Good day, ladies and gentlemen and welcome to the NMI Holdings Fourth Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference maybe recorded. I’d now like to introduce your host for today’s conference, Mr. John Swenson of National MI. Sir, please go ahead.

Thanks you operator. Good afternoon and welcome to the 2016 fourth 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, Chairman and CEO; Glenn Farrell, our Chief Financial Officer; and Rob Fore, our Controller. Financial results for the fourth quarter and year 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 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 party should rely on the fact that the guidance of forward-looking statements is current at any time other than the time of this call. Now to our conference call. Brad will open with an update on the state of the business and then Glenn will discuss the financial results in detail. After some closing remarks from Brad, we will take your questions. With that, let me the call over to Brad Shuster.

Good afternoon everyone. I'm very pleased to report that in the fourth quarter of 2016 we once again delivered record performance in insurance-in-force, premiums earned and pretax income. We also continued to shift the mix of our NIW to align with the long-term industry averages achieving a 75% mix of monthly product in the fourth quarter. This fulfilled a key 2016 goal. By these most important metrics, 2016 was a great year and we believe we are set up for an even stronger 2017. We want to thank our customers, employees, business partners and shareholders for helping to make this happen. As we have said previously, we are focused on achieving higher returns which for us means three things. First, we build high quality relationships with customers where our customer service and reliability as a counterparty are valued. We added 167 new customers in 2016, growing our customer base by 17%. Second, we are committed to managing expenses in a way that supports our growth and our long-term vision for efficiency and returns. In 2016, we more than doubled insurance-in-force, policies-in-force and premiums earned, while increasing operating expenses by only 16%. And third, we believe we have a superior approach to managing risk as we have underwritten or conducted a post closure view on roughly 85% of our portfolio. We believe this is far more than any other mortgage insurer. This practice was a fundamental principle when we started the company. It gives us a better understanding of the loans in our portfolio, enabled us to offer 12-month rescission relief and we believe ultimately will lead to better loss performance and far better customer relations over a full credit cycle. Our strong execution is evident in our increasing margins and operating leverage. When we compare our performance in the second…

Thank you Brad, and good afternoon everyone. I'm pleased to share with you our financial results for the fourth quarter and full-year 2016. As Brad mentioned, we had a great fourth quarter and it allowed us to end the year with record numbers in our most important metrics of performance. Primary insurance-in-force at quarter end grew to $32.2 billion, up nearly 4 billion or 14% from 28.2 billion at the end of the third quarter and more than double where we were at the end of last year. Premiums earned for the quarter were $32.8 million, up from 31.8 million in the prior quarter. Annualized premium yield for our primary book in the quarter was 44 basis points and includes the impact of a full quarter of reinsurance. As a reminder, our reinsurance program commenced last September and as a result we saw only one-month of impact from reinsurance in the third quarter results. Excluding the impact of reinsurance, premium yield of 48 basis points was essentially flat quarter over quarter. In the fourth quarter, we continued to shift our mix of NIW to monthly product. Monthlies represented 75% of total NIW for the quarter, up 71% in Q3 and 45% in the fourth quarter of 2015. In Q4, monthly NIW volume was up 92% compared with the fourth quarter of 2015. Single Premium NIW was down 21% versus the prior quarter and down 47% from the prior year. This is consistent with our objective of shifting our NIW and insurance-in-force mix to mirror the long-term industry average. And the primary insurance-in-force at year-end was 60% monthly, a significant increase over the 47% mix of monthly we had as of the end of 2015. In terms of purchase refinance mix, in the fourth quarter, purchase represented 72% of NIW with…

