Yahoo Finance NMI Holdings, Inc. (NASDAQ:NMIH) Q1 2024 Earnings Call Transcript
NMI Holdings, Inc. (NASDAQ:NMIH) Q1 2024 Earnings Call Transcript April 30, 2024
NMI Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon and welcome to the NMI Holdings First Quarter 2024 Earnings Conference Call. All participants will be listen-only mode. [Operator Instructions] Please note, this event is being recorded. After today's presentation there'll be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mr. John Swenson. Please go ahead.
John Swenson: Thank you. Good afternoon and welcome to the 2024 first quarter conference call for National MI. I'm John Swenson, Vice President of Investor Relations and Treasury. Joining us on the call today are Brad Shuster, Executive Chairman; Adam Pollitzer, President and Chief Executive Officer; Ravi Mallela, Chief Financial Officer; Andrew Greenberg, our senior Vice President of Finance and Nick Realmuto, our Controller. Financial results for the quarter were released after the close today. The press release may be accessed on NMI's website located at nationalmi.com under the Investors tab. During the course of this call, we may make comments about our expectations for the future. Actual results could differ materially from those contained in these forward-looking statements.
Additional information about the factors that could cause actual results or trends to differ materially from those discussed on the call can be found on our website or through our regulatory filings with the SEC. If and to the extent the company makes forward-looking statements, we do not undertake any obligation to update those statements in the future in light of subsequent developments. Further, no one should rely on the fact that the guidance of such statements is current at any time other than the time of this call. Also note that on this call, we may refer to certain non-GAAP measures. In today's press release and on our website, we provided a reconciliation of these measures to the most comparable measures under GAAP. Now, I'll turn the call over to Brad.
Bradley Shuster: Thank you, John, and good afternoon, everyone. As we talk today, I'm greatly encouraged, both by the continued resilience that we see in the broader macro environment and housing market and by the significant and consistent success we're achieving across our business. In the first quarter, National MI again delivered standout operating performance, continued growth in our insured portfolio, and record financial results. Our lenders and their borrowers continue to turn to us for critical down payment support. And in the first quarter, we generated $9.4 billion of NIW volume, ending the period with a record $199.4 billion of high-quality, high-performing primary insurance in-force. In Washington, our conversations remain active and constructive.
Policymakers, regulators, the FHFA and the GSEs remain keenly focused on promoting broader access and affordability to the housing market for all borrowers, and we believe there is broad recognition of the unique and valuable role that the private mortgage insurance industry plays in this regard. At National MI, we recognize the need to provide borrowers with a fair and equitable opportunity to access the housing market, establish a community identity, and build long-term wealth through home ownership. We are actively engaged and committed to equally supporting borrowers from all communities, and are proud to have helped nearly 1.8 million borrowers to-date realize their home ownership goals. Overall, we had a terrific first quarter and are well-positioned to continue to lead with impact and drive value for our people, our customers and the borrowers, and our shareholders going forward.
With that, let me turn it over to Adam.
Adam Pollitzer: Thank you, Brad, and good afternoon, everyone. National MI continued to outperform in the first quarter, delivering significant new business production, consistent growth in our insured portfolio, and record financial results. We generated $9.4 billion of NIW volume and ended the period with a record $199.4 billion of high-quality, high-performing primary insurance in-force. Total revenue in the first quarter was a record $156.3 million, and we delivered record GAAP net income of $89 million. EPS was a record $1.08 per diluted share, up 8% compared to the fourth quarter, and 24% compared to the first quarter of 2023, and we generated an 18.2% return on equity. Overall, we had an exceptionally strong quarter and are confident as we look ahead.
The macro environment and housing market in particular have remained resilient in the face of elevated interest rates. Our lender customers and their borrowers continue to rely on us in size through critical down payment support, and we've seen attractive and sustained new business opportunity fueled by long-term secular trends. We have an exceptionally high-quality insured portfolio, and our credit performance continues to stand ahead. Our persistency remains well above historical trend, and when paired with our current NIW volume, has helped to drive consistent growth and embedded value gains in our insured book. And we continue to manage our expenses in capital position with discipline and efficiency, building a robust balance sheet that is supported by the significant earnings power of our platform.
Notwithstanding these strong positives, however, macro risks do remain, and we've maintained a proactive stance with respect to our pricing, risk selection, and reinsurance decisioning. It's an approach that has served us well and continues to be the prudent and appropriate course. More broadly, we've been encouraged by the continued discipline that we've seen across the private MI market. Underwriting standards remain rigorous, and the pricing environment remains balanced and constructive. Overall, we had a terrific quarter, delivering strong operating performance, continued growth in our insured portfolio, and record financial results. We started the year with significant momentum, and looking ahead, we are well-positioned to continue to serve our customers and their borrowers, invest in our employees and their success, drive growth in our high-quality insured portfolio, and deliver through the cycle growth, returns, and value for our shareholders.
With that, I'll turn it over to Ravi.
