NMI Holdings Shines in Earnings Call Despite Challenges

NMI Holdings Inc ((NMIH)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for NMI Holdings Inc. painted a largely optimistic picture of the company’s financial health and future prospects. Despite noting increased claims expenses, slight declines in persistency, and some challenges in expense management, the overall sentiment was positive. The company demonstrated strong financial performance with record insurance-in-force and a favorable regulatory environment, suggesting a robust position and outlook.

Record Insurance-in-Force and Financial Performance

National MI concluded 2024 with impressive figures, achieving a record $210.2 billion in high-quality insurance-in-force. The company also reported a record adjusted net income of $365.6 million, marking a 13% increase compared to the previous year. This demonstrates the company’s strong financial performance and solidifies its position in the market.

Strong New Business and Customer Engagement

The company saw significant growth in new business, activating 118 new lenders and ending the year with over 1,600 active accounts. This contributed to generating $11.9 billion in new insurance written (NIW) volume in the fourth quarter and a total of $46 billion for the year, showcasing strong customer engagement and business expansion.

Outstanding Credit Performance

National MI boasts the fastest-growing, highest-quality insurance portfolio in the mortgage insurance industry. This strong credit performance has enabled a record number of borrowers to gain access to housing, underscoring the company’s pivotal role in the housing market.

Efficient Capital Management and Shareholder Returns

The company completed a successful debt refinancing as an investment-grade issuer and returned capital to shareholders through a repurchase program. It also achieved a record full-year adjusted return on equity of 17.6%, highlighting effective capital management and commitment to shareholder returns.

Positive Regulatory Environment and Market Conditions

Conversations with policymakers have been productive, with bipartisan recognition of the private mortgage insurance industry’s role in expanding homeownership. This positive regulatory environment bodes well for the company’s future operations and market conditions.

Increased Claims Expense

Despite the successes, the company faced increased claims expenses, which rose to $17.3 million in Q4 from $10.3 million in Q3. This was primarily due to new notices related to storm activities, such as Hurricanes Helene and Milton.

Persistency Decline

The persistency rate saw a slight decline, with twelve-month persistency at 84.6% in Q4, down from 85.5% in Q3. This minor decline indicates some challenges in maintaining existing insurance policies.

Expense Management Challenges

The company faced challenges in managing expenses, with underwriting and operating costs increasing to $31.1 million in Q4 from $29.2 million in Q3. The expense ratio also rose to 21.7%, reflecting the need for improved expense management strategies.

Forward-Looking Guidance

Looking ahead, National MI provided guidance for a robust 2025, emphasizing strong financial performance and strategic initiatives. The company plans to focus on customer service, technology leadership, and disciplined growth. They aim to enhance shareholder value through a refreshed share repurchase program totaling $330 million and maintain a strong capital position. The company’s commitment to compounding book value and delivering mid-teens returns remains steadfast.

In summary, NMI Holdings Inc.’s earnings call conveyed a predominantly positive outlook, marked by record financial achievements and strategic foresight. While facing some operational challenges, the company’s robust insurance portfolio, strong regulatory support, and shareholder-focused strategies position it well for continued success in the financial markets.