Good morning, everyone. We're ready to get started. I'm John Swenson, Vice President of Investor Relations and Treasury for National MI. It's really great to see you all again live and in person. Wanna welcome you to our 2021 Investor Day. Really exciting to be here live again in New York at the St. Regis. Also wanna extend a special welcome to those of you joining online. This presentation is being simulcast on the web and accessible on our website at nationalmi.com. For those joining remotely, the presentation materials we'll present today have been made available alongside the webcast, again, on the IR section of our website. We will host a Q&A session following today's formal presentations, and our webcast audience will have an opportunity to submit questions through the Q&A window on the webcast page.
Finally, a replay of today's meeting will be available, again, on the IR section of our website at www.nationalmi.com. During the course of this 2021 Investor Day discussion, 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 today can be found on page 88 of this presentation and on our website or through our filings with the SEC, which are also on our website. If and to the extent we make 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 such statements is current at any time other than the time of this presentation. Also note, we will refer to certain non-GAAP measures and provide a reconciliation to the most comparable measures under GAAP on pages 86 and 87 of this presentation and on the Investor Relations section of our website. We've got a great program for you today. We'll open with a Chairman's message from Brad Shuster. He'll spotlight our significant success to date and frame for you what we believe is an underappreciated growth opportunity broadly in our industry and for NMI in particular. Claudia Merkle, our CEO, will follow with more detail on our accomplishments. Norm Fitzgerald, our Chief Sales Officer, will share with you his insights on our continued success with customers.
Mohammad Yousaf, our Chief Business Transformation Officer, will dig into the digital transformation taking place broadly in the mortgage industry and NMI's unique leadership position in this area. Then Rob Smith, our Chief Risk Officer, will share a perspective on our differentiated risk management approach and the exceptional industry-leading credit performance we achieved through the COVID stress. After Rob, Adam Pollitzer, our CFO, will review our strong financial performance, the value we're creating every day in our business, and the emerging opportunity to unlock that value as we go forward. We will take a brief break after Mohammad's comments. With that, welcome again, and I'll turn it over to Brad Shuster.
Well, thank you, John. Let me just reiterate John's comments of welcome and to tell you how great it is to see those of you in the room. It's been just about two years since we were last in front of you in this room, and feels really good to be back up here again. We've got some exciting developments about the business to share with you. We appreciate your attendance, and we also welcome those who are attending virtually and appreciate your interest in the company. We're really excited today to recap the success we've had, very significant, but probably more excited to share our view about the future and what we think lies ahead for NMI. There's gonna be three themes that we're gonna emphasize throughout the day.
That's gonna be the success we've had to date. Second, the significant outperformance we've delivered as a company throughout the COVID crisis. Finally, the exceptional opportunity we believe lies ahead to drive significant responsible growth in the business, but also to unlock significant shareholder value going forward. First, let me review our founding principles that have guided the company since inception. We were formed to drive value for our customers, their borrowers, our employees, and our shareholders. We are a company that is all about enabling homeownership. That's a very important societal need, now more than ever, and we take that role very seriously and it's part of our DNA as a company.
In order to do that in an effective way, because we're issuing guarantees every day, we've got to do it in a credible and durable way so that we're poised to perform across all market cycles, and we'll talk a lot more about that. Since inception, we've been about creating a great customer experience, being a relatively newer company to the industry. We also haven't been static since we formed. We've taken advantage of many of the technological advancements available to us now in order to enhance our customer delivery platform. From early days, we were all about building a durable portfolio that would be able to perform throughout any kind of economic cycle. As we talk more about how we've done during the COVID crisis, we'll emphasize that.
From day one, we've also sought to foster a winning culture and to be a place that people enjoy working at, and that they embrace the success of our customers as our own success. We feel good about what we've achieved there. Finally, we've always been about delivering strong financial returns for our shareholders. Those founding principles are just as true today as they were at the inception of the company. Next, I'll introduce our executive management team. Very proud of this team, personally, having been involved in the recruitment and development of each of them.
They are all here today, and I hope you'll take advantage of the opportunity to get to know them a little bit at the breaks and share your questions in Q&A so you can get to understand their way of approaching our business. All of them have more than 20 years of experience, either in insurance, mortgage, other financial services, very experienced team. They are the leadership group for our more than 240 employees who every day seek to outperform for our customers and therefore cause the outperformance of the company as a whole. I think we have the best talent in our industry, and I think you'll agree with me after today. We are delighted for the opportunity to showcase our team to you.
Okay, let's drill down a little bit on our significant success to date. Just to sum it up, the success we've had and the success we see going forward is due to our people. We're very proud of our team and our culture. We consider this to be a competitive advantage as we go forward in the marketplace, and it enables us to recruit and retain the best. We can do this even in a very, very active employment market where we have our headquarters in the Bay Area. We still do extremely well in terms of our overall retention rate, and we think that's a great part of our story. Just some evidence of why we believe that's true. For the last six years, we've been named as Fortune Magazine's list of best places to work.
That's all a function of how our employees say they feel about working at our company. It's what they're saying about our company. It really validates the view that we have. We work really hard every day to try and continue that culture and continue that in the workplace 'cause we think it causes us to be a better company and to deliver better results. We'll talk a little bit about our success with customers. Lenders continue to respond to our value proposition. That's in the box in the upper right-hand part of the slide.
That is largely the value proposition we've had all along, although we have evolved that as technology has enabled us to deliver more effectively both in terms of the results, but also the costs of our delivery. It’s evolved, but it’s still true. We've developed a very strong national customer franchise, but what we wanna leave you with today is that we're not done. There's still much more growth and opportunity ahead on the customer side. You're gonna hear from Norm Fitzgerald a little later, our Chief Sales Officer, and he'll drill down very significantly into that point. Let's talk a little bit more about building our high-quality portfolio. Very simply, we've been able to achieve success both in the growth, but more importantly, in the quality of our portfolio.
You saw in our Q3 results, our insurance in force is now $144 billion, and that's up 52% since the beginning of 2020. Obviously, a period of time where there was some stress in the marketplace, and we're very proud of that result, and we're gonna talk more about it. Our outlook on the market and where we're positioned as a company supports our expectation to continue to outpace the industry growth. You're gonna hear a lot more about our comprehensive credit risk management framework because we believe that's the key to be able to continue doing what we're doing and outperform across market cycles.
I think we can say without qualification that we have the highest quality insured portfolio in the industry, and we're extremely proud of achieving what we believe is a unique combination of growth and quality. Finally, the success we've had in building our employee base and our culture, in our customer franchise development, in building a high quality portfolio, and establishing our credit risk management framework, have led to very strong financial results, consistent mid-teens returns during the COVID crisis, demonstrating the stability of our business model and the ability to outperform across all market cycles, one of our founding principles. Importantly, our success provides more than ample runway to continue down the path we're on. Let me drill down a little bit more about the performance during the COVID era.
We entered the COVID time from a position of real strength. Our balance sheet was protected by our comprehensive credit risk management framework. Even though we were undergoing a period of stress in the broader market, we served more customers and more borrowers than ever before in our history, and did it all from working remotely. We dramatically scaled our customer base, our NIW, and our insurance in-force. I think those results really validate our comprehensive credit risk management framework. That, in turn, drove record financial results, both in terms of insurance in-force growth and mid-teens returns during the most severe part of the stress from the crisis. Now, let's turn a little bit from what we've achieved to date and talk a little bit about what we see going forward.
The bottom line is the macro environment for our industry is extremely strong. Economic forecasts remain strong. Consumer balance sheets are the best they've ever been. We don't see that changing. Interest rates are quite cooperative in terms of how they're going to spur significant market size. The demand for housing, a lot has been talked about this, but we still believe this is a little bit of an underappreciated secular shift here, and we'll talk more about that. All these items combine to make our view of the environment going forward extremely positive. We feel really good about what the environment's gonna hold for us moving forward. Let me drill down on that point a little bit.
This is a very important slide, and if you work in the mortgage insurance business, this is a very exciting slide. There are a number of secular themes which we believe are causing a sustainable shift in the market opportunity. Those include the demographic trends of people reaching the age where they typically wanna buy their home. This is one of the trends was part of our original thesis, and it's proved to be true and it continues to be true, and we believe that's gonna sustain itself. Post-COVID demand for housing, very strong, will continue to be strong. Demand significantly outpaces supply. That is not going to change anytime soon, in our view. There's initiatives in Washington around access and affordability that have the potential to add additional tailwinds to our market opportunity.
Because of the strong house price appreciation, driven by the imbalance of supply and demand in the housing market, you're seeing changes to GSE loan limits, average loan balances, which drive more market opportunity for us. Additionally, MI penetration is moving up. As houses become more expensive, the need for down payment support rises, and this is another big secular driver. All of those together combine for what we see as a massive opportunity going forward. The bottom part of the chart shows the MI opportunity from 2015 to 2019, a five-year period, at about $1.4 trillion. Starting in 2020 and looking forward another five years, we size that market opportunity at $2.9 trillion or more than 2x the last five years.
Again, that is a massive opportunity for us and we think we are right where we need to be in order to capitalize on that. So, following up on our expectations for the market, we think there's a huge opportunity for the industry as a whole to grow its insurance in force, which is the revenue and profit driver of the business. That's just added tailwind to an already really positive picture. Interest rate levels are extremely accommodative for this to occur. There's another opportunity that we see. We've written so much business at such low coupon rates, the opportunity for our persistency to ramp up materially from where it is represents another huge opportunity to continue to over-deliver in terms of our results.
