NMI (US:NMIH)2024-11-07 01:59Financial Data and Key Metrics Changes - Total revenue in Q3 2024 was a record $166.1 million, up 2% from Q2 2024 and 12% from Q3 2023 [10][18] - GAAP net income was $92.8 million, or $1.15 per diluted share, reflecting a 1% increase from Q2 2024 and an 11% increase from Q3 2023 [20] - Return on equity was 17.5% [10] - The company reported a default rate of 87 basis points at the end of Q3, an increase from 76 basis points at the end of Q2 [19][32] Business Line Data and Key Metrics Changes - The company generated $12.2 billion of new insurance written (NIW) volume in Q3 2024, maintaining a record $207.5 billion of primary insurance in force, which is up 2% from Q2 2024 and 7% from Q3 2023 [5][15] - Net premiums earned reached a record $143.3 million, compared to $141.2 million in Q2 2024 and $130.1 million in Q3 2023 [16] - Investment income was $22.5 million, up from $20.7 million in Q2 2024 and $17.9 million in Q3 2023 [17] Market Data and Key Metrics Changes - The company noted a broad resiliency in the housing market despite elevated interest rates, which has supported its lender customers and borrowers [10][12] - The persistency rate was 85.5% in Q3 2024, slightly up from 85.4% in Q2 2024 [15] Company Strategy and Development Direction - The company aims to provide borrowers with access to the housing market and has helped nearly 2 million borrowers to date [7] - The management emphasized a proactive approach to pricing, risk selection, and reinsurance, which has been effective in managing the mix of new business by risk cohort and geography [12][13] - The company secured new reinsurance treaties in October, providing forward flow coverage and comprehensive risk protection for future business production [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong operating performance and growth potential, citing favorable macroeconomic conditions and a resilient housing market [10][11] - The company anticipates continued growth in its high-quality insured portfolio and aims to deliver value for shareholders [27] Other Important Information - S&P upgraded the company's financial strength and issuer ratings to A- and BBB- in October [22] - The company repurchased $16.9 million of common stock in Q3 2024, with $108 million of repurchase capacity remaining [24][23] Q&A Session Summary Question: Year-over-year increase in new notices and lower cure rate - Management noted that the increase in defaults reflects normal seasonal trends and the growth in the natural seasoning of the portfolio, with no significant episodic factors [31][35] Question: Changes made by risk cohort - Management stated that they continuously monitor the market and adjust pricing based on risk environment changes, with targeted adjustments made in Q3 [36][38] Question: Mark-to-market LTV on delinquent portfolio - The mark-to-market LTV on the defaulted portