NMI (US:NMIH)2021-11-03 02:43Financial Performance - The company reported record adjusted net income of $61.8 million or $0.71 per diluted share, and record GAAP net income of $60.2 million or $0.69 per diluted share [9][45] - Adjusted return on equity for the quarter was 16.6% and GAAP ROE was 16.2% [9] - The primary insurance in force grew to a record $144 billion, up 5% from the second quarter and 37% from the third quarter of 2020 [10][35] - Net premiums earned were a record $113.6 million, compared to $110.9 million in the second quarter [35][39] - The 12-month persistency ratio increased to 58.1%, up from 53.9% in the second quarter [36] Business Lines and Market Data - The company generated $18.1 billion of new insurance written (NIW) in the third quarter, including $16.4 billion of purchase volume [24] - Refinancing NIW volume declined to $1.7 billion, accounting for 9% of total production, down from $3.8 billion or 17% in the second quarter [26] - The private mortgage insurance market is expected to reach a total industry volume of $575 billion in 2021 [27] - The default rate declined to 1.6% at September 30, with further improvement noted in October [43][68] Company Strategy and Industry Competition - The company is focused on expanding access to homeownership and supporting borrowers from all communities [12][13] - The management emphasized the importance of maintaining a balanced risk-return profile while driving growth in the insured portfolio [20][53] - The company is committed to a disciplined approach to managing risks, expenses, and capital [51] Management Commentary on Operating Environment and Future Outlook - Management expressed optimism regarding the quality of the underlying book and the resilience of the housing market [11][29] - The company expects to continue driving growth and delivering strong results for shareholders [29][51] - The management noted that the housing market dynamics remain favorable, with sustained demand expected [108] Other Important Information - The company announced a succession plan where Adam Pollitzer will take over as President and CEO on January 1, 2022 [14][17] - The company completed a $364 million insurance-linked note (ILN) transaction, which is among the largest to date [46][49] - Total cash and investments were $2.2 billion at quarter end, with shareholders' equity at $1.5 billion, a 4% increase from the second quarter [49] Q&A Session Summary Question: Can you quantify the factors impacting the decline in average premium? - The yield declined from 34.1 basis points in Q2 to 32.4 in Q3, attributed to strong growth in insurance in force and a decline in singles NIW volume [56][59] Question: What are the expectations for the fourth quarter? - Guidance for Q4 indicates a trend down in net yield due to additional seated premium costs from the recent ILN offering [60] Question: How do you view the policy changes from Washington? - The company sees expanding opportunities for homeownership as central to its mission and expects to play a significant role in shaping future housing policy discussions [61][62] Question: Can you provide insight into the increase in new defaults? - New defaults increased to 1,600 in Q3 from 1,100 in Q2, but the overall default population continues to decline [68] Question: What is the outlook for claims from recent defaults? - The company is optimistic about the performance of borrowers in forbearance programs and expects significant cure activity [73] Question: How is the credit appetite evolving? - The company has not fundamentally shifted its risk appetite but is easing some restrictions put in place during the pandemic [117][119]