NMI Holdings, Inc. Reports Second Quarter 2014 Financial Results

EMERYVILLE, Calif., Aug. 7, 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 six months ended June 30, 2014.  The Company reported a net loss for the three months ended June 30, 2014 of $12.9 million or $0.22 per share.  The Company reported a net loss for the six months ended June 30, 2014 of $27.9 million, or $0.48 per share.

In the second quarter of 2014, the Company had primary new insurance written of $429.9 million compared to $354.3 million of primary new insurance written in the quarter ended March 31, 2014.  The Company did not write any new pool insurance in the first six months of 2014.

"We are pleased to see strong growth in new insurance written quarter over quarter," said Bradley Shuster, president and CEO of NMI Holdings, Inc. "National MI continues to receive very positive feedback on our products from existing customers as well as new and potential customers.  We continue to build momentum into the second half of 2014."

As of June 30, 2014, the Company had primary risk-in-force of $220.9 million compared to primary risk-in-force of $115.5 million as of March 31, 2014.  Pool risk-in-force was unchanged as of June 30, 2014 remaining at $93.1 million.

Total revenues for the second quarter were $4.5 million, comprised of $2.1 million in premiums earned, $1.5 million of investment income and $0.9 million of gain from change in the fair value of the warrant liability.  Total expenses for the quarter were $18.7 million.

Total revenues for the first six months of 2014 were $8.8 million, comprised of $4.0 million in premiums earned, $3.0 million of investment income and $1.8 million of gain from the change in the fair value of the warrant liability.  Total expenses for the six months ended June 30, 2014 were $38.0 million compared to $29.4 million for the six months ended June 30, 2013, driven primarily by expanding operations and the hiring of personnel.

At June 30, 2014, the Company had approximately $448.0 million of cash and investments and book equity of $443.9 million or $7.61 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 $239.1 million at June 30, 2014, excluding investments in the Company's insurance subsidiaries. Cash and investments at the Company's insurance subsidiaries at June 30, 2014 was $208.9 million.

On July 10, 2014, the Federal Housing Finance Agency ("FHFA") issued proposed Private Mortgage Insurer Eligibility Requirements ("PMIERs") for public comment. The PMIERs, when finalized, will establish the standards for private mortgage insurers to be approved to insure residential mortgages sold to or guaranteed by Fannie Mae and Freddie Mac. "National MI believes a strong and financially stable private mortgage insurance industry is a key component of a healthy residential mortgage market," Shuster said.  "National MI has a conservative balance sheet and a strong financial position, with a disciplined risk management philosophy.  We plan to submit comments on the proposed requirements to the FHFA by the September 8 deadline, and we expect to comply with the new PMIERs within the time frame allowed."

Conference Call and Webcast Details

NMI Holdings, Inc. will hold a conference call today, August 7, 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: 71636874 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 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 June 30,


For the Six Months Ended June 30,


2014



2013



2014



2013


Revenues

(In Thousands, except for share data)

Premiums written












Direct

$

5,051



$

1



$

10,229



$

1


Net premiums written

5,051



1



10,229



1


Increase in unearned premiums

(2,958)





(6,232)




Net premiums earned

2,093



1



3,997



1


Net investment income

1,468



1,407



2,957



1,817


Net realized investment gains



452





481


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

952



(1,114)



1,769



(1,080)


Gain from settlement of warrants





37




Total Revenues

4,513



746



8,760



1,219


Expenses












Insurance claims and claims expenses

28





28




Amortization of deferred policy acquisition costs

42





61




Other underwriting and operating expenses

18,595



17,020



37,877



29,445


Total Expenses

18,665



17,020



37,966



29,445


Loss before income taxes

(14,152)



(16,274)



(29,206)



(28,226)


Income tax benefit

(1,297)





(1,297)




Net Loss

$

(12,855)



$

(16,274)



$

(27,909)



$

(28,226)














Loss per share












Basic and diluted loss per share

$

(0.22)



$

(0.29)



$

(0.48)



$

(0.51)


