November 6, 2014

NMI Holdings, Inc. Reports Third Quarter 2014 Financial Results

EMERYVILLE, Calif., Nov. 6, 2014 /PRNewswire/ -- NMI Holdings, Inc., (NASDAQ:  NMIH) (the "Company"), the parent company of National Mortgage Insurance Corporation (National MI), a U.S.-based, private mortgage insurance company, today reported its results for the three and nine months ended September 30, 2014.  The Company reported a net loss for the three months ended September 30, 2014 of $11.0 million or $0.19 per share.  The Company reported a net loss for the nine months ended September 30, 2014 of $38.9 million, or $0.67 per share.

For the three months ended September 30, 2014, the Company had primary new insurance written of $974.9 million compared to $429.9 million of primary new insurance written for the three months ended June 30, 2014.  The Company did not write any new pool insurance in the first nine months of 2014.

"National MI saw tremendous growth in our new insurance written and risk-in-force during the third quarter," said Bradley Shuster, president and CEO of NMI Holdings, Inc. "National MI continues to increase our footprint in the market place and continues to acquire new customers while strengthening existing customer relationships."

As of September 30, 2014, the Company had primary risk-in-force of $435.7 million compared to primary risk-in-force of $220.9 million as of June 30, 2014.  Pool risk-in-force was unchanged as of September 30, 2014 remaining at $93.1 million.

Total revenues for the third quarter were $6.6 million, comprised of $3.9 million in premiums earned, $1.3 million of investment income, $0.1 million of net realized gains and $1.2 million of gain from change in the fair value of the warrant liability.  Total expenses for the quarter were $17.9 million.

Total revenues for the first nine months of 2014 were $15.4 million, comprised of $7.9 million in premiums earned, $4.3 million of investment income, $0.1 million of net realized gains and $3.0 million of gain from the change in the fair value of the warrant liability.  Total expenses for the nine months ended September 30, 2014 were $55.8 million compared to $45.5 million for the nine months ended September 30, 2013, driven primarily by expanding operations and the hiring of personnel.

At September 30, 2014, the Company had approximately $446.0 million of cash and investments and book equity of $434.4 million or $7.44 in book value per share, based on shares outstanding of 58,363,334.  This book value excludes any benefit attributable to the Company's net deferred tax asset.

Cash and investments at the holding company stood at $172.9 million at September 30, 2014, excluding investments in the Company's insurance subsidiaries. Cash and investments at the Company's insurance subsidiaries at September 30, 2014 was $273.2 million.

"I am pleased with the solid growth we have seen in the third quarter. We believe there is tremendous opportunity ahead for National MI and I am confident that we have positioned ourselves very well to realize our potential," Shuster added.  "I, my executive management team and every employee at National MI are looking forward to closing out 2014, our first full year of writing business, on a very strong note," Shuster said.

Conference Call and Webcast Details

NMI Holdings, Inc. will hold a conference call today, November 6, 2014 at 2:00 p.m. Pacific time / 5:00 p.m. Eastern time to allow analysts and stockholders the opportunity to hear management discuss the Company's quarterly results.  The conference call will be broadcast live on the Company's website, on the "Events and Presentations" page of the "Investors" section at http://ir.nationalmi.com.  The call may also be accessed by dialing (888) 734-0328 inside the U.S., or (678) 894-3054 for international callers, using conference ID: 15462916 or by referencing NMI Holdings, Inc.  Investors and analysts are asked to dial-in ten minutes before the conference call begins.

About National MI
National Mortgage Insurance Corporation (National MI), a subsidiary of NMI Holdings, Inc. (NASDAQ: NMIH), is a U.S.-based, private mortgage insurance company enabling low down payment borrowers to realize home ownership while protecting lenders and investors against losses related to a borrower's default. To learn more, please visit www.nationalmi.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this press release or any other written or oral statements made by or on behalf of the Company in connection therewith may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the U.S. Private Securities Litigation Reform Act of 1995 ("PSLRA").  The PSLRA provides a "safe harbor" for any forward-looking statements.  All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements, including any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance.  These statements are often, but not always, made through the use of words or phrases such as "anticipate," "believes," "can," "could," "may," "predicts," "potential," "should," "will," "estimate," "plans," "projects," "continuing," "ongoing," "expects," "intends" and similar words or phrases.  All forward-looking statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that may turn out to be inaccurate and could cause actual results to differ materially from those expressed in them.  Many risks and uncertainties are inherent in our industry and markets.  Others are more specific to our business and operations.  Important factors that could cause actual events or results to differ materially from those indicated in such statements include, but are not limited to:  our ability to implement our business strategy, including the development and maintenance of our customer base and implementing continued enhancements to our infrastructure and systems; changes in the business practices of the GSEs, including the timing of and final requirements in their proposed new mortgage insurer eligibility requirements or any of their decisions that may impact the use of private mortgage insurance; actions of existing competitors; changes to laws and regulations that impact the role of the GSEs in the secondary market or the use of private mortgage insurance and general economic downturns and volatility.  These risks and uncertainties also include, but are not limited to, those set forth under the heading "Risk Factors" in our most recent Registration Statement on Form S-1, and described from time to time in subsequent reports filed with the U.S. Securities and Exchange Commission, including our Risk Factors detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2013, as updated from time to time in subsequent reports filed with the SEC.  All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.  Any forward-looking statement speaks only as of the date on which it is made and we undertake no obligation to publicly update or revise any forward-looking statement to reflect new information, future events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events except as required by law.

