NMI Holdings, Inc. (NASDAQ:NMIH) is a leading provider of private mortgage insurance, a critical component of the U.S. housing finance system. Incorporated in 2011 and headquartered in Emeryville, California, the company has established itself as a respected player in the industry, known for its innovative approach, disciplined risk management, and commitment to serving its customers.
Business Overview: Navigating the Mortgage Insurance Landscape with Expertise
NMI Holdings was incorporated in May 2011 and began its start-up operations in 2012. The company was formed to provide private mortgage guaranty insurance, also referred to as mortgage insurance (MI), through its wholly-owned insurance subsidiaries, National Mortgage Insurance Corporation (NMIC) and National Mortgage Reinsurance Inc One (Re One). NMIC issued its first mortgage insurance policy in April 2013 and is licensed to write mortgage insurance in all 50 states and the District of Columbia.
Since its formation, NMI Holdings has focused on establishing customer relationships with a broad group of mortgage lenders and building a diversified, high-quality insured portfolio. As of December 31, 2024, the company had issued master policies with 2,090 customers, including national and regional mortgage banks, money center banks, credit unions, community banks, builder-owned mortgage lenders, internet-sourced lenders, and other non-bank lenders.
The company's success in acquiring a large and diverse group of lender customers and growing a portfolio of high-quality insurance-in-force can be attributed to its founding principles. These include helping qualified borrowers achieve their homeownership goals, ensuring the company remains a strong and credible counterparty, delivering a high-quality customer service experience, establishing a differentiated risk management approach, utilizing a proprietary risk-based pricing platform, and fostering a culture of collaboration and excellence.
It's worth noting that Re One historically provided reinsurance coverage to NMIC in accordance with certain statutory risk retention requirements. However, these requirements have been repealed, and the reinsurance coverage provided by Re One to NMIC has been commuted. Re One remains a wholly-owned, licensed insurance subsidiary but does not currently have active insurance exposures.
As of December 31, 2024, NMI Holdings had $210.2 billion in primary insurance-in-force, a testament to its success in capturing market share and supporting homebuyers across the United States. The company's focus on risk management, technological innovation, and customer service has been a key driver of its growth, allowing it to navigate the evolving mortgage insurance landscape with agility.
Financial Strength and Resilience
Financials
NMI Holdings has demonstrated impressive financial performance over the years, with a track record of delivering consistent growth and profitability. In the fiscal year ended December 31, 2024, the company reported total revenue of $651 million, up 12% from the previous year, and net income of $360.1 million, or $4.43 per diluted share. The company's adjusted net income for the full year was $365.6 million, representing a 13% increase from 2023.
The company's strong financial position is further evidenced by its robust balance sheet. As of December 31, 2024, NMI Holdings reported total assets of $3.35 billion and shareholders' equity of $2.22 billion, with a book value per share of $28.21. Excluding the impact of net unrealized gains and losses in the investment portfolio, the company's book value per share stood at $29.80, up 17% year-over-year.
For the most recent quarter (Q4 2024), NMI Holdings reported revenue of $166.5 million, a 10.6% increase compared to Q4 2023. Net income for the quarter was $86.2 million, growing 5.9% year-over-year. The increase in revenue was primarily driven by growth in monthly premiums earned and net investment income, while the rise in net income was attributed to higher revenue, partially offset by an increase in claims expenses.
NMI Holdings operates solely in the U.S. mortgage insurance market, which allows it to focus its resources and expertise on a single, well-understood market. The company's operating cash flow for the fiscal year 2024 was $393.6 million, with free cash flow of $386.7 million, demonstrating its ability to generate substantial cash from its operations.
Liquidity
NMI Holdings has demonstrated a disciplined approach to capital management, utilizing a combination of equity, debt, and reinsurance to support its growth and ensure compliance with regulatory requirements. The company's use of third-party reinsurance, including quota share and excess-of-loss agreements, has been a key component of its risk management strategy, allowing it to actively manage its exposure and maintain a strong capital position.
As of December 31, 2024, NMI Holdings reported $3.1 billion in total available assets under the Private Mortgage Insurer Eligibility Requirements (PMIERs) set by the Government-Sponsored Enterprises (GSEs), with $1.8 billion in risk-based required assets. This translates to $1.3 billion in excess available assets, providing the company with ample financial flexibility to support its ongoing operations and future growth initiatives.
The company's financial strength is further underscored by its solid liquidity position. NMI Holdings maintains $2.8 billion in cash and investments, providing a substantial cushion against potential market volatility or unexpected claims. Additionally, the company has access to a $250 million revolving credit facility, further enhancing its financial flexibility.
NMI Holdings' debt-to-equity ratio stands at a very low 0.0002, indicating minimal leverage and a strong balance sheet. The company's current ratio and quick ratio are both 0.43, reflecting its ability to meet short-term obligations.