While the entire industry stands to benefit from these trends, we feel that we're extremely well-positioned to, in particular, in order to take advantage of those trends. Just to say a few more words on that, our customer franchise has scaled significantly. We've utilized advances in technology in order to make that happen and in order to speed up the adoption of our product by our customers, and we will continue to use that. That accelerates our ability to ramp up our new customer relationships. Our capital position is extremely strong, and our comprehensive credit risk management framework is there to make sure we create significant runway to fund our future growth, but also it creates a path for capital distribution, which Adam will comment more on later.
Having said all that, we're still gonna stay true to our founding principles. We're looking for responsible growth, and we always look to position the company to outperform across all market cycles. We believe we are uniquely positioned to outperform because that's what our track record has been, as you can see by our insurance in force growth relative to the rest of the industry on this chart. In a growing market, we have grown the fastest, and we expect to continue to lead. Summarizing our outlook is favorable both for the industry and for NMI. We see a record multiyear NIW opportunity ahead. We believe we will drive the industry-leading insurance in force growth, and that will be supported by our comprehensive credit risk management framework, generating strong growth, consistent high returns, and significant value going forward. Here's a slide that we've shared before.
You'll recall we call this the Blue Mountain of Profitability, one of my favorite slides. It illustrates the uniquely powerful and highly visible nature of our business model. As we manage risk, expenses, and capital, our underwriting margin and profitability are poised to expand. As we look forward, we see the opportunity for strong returns and significant shareholder value. To summarize my message this morning, we've built a strong foundation for our company. We have a proven strategy driving high growth and returns. The housing market is an underappreciated secular growth story. The need for mortgage insurance has never been greater, and we have a clear opportunity to continue doing what we do best, which is to deploy capital to support our growing customer base, drive shareholder value, and outperform across all market cycles.
With that, I thank you for your time and your interest in our company. We look forward to your questions at the end of the day. With that, I'll turn it over to Claudia Merkle.
Thank you, Brad, and good morning, everyone. I'll begin on slide 22. It's great to see all of you in person today, and I'm excited to share all that National MI has done to build a valuable and durable business, react with speed and success to the unprecedented nature of the COVID pandemic, and position our company to capitalize on the tremendous growth opportunity we see ahead of us. As we talk today, I'm incredibly optimistic about the long-term outlook for the mortgage market, the MI industry, and National MI in particular. My optimism starts with all the success we've had to date. We built National MI to deliver sustained outperformance across all market cycles, and the resiliency of our performance through COVID validates our efforts and highlights the value of our strategy. It starts with culture, creating an inclusive environment that fosters collaboration, creativity, and trust.
From a customer standpoint, building relationships based on value-added engagement and a differentiated value proposition is key. Leading with technology to continue to expand our reach and drive efficiencies. In terms of risk management, leading with discipline in everything we do, and putting credit risk management at the forefront of our strategy. From a portfolio standpoint, achieving a unique combination of best-in-class growth and quality. The ultimate proof of our success is our financial outperformance, uniquely delivering high growth, high returns, and low volatility in normal times and through the COVID stress. Our success to date uniquely positions National MI to outperform as we go forward, capitalizing on the significant market opportunity that Brad described, while maintaining our focus on managing risk, expense, and capital to maximize shareholder value.
Shifting to slide 23, I'll share some additional detail on our success to date, starting with our culture and people. We've always prided ourselves on our culture and believe the quality of our team and the diverse, inclusive environment that we've established are key competitive advantages, and this is more true today than ever before. Connectivity, collaboration, and support have taken on added importance since the start of the pandemic and will continue to be critical values going forward. We have 241 employees who are engaged and highly motivated to deliver for their colleagues, for our customers and their borrowers, and for our shareholders.
Our employees are fully engaged with our core values and the critically important social role that National MI plays in helping borrowers access all of the benefits of homeownership, something that is more valuable and that we are more proud of today than ever before. Turning to slide 24. Sustainability is a cornerstone of our value system, and it's been a focus since our founding. Sustainability for National MI starts with our social mission, providing down payment support to borrowers. We have helped over 1.2 million borrowers become homeowners since our formation, and in doing so, have helped foster a sustainable housing finance system. We are committed to giving back to our community and to diversity, equity, and inclusion across our employee population and in our board of directors. Human capital and human management is a key priority for us.
We aim to hire, train, and retain the very best talent, and we've been successful, being named a Great Place to Work for six consecutive years. Turning to slide 25, the extensive success we've had growing our customer franchise and deepening our lender relationships. We're a value-added partner to lenders, putting the right salespeople who have leadership experience in the right seats and having them sell the right value proposition of certainty of coverage and service. This has worked for us to a great effect, and you can see how significantly and consistently we have grown our franchise over the last several years. Slide 26 is critical. We have the highest quality, fastest-growing insured portfolio in the industry. As an insurance company, we take risk. That's our purpose.
Taking this risk responsibly, reviewing it, and understanding it in detail, being selective as to what we ultimately put on our books, and establishing appropriate concentration guidelines is key. Our focus on building our business in a long-term, risk-responsible manner comes through in the profile of our insured portfolio. We have been incredibly successful stacking high-quality NIW volume year on year and driving best-in-class growth in insurance in force. Turning to slide 27. We have positioned National MI to outperform through significant stress, and the conservatism with which we have managed our business across the board is valuable as we navigated through the COVID stress. There is a tremendous amount that goes into building a business like ours.
From day one, we have recognized that there is no bigger long-term driver of our success than credit performance and how well we manage risk in our insured portfolio. Our philosophy all along has been that in order to get full benefit from risk management strategies when times are tough, you need to have implemented them when times were good, and this is what we did. We have a comprehensive risk management approach that spans three foundational pillars. Individual risk underwriting, where we aim to directly touch, if you will, the vast majority of our loans that we insure. Getting a loan file, reviewing it, making a decision based on data, and preserving access to that valuable information for future periods.
The use of Rate GPS, our proprietary dynamic risk model that allows us to fully price for the risk we're taking and to price away the risk we don't want in our portfolio. An expansive reinsurance program, which covers nearly all of the risks we have ever written as a company, and essentially ring-fences our exposure in periods of broader uncertainty or credit volatility. It is this framework and our decision to fully invest in it and deploy it long before the onset of the COVID pandemic that positioned us to outperform through the stressed environment we experienced with COVID. Moving to slide 28. Our credit performance through the stress of COVID highlights the value of our comprehensive and proactive risk management approach.
Our peak default rate, which we and the rest of the industry saw last summer when the stress of the pandemic was at its highest, was roughly half that of the rest of the sector. We have a higher quality insured portfolio, and as a result, faced less volatility through stress than others did. As we look to continue to capitalize on the enormous opportunity that we see ahead of us in the mortgage insurance market, we will remain equally focused on credit quality. Turning to slide 29. The success that we've achieved with our people, with our customer franchise, our lenders, with our portfolio, and with our credit risk management focus has driven exceptionally strong financial performance. We have delivered significant success across every key financial measure for an extended period of time. I'm proud of all that we've accomplished to date and the tremendous success we've achieved.
We have the right team and the right strategy. Our franchise is stronger than ever, and National MI is exceptionally well-positioned to perform going forward. We are poised to capitalize on the compelling long-term opportunity in the MI sector, leveraging all that we have done right to date to continue our outperformance. Turning to slide 31. The new business environment is remarkably strong. As mentioned, there are a number of secular tailwinds that are driving a record MIW opportunity, and the mortgage insurance value proposition and need for MI support has never been stronger. Turning to slide 32. Against the backdrop of this record MI market, we see a significant opportunity to continue responsibly growing our new business platform and insured portfolio. We have a strategy that works.
We have scaled our customer franchise and delivered industry-leading growth in insurance in force while maintaining the strictest credit risk discipline in the industry and delivering the strongest returns in the market. Wrapping up on slide 33. We are excited about the opportunity ahead of us. National MI has a proven track record of outsized growth, strong risk management, and consistent financial outperformance, delivering significant value for our shareholders. We will continue to leverage our differentiated strategy to expand our customer platform and access to the market. We'll continue to stay focused on our social mission of supporting accessibility and affordability while investing in our people and in our community. We believe we are extremely well-positioned to continue to lead in the market and deliver significant value to shareholders, and I'm excited about the opportunity that lies ahead for National MI. Thank you for your time today.
Now I'll introduce our Chief Sales Officer, Norm Fitzgerald.
Excuse me. There's no clicker up here. Well, thank you, Claudia. Thanks to all of you for being here today and taking the time to hear our story. I'm really excited to be here live in New York City. Oh, there you go. All right. We're gonna talk today a little bit about technology. I woke up at two in the morning worried about the damn clicker, and there you go. Okay. Anyways, honestly, I'm really happy to be here live today with all of you. As Chief Sales Officer, I'm really proud of what we've accomplished as a sales team and as a company over the past nine years. I'm especially gratified to see what my group has accomplished in 2021 as we entered a new normal in the post-COVID environment.
Now, just a few minutes ago, you heard Brad and Claudia talk about our founding principles. PPCC is in our DNA, I heard them say. Now, I assure you that my team embraces this with passion. It's one of the reasons that we win. Today, I wanna frame for you where we are now in terms of our customer franchise compared to where we were when we started. Now, we built our sales team and our customer base from the ground up, person by person, account by account, and I assure you that was a challenging process. We've got very good people on our team today. We talked about them a lot. I recognize Sheree McCarthy is one of our very best, and she's with us today. She runs the Northeast.