Thank you, Glenn. It is clear that 2016 was a great year for National MI. We achieved profitability, more than doubled insurance in force and premiums earned, negotiated a reinsurance treaty to support our growth and solidify our position as a strong returns oriented mortgage insurance provider. We are very pleased with these results. Looking ahead, we believe 2017 will be an even better year, as we continue to execute on the business model, layering on more high quality insurance in force and driving strong revenue growth, while prudently managing expenses and risk. With our largely fixed expense base, we believe that the operating leverage we have already demonstrated is going to drive increasing profits and returns throughout the year. We look forward to reporting those results to you as the year unfolds. Finally, you all should have seen our recent announcement that Glenn Farrell will be retiring in July of this year. I want to acknowledge Glenn and what he has meant to the company over the past two years. Glenn is a great personal friend. He came out of retirement to join us at an important time in our journey, as we were moving from a start up to a mature company. He helped to bring world-class controls and professionalism into what was already a strong finance function. He also brought a unique and valuable perspective to our management team based on his decades of business experience. Glenn will be in the CFO role until May, which is when we will welcome Adam Pollitzer, our new CFO. Glenn, you are a great leader and a valued friend and we are so grateful for your contributions to National MI. You all will hear from Glenn again on our next conference call. Now, a little about Adam Pollitzer. Adam comes to us from JP Morgan where he was a Managing Director on their insurance coverage team. He knows the mortgage insurance sector very well and he comes to us with a deep understanding of the dynamics in our industry. He is a smart and talented executive and we are excited to have him join our team. I believe our ability to attract someone like Adam is a reflection of our opportunity to continue to grow and create value for all of our stakeholders. With that, let's bring the operator back, so we can take your questions.

[Operator Instructions] The first question comes from the line of Mackenzie Aron with Zelman & Associates.

Thanks. First question, on the premium yield, can you just help remind us as to where we should be expecting that to go over the next year, given the impact of reinsurance and potentially any volatility around the single premium line?

Yeah. Mackenzie, this is Glenn. I think we’ve stated earlier that that should be trending upwards towards the 50 basis point before reinsurance. The reinsurance does take about five basis points off of the gross premium earned number. So I would expect it to trend towards the 45 basis point level.

Okay, great. And then on the operating expenses, just any way to be thinking about the year-over-year growth that we could see in ‘17?

I don't think that we're going to be giving guidance per se, but I think we will expect to see some increases as we continue to grow. And as you saw in or you heard in the script, we were up about 16% year-over-year, not anticipating that sort of growth, but it is going to be moving upward.

Your next question comes from Randy Binner, FBR.

Hey, thank you. I guess I'd like to ask expense ratio improvement potential in 2017 and I think it's, the ROE guidance you gave us is a helpful way to think about it. But can you kind of dimension for us a little bit how you think about that rate of improvement in ’17 and maybe ‘18. And I guess maybe another way of asking it is, I mean is the fixed expense base really fixed at this point and we can just model that down based on how the earned premium comes in?

Hey, Randy. It’s Glenn. I think the expense ratio you saw come down significantly in 2016. We still will continue to see that driven down. With the ROE kind of targets that we've laid out for you, I think that kind of drives based on where we are with the premiums earned versus of what the overall combined ratio would be and then also with the low loss ratio we do expect that that expense ratio to be coming down significantly.

Thank you for that. And then on the FHA, I think that their December data came out and there was an elevation or a spike in losses there. Do you have any view on that data? We've just, I think, come to see a very benign loss environment for MI and for housing in general, it's very credit positive, but that was a little bit of a blip. So don't know if you have any comment there and do you think that may have affected the new administration's decision to reverse the proposed 25 basis point rate cut or do you think that that decision was more based on kind of the politics of preserving the private market?

Randy, this is Brad. No, we don’t have any comment on their results that you were referring to, but I do think that the decision to act by the new administration was very sound. And I’m very encouraged by the potential to again reexamine the mission of the FHA and to get it focus more squarely on lower income buyers with lower value mortgages. So we're very encouraged as things develop here, but we’ll monitor it carefully.

[Operator Instructions] Your next question comes from the line of Bose George with KBW.

Hey, guys. Good afternoon. Let me just throw one more on future expenses. In terms of your guidance, when you hit the mid-teens ROE by the end of 2018, what sort of combined ratio does that envision?

Bose, it's John. So we’re thinking something around 50% at that point for a combined ratio.

Okay, great. And I guess your earlier commentary was on the loss ratio presumably is that that will still be a very important number at that point?

Sorry, one more time Bose.

Just on the loss ratios, a piece of that, I guess you did say earlier that the loss ratio will be a very small part of, it will be a very small number still through 2018?

Yeah. I think what we said was low to mid-single digits. So yes, that will be a small part of that 50%.

Okay. Great. Thanks. And then actually what was the dollar amount of premium that you recognized from cancellation of singles this quarter and can you just remind us where that was last quarter?

It was about approximately $5 million, both in Q3 as well as Q4, Bose.

I'm showing no further questions in queue at this time. I’d like to turn the call back to management for any closing remarks.

Okay. We thank you for joining us on the call today and we appreciate your support. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone, have a great day.