NMI (NMIH)2025-02-14 21:10Insurance Portfolio and Market Position - As of December 31, 2024, the company had issued master policies with 2,086 customers and had 56.1 billion of primary risk-in-force (RIF) [19] - For the year ended December 31, 2024, the company generated new insurance written (NIW) of 13 trillion of mortgage debt outstanding as of December 31, 2024 [21] - Government mortgage insurers accounted for an estimated 58% of the total insured mortgage origination market in 2024, down from a peak of approximately 82% in 2009 [28] - The company aims to maintain a RIF across all policies written to approximate 25% of primary IIF, with coverage levels varying between 6% and 35% [32] - The private mortgage insurance industry consists of six active participants, including the company, with competition based on terms of coverage, pricing, and customer service [27] - The company’s strategy focuses on expanding its customer base and growing its insured portfolio through long-term relationships and disciplined risk selection [20] - No individual customer accounted for greater than 10% of consolidated revenues in 2024 [44] Underwriting and Risk Management - The company employs a proprietary risk-based pricing platform, Rate GPS®, to establish individualized premium rates based on various risk factors [60] - The underwriting guidelines incorporate credit eligibility requirements, including borrower credit scores (FICO), maximum DTI levels, and maximum LTVs [47] - The company has established processes for independent validations and rescission relief, enhancing the underwriting review process [52] - The company has implemented a quality control process to ensure adherence to underwriting guidelines, conducting audits of insured loans on a random and targeted basis [75] - The company has established enterprise-wide policies for risk management, with oversight from the Risk Committee of the Board of Directors [73] - The company’s underwriting and credit risk management policies may not fully anticipate unforeseen risks, potentially leading to increased losses [154] - The company’s underwriting and credit risk management policies may not fully anticipate risks, potentially leading to material adverse effects on its financial condition [173] Financial Performance and Economic Factors - The company’s NIW and revenues are highly dependent on the volume of high-LTV loan originations, which may be negatively affected by rising interest rates and stricter underwriting standards [172] - Changes in inflation, interest rates, and mortgage interest rates could adversely impact the company’s future revenue and financial condition [154] - The company expects claims to increase as its insured loan portfolio grows and matures, influenced by macroeconomic factors [190] - The company may experience increased claims if third-party underwriting service providers fail to perform adequately [154] - The company’s substantial indebtedness may adversely affect its financial condition and ability to access capital [157] - The premiums charged by the company may be insufficient to cover future claim payments and operating costs, which could adversely affect operating results [178] - Economic downturns in specific regions could lead to higher rates of default and loss, adversely affecting the company's financial condition [177] Regulatory Environment and Compliance - NMIC is required to maintain available assets of at least $400 million or a risk-based required asset amount, whichever is greater [98] - NMIC certified compliance with PMIERs as of December 31, 2023, by April 15, 2024 [99] - NMIC holds a certificate of authority in all 50 states and D.C., subject to ongoing financial reporting and regulatory requirements [100] - The maximum permitted risk-to-capital (RTC) ratio is typically 25:1, with Wisconsin having slightly higher limits [113] - State insurance regulators have the authority to change regulations governing mortgage insurance, including capital requirements and underwriting standards [115] - MI premium rates in certain states require prior approval to protect policyholders from excessive or unfairly discriminatory rates [119] Technology and Operational Risks - The company relies on technology for service delivery, and failure to maintain technological demands could adversely impact financial performance [214] - The company processes, transmits, stores, and protects large amounts of personal information related to borrowers' mortgages, which is critical to its business operations [216] - IT systems and networks are vulnerable to unauthorized access and failures due to cyber-attacks, natural disasters, and technology failures [216] - Remote and hybrid working arrangements may increase the risk of cybersecurity attacks and data security incidents [216] - Employees and vendors rely on portable computers and mobile devices, which can heighten security vulnerabilities [216] Employee and Organizational Culture - The company has 230 full-time and part-time employees as of December 31, 2024, and engages third-party vendors for additional support services [87] - As of December 31, 2024, 83% of the employee population identified as members of a diverse group, including 55% as women and 34% as racial/ethnic minorities [90] - The company was recognized as a Great Place to Work for the ninth consecutive year in 2024, highlighting its commitment to employee satisfaction and development [91] Market Competition and Challenges - The company faces intense competition in the private mortgage insurance industry, with six active competitors, which could negatively impact its ability to achieve business goals [159] - The company is at risk of losing business from significant mortgage lenders, which could negatively impact its market share and financial performance [171] - The company faces increased competition from government mortgage insurers, which have captured a significant share of the high-LTV MI market, remaining above historical levels [166] - The volume of new insurance written (NIW) could decline if lenders and investors opt for alternatives to private mortgage insurance (MI), particularly for high-LTV loans [163] Claims and Reserves Management - The company expects claims to increase as its insured loan portfolio grows and matures, influenced by macroeconomic factors [190] - If estimates for claims reserves are incorrect, actual claim payments may exceed reserves, adversely affecting financial results [194] - Reserves are established based on estimated claim frequency and severity, which are influenced by historical loan performance data [195] - The establishment of claims and IBNR reserves involves significant judgment and is influenced by economic conditions such as unemployment rates and housing price trends [196] - Natural disasters and pandemics pose risks that could lead to increased claims and defaults, adversely affecting financial results [198] - The company has observed that loans in disaster zones typically cure at a higher rate than non-disaster related loans, impacting reserve levels [200]