Media Contact:
Mary McGarity
Strategic Vantage Marketing & Public Relations
(203) 513-2721
MaryMcGarity@StrategicVantage.com 


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


For the Three Months Ended September 30,


For the Nine Months Ended September 30,


2014



2013



2014



2013


Revenues

(In Thousands, except for share data)

Premiums written












Direct

$

9,661



$

482



$

19,890



$

483


Net premiums written

9,661



482



19,890



483


Increase in unearned premiums

(5,761)





(11,993)




Net premiums earned

3,900



482



7,897



483


Net investment income

1,342



1,519



4,299



3,336


Net realized investment gains (losses)

134



(308)



134



172


Gain (loss) from change in fair value of warrant liability

1,240



468



3,009



(610)


Gain from settlement of warrants





37




Total Revenues

6,616



2,161



15,376



3,381


Expenses












Insurance claims and claims expenses

(26)





2




Amortization of deferred policy acquisition costs

47





108




Other underwriting and operating expenses

17,848



16,034



55,725



45,480


Total Expenses

17,869



16,034



55,835



45,480


Loss before income taxes

(11,253)



(13,873)



(40,459)



(42,099)


Income tax benefit

(277)





(1,574)




Net Loss

$

(10,976)



$

(13,873)



$

(38,885)



$

(42,099)














Loss per share












Basic and diluted loss per share

$

(0.19)



$

(0.25)



$

(0.67)



$

(0.76)


Weighted average common shares outstanding

58,363,334



55,637,480



58,239,251



55,589,674


 


CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


September 30, 2014


December 31, 2013


(In Thousands)

Total investment portfolio

$

308,564



$

409,088


Cash and cash equivalents

137,485



55,929


Deferred policy acquisition costs, net

1,651



90


Software and equipment, net

10,777



8,876


Other assets

7,101



7,236


Total Assets

$

465,578



$

481,219


Reserve for insurance claims and claims expenses

$

2



$


Accounts payable and accrued expenses

13,691



10,052


Unearned premiums

13,440



1,446


Warrant liability

3,312



6,371


Current tax payable

602




Deferred tax liability

133



133


Total Liabilities

31,180



18,002


Total Shareholders' Equity

434,398



463,217


Total Liabilities and Shareholders' Equity

$

465,578



$

481,219


 

New Insurance Written ("NIW"), Insurance in Force ("IIF") and Risk in Force ("RIF") 

A significant portion of our NIW in the first nine months of 2014 was comprised of single premium policies.  Our single premium polices are currently written in two ways:  single premium policies written on a loan by loan basis ("Single") and single premium policies written on individual loans that are aggregated and delivered by the lender in a single transaction ("Aggregated Single").  Prior to writing Aggregated Single policies, the lender solicits single premium bids from us and other private MI companies.  Because of the lower acquisition cost, the competitive bidding process and traditionally higher FICO scores associated with these policies, Aggregated Single policies have lower premiums than our Single premium policies.

While our single premium policies (including Single and Aggregated Single) currently represent the majority of our NIW and IIF, we expect the mix of our policy types to change meaningfully in future quarters with an increasing percentage of monthly premium policies.  Our current long term expectation is for our total single premium polices (including Single and Aggregated Single) to collectively represent ten to twenty percent of our NIW and IIF as we expand our customer base and our business develops.

The tables on the following pages provide information on our IIF by different metrics for the periods presented, including weighted average premiums (in basis points), FICO distributions, LTVs, premiums written and earned, average loan sizes and geographic distribution.

The table below shows NIW, IIF, RIF, policies in force, the weighted-average coverage and loans in default, by quarter, for the last five quarters, for our primary book.