It's people like Sheree and people on our team that make us successful. I have had the privilege to build our sales team organically and to build it around people who prove to be effective in this new environment, keeping in mind that relationships and experience matter a lot. We have strategically built a team of strong and resilient people who represent the core culture and values that we were founded on. I believe that we have the best sales force in the MI industry, and their success shows up in the growth of our account base and in the growth of our NIW over the past several years. I'm excited to take you through the results we've achieved, but even more excited about the market opportunity that we see in front of us.
I'm also gonna share what we see as the digital transformation in the mortgage industry and the unique opportunity that it creates for National MI going forward. We have been incredibly successful activating a new customer, our new customers. Our account growth is the fundamental driver of our record NIW and is driving industry-best growth in our insurance in force. Now, you'll see here that over the past three years, we have meaningfully increased our active customers each year, reaching a new record of 1,280 active customers as of the end of the Q3 . Our business success has consistently focused on strengthening and expanding our customer base, and that objective continues to be vital to our NIW growth. Every new account gains more access to the market for National MI.
You see here that through September 30th, with this broad and diverse base, together, we have successfully driven $87 billion in NIW and grown our insurance in force to almost $144 billion. In 2021, we entered a new normal, and we are working in that new normal now. Now, as Chief Sales Officer, I have found ways to keep our team connected and productive and motivated in a virtual environment. We've been excited about starting to visit customers again in their offices. However, our engagement is, and we expect it to continue to be more virtual, and we're prepared. We've developed a strong digital engagement model. More importantly, we are committed to continuously improving and evolving our digital platform and sales skills in order to create a meaningful client engagement.
Things continue to change fast, and I'm fortunate to have a talented team that is excited to grow and evolve with the needs of the market. Customer development is essential to us. Building our base and knowing our customers has been my rallying cry for nine years, and now we're at nearly 1,300 accounts strong. An approved account is step one, but I emphasize with my team that step two is even more crucial. We aren't really ready to win until we are turned on in a customer's system, what we refer to as activated. In today's world, knowing our customer and their entire process, front end to back end, is critical in order to win business. I'm proud to say that we have activated 187 new accounts since the start of COVID.
Year to date, in 2021 alone, we have activated 97 new accounts, including 23 of the top 600 lenders in the country, representing about $11 billion of NIW opportunity for us to earn. Because of our success in account growth, we have an incredibly diverse customer base. In the Q3 , we generated NIW from a record number of unique accounts, and our commitment is to continue in that direction. Now, we cherish every partner, and we treat them with respect. We are consistent with what we offer. We treat every account the same regardless of volume. Our team has built lasting and solid relationships with a large number of customers, and we are ceaselessly working to nurture and develop both existing and prospective accounts. Okay, so why do we win? Now I get this question a lot, and the answer is simple. It depends.
Because every customer situation is different, but it always starts with effectively building relationships and trust. Now, for one customer, it may be about our post-close underwriting validation program and accelerated rescission relief. For another, it may be our ability to seamlessly integrate into their loan origination system. For many, it may come at a long end of a process of due diligence and executive-level engagement. I can say, as a general matter, that more and more of our conversations with customers, both current accounts and prospects, are about what the industry refers to as the digital mortgage roadmap. We are a thought leader on this subject and have technical credibility because of our modern IT platform and Rate GPS systems. This has become a big differentiator for us, and we're leveraging it to broaden our footprint in the market.
We have shown a great ability to build our base of customers and drive NIW. Just a few years back, when we boarded a newly approved customer, that was just the beginning of a long journey towards introducing and reintroducing ourselves to hundreds of different call points within our accounts face-to-face, desk-to-desk. For a new company, that was a challenge competing against legacy accounts. Changing habits was the single most significant obstacle in gaining approval and then driving individuals into choosing NMI. The social distancing and the work from home phenomenon quickly accelerated the adoption of the digital roadmap and forced a shift in everyone's habits. From how they worked to where they worked. NMI's sales team was at the forefront, educating both our own team and using that knowledge to help evolve our clients when they needed it most.
Now, this enhanced the speed and efficiency of embedding ourselves into the customer's process. This is how a new company eliminates the hurdle of habit. We went from physically visiting hundreds of in-person customers a day to connecting with over 100,000 digital customers a day. Hundreds a day to hundreds of thousands a day. Combining both our skills of face-to-face sales meetings with our newly acquired acumen in digital sales connections has dramatically increased our visibility and productivity. I'd also like to mention our best-in-class training platform has been a value add for our customer base and has truly solidified our position as a long-term and essential partner. We've offered an outstanding customer training program for years. Part of our success, though, has been quickly shifting and refreshing what we offer to address an evolving set of customer needs.
Our training platform expanded to educating customers about this digital roadmap and how they can embrace it, too, and enhance their own digital client experience. I want to emphasize here that the digital experience begins and continues with personal relationships. Digitization helps efficiently get our best people in front of more customers, and our ability to capture that moment and drive our value adds, our service, our culture, our PPC still matters. People still do business with people they know, trust, and like. Our team's excitement and level of commitment to our customers absolutely remains the most critical component to why we win. Let's take a look at who we win with. We have been focused on and winning in the right areas. Although not limited to, we have been focused on activating and building our relationships with the top 600 lenders in the country. Why?
This is where we see greater than 90% of the industry NIW volume. We are positioned well. We have 452 active relationships, and our entire company has helped drive significant penetration with this impactful and very large base of customers in that top 600. With our digital engagement approach, we can reach that account base and opportunity more effectively and efficiently than ever before. What's exciting for us is that we are laser-focused on and closely engaged with most of the 148 potential accounts. 61 of which we already have an approved master policy, and we're simply working on activation. We fastidiously and carefully board new clients and make sure their experience is the best that it can be.
Our team has been, and will continue to tirelessly pursue the still enormous opportunities in that $60 billion opportunity that lies ahead for us. Our best days are still to come. As I mentioned on the previous slide, digitization and technology have transformed our highly inefficient industry into a highly efficient one. A path that we were walking down for the past few years that turned into a sprint in 2021, and I promise you that we are running. Our team will continue to focus on growing our wallet share and our active accounts and concentrate on activating the rest. As you've heard, the mortgage industry is becoming more and more digital. Those who can handle more volume with shorter lead times at the lowest cost have a competitive advantage in today's market. For customers, they're compressing the mortgage cycle. Prospective borrowers are applying online.
Credit checks and FICO scores are being processed instantaneously. For us, MI quotes are pulled and priced electronically. Loan documentation is uploaded to secure lender portals. All this with very limited human touch. The technology shift is driving efficiency and flexibility for our customers and for NMI. The trend is also expanding our new business opportunity because technology disrupts lender habits and legacy relationships. We win if we can help the lender do it faster, more efficiently, and with greater precision. This trend is allowing us to capitalize on our competitive advantage because we are the disruptor. We are a technology-forward company and have pivoted to a digital engagement model quickly and seamlessly, which is driving both new account growth and wallet share gains as the industry recognizes our capabilities.
Our team is built around strong people who shift and move, and in some ways help drive the new normal. Our entire team is fully committed to the present and the future, and we have an incredibly strong team built for an ever-evolving market. Also, because of our technology advantage, we can now target and serve a broader and more diverse lender base efficiently, and that's exactly what we're doing. In summary, we've been incredibly successful, driven by a great team with a differentiated message and value proposition. Now, I joined this company as a startup because I love building things, and I can say that I am as excited today about our opportunity and our potential as I was on my day one. It's all about our customers, our people, and our culture, which is paramount to me personally.
We have an advantage through Rate GPS and our digital literacy when it comes to efficiently engaging with customers and winning their business. Now, our team will continue to focus on that top 600 account activation using our passion, commitment, experience, and desire to enhance customer engagement and experience. We are dedicated to driving all of this with Salesforce efficiency and excellence. With this combination, the best people and the best platform, we are excited about what we are able to accomplish in this market and the opportunity that lies ahead for us. I thank you for your time and attention. Speaking of excellence, I'm happy to turn the presentation over to Mohammad Yousaf, our Chief Business Transformation Officer.
Good morning. You've heard us all sharing our perspective on digital mortgage and transformation of the digital mortgages, and how NMI has been leveraging this transition to our advantage. In operations and IT, we are on the front lines of the transition and are focused on supporting the rapid growth of our business volume, maintaining the highest level of data protection, and rolling out technologies that enhance our productivity and efficiency. With that, let me share a bit about what you see on this slide. Innovation, speed, connectivity, and scalability. We have a modern de novo IT operations platform. This gives us market credibility, but also huge advantages in terms of availability of resources, upgrading them and maintaining them. The second point is time to market. We are nimble and have ability to respond to the need of our company and our users quickly and seamlessly.
The next point is connectivity. We have established broad connectivity with our customers in the format that they require that is fast, reliable and secure. The faster we are able to integrate and get visibility with the customer, the faster we are able to begin generating NIW with the customer and for NMI. The fourth point is scalability. We design a platform that can scale easily and efficiently without significant added work or cost or time. Our volume over the last 12 months is more than double what it was two years ago, and we are serving the volume with fewer headcounts and no degradation in response time or underwriting rigor. We're accomplishing that through intelligent workflow, optimization, load balancing across our operations platform. Importantly, we have not reduced the level of human touch in the underwriting process.