Weighted average common shares outstanding

58,289,801



55,629,932



58,176,181



55,565,374


 

 


CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


June 30, 2014


December 31, 2013


(In Thousands)

Total investment portfolio

$

413,307



$

409,088


Cash and cash equivalents

34,671



55,929


Deferred policy acquisition costs, net

1,051



90


Software and equipment, net

10,172



8,876


Other assets

6,962



7,236


Total Assets

$

466,163



$

481,219


Reserve for insurance claims and claims expenses

$

28



$


Accounts payable and accrued expenses

8,494



10,052


Unearned premiums

7,679



1,446


Warrant liability

4,552



6,371


Current tax payable

1,367




Other liabilities

133



133


Total Liabilities

22,253



18,002


Total Shareholders' Equity

443,910



463,217


Total Liabilities and Shareholders' Equity

$

466,163



$

481,219


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

A significant portion of our NIW in the first six 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 loans 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 a lower premium 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 type 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 current IIF by different metrics, including basis points, FICO distributions, LTV, premiums written and earned, average loan size and geographic distribution.

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

Primary

Quarter Ended


June 30, 2014


March 31, 2014


December 31, 2013


September 30, 2013


(Dollars in Thousands)

New insurance written

$

429,944



$

354,313



$

157,568



$

3,560


Insurance in force (end of period)

$

939,753



$

514,796



$

161,731



$

4,604


Risk in force (end of period)

$

220,949



$

115,467



$

36,516



$

1,196


Policies in force (end of period)

3,865



2,072



653



22


Weighted-average coverage (1)

23.5

%


22.4

%


22.6

%


26.0

%

Loans in default (count)

1








Risk in force on defaulted loans

$

100



$



$



$


(1)              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 quarter ended June 30, 2014


As of and for the quarter ended March 31, 2014


IIF

NIW

Premiums Written

Premiums Earned


IIF

NIW

Premiums Written

Premiums Earned


(In Thousands)

Monthly

$

277,490


$

206,767


$

301


$

301



$

73,734


$

50,136


$

99


$

99


Single

125,056


97,037


2,086


224



28,020


26,518


535


56


Aggregated Single

537,207


126,140


1,292


196



413,042


277,659


3,150


355


Total Primary

939,753


429,944


3,679


721



514,796


354,313


3,784


510




















Pool

4,936,751



1,372


1,372



5,028,677



1,394


1,394


Total

$

5,876,504


$

429,944


$

5,051


$

2,093



$

5,543,473


$

354,313


$

5,178


$

1,904


 


As of and for the quarter ended December 31, 2013


As of and for the quarter ended September 30, 2013


IIF

NIW

Premiums Written

Premiums Earned


IIF

NIW

Premiums Written

Premiums Earned


(In Thousands)

Monthly

$

24,558


$

20,395


$

25


$

25



$

4,604


$

3,560


$

6


$

6


Single

1,790


1,790


47


7







Aggregated Single

135,383


135,383


1,572


166







Total Primary

161,731


157,568


1,644


198



4,604


3,560


6


6




















Pool

5,089,517



1,414


1,414



5,171,664


5,171,664


476


476


Total

$

5,251,248


$

157,568


$

3,058


$

1,612



$

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


June 30, 2014


March 31, 2014


December 31, 2013


September 30, 2013


(Shown in Basis Points)

Monthly

58



56



64



66


Single

215



205



251




Aggregated Single

102



113



116




 

Weighted Average FICO


June 30, 2014


March 31, 2014


December 31, 2013


September 30, 2013

Monthly

747



749



747



762


Single

746



752



735




Aggregated Single

758



759



759




 

Weighted Average LTV


June 30, 2014


March 31, 2014


December 31, 2013


September 30, 2013

Monthly

93

%


92

%


93

%


92

%

Single

93



92



92




Aggregated Single

90



90



90




 

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

Total Portfolio

NIW


IIF


RIF


(Dollars in Thousands)