 

Primary

Three Months Ended


September 30,
2014


June 30,
2014


March 31,
2014


December 31,
2013


September 30,
2013


(Dollars in Thousands)

New insurance written

$

974,910



$

429,944



$

354,313



$

157,568



$

3,560


Insurance in force (1)

$

1,812,956



$

939,753



$

514,796



$

161,731



$

4,604


Risk in force (1)

$

435,722



$

220,949



$

115,467



$

36,516



$

1,196


Policies in force (1)

7,628



3,865



2,072



653



22


Weighted-average coverage (2)

24.0

%


23.5

%


22.4

%


22.6

%


26.0

%

Loans in default (count)



1








Risk in force on defaulted loans

$



$

100



$



$



$



(1) Reported as of the end of the period.

(2) End of period RIF divided by IIF.

 

The table below shows primary and pool IIF, NIW and premiums written and earned by policy type.

 

Primary and Pool


As of and for the Three Months Ended September 30, 2014


As of and for the Three Months Ended June 30, 2014


IIF

NIW

Premiums Written

Premiums Earned


IIF

NIW

Premiums Written

Premiums Earned


(In Thousands)

Monthly

$

690,081


$

423,625


$

883


$

883



$

277,490


$

206,767


$

301


$

301


Single

257,557


132,973


2,771


353



125,056


97,037


2,086


224


Aggregated Single

865,318


418,312


4,666


1,323



537,207


126,140


1,292


196


Total Primary

1,812,956


974,910


8,320


2,559



939,753


429,944


3,679


721




















Pool

4,822,061



1,341


1,341



4,936,751



1,372


1,372


Total

$

6,635,017


$

974,910


$

9,661


$

3,900



$

5,876,504


$

429,944


$

5,051


$

2,093


 


As of and for the Three Months Ended March 31, 2014


As of and for the Three Months Ended December 31, 2013


IIF

NIW

Premiums Written

Premiums Earned


IIF

NIW

Premiums Written

Premiums Earned


(In Thousands)

Monthly

$

73,734


$

50,136


$

99


$

99



$

24,558


$

20,395


$

25


$

25


Single

28,020


26,518


535


56



1,790


1,790


47


7


Aggregated Single

413,042


277,659


3,150


355



135,383


135,383


1,572


166


Total Primary

514,796


354,313


3,784


510



161,731


157,568


1,644


198




















Pool

5,028,677



1,394


1,394



5,089,517



1,414


1,414


Total

$

5,543,473


$

354,313


$

5,178


$

1,904



$

5,251,248


$

157,568


$

3,058


$

1,612


 


As of and for the Three Months ended September 30, 2013


IIF

NIW

Premiums Written

Premiums Earned


(In Thousands)

Monthly

$

4,604


$

3,560


$

6


$

6


Single





Aggregated Single





Total Primary

4,604


3,560


6


6











Pool

5,171,664


5,171,664


476


476


Total

$

5,176,268


$

5,175,224


$

482


$

482


 

The tables below show the initial weighted average premium, in basis points, the weighted average FICO and the weighted average LTV, by policy type, for the quarter in which the policy was originated.

 

Weighted Average Premium





September 30,
2014


June 30,
2014


March 31,
2014


December 31,
2013


September 30,
2013


(Shown in Basis Points)

Monthly

59



58



56



64



66


Single

208



215



205



251




Aggregated Single

112



102



113



116




 

Weighted Average FICO





September 30,
2014


June 30,
2014


March 31,
2014


December 31,
2013


September 30,
2013

Monthly

746



747



749



747



762


Single

747



746



752



735




Aggregated Single

760



758



759



759




 

Weighted Average LTV





September 30,
2014


June 30,
2014


March 31,
2014


December 31,
2013


September 30,
2013

Monthly

92

%


93

%


92

%


93

%


92

%

Single

92



93



92



92




Aggregated Single

89



90



90



90




 

The table below reflects our total NIW, IIF and RIF by FICO as of September 30, 2014.

 

Total Portfolio

NIW


IIF


RIF


(Dollars in Thousands)


As of September 30, 2014

> = 740

$

5,460,869


77.0

%


$

5,104,453


76.9

%


$

357,517


67.6

%

680 - 739

1,431,757


20.2



1,344,541


20.3



156,291


29.6


620 - 679

200,377


2.8



186,023


2.8



15,004


2.8


< = 619









Total

$

7,093,003


100.0

%


$

6,635,017


100.0

%


$

528,812


100.0

%

 

The table below reflects our primary NIW, IIF and RIF by FICO for the 2014 and 2013 books as of September 30, 2014.