We have made it more focused, accurate, effective, and efficient through this workflow optimization technology. Turning on to slide 44. I want to provide a little more color on the digital mortgage transformation. The mortgage industry broadly has been progressing its digital roadmap for the past several years, and the digital transformation accelerated because of COVID. Volume expanded in the way that strained human resources, and everyone across the housing finance ecosystem had to adapt to remote work and contactless engagement with every point of the chain. The solutions available across the mortgage landscape have proven to be convenient, reliable, secure, and now are the new normal for how all players engage in the mortgage market. I'll wrap up on slide 45.
I believe that National MI is extremely well-positioned to continue to lead through this digital transformation and to leverage technology in the way that enhances customer engagement, risk selection, pricing, underwriting accuracy, risk assessment and management, and operational efficiencies. We are thought leader in this space. We have technical credibility that opens doors at the C-suite level of customers and enhances our relationship bonds, creating much more durable and valuable long-term relationship with the customers. In summary, I'm excited about the opportunity we have to continue to lead in this market and to leverage that leadership into strong value creation for our shareholders. Thank you for your attention this morning. With that, we're going to take a short break, and then you'll hear from Rob Smith, our Chief Risk Officer.
Okay. Hi, everyone. Thanks for joining us today. It is great to see people in person again and be in New York City during the holidays. There was a bit of a crowd on Fifth Avenue last night, something about lighting a tree. It was hard to get home from dinner. So as in past years, I'll spend some time reviewing our risk management approach, discussing how we select risk and distribute it. I'm gonna follow up in some detail on how well our focused risk management approach performed through the recent COVID pandemic. Finally, I'll provide our perspectives on the current environment and outlook. I'll just go there, you can see what I'm gonna talk about. Risk management is always a priority for us. Our risk management culture and framework helps put homeowners in sustainable housing situations.
It helps protect our long-term return profile and the balance sheet of our company, reduces earnings volatility and capital requirements during adverse events. Our risk management framework is proven. Let me start by providing some perspectives on the origination and oversight environment. We continue to operate in a strong regulatory environment. The industry credit profile has been outstanding since the Great Recession. The experience with the COVID pandemic has supported the wisdom of keeping tight controls in place. The housing market was a core strength of the economy through the pandemic and continues to be today. There's little incentive for anyone to disrupt that strength. A robust risk management framework served us well through the pandemic. You can see some of the highlights of the framework we use on the slide. It's one thing to have diverse elements in a risk management framework.
It's another thing to put them to use. I'll go into more details on our three pillars. The first two pillars you see cover risk selection, and the third pillar covers risk distribution. The pillars in our framework are interrelated. We start with individual risk underwriting and review. This gives us greater insight into individual loan risk characteristics and informs our pricing. When it comes time to distribute the risk, our execution's improved due to our risk selection, and we gain insight into what reinsurance providers most value and are most concerned about. Individual risk underwriting is important because it helps us better understand the risks we are insuring and allows us to take immediate action on risks as they arise. Rate GPS is important because it helps us accurately target the appropriate risk-return trade-off for every mortgage we insure.
Reinsurance is important because it protects us from economic shocks, and in doing so, reduces the volatility of underwriting results. Now we'll talk about our first pillar. The benefits of performing extensive loan level reviews is many. By performing extensive underwriting and post-close validation rather than relying exclusively on QC sampling, we can identify emerging risk trends early and take corrective action. On an individual loan level, action can be taken before loans become delinquent, when problems are easier to correct for both originators and borrowers. Highlighting issues in the manufacturing process then prevents defects from recurring and impacting multiple loans. This was especially true during the pandemic, when economic impacts hit borrowers suddenly and underwriting guidelines changed just as suddenly. Borrowers who entered the mortgage origination pipeline with excellent credit profiles were suddenly faced with extremely uncertain futures regarding their future employment and income.
Underwriting guidelines were adjusted quickly in reaction to this new economic reality. With a process in place to perform loan level reviews on the vast majority of insured mortgages, we were able to weed out borrowers in troubled situations and ensure new guidelines were being followed. An additional benefit for us and our risk-sharing partners is data accuracy. By reviewing so many files post-closing and instituting a process where post-close loan data is used to correct discrepancies that may have been submitted pre-closing, we can ensure that our data is the most reflective of the true borrower situation at origination. Importantly, due to our exceptional IT platform, as Mohammad described, we're able to perform this review in a very cost-efficient manner. Technology-enabled tools are something we've always invested in and successfully deployed.
A good example of this is Rate GPS, our second pillar. Our underwriting and our risk selection, which I'll cover in the next slide, directly impact the credit characteristics of our portfolio. Over the past several quarters, we were able to continue to write high volume and also create the highest quality insured portfolio in the industry by several measures. As one example, our concentration of lower credit score business is less than half that of the industry average. We are able to create this high-quality portfolio through extensive use of Rate GPS, our risk-based pricing engine. Today, a risk-based pricing engine is not unique in the industry. Having the discipline to use it to select and price the vast majority of business, over 95% in our case, is unique. You can see the impact of using our system on this slide.
When COVID first hit, we were able to pull back on risk quickly. As risks subsided, we were able to reengage where we felt comfortable, targeting first those areas we felt offered the best risk-reward profile. As you can see in the graphs on the right-hand side of the slide, we reduced our exposure in several key risk variables more quickly than the rest of the industry as the pandemic hit through the use of Rate GPS. Turning now to the third pillar, our reinsurance program. There are attributes of our comprehensive reinsurance program that are important and valuable. The scope of our reinsurance program is extensive, covering essentially 100% of our insurance in force, and covers both traditional and capital markets executions. We are consistent purchasers of reinsurance, executing multiple reinsurance transactions each year.
We've been executing reinsurance transactions for many years, really since we had enough risk to reinsure, and we were one of the first to issue Insurance-L inked-N otes. These attributes of our comprehensive reinsurance program generate significant capital and risk management benefits in an extremely cost-efficient manner. This slide has a lot of numbers. This shows a simplified example of the impact of reinsurance. I'm not gonna go through all the numbers, but just focusing on the bottom line. Over a stress event similar to the Great Recession, we would experience results that are far from stressful, an earnings event, but not a capital event for the company.
As with our underwriting and pricing, we feel the cost of this coverage is far outweighed by the benefit we drive, both in good times through the capital relief we achieve, and not so good times when we reduce earnings volatility. The end result of our credit risk management program is the strongest credit performance in the industry through the pandemic. Our peak default rates were 3.78% versus the industry average of 6%, and our cumulative loss ratio was 10.5% versus the industry average of 28%. We have proven and successful risk management programs and technology in place. They help us continue to execute successfully in today's environment. Now we'll talk about that environment. The great news is the credit environment is excellent. The macroeconomic environment is favorable, with low and declining unemployment and strong economic growth.
Household wealth and incomes are growing, and the consumer balance sheet is strong. The housing market has shown incredible resiliency through the pandemic with historically strong house price appreciation. The mortgage industry continues to demonstrate discipline in credit and underwriting. Finally, the assistance provided to borrowers facing stress due to the pandemic has been extensive and effective. We've talked about house price appreciation last year, virtually, not in person. Since then, it's accelerated even more. We're seeing strength across all markets in the country, and we see no indications of any regional housing bubbles. The primary reason this is happening is there's a fundamental imbalance between supply and demand. We believe that increased demand post-COVID is sustainable and unlikely to be met by supply in the near term. Increasing demand is driven by several factors. Mortgage rates remain near record lows.
The average 30-year mortgage rate is less than 3.25% today. That's very good from a historical perspective. The millennial generation, which is the largest in American history, continues to enter the housing market. Finally, the pandemic triggered emotional and a practical pull towards homeownership, as well as broadened the geographic areas available to many workers. The supply shortage traces to long-term declines in the construction of single-family homes in the U.S. post the Great Recession. This issue has been most acute in entry-level housing, which is a key for our core first-time home buyer. One estimate has the nationwide housing shortage at 3.8 million units. This is equal to roughly four years of single-family housing completions. As I mentioned, this imbalance is expected to continue driving house price appreciation.
Historical house price appreciation averages 3% over a long-term horizon. The past two years have seen house price appreciation significantly above that average. This appreciation rate is expected to come down in 2022, but will continue to be above the long-term average. Turning to our delinquency results for the pandemic. Roughly 20 months into the pandemic, we are seeing encouraging performance trends. Defaults peaked at a low absolute level. They didn't come near the 15%-20% some industry observers had predicted, and continue to trend down steadily. The servicers are contacting borrowers, assessing their need for continued assistance, and finding that in many cases it's no longer needed. It's clear that forbearance programs and the expanded modification waterfall, most importantly, including the new payment deferral option, are working, easing the path for borrowers through this economic turmoil.
We see this playing out in the broader market. Forbearance programs, which were widely offered during the pandemic, were widely accepted. They were helpful and impactful for borrowers. What we're seeing now is reliance on forbearance programs is rapidly declining as the recovery continues to take hold. We have received reports from some of our largest servicers that indicate that of those who took forbearance, nearly 90% have already exited forbearance in a way that has resulted in the borrower staying in their home. Given these results so far and the positive economic and housing environment, we expect this trend to continue. Another aspect of our business that was impacted by COVID is loss reserving. Due to the unprecedented nature of COVID, we took a conservative approach, as did many in the industry.
