NMI Holdings Inc.: NMI Holdings, Inc. Reports Second Quarter Net Income of $2 Million, Enters Into Reinsurance Treaty to Support Growth

Tickers: NMIH
August 2, 2016

EMERYVILLE, CA -- (Marketwired) -- 08/02/16 --

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NMI Holdings, Inc.(NASDAQ: NMIH)today reported net income of $2.0 million, or $0.03 per share, for the second quarter ended June 30, 2016. This compares with a net loss of $3.9 million, or $(0.07) per share, in the prior quarter and a net loss of $10.4 million, or $(0.18) per share, in the second quarter of 2015. Total revenue for the quarter was $29.6 million, up 33% from $22.2 million in the prior quarter and up 171% from $10.9 million in the second quarter of 2015.

The company also announced today that it has entered into a quota share reinsurance agreement with a panel of third-party reinsurance providers. The company expects that Fannie Mae and Freddie Mac will allow full credit under the Private Mortgage Insurer Eligibility Requirements (PMIERs) for risk ceded under the agreement.

Bradley Shuster, chairman and CEO of National MI, said, 'In the second quarter we achieved GAAP profitability, a significant milestone for this young company just three years after writing our first mortgage insurance policy. It is a reflection of our dedication to customer service, our disciplined approach to account development, and diligent management of both risk and expenses. We are grateful to our customers for their belief in us, our employees for their hard work and loyalty, and our shareholders and other business partners for their support of National MI since its founding. We are at an exciting inflection point in our development as we now have visibility to rapid earnings growth for many years to come. Looking ahead, we now expect to report pre-tax income of $7 to $10 million for the full year 2016, and are reaffirming our guidance for pre-tax income of at least $60 million in 2017.'

  • As of June 30, 2016, the company had primary insurance-in-force of $23.6 billion, up 27% from $18.6 billion at the prior quarter end and up 229% over $7.2 billion as of June 30, 2015.
  • Premiums earned for the quarter were $26.0 million, up 31% from $19.8 million in the prior quarter and up 194% over $8.9 million in the same quarter a year ago.
  • Total NIW of $5.8 billion in the second quarter was up 37% over $4.3 billion in the prior quarter and up 129% over $2.5 billion in the second quarter of 2015.
  • Monthly premium NIW was $3.7 billion, an increase of 49% over $2.5 billion in the prior quarter and an increase of 153% over the second quarter of 2015. Single premium NIW of $2.1 billion was up 21% from the prior quarter and up 96% compared with the same quarter a year ago.
  • Total underwriting and operating expenses in the second quarter were $23.2 million, including share-based compensation expense of $1.8 million. This compares with total underwriting and operating expenses of $22.7 million, including $1.4 million of share-based compensation, in the prior quarter, and $20.9 million, including $2.1 million of share-based compensation, in the same quarter a year ago.
  • Loss expense for the quarter was $0.4 million, resulting in a loss ratio of 1.8%.
  • As of the end of the second quarter, the company had approved master policies in place with 1,061 customers, up from 1,023 as of the end of the prior quarter, and up from 842 as of the end of the second quarter of 2015. Customers delivering NIW in the quarter grew to a new high of 518, which compares with 469 in the prior quarter and 340 in the same quarter a year ago. On an ever-to-date basis, customers delivering NIW grew to 649.
  • At quarter-end, cash and investments were $654 million, including $78 million at the holding company, and book equity was $422 million, equal to $7.14 per share. This book value excludes any benefit attributable to the company's deferred tax asset of approximately $66 million as of Dec. 31, 2015.
  • At quarter-end, the company had total PMIERs available assets of $432 million, which compares with risk- based required assets under PMIERs of $377 million.
Quarter Quarter Quarter
Ended Ended Ended Growth
Growth
6/30/2016 3/31/2016 6/30/2015 Q/Q Y/Y
Primary Insurance-in-Force ($billions) 23.62 18.56 7.19 27 % 228 %
New Insurance Written - NIW ($billions)
Monthly premium 3.70 2.49 1.46 49 % 153 %
Single premium 2.14 1.76 1.09 21 % 96 %
Total 5.84 4.25 2.55 37 % 129 %
Premiums Earned ($millions) 26.04 19.81 8.86 31 % 194 %
Underwriting & Operating Expense ($millions) 23.23 22.67 20.91 2 % 11 %
Loss Expense ($millions) 0.47 0.46 - 3 % -
Loss Ratio 1.8 % 2.3 % -
Cash & Investments ($millions) 654 630 434 4 % 51 %
Book Equity ($millions) 422 410 412 3 % 2 %
Book Value per Share $ 7.14 $ 6.94 $ 7.01 3 % 2 %
Approved Master Policies 1061 1023 842 4 % 26 %
Customers Generating NIW 518 469 340 10 % 52 %
Reinsurance Agreement
Effective Sept. 1, 2016, the company's quota share reinsurance agreement covers the following components of its portfolio, subject to certain limitations and conditions:

  • Approximately 23% of existing policies written as of Aug. 31, 2016.
  • Approximately 95% of the company's pool agreement with Fannie Mae.
  • Approximately 23% of policies written from Sept. 1, 2016 through Dec. 31, 2017.
National MI will receive a 20% ceding commission for ceded premiums related to this transaction, as well as a profit commission provided that the loss ratio on the loans covered under the agreement generally remains below 60%. For risk ceded under the agreement, the implied after-tax cost of capital over the term of the transaction is expected to be approximately 3%.

Conference Call and Webcast Details
The company will hold a conference call and live webcast today at 1:30 p.m. Pacific Time / 4:30 p.m. Eastern Time. The webcast will be available on the company's website, www.nationalmi.com, in the 'Investor Relations' section. The call also can be accessed by dialing (888) 734-0328 in the U.S., or (914) 495-8578 for international callers using Conference ID: 40158937, or by referencing NMI Holdings, Inc.

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 (Securities Act), Section 21E of the Securities Exchange Act of 1934, as amended (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 an