As of June 30, 2014

>= 740

$

4,828,040


78.9

%


$

4,637,903


78.9

%


$

221,984


70.7

%

680 - 739

1,118,164


18.3



1,076,146


18.3



84,266


26.8


620 - 679

171,889


2.8



162,455


2.8



7,789


2.5


<= 619









Total

$

6,118,093


100.0

%


$

5,876,504


100.0

%


$

314,039


100.0

%

 

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

Primary - 2014 Book

NIW


IIF


RIF


(Dollars in Thousands)


As of June 30, 2014

>= 740

$

527,289


67.2

%


$

523,941


67.2

%


$

121,540


65.7

%

680 - 739

238,307


30.4



237,685


30.5



58,656


31.7


620 - 679

18,661


2.4



18,492


2.3



4,796


2.6


<= 619









Total

$

784,257


100.0

%


$

780,118


100.0

%


$

184,992


100.0

%

 

Primary - 2013 Book

NIW *


IIF


RIF


(Dollars in Thousands)


As of June 30, 2014

>= 740

$

113,907


70.2

%


$

113,207


70.9

%


$

25,168


70.0

%

680 - 739

47,102


29.0



45,420


28.5



10,516


29.2


620 - 679

1,163


0.8



1,008


0.6



273


0.8


<= 619









Total

$

162,172


100.0

%


$

159,635


100.0

%


$

35,957


100.0

%

 

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

Pool - 2013 Book

NIW *


IIF


RIF


(Dollars in Thousands)


As of June 30, 2014

>= 740

$

4,186,844


81.0

%


$

4,000,755


81.0

%


$

75,276


80.9

%

680 - 739

832,755


16.1



793,041


16.1



15,094


16.2


620 - 679

152,065


2.9



142,955


2.9



2,720


2.9


<= 619









Total

$

5,171,664


100.0

%


$

4,936,751


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.


June 30, 2014


December 31, 2013

Average Primary Loan Size by FICO

(In Thousands)

>= 740

$

247



$

253


680 - 739

236



237


620 - 679

222



194


<= 619




 

Percentage of RIF by Loan Type

Primary


Pool

As of June 30, 2014






Fixed

92.7

%


100.0

%

Adjustable rate mortgages:






Less than five years

0.2




Five years and longer

7.1




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.

Total RIF by LTV

Primary


Pool


RIF


% of Total LTV


Policy Count


RIF


% of Total LTV


Policy Count

As of June 30, 2014

(Dollars in Thousands)

95.01% and above

$

1,014



0.5

%


15



$



%



90.01% to 95.00%

115,061



52.1



1,737








85.01% to 90.00%

84,790



38.4



1,394








80.01% to 85.00%

20,084



9.0



719








80.00% and below







93,090



100.0



21,265


Total RIF

$

220,949



100.0

%


3,865



$

93,090



100.0

%


21,265


 

The following charts show the distribution by state of our IIF and RIF, for both primary and pool insurance.  The distribution of risk across the states as of the quarter ended June 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 June 30, 2014


1.

California

21.3

%


21.3

%

2.

Texas

4.7



4.8


3.

Virginia

4.6



4.4


4.

Michigan

4.4



4.4


5.

Florida

4.1



4.3


6.

New Jersey

3.7



3.4


7.

Georgia

3.6



3.7


8.

Colorado

3.4



3.5


9.

Arizona

3.4



3.4


10.

North Carolina

3.3



3.5



Total

56.5

%


56.7

%

 

Top 10 Pool IIF and RIF by State

IIF


RIF

As of June 30, 2014


1.

California

28.6

%


28.0

%

2.

Texas

5.4



5.5


3.

Colorado

3.9



3.9


4.

Washington

3.9



3.9


5.

Massachusetts

3.7



3.6


6.

Illinois

3.7



3.7


7.

Virginia

3.7



3.7


8.

New York

2.9



2.9


9.

Florida

2.8



2.8


10.

New Jersey

2.7



2.7



Total

61.3

%


60.7

%

 

SOURCE NMI Holdings, Inc.



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