As the uncertainty of the pandemic abates, we will continue to assess the level of reserves, and we will respond accordingly. In summary, risk management continues to be a focus and priority for us. We have a framework and operational pillars in place, and they work well. We're encouraged by the current environment and believe we are well-positioned to continue to be successful. With that, I'll turn it over to Adam to walk through some of our financial results and outlook. Thank you.
Thanks, Rob, and good morning, everyone. I'll begin on slide 67, and over the next several pages, we'll share a perspective about our financial profile and capital position, and importantly, the exceptional opportunity we see to drive continued growth, strong mid-teen returns, and value. The path we see to unlocking this value and rewarding our shareholders through capital distributions. Getting into the detail on slide 68, the success that we've achieved with our people, with our customer franchise, with our portfolio, with our credit risk management framework, and with our innovation in the reinsurance markets, has driven our financials. We've delivered significant success across every key measure of financial performance. Top line, we have strong revenue growth. Underwriting margin, our credit outperformance comes through in our loss ratio and our organizational discipline and embedded operating leverage drives our expense ratio.
Taken together, we have bottom-line profitability with consistent earnings growth and strong mid-teen returns. Our book value, we're generating significant capital for shareholders, and we've been performing at a high level for an extended period of time, building from one quarter to the next with discipline, consistency, and visibility. Turning to slide 69, the onset of the pandemic introduced unprecedented stress, but it also provided us with an unprecedented opportunity to perform for our customers and their borrowers at a time when they needed us most. I'm incredibly proud of what we achieved over the past 20 months. I'll tally some items off the page before focusing on the financial outcomes. Since March 2020, we've helped over 500,000 borrowers gain access to housing at a time of critical need.
We've enhanced our customer engagement and accelerated our franchise growth. We've generated $119 billion of high quality, high return NIW volume. We've grown our insurance in force by roughly 50% to $144 billion at September 30th. We've delivered best-in-class credit performance by a wide margin. We've continued to innovate in the reinsurance and capital markets, and we've achieved incremental expense leverage and a sub 30% adjusted expense ratio. Broadly speaking, we outperformed, and we demonstrated our ability to deliver results across all market cycles. We've built our business to deliver a very high floor in stress scenarios and operate with a very high ceiling when market conditions are favorable. We are now in a resoundingly strong market environment. Our results have rebounded sharply, and we're incredibly excited about the opportunity ahead.
We're proud of what we've achieved and the success we've delivered to date, primarily because of the confidence it provides as we look forward. Looking forward, we see an exceptional opportunity. Secular trends are driving record private mortgage insurance market volume. We've consistently differentiated ourselves to the positive, and we believe we are well-positioned to deliver continued growth, returns, and value. Turning to slide 71. The exceptional opportunity for growth that we see in the near term begins with NIW volume. The private mortgage insurance market is poised to deliver record NIW volume over the next several years, driven by a resilient housing market, demographics, a growing need for down payment support, and increasing private MI penetration rates. Brad and Claudia both sized the multiyear opportunity.
We expect total private MI industry volume will reach $2.9 trillion from 2020 through 2024, which is more than double what the industry achieved from 2015 to 2019 before the pandemic. Against this resoundingly strong backdrop, we believe we are well-positioned, in fact, better positioned today than ever before to serve our customers and their borrowers, and in doing so, capture significant NIW volume going forward. We've already dramatically scaled our new business production and expect to continue writing a large volume of high quality, high return, and highly persistent business as we go forward. We expect the private MI industry will deliver significant growth in total industry in force over the next several years, reaching $2 trillion of total IIF by the end of 2024.
That's a 50% increase over the next three years, driven by record NIW and improving persistency. We believe that National MI, in particular, is uniquely well-positioned to perform and build embedded portfolio value on an accelerated basis. Our insurance in force growth has already dramatically outpaced the rest of our industry. At the end of 2019, we had $95 billion of insurance in force, which accounted for 8% of the total industry tally. By September 30th of this year, we had $144 billion of insurance in force and accounted for 10.5% of the total industry. This trend, an increasing capture of a growing industry balance, is a core driver of our top line growth and key to the accelerated build of our embedded portfolio value and will naturally continue over the next several years.
The private MI market is a high-growth sector, and we have the growth advantage in the industry. The top line growth from record NIW and our outsized insurance in force growth is critical. Equally important is our loss performance, expense discipline, and capital efficiency in future periods, because taken together, these drive our bottom line profitability and return on equity. On slide 73, we see an exceptional opportunity to continue delivering growth, profitability, and value, in part because we're optimistic about the continued strength of our credit performance post-COVID. I believe it's now well understood how the performance of our COVID default population continues to trend in a favorable direction, with an increasing number of impacted borrowers curing their delinquencies and fewer new defaults emerging as the economic stress of the pandemic recedes.
Post-COVID, our aggregate loss experience will be driven much more by the performance of the business that we're putting on the books today than it will be by the business we put on prior to the pandemic, simply by virtue of our policy counts. Our production from 2020 and 2021 already accounts for a significant majority of our insured portfolio, and this augurs well for our long-term credit performance. The NIW volume that we've generated since the onset of the pandemic is some of the highest quality business we've ever written.
Our new production is equitizing quickly and moving our risk exposure further out of the money given the strength of house price appreciation nationally. The pairing of our record NIW production and portfolio turnover has served as a fountain of youth, if you will, bringing down the average age of our overall portfolio, which is consequential because under normal times, the peak loss incurrence period for a mortgage is three to six years after origination. Staying young keeps our aggregate portfolio away from this peak default and loss incurrence period. We can already see and begin to measure the performance of this new business. We wrote over 356,000 policies between April 1st, 2020, and September 30th of this year, and only 941 of that group are in default.
Altogether, we have reason to be optimistic about our long-term credit performance. Shifting to slide 74 in operating expenses. Discipline, efficiency, and the scalability of our platform have always been a primary focus, and that certainly remains the case today. We had 241 employees and incurred $135 million of adjusted operating expenses during the twelve months ended September 30th. By far, the smallest headcount and expense base in the mortgage insurance industry. Going forward, we do not need to add significant headcount or make sizable fixed investments to support our portfolio growth. Our platform is modern, scalable and efficient, and provides us with real operating leverage. We've achieved consistent gains in our expense ratio, which now sits below 30%, and we expect to continue driving efficiency and expense ratio improvement over the long term.
Turning forward, we like this chart a lot. We use it a lot. Brad and I both have iterations of it in our materials today, and we've shared versions of it in many of our past Investor Day discussions. As Brad mentioned, we call it the Blue Mountain of Profitability. I see it as a visual representation of the exceptional opportunity we have to deliver growth, profitability, and value. The scale of our profit potential over the next several years is significant, fueled by a record NIW opportunity, improving persistency, rapid growth in our insured portfolio, and continued discipline around capital, risk, and expenses. In this particular view, the Blue Mountain is split, with the total slope representing our current expectation for profit development and the area below the white line representing our profit expectation when we last shared this slide in 2019 before the pandemic.
Our future opportunity and bottom line expectations have expanded meaningfully with the dramatic growth in the overall MI market opportunity and the success we've achieved scaling our franchise. The opportunity that lies ahead for National MI is larger, brighter, and more profitable than it has ever been before. Turning to slide 76, I'll share a perspective on how we're positioned to deliver strong mid-teen returns over the long term. I like this view. It's what I call a decomposition of our ROE profile, because it helps us take stock of the different factors that drive our bottom line and returns, and trace how our operating decisions work their way through our financial performance. Most importantly, we can see how readily achievable our goals are and how we're poised to continue delivering on our strong mid-teen return target over the long term.
Now to something new and important, the opportunity that we have to directly unlock shareholder value through capital distributions. Over the next slides, next few slides, I'll share a perspective on our balance sheet and why I'm so excited that we have the capacity to both fund the exceptional growth opportunity that we see ahead, and at the same time, provide direct value to our shareholders through capital distributions. I'll start with an overview of our balance sheet and funding profile. Capital is critical for us. We're a balance sheet-intensive insurer making long-term commitments to our counterparties under a broad umbrella of regulatory and rating agency oversight. We focus on our balance sheet at all times.
We have a solid foundation today with a strong liquidity and capital position and broad protection from our comprehensive reinsurance program, a conservative investment portfolio, and access to funding across the capital markets and reinsurance spectrum. We've done an enormous amount of work to innovate in the capital and reinsurance markets and optimize our funding profile. In the last month and a half alone, we've completed three important transactions that have meaningfully bolstered our position. In October, we secured new quota share reinsurance coverage for 2022 and 2023 at the best price and terms we've ever achieved. Also in October, we completed our seventh ILN offering, building on our past success in the risk transfer market to secure $364 million of working layer risk protection. Just this week, we announced the refresh of our revolving credit facility.
We increased the size of the facility from $110 million - $250 million. We extended the maturity by two and a half years from February 2023 to November 2025, and we were able to streamline our covenant package. Here on slide 79, we provide a snapshot of how we're currently funding our gross PMIERs' capital requirement with a balanced mix of quota share reinsurance, ILNs, debt and equity. Our funding profile today is sizable. It provides significant downside protection, with reinsurance offering both funding support and risk absorption in downside scenarios. It's efficient. We estimate that our weighted average pre-tax cost of PMIERs' funding to be less than 7%. It enhances our return profile, embedding responsible, cost-effective leverage, and it provides us with significant flexibility.
