NMI Holdings, Inc. Reports Second Quarter 2014 Financial Results

07 Aug, 2014, 16:02 ET from NMI Holdings, Inc.

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.