 

Primary - 2014 Book

NIW


IIF


RIF


(Dollars in Thousands)


As of September 30, 2014

> = 740

$

1,160,118


65.9

%


$

1,106,148


65.6

%


$

262,386


64.6

%

680 - 739

551,900


31.4



532,697


31.6



131,980


32.5


620 - 679

47,149


2.7



46,439


2.8



12,022


2.9


< = 619









Total

$

1,759,167


100.0

%


$

1,685,284


100.0

%


$

406,388


100.0

%

 

Primary - 2013 Book

NIW *


IIF


RIF


(Dollars in Thousands)


As of September 30, 2014

> = 740

$

113,907


70.2

%


$

87,918


68.9

%


$

19,829


67.6

%

680 - 739

47,102


29.0



38,751


30.4



9,232


31.5


620 - 679

1,163


0.8



1,003


0.7



273


0.9


< = 619









Total

$

162,172


100.0

%


$

127,672


100.0

%


$

29,334


100.0

%

 

The table below reflects our pool NIW, IIF and RIF by FICO for the 2013 book as of September 30, 2014.

 

Pool - 2013 Book

NIW *


IIF


RIF


(Dollars in Thousands)


As of September 30, 2014

> = 740

$

4,186,844


81.0

%


$

3,910,387


81.1

%


$

75,302


80.9

%

680 - 739

832,755


16.1



773,093


16.0



15,079


16.2


620 - 679

152,065


2.9



138,581


2.9



2,709


2.9


< = 619









Total

$

5,171,664


100.0

%


$

4,822,061


100.0

%


$

93,090


100.0

%

 

*          Represents total NIW for the year ended December 31, 2013.

The tables below reflect our average primary loan size by FICO and the percentage of our RIF by loan type.

 


September 30, 2014


December 31, 2013

Average Primary Loan Size by FICO

(In Thousands)

> = 740

$

241



$

253


680 - 739

233



237


620 - 679

216



194


< = 619




 

Percentage of RIF by Loan Type

Primary


Pool

As of September 30, 2014






Fixed

94.2

%


100.0

%

Adjustable rate mortgages:






Less than five years

0.1




Five years and longer

5.7




Total

100.0

%


100.0

%

 

The following chart reflects our RIF by LTV ratio.  We calculate the LTV ratio of a loan as a percentage of the original loan amount to the original value of the property securing the loan.  In general, the lower the LTV ratio the lower the likelihood of a default, and for loans that default, a lower LTV ratio generally results in a lower severity for any claim, as the borrower has a higher amount of equity in the property.

 

Total RIF by LTV

Primary


Pool


RIF


% of Total LTV


Policy Count


RIF


% of Total LTV


Policy Count

As of September 30, 2014

(Dollars in Thousands)

95.01% and above

$

2,236



0.5

%


39



$



%



90.01% to 95.00%

234,174



53.7



3,583








85.01% to 90.00%

164,794



37.8



2,735








80.01% to 85.00%

34,518



8.0



1,271








80.00% and below







93,090



100.0



20,890


Total RIF

$

435,722



100.0

%


7,628



$

93,090



100.0

%


20,890


 

The following charts show the distribution by state of our IIF and RIF for primary and pool insurance.  The distribution of risk across the states as of September 30, 2014 is not necessarily representative of the geographic distribution we expect in the future.

 

Top 10 Primary IIF and RIF by State

IIF


RIF

As of September 30, 2014


1.

California

18.5

%


18.2

%

2.

Texas

6.1



6.3


3.

Florida

4.4



4.4


4.

Michigan

4.0



4.3


5.

Virginia

4.0



4.0


6.

Pennsylvania

4.0



3.8


7.

North Carolina

3.7



3.8


8.

Ohio

3.5



3.6


9.

Arizona

3.3



3.4


10.

Georgia

3.3



3.4



Total

54.8

%


55.2

%














 

Top 10 Pool IIF and RIF by State

IIF


RIF

As of September 30, 2014


1.

California

28.6

%


28.0

%

2.

Texas

5.4



5.5


3.

Colorado

3.9



3.9


4.

Washington

3.9



3.8


5.

Massachusetts

3.7



3.6


6.

Virginia

3.7



3.7


7.

Illinois

3.6



3.7


8.

New York

2.9



2.9


9.

Florida

2.7



2.8


10.

New Jersey

2.7



2.7



Total

61.1

%


60.6

%














 

SOURCE NMI Holdings, Inc.

News Provided by Acquire Media


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