Ravi Mallela: Thank you, Adam. We delivered records financial results in the first quarter with significant new business production, consistent growth in our high-quality insured portfolio, record top-line performance, favorable credit experience, continued expense efficiency, and record net income and earnings per share. Total revenue in the first quarter was a record $156.3 million. GAAP net income was a record $89 million. EPS was a record $1.08 per diluted share, and our return on equity was 18.2%. We generated 9.4 billion of NIW, and our primary insurance in-force grew to 199.4 billion, up 1.2% from the end of the fourth quarter, and 6.8% compared to the first quarter of 2023. 12-month persistency was 85.8% in the first quarter, compared to 86.1% in the fourth quarter.
Persistency remains well above historical trend and continues to serve as an important driver of the growth and embedded value of our insured portfolio. Net premiums earned in the first quarter were a record $136.7 million, compared to $132.9 million in the fourth quarter. We earned $586,000 from the cancellation of single premium policies in the first quarter, compared to $983,000 in the fourth quarter. Net yield for the quarter was 27.6 basis points, up from 27.1 basis points in the fourth quarter. Core yield, which excludes the cost of our reinsurance coverage and the contribution from cancellation earnings, was 34.1 basis points, up from 33.8 basis points in the fourth quarter. Investment income was $19.4 million in the first quarter, compared to $18.2 million in the fourth quarter.
We saw continued growth in investment income during the quarter, as we deployed new cash flows and reinvested rolling maturities at favorable new money rates. Total revenue was a record $156.3 million in the first quarter, up 3.2% compared to the fourth quarter, and 14.2% compared to the first quarter of 2023. Underwriting and operating expenses were $29.8 million in the first quarter, compared to $29.7 million in the fourth quarter. Our expense ratio was 21.8%, compared to 22.4% in the fourth quarter. We had 5,109 defaults at March 31st, compared to 5,099 at December 31st, and our default rate declined to 80 basis points at quarter end. Claims expense in the first quarter was $3.7 million, compared to $8.2 million in the fourth quarter. We have a uniquely high quality insured portfolio, and our claims experience continues to benefit from the discipline with which we've shaped our book, and the strong position of our existing borrowers, as well as the broad resiliency we've seen in the housing market.
Interest expense in the quarter was $8 million. Net income was a record $89 million, up 6.8% compared to the fourth quarter, and 19.6% compared to the first quarter of 2023. Diluted EPS was a record $1.08 per share, up 7.5% compared to the fourth quarter, and 23.5% compared to the first quarter of 2023. Total cash and investments were $2.5 billion at quarter end, including $92 million of cash and investments at the holding company. Shareholder's equity as of March 31st was $2 billion, and book value per share was $24.56. Book value per share, excluding the impact of net unrealized gains and losses in the investment portfolio, was $26.42. Up 3.4% compared to the fourth quarter, and 17.1% compared to the first quarter of last year. In the first quarter, we repurchased $25.2 million of common stock, retiring 840,000 shares at an average price of $29.98.
As of March 31st, we had 152 million of repurchase capacity remaining under our existing program. At quarter end, we reported total available assets under PMIERs of $2.8 billion, and risk-based required assets of $1.6 billion. Excess available assets were $1.3 billion. Overall, we delivered standout financial results during the quarter, with consistent growth in our high-quality insured portfolio, and record top-line performance, favorable credit experience, and continued expense efficiency, driving record bottom-line profitability and strong returns. With that, let me turn it back to Adam.
Adam Pollitzer: Thank you, Ravi. We had a terrific quarter, once again, delivering significant new business production, continued growth in our insured portfolio, and record financial performance. Looking forward, we're encouraged by the continued resiliency that we see in the macro environment and housing market, and we are well-positioned to continue delivering differentiated growth, returns, and value for our shareholders. We are leading the market with discipline and distinction. Sustainable secular trends are fueling a long-term private MI industry opportunity, and we are well-positioned with a strong customer franchise, a talented team that's driving us forward every day, an exceptionally high-quality book covered by a comprehensive set of risk transfer solutions, a robust balance sheet, and the significant earnings power of our platform.
Taking together, we're confident as we look forward. Before closing, I also want to take a moment to acknowledge Ravi, and thank him for the important contributions he's made to National MI success over the past two and a half years. Ravi has brought a valuable strategic perspective to our management team, and he's been an important business partner for me. Under his leadership as CFO, we've delivered standout operating performance and record financial results quarter after quarter. We've continued to lead with innovation in the risk transfer markets, has successfully introduced our share repurchase program, and has made the right investments to position National MI for continued long-term success. So thank you, Ravi. Our new CFO, Aurora Swithenbank, will be joining us in May, and we're excited to welcome her at a time when we have such significant momentum across our business.
With that, I'll ask the operator to come back on so we can take your questions.
Operator: Thank you. We will now begin the question and answer session. [Operator Instructions] Your first question comes from Bose George with KBW. Please go ahead.
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