Product Segments and Offerings
NMI Holdings operates as a single reportable segment - the Mortgage Insurance segment. This segment provides private mortgage insurance coverage, which protects lenders and investors from default-related losses on a portion of the unpaid principal balance of a covered mortgage. NMIC, the company's primary insurance subsidiary, is the key driver of its operations.
The company's primary focus is on providing primary mortgage insurance, typically written on a flow basis at the time of loan origination. NMIC offers primary coverage on first-lien mortgage loans, with the majority secured by owner-occupied single-family homes and condominiums. Coverage levels can range from 6% to 35% of the loan's unpaid principal balance, with higher coverage generally resulting in higher premium rates.
NMI Holdings has established prudent underwriting standards and loan-level eligibility criteria, assessing factors such as loan-to-value (LTV) ratio, borrower credit score, debt-to-income (DTI) ratio, loan type, and property characteristics. The company utilizes its proprietary Rate GPS platform to dynamically price policies based on the risk profile of each loan, allowing it to build a high-quality, well-diversified insurance portfolio.
As of December 31, 2024, NMI Holdings had $210.18 billion in primary insurance-in-force (IIF) and $56.11 billion in primary risk-in-force (RIF). The company generated $46.04 billion in new insurance written (NIW) during 2024, a 14% increase compared to the prior year. The primary insurance portfolio has maintained strong credit quality, with an average FICO score of 757 and average LTV of 92.3% as of the end of 2024.
To manage its risk and support business growth, NMI Holdings utilizes various third-party reinsurance agreements, including excess-of-loss (XOL) transactions, quota share (QSR) arrangements, and insurance-linked note (ILN) transactions. These reinsurance programs provide capital relief, diversify risk exposures, and enhance the company's financial strength.
Through its subsidiary, NMI Services, Inc. (NMIS), the company also offers outsourced loan review services to mortgage originators, reviewing loan data and documentation to assess compliance with underwriting guidelines.
Commitment to Innovation and Customer Service
NMI Holdings has consistently demonstrated its dedication to innovation, investing in technology and developing proprietary solutions to enhance its capabilities and better serve its customers. The company's proprietary pricing platform, Rate GPS, allows it to dynamically evaluate and price risk at the individual loan level, enabling it to offer tailored solutions to its lender partners.
Furthermore, NMI Holdings' focus on customer service has been a key differentiator in the industry. The company's Solution Center, a dedicated customer service team, provides support in loan submission, underwriting services, risk management, and technology, fostering strong relationships with its lender customers.
Navigating Market Challenges with Resilience
The mortgage insurance industry has faced its share of challenges in recent years, including the impact of the COVID-19 pandemic, rising interest rates, and economic volatility. However, NMI Holdings has demonstrated its resilience, adapting its strategies and leveraging its strengths to navigate these conditions successfully.
During the pandemic, the company's proactive risk management and comprehensive reinsurance program helped it weather the storm, with its insured portfolio continuing to perform well. As interest rates have risen, NMI Holdings has maintained a balanced and constructive pricing approach, ensuring that it can continue to support its lender partners and their borrowers while also protecting its own financial returns.
Looking Ahead: Capitalizing on Favorable Market Trends
The private mortgage insurance industry is poised for continued growth, driven by strong housing demand, the GSEs' emphasis on private capital participation, and the persistent need for down payment support among homebuyers. NMI Holdings is well-positioned to capitalize on these favorable market trends, leveraging its competitive advantages and disciplined approach to drive further expansion and value creation for its shareholders.
The company's robust customer franchise, talented team, high-quality insured portfolio, and comprehensive risk management framework position it for long-term success. As NMI Holdings continues to innovate, forge stronger customer relationships, and prudently manage its capital and risk, it is poised to maintain its position as a leading provider of private mortgage insurance in the years to come.
While specific forward-looking guidance for 2025 and beyond was not provided, management expressed confidence in the company's ability to continue serving customers, investing in employees, driving growth in its high-quality insured portfolio, and delivering through-the-cycle growth, returns, and value for shareholders. The company expects the private MI market to remain strong in 2025, with long-term secular trends continuing to drive an attractive new business opportunity.
NMI Holdings anticipates that its credit experience will continue to trend higher compared to Q3 2024, in line with expectations, as more recent production years enter a period of typical loss occurrence. The company has also secured a new $250 million share repurchase authorization, in addition to the $80 million remaining under its existing program, providing significant capacity to continue driving value and returning capital to shareholders.
Conclusion
NMI Holdings has established itself as a resilient and forward-thinking player in the mortgage insurance industry. With its strong financial position, innovative capabilities, and unwavering commitment to customer service, the company is well-equipped to navigate the evolving market landscape and capitalize on the favorable trends shaping the housing finance ecosystem. As NMI Holdings continues to execute its strategic priorities, it is poised to deliver sustainable growth and create long-term value for its shareholders.