The flexibility to both fully capture the tremendous growth opportunity we see ahead and evolve our capital discussions to include a pathway to directly unlocking capital and value for our shareholders. Shifting forward, slide 80 contains a lot of detail, but it's important, so I'll ask you to please bear with me as I walk through. Our pathway to capital distributions starts with sizing our excess position, and I'd like to share with you the guideposts that we look at when mapping out our funding need. Our capital naturally supports both our in-force portfolio and provides runway to fund our new business production. As a high-growth company with a record NIW opportunity ahead, runway is particularly important. Overall, we're in a terrific position. We're organically generating an increasing amount of growth capital every day.
Our three most recent capital transactions, our new quota share, ILN and revolver, have dramatically expanded our pool of immediately available growth capital and meaningfully extended our funding runway. Our target in terms of the number of months of funding runway that we aim to keep on hand is not static because it depends on the risk environment, our expectation for NIW volume and the risk mix in PMIERs charges on new production, as well as the state of the reinsurance market and our organic capacity. We are in an exceedingly strong position today. We also consider other benchmarks, our PMIERs and state regulatory capital needs, our target financial leverage, the structure and expanse of our reinsurance program, and our holding company liquidity needs as we calibrate the size of our excess position.
We do need state regulatory approval to access most of this capital, but we are in a position today to advance our capital discussion and work towards unlocking significant value for our shareholders. Turning to slide 81, I share a summary perspective on our path to capital distribution, focusing on the key drivers that we expect will put us in a position to unlock value and the timeline over which we see these drivers emerging. I'll highlight two important points here. First, we're already at least halfway through this list. Items one through three are in the rearview mirror. Item four, an increase in our statutory dividend capacity, will naturally develop early next year as our statutory dividend capacity in 2022 will be based on our 2021 financial results. Second, our path to an initial distribution isn't dependent on first completing all seven steps.
We expect our distribution opportunity will emerge as we're marching through, not after we complete this progression, and will grow over time as more and more of our drivers solidify. Overall, capital distribution is a near-term opportunity and a priority focus for us. Overall, we've delivered significant success to date with our people, our customers, our portfolio and our platform. We've built our business with an eye towards durability and long-term risk responsibility and believe our outperformance through COVID highlights our ability to perform across all market cycles. As we look forward, we see an exceptional opportunity to drive continued growth, returns and value, and we're excited to fully deliver for our shareholders. Thank you for your time today and continued interest in National MI. We'll now take a five-minute break to set up for Q&A.
Okay, let's get started with the Q&A. We've been looking forward to your questions. John Swenson will interject questions from those attending virtually throughout the Q&A session. First question. Please state your name and your company.
Bill Goldman from Cetus Capital. So page 75, the blue mountain that you guys call it. So you know, an impressive slide for sure. I guess the question is, you know, net premium yield, which wasn't really discussed so much in this presentation, which I think is a major concern for the shareholders currently. I think the stock price has reflected that. Can you give us a sense of what kind of assumptions are built into net premium yield for that slide?
Adam, that's on your Blue Mountain, not mine. Why don't you address that?
Sure. Happy to. It's a good question, obviously. Look, premium yield is one component that drives our performance, right? It's a factor that influences our top line opportunity. Equally important is the growth that we achieve in our insurance in force. Most importantly today, premium yield is a representation, right? It's an outcome. It's how we price business in the aggregate in our portfolio. It also is impacted by cancellation activity, the turnover in our portfolio, as well as the decisions we make around funding because our reinsurance costs come through in our premium line as opposed to as an interest expense component. There's a range of items that in fact impact premium yield.
Most importantly for us, when we're building our business today and we're out in the market aggregating NIW and building insurance in force, the business that we're putting on the books today as a pricing matter is consistent with our goals of achieving strong mid-teens returns for each piece of business, not just in the aggregate, but for each piece of business that we bring on. We do focus on it. You know, as to where our premium yield moves going forward, it will depend on a range of factors, but the Blue Mountain of Profitability is one that we expect will emerge given what we're achieving from a pricing standpoint in the market today, where embedded rate is in our existing portfolio, and the growth opportunity that we see ahead from an insurance in force standpoint.
Okay. Thank you. Mark DeVries from Barclays. I was hoping you could drill down on the assumptions behind kind of the projection that we get to industry IIF of $2 trillion by 2024, because if you're right about that, it's a pretty significant tailwind for the whole industry.
Sure. Mark, it's a great question and happy to share a perspective. It is a massive opportunity, right? Industry insurance in force growth by 50% over the next three years is a tremendous opportunity for us and others in the sector. We believe that we'll be an outsized beneficiary as we drag our insurance in force share closer to where we are from a new business standpoint today. There's a natural tailwind for us that should drive outsized growth and accelerated opportunity. In terms of the underlying assumptions, candidly, I think they're somewhat conservative. When we look at it, we know how everybody's portfolio in the industry breaks down. We've got roughly $1.4 trillion of industry in force as of September 30th. I think it's $1.36 trillion.
We've applied the turnover rates that we see in our portfolio for like-for-like vintages to everybody else's production. We're assuming that turnover in, I'll call it, existing vintages that have experienced some of the highest turnover, right, the lowest persistency that we've ever seen continues through 2024. But that new business that's coming on this year, last year, and as we roll forward over the next few years will be stickier, right? Because we have record low underlying note rates. But the persistency assumptions that underpin that new business, I'll call it, are closely connected to that long-term 80% rough persistency that we see in the industry, even though we've got record low note rates. It might end up being conservative, as we look at it. It's a view that we're really excited about though because of the tremendous opportunity it presents.
Bose.
Okay. Thanks. Good morning. Bose George from KBW. So when you guys talk about the 15% ROE, how does it treat PMIERs' excess? Does it, you know, sort of assume some buffer in the equity number? Yeah.
It's another one for you, Adam.
Great. It's an active day. Bose, happy to address it. Our goal is to continue to deliver strong mid-teen returns, and we think we are well positioned to do so. Our ability to actually achieve that level of return and deliver through COVID reinforces that confidence. In terms of what the underlying assumptions are, really, it does make some assumptions obviously about, I'll call it, underwriting leverage. You'll see on the page that it does assume we get a little bit of improvement in the ratio of premiums earned to equity. That will come over time as we're deploying our significant capital position today and also managing excess build through capital distributions. There's no singular assumption around cushion in there. Over the long term, we do expect to target roughly a 35% PMIERs cushion.
That won't be static, but it depends on the risk environment. It depends on the growth opportunity that lies ahead for us. Long term, we do need to naturally maintain a bit of a cushion to absorb unexpected outcomes or outsized growth that we can deliver.
Doug Harter from Credit Suisse. I was just hoping you could talk about the level of home price appreciation we have seen, both from, you know, how that's embedded into your future credit loss expectations, but also kind of how that would factor into the persistency outlook as well.
Rob, why don't you start with the loss expectation part, and then Adam, you can finish on the persistency.
Yeah, you know, Adam mentioned some of this during his remarks, but we have a very young portfolio now, and we also have what has any age to it has a lot of house price appreciation built into it. You know, we run a scenario analysis every quarter on our portfolio at the loan level of mark to market every policy we have, more on an index basis, not so much an AVM basis. You know, we're seeing expected losses even under benign scenarios going forward or even under stress scenarios going forward, quite frankly, to be very, very low, historically low. So it's a great base to build our franchise upon. You know, what was it? Q3. I forget.
I always look at the moment, but as of Q3 we're at $143 billion, I think it was. There's a very, very low loss expectation in that portfolio, both because of the quality but also the equitization. You know, we start generally at 92 LTV on average when we insure a mortgage. If you get outsized house price appreciation, you know, the borrower generates equity very quickly. It's also affected the performance through COVID too, you know. I talked about the new payment deferral option. That payment deferral option works well when you have a lot of equity. You know, if you're taking 12 payments, 18 payments tacking on your balance, that's more acceptable to the borrower if they have a lot of equity in the first place.
It really helps from a lot of standpoints. We feel really good about where we expect the existing portfolio to perform going forward.
Great. I'll pick up on persistency. I'll make one additional observation, though, for I'll call it the go forward. Obviously, we see real health and sustainability to the HPA environment. Raj spent a lot of time talking about the supply-demand imbalance. It's one that we don't see clearing in the near term, and probably not until I'll call it the outer edge of an intermediate term period. That said, when we're pricing our business, when we're looking forward, when we're building estimates about loss performance, we're not assuming that we'll continue to see 5%, 7%, 10% HPA, even if that's what ultimately develops because of the supply-demand imbalance.
When we are looking forward, we're making, I'll call it far more conservative, and I think appropriately conservative assumptions around the path of house prices nationally, more closely aligned with what we see as a long-term historical average, which generally runs about 3% per annum. In the U.S., we tend to get about 2% nominal growth with inflation and 1% real appreciation in house prices because of supply-demand imbalance, growing population. Look, the reality is in periods of heavy inflation, real asset prices tend to appreciate. We focus on what might come after an inflationary environment. There's a variety of factors that we think will sustain house prices for the next several years. Inflation probably sets a floor, right? It costs more to build. The replacement product is more expensive, and so therefore, homes get sold for higher values.
