio per se when we're pricing.

We target a return and the anticipated a loss performance is a critical input, but it is one input out of many that informs the pricing strategy and the pricing picks.

Jack Micenko -- Susquehanna International Group -- Analyst

OK. Sure. If I can get just one more in. I guess looking at your past history on the ILN timing, is it -- should we think June, July again? Was there any reason not to think that that would be the timing of the -- of something you'd want on the '18 book?

Adam Pollitzer -- Chief Financial Officer

Yeah. Jack, look, we're still working through our analysis as to the timing, the sizing, also, just the nature of any ILN insurance. I do think we have a bias to be more conservative in terms of when we transact, we'd like to get in when the markets are available and available on favorable terms, not at a point where we can give you specific guidance as it's going to be July, August, September, October. But we're working through that right now.

Jack Micenko -- Susquehanna International Group -- Analyst

Thank you.

Operator

Thank you. And our following question comes from Chris Gamaitoni from Compass Point. Your line is now open.

Chris Gamaitoni -- Compass Point -- Analyst

Hi, everyone. All my questions have been answered. Thanks.

Claudia Merkle -- Chief Executive Officer

Thanks, Chris.

Brad Shuster -- Executive Chairman

Thanks, Chris.

Operator

Thank you. And our next question comes from Mark Hughes with SunTrust. Your line is open.

Michael Ramirez -- SunTrust Robinson Humphrey -- Analyst

Good afternoon, guys. This is Michael Ramirez on for Mark. Thanks for taking our questions. I guess you mentioned average premium yield was pretty strong in the quarter relative to your guidance.

Could you please help us understand what drove this performance and do you think this is sustainable?

Adam Pollitzer -- Chief Financial Officer

Sure. In terms of the -- our yield was flat at 42 basis points. We hadn't anticipated a significant move through the course of the year. We also referenced that the year we would see a trend through the year, but quarter to quarter, I'll call it comparison or the comparison relative to what we had anticipated, we saw cancellation revenue come in a bit higher than we'd anticipated.

We continue to get a benefit from the pull-through and shift in our overall insurance-in-force mix toward monthly premiums. And part it then is just modeling, right? We'll only be so refined and so smart on our modeling and seeing yield come in a basis point above our expectation. It's just the natural development of a business relative to a modeled expectation.

Michael Ramirez -- SunTrust Robinson Humphrey -- Analyst

All right. Thanks for that. That's helpful. Additionally, if I may, I guess could you please give us some insight to mortgage origination trends in April? And how the spring season selling shaping up for you guys?

Adam Pollitzer -- Chief Financial Officer

Look, honestly, the -- we don't have insights into the overall origination environment. We certainly noticed that seasonal trends continue to come through, so April is bigger than March and March was bigger than February. And remember what drives our market is going to be a bit different than what drives the overall origination environment. Ours is much more of a purchase-driven market.

The purchase market is showing great strength and health and we're seeing what we would have anticipated in terms of seasonal movements. The refi market is obviously expanded versus where it was toward the end of last year, given the move in rates. But we just have less penetration and see less business coming through that market. As it relates to our business, we're seeing the trends that we would have anticipated, and Claudia alluded to optimism that the 2019 NIW market for the overall MI industry will be a bit stronger than what we saw in 2018.

Michael Ramirez -- SunTrust Robinson Humphrey -- Analyst

Great. Thank you, guys.

Operator

Thank you. And our last question comes from Bill Stephano with Deutsche Bank.

Bill Stephano -- Deutsche Bank -- Analyst

Yeah. Thanks. So Claudia, you had discussed in your opening remarks the consultative sales method that you're using and it's helping to drive new business with new customers and also further new business with existing customers. Has Rate GPS -- did it slow down this consultative process? Did it speed it up in some ways? Was there a transition where the momentum that you had felt like it shifted in some way and hopefully you can kind of talk around that and how Rate GPS has helped you be consultative?

Claudia Merkle -- Chief Executive Officer

Sure. Absolutely. So first and foremost, just to clarify what we mean by digital road map is, it's how lenders are adopting technology to more directly engage with their borrowers. And then lenders, also, want to map out how they can improve their underwriting efficiencies and ultimately reduce costs.

So our best discussions with our customers extend far beyond MI, and we shine when we share best practices and insights in ways we can help lenders succeed. So the digital road map conversation is top of mind for lenders today. If you think about it, Rate GPS, it's a natural launching point for the discussions around technology. So the consultative selling is our sales, operations and IT teams are just fully engaged here to be able to help our lenders grow and understand that digital road map.

So it's actually fueled the consultative selling. So it's been impactful for NMI and certainly been impactful for our lenders.

Bill Stephano -- Deutsche Bank -- Analyst

Got it. OK. Thanks. That's all from my end.

Operator

Thank you. And I'm showing no further questions at this time. I would now like to turn the call back to management for closing remarks.

Claudia Merkle -- Chief Executive Officer

So thank you for joining us on the call today. We will be presenting at the KBW conference in New York on May 30. We look forward to seeing you there. Thanks, and have a great evening.

Operator

[Operator signoff]

Duration: 41 minutes

Call participants:

John Swenson -- Vice President, Investor Relations, and Treasury

Brad Shuster -- Executive Chairman

Claudia Merkle -- Chief Executive Officer

Adam Pollitzer -- Chief Financial Officer

Rick Shane -- J.P. Morgan -- Analyst

Mark DeVries -- Barclays -- Analyst

Bose George -- KBW -- Analyst

Mackenzie Aron -- Zelman and Associates -- Analyst

Geoffrey Dunn -- Dowling and Partners -- Analyst

Jack Micenko -- Susquehanna International Group -- Analyst

Chris Gamaitoni -- Compass Point -- Analyst

Michael Ramirez -- SunTrust Robinson Humphrey -- Analyst

Bill Stephano -- Deutsche Bank -- Analyst

More NMIH analysis

All earnings call transcripts