• Total Revenue: $166.1 million, a record for the third quarter.
• GAAP Net Income: $92.8 million or $1.15 per diluted share.
• Return on Equity: 17.5% for the third quarter.
• New Insurance Written (NIW) Volume: $12.2 billion.
• Primary Insurance in Force: $207.5 billion, up 2% from the previous quarter.
• 12-Month Persistency: 85.5% in the third quarter.
• Net Premiums Earned: $143.3 million.
• Investment Income: $22.5 million.
• Underwriting and Operating Expenses: $29.2 million.
• Expense Ratio: 20.3% for the quarter.
• Default Rate: 87 basis points at quarter end.
• Claims Expense: $10.3 million.
• Interest Expense: $7.1 million.
• Total Cash and Investments: $2.8 billion at quarter end.
• Shareholders' Equity: $2.2 billion.
• Book Value Per Share: $27.67.
• Common Stock Repurchase: $16.9 million, retiring 443,000 shares.

• Warning! GuruFocus has detected 4 Warning Sign with NMIH.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• NMI Holdings Inc (NASDAQ:NMIH) reported record financial results for the third quarter, with total revenue reaching $166.1 million.
• The company achieved a GAAP net income of $92.8 million, or $1.15 per diluted share, representing a 17.5% return on equity.
• NMI Holdings Inc (NASDAQ:NMIH) generated $12.2 billion of new insurance written (NIW) volume, ending the period with a record $207.5 billion of high-quality, high-performing insurance in force.
• The company's 12-month persistency rate was 85.5%, indicating strong retention of its insured portfolio.
• S&P upgraded NMI Holdings Inc (NASDAQ:NMIH)'s financial strength and issuer ratings to A- and BBB-, respectively, recognizing the quality of its insured portfolio and balanced capital structure.

Negative Points

• The default rate increased to 87 basis points at the end of the third quarter, up from 76 basis points at the end of the second quarter.
• Claims expense rose significantly to $10.3 million in the third quarter, compared to $276,000 in the second quarter.
• The company noted macroeconomic risks remain, necessitating a proactive stance on pricing, risk selection, and reinsurance decisions.
• Underwriting and operating expenses increased to $29.2 million in the third quarter, up from $28.3 million in the second quarter.
• The average reserve for notices of default decreased slightly, indicating potential variability in future claims exposure.

Q & A Highlights

Q: The year-over-year increase in new notices this quarter accelerated, and the cure rate was also lower. Is there anything episodic observed, or is it the impact of vintage seasoning? A: Adam Pollitzer, President & CEO, explained that the increase in defaults is expected due to normal seasonal trends and the natural seasoning of the portfolio. The default rate was 87 basis points, the lowest in the industry. Seasonal trends typically show an uptick in defaults in the second half of the year due to reduced cash inflows and increased spending during the holidays.

Q: Can you provide more color on the targeted changes made by risk cohort? A: Adam Pollitzer noted that NMI Holdings continuously monitors the market and adjusts pricing based on risk. The company made targeted changes in the third quarter, particularly in local markets like Florida and Texas, where affordability constraints are emerging.

Q: What is the mark-to-market LTV on the delinquent portfolio, and will claims paid remain low if home prices stay steady? A: Aurora Swithenbank, CFO, stated the mark-to-market LTV on the defaulted portfolio is roughly 73%. Adam Pollitzer added that reserves are established based on expected claim exposure, and while claims paid are minimal, reserves account for potential future claims.

Q: Can you discuss the competitive dynamics for NIW and the pricing on new business? A: Adam Pollitzer mentioned that industry pricing is stable and rational, with discipline across the market. While there are natural fluctuations in market share, the pricing environment remains balanced and constructive.

Q: How do you expect expenses to trend, and what would bring you closer to the high end of your expense ratio range? A: Aurora Swithenbank noted that while there is natural growth in expenses due to inflation, there are no specific near-term investments that would significantly alter the expense ratio. Adam Pollitzer added that long-term investments in people, systems, and risk management are ongoing.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.