Now, as a persistency matter, there's a balance, right, that we see. What really impacts our view of persistency is the underlying note rate. It's not necessarily the path of house price appreciation. There are factors that are influenced by house price appreciation. There, there's a path that borrowers have for canceling MI under certain valuation scenarios. Primarily what we see is that it's really the underlying note rate. Is a borrower ripe for refinancing? Do they have an opportunity to save money? With record low note rates today, our expectations for the refinancing environment going forward are naturally more muted. That's balanced, though, because the lower the note rate, the more of a borrower's monthly payment that goes towards principal amortization as opposed to interest expense.
What that means is that the borrower with a lower note rate, like for like, will achieve a 78% automatic cancellation under HPA on a little bit more of an accelerated timeframe. We consider those dynamics and how they play against each other from a persistency standpoint. Overall, we do expect that the business we're putting on will be some of the stickiest that we've ever written, because in a 2.8%-3% underlying note rate environment, that refinancing opportunity just really doesn't emerge, most likely going forward.
Norm, I don't want you to feel left out. With your pie chart, you described the number of new customers that you brought on during COVID. I think it was 187 or so. That essentially sets us up for good growth over the next couple of years, if we understand that correctly. The next question is of the remaining that you do not have a master policy agreement with, kind of that empty component of the pie chart. What's the distribution between large and small, and kind of where I'm going with this is if those are generally larger, and then they would have an outsized opportunity on a like for like new customer arrangement.
Just for the record, could we get your name and affiliation?
Bill Dezellem on Tieton Capital.
Great. Thanks, Bill.
All right, thanks. You know what? If you take a look specifically that group, you're talking about the 148 that we broke down on that particular screen. Okay. I guess the best way I could answer that would be if you look beyond the top five customers. This is the top 600 that we were focused on. We've got people outside of that. If you get beyond the top five or so customers in the country, that top 600 is large, but not. Let's say they relatively balance themselves out over that group. It's heavily weighted at the top.
That $60 billion opportunity based off of the size of the market that we're in now is well represented with that group. The 61, I believe, I think I had that number, 61 that we have a master policy with now. Those are the ones we're most excited about because that's the closest one. That's somebody that's already decided to do business with us. We're probably now in different stages of working through integration, so that we're within their system and that they can fully launch us. That's an exciting group for us. I apologize I don't recall the breakdown between each individual one. Next year, as we go into this, we have a very targeted list o f accounts that we have next steps with. I don't know if that answers your question.
Actually, I may do a follow-up.
Okay. Wait for the mic.
All right, the follow-up then would be, if there are five that are significantly outsized, how many of those five are you currently not working with? And are they on your targeted list for the next 12 months?
Well, everybody's on the targeted list. Some of them we are active with, but let's say we're not fully active with, so there's different ways to look at that. I think the best part for us when we take a look at the success that we've had, I believe at this particular time, we don't have a single customer that is greater than 5% of our overall business. I love the way that we've built our active account base because we're not heavily relying on any one single entity. That is exactly what we'd like to be able to continue.
This one has to be for Adam, right?
Hello. Mark Vannatter with conclusivestocks.com. This is a question probably most of the people in this room know, but I don't know, and maybe some others don't. It's about competition. I don't expect you to comment on that, but I'm concerned about what you're able to charge for the service you provide, mortgage insurance. Obviously, if FHA or some of your competitors drop their rates down, you may have to do something in the future. I'm not asking you to comment on that. You know, there's no way you could. What I am asking is where have you ranged over the last several years in what you've been able to charge? Is it going up a little? Down a little? How's it going?
Rob, you wanna start with that?
Yeah, I can answer that. You know, as Adam mentioned, first of all, we're a regulated industry, regulated in 50 states plus D.C., and they do regulate our rates. You know, we price, again, what we feel is appropriate for the economic environment, which is kind of what we have to do. When times are good, you know, rates will go down, and when times are bad, they'll go up. We've seen that. You know, we saw that during COVID, rates generally went up. There was a lot of uncertainty. You know, in hindsight, if we'd known house prices were gonna go up 20% in the past year, we might have priced differently.
At the time, it was scary, you know, we had to sudden stop the economy. As you can see, we reacted very quickly. Rates in the industry generally went up, across the board because, you know, there's a risk component to, our premium. Since then, they've come down a bit because the environment's got much better. You know, We saw the default rates coming down. You know, again, when COVID hit, there was an expectation, or not an expectation, some estimates that upwards of 20% of borrowers would take forbearance. That's a large number. That one had significant implications, for the entire housing market, quite frankly. You can get into these downward spirals and, fortunately, that didn't happen. You know, there's a lot of stimulus, economic and fiscal stimulus.
At the time, we took a conservative approach. We were a little faster, as we mentioned, than some of our competitors, but everyone took a conservative approach, so prices went up. It's hard to estimate how much, because, you know, there's so many different pricing factors, but probably 15%-20% at least. Since then, again, you know, I think appropriately, prices have come down a bit because the economy is much better. You know, it's always been a competitive market, you know, since the start of the industry. I think it's appropriately competitive. You know, we're doing the right thing, what we're supposed to do. What are.
You know what, I bring up the regulatory standpoint 'cause there was a lot of talk several years ago. There was a big decline in corporate tax rates. There was some expectation that we would keep the gains we had, but we just can't do that, right? I mean, we actually as state regulators send notes to every insurance company, not just ourselves, but every insurance company saying, "Next time you file rates, we expect the new corporate tax rates to be in your filing." You know, there's things like that where you just you know, you have to. We're allowed to generate an appropriate return, but not an excess return. I think we do generate an appropriate return for the risk we take. I think we'll continue to do so as an industry.
Great.
Good morning. It's Mark Hughes with Truist. Question for Mohammad. I'm curious what areas you're focusing on now, kind of the projects that you have right in front of you and what you can or may be doing to help Norm capture share in terms of new insurance written. There's a discussion about how the technology's disrupting the sales process. Curious from your perspective to hear more about that.
Absolutely. As you looked into all of our presentations today, there's two key areas where IT and operations are significantly helping our growth with sales. One of them is partnering with sales to educate our lender group how to get ahead of this technology transition, this digital transition. We provide, you know, wide range of consultative services to our lenders evaluating their digital roadmaps.
Even in some cases, creating some digital roadmap for them. We believe once we equip them with that right mindset, internally, we are ready to adapt digitization across technology. It will be easy for us to plug and play. That's one area we're heavily focused on with our sales team in NMI. Second area, which we also are focused on, is how to efficiently process these loans and how to make sure that these loans are getting to the right people in the right amount of time, early enough in the process where these don't sit by the wayside, and not get any attention. In between these two mix, I do believe we create an experience for our lenders which is frictionless. Hopefully, that answers your question.
Frank Bamberger, FP Asset Management. Two questions. One, if next year interest rates rise, how will that affect your volume and profits? The second question is on the capital distribution. Have there been any in the past? If you can comment on it, what might be expected and when? You may not be able to comment on that. I was just wondering what could be expected on a capital distribution.
Adam?
Sure. Frank, happy to answer both questions. In terms of interest rates and the potential impact on our business and profitability for next year, generally speaking, we do expect interest rates will rise. We expect that that will be reflected in mortgage note rates, but we expect the path up will be one that's managed and will present a constructive opportunity still for borrowers to get into homes. Really, the drivers of the record level of production that we see ahead, the record level of demand that we see are not, I'll call it interest rate sensitive at their core. They're real secular drivers, right? This is about people who are getting older, who wanna be in homes as a life matter, right, as a life cycle matter.
They're at an age where they're getting married, they're having kids, they want to establish roots in a particular community. The pandemic, Rob mentioned, it's driven an emotional and practical pull towards homeownership that we really haven't seen in the U.S. since the post-World War II period. Those themes, we expect, will continue to drive tremendous NIW opportunity, even if rates move modestly higher. At the same time, a move higher in rates has the effect of, I'll call it locking in our portfolio. Because a move higher in rates reduces the refinancing opportunity for existing borrowers in the portfolio. In many ways, a dollar of insurance in force is more valuable for us than a dollar of NIW. We like all the dollars. We want them coming in.
A dollar of insurance in force that we've already got in the portfolio has three key advantages. One, it's more efficient as an expense matter because we've already paid sales compensation. We've already gone through the process of underwriting it. And so that dollar of insurance in force that stays with us contributes additional revenue without attracting additional expense. It's also more likely to outperform as a loss matter simply because it's seasoned, right? It's got the benefit of record HPA behind it and equitization of our risk. So we really value the incremental insurance in force that may come through persistency in a higher rate environment. Hopefully that's helpful. As to the question on capital distributions, we have not distributed capital to shareholders yet. This is the first time that we've really rolled out this conversation.
I mean, I do want everybody in the audience to take away something consequential from the fact that I devoted so much time in my remarks to a focus on capital distribution. It's a near-term opportunity for us, and it's something that's a priority focus for me and the entire management team, right? We are building tremendous value. We are building capital organically. We're having tremendous success funding our business efficiently, and we want to make sure that shareholders can fully participate in that success alongside of us. I won't give you a specific timeline other than to say the pathway to capital distribution slide that I closed with, we are well along that pathway, and we're really excited about our opportunity to progress those conversations quickly.
Okay.
This is a question for Rob and possibly Adam, and I have a follow-up question for Adam. Rob, in your.
Could we just have your name and.
Oh, I'm sorry. Harry Fong from MKM Partners.
Yeah.
Rob, in your presentation, you highlighted the advantages of your risk management relative to the industry. Has that advantage already been reflected in how you set loss reserves?
Yeah. Loss reserving is an interesting process, for sure. There are some advantages I think that we have. It's hard to say exactly how one sets loss reserves. I can tell you how we do it. We use, as we do with our risk-based pricing, we use econometric models. We set reserves at the loan level. Part of the input is, you know, the level of equity that the borrower has in their house. There's some mark-to-market aspect there. There's expectations of future house prices, historical performance of the different attributes of the individual loan at the individual loan attributes, certainly the aging of the delinquency and things like that. We feel really good about the level of the loss reserves that, you know, loss reserving is interesting again, because you know, when you have times of uncertainty, you want to select something that's appropriately conservative.
We never look at our loss reserve as a number. You know, we have to post a number, but we really look at a range when we're setting them, and then we decide where is the most appropriate in that range to set them. But we feel good with what we feel really good about is, again, the way we approach reserving and the use of these models, because we can really reflect the economic environment at the time. You know, traditionally, a lot of loss reserving is done on actuarial triangles. You know, you look and see how things performed over the last 20 years or 10 years, what have you.
With the data we have available today and the modeling techniques, we can get a lot more accurate in how, you know, these loans expect to perform. So as we come out of COVID stress, you know, we'll be very responsive, but still, you know, conservative. We, you know, we don't wanna make a mistake here, but, we feel really good about, you know, the levels of reserve we set and that they're appropriately reflecting, how we think the path will look going forward.
Let me add a comment. While this isn't specific to the loss reserve, remember, because it's a loan-level review, it does tie back to the pillars. Because if you think about a loan-level review, we're looking at a lot more loans. What we're putting into that process that Rob just described are loans that we want in the portfolio, not just from the underwriting pillar, but also Rate GPS, because we're pricing and bringing in what we want and pushing away layered risks. Essentially it does tie back to the pillars on the loan-level review for loss reserves.
I would love to spend another hour with you on the subject matter, but we don't have that much time. Adam, in your slide reflecting the pro forma capital situation, it shows that a couple of things to be done in 2022 would get you an incremental $500 million. You already know your in-force book and the roll-off of that in-force book. If we take that in-force book out with no growth, where would that $500 million be?
You know, I'm sorry. I'm not sure the $500 million number that you're referencing. Maybe just to give you some clarity about how we roll forward and what portfolio growth or lack of growth would mean for excess capital. When we look at it, the pro forma that I've shared is not a function of what we'll develop in 2022. That's the pro forma for the three transactions that we've announced since the end of the Q3 . The ILN deal that we completed in October, the quota share agreement that we just put in place, as well as the revolver that and it closed. We put out a press release on Tuesday. That is in, that's done. There will likely be incremental opportunity that develops for us in 2022.
We've shared many times before that we're a programmatic issuer in the ILN market. We're now issuing an ILN roughly every six months. As the cycle breaks down, we'll probably do a deal sometime, early next year in the H1 and another transaction in the H2 . Those will create incremental capital. Now the interesting piece around how we structure our position, and it ties to the funding efficiency slide that I put up, is the overwhelming majority of our in-force portfolio exists under reinsurance arrangements, and it's incredibly valuable for many reasons, right? One reason, obviously, is that it insulates us against adverse outcomes and stress scenarios.
it also means when I think about our need for excess capital, any balance sheet intensive financial services firm, whether it's an insurance company of any flavor, a bank, a specialty finance company with other consumer credit exposures, any balance sheet intensive financial services firm, at its core, you keep excess capital for two reasons, right? One reason is the risk that you'll have an adverse development on your in-force exposure, that because of that adverse development attracts incremental capital, so you need to have something in reserve to plug a need to a certain extent, and then to fund growth, right? To fund growth that you expect will develop in excess of what you can organically fund yourself and what you might be comfortable, I'll call it, letting it run on the ability to get that capital externally.
For us, because all of our in-force portfolio effectively sits under reinsurance structures, not only do they ring-fence the risk, they also ring-fence the capital strain. Because in stress scenarios, reinsurance not only absorbs loss on an accordion-like basis, but it also provides us with incremental capital relief on an accordion-like basis, because as risk comes out, capital needs come out. For us, our view of excess capital, we never lose sight of the needs of the in-force portfolio, but it's much more driven by the runway that we wanna keep to fund new business growth that exceeds our organic capacity, which is why on my slide I spent so much time framing how we think about that runway and where we are today in terms of significant extension.
Hi. Good morning. It's Mihir Bhatia from Bank of America. Wanted to talk about expenses for a second. Given that you individually underwrite most of your loans versus the QC approach that a lot of your competitors do, what does that imply that you necessarily will have a higher cost per loan than your competitors and the trade-off being you end up with maybe a little bit better credit? What I'm really trying to understand is as you scale and you continue benefiting from scale, how low can your expense ratio go? Can you get to the low or I guess mid- to high teens that some of the newer MIs have got to, or are you kind of gonna be closer to the legacy MIs in the mid -20s?
Great. It's a good question. Look, generally speaking, my philosophy is I'd much rather have a dollar of expense than a dollar of loss, because a dollar of expense is only ever a dollar out the door. Whereas a dollar of loss is really an anticipated dollar, and in certain scenarios, it could become $5, right? When we think about how we balance, ultimately it's not about what is our expense ratio in isolation, it's really about our underwriting margin, right? What are our expectations for both expense ratio as well as how losses will develop to get to combined ratio and the inverse being underwriting margin. We've shared before that we expect we will continue to achieve scale in our expense ratio. That we expect our expense ratio will ultimately progress to the low- to mid-20s.
We're well on our way today. Look, obviously, we continue to focus on efficiency. We do like to touch every loan. Mohammed mentioned, though, that figuring out ways to touch every loan as efficiently as possible through, we still want human touch, but structuring that human touch in a way that makes it efficient, that puts our people in a position to be successful, to really increase the capacity to review loans. We don't expect that we will need to meaningfully increase the expense dollars that we're allocating to the individual risk underwriting as our volume continues to develop.
Hi, Aaron Saganovich, Citi. I just had a question about mortgage originators. You're seeing, you know, heightened competition among them. Some news stories about, you know, kind of a lax underwriting happening. You know, what are you seeing from new insurance written these days, and are you seeing any weakening of standards among originators?
I'll turn that one to Claudia.
Yeah. Certainly always a lot of competition, and there's increased competition in the origination side as well. We do not see any kind of degradation in the in the underwriting. I think this is also part of the reason why we look at loans more than other MI companies, whether it's through data or through actual live touch, because we understand then what we're putting in our portfolio. I don't think the originators are cutting corners. I really don't. I think most of the originators, the sound ones, especially what's called the top 600 that we work with primarily, they understand that manufacturing a loan and getting it to the secondary marketing and having a good reputation is critical.
What we see for us is that, we're working with the right originators, and the right manufacturing of those loans. We see really good manufacturing credit. Full doc, you know, it's a big part of being able to look at these loans. They're full documentation, and many of them have, you know, several appraisals in them based on the loan size.
Oh, all right. Sorry. Bill Goldman from Cetus Capital. The pricing question as it relates to like FHA, VA potentially reducing their pricing. I mean, how much does that really affect you guys, if at all? You know, isn't it really a different loan type? You know, is that much lower FICO score type borrower? I'm just curious how you guys think about that because there seems to be a lot of fear out there that FHA is gonna lower prices in 2022.
Yeah, I'll just, before I turn it over to Adam, I just. That fear is always there. The FHA is gonna do this or that. That's nothing new. I don't think it's particularly acute right now, but Adam why don't you.
Yeah, I think that's right. I'll share two perspectives on it. One is that your question and a bit of the answer that you provide is exactly spot on, right? It really is a different market. The borrowers that we serve sit at a different point in their credit profile, meaningfully different point. So a pricing reduction from the FHA, when we look at it, we've scaled different size reductions as sort of hypotheticals, has the potential, I'll call it, to shave a small amount of volume out of the private MI market, but not in a consequential way that would really cause us to meaningfully change what we put on the pages today. The other piece is that it's not necessarily gonna be made in isolation, right?
Changes that the FHA would take to pricing are changes because of the environment that we're in and the capital position of the FHA, right? They'll make decisions on their own. Those same factors might also come through in how the GSEs decide to price their product, right, the decisions that they make around the need for the size of LLPAs. They're not just gonna necessarily be made in isolation, particularly when I think the goals from a housing policy standpoint, each organization, right, are different. There's different perspectives that they have individually. There's different considerations they have around their capital position, their risk appetite.
The purpose that they're focused on, which is to increase access and affordability, is one that's generally, not just generally, that exists across the entirety of the housing finance ecosystem and may lend itself, I'll call it, to more balanced actions. If there is an FHA action, we don't know, but it would stand to reason that similar perspectives could come through in pricing that also could make GSE product that much more attractive.
Brad, we're bumping up against time.
Okay.
We wanna thank more than 50 people who joined online. All of their questions were answered.
Okay.
In our live discussion. Thanks so much, everyone. It's been a great morning. I'll turn it back to you.
Yeah. Well, thank you. I think John said it very well. We appreciate your joining us either here in the room or online today. We are excited for the chance to tell you our story. We hope we shared some of that excitement with you and that you're now excited as well. We are available. If you have questions that come to mind following up from today's program, please reach out to any of us. We're available for you all the time. Thank you very much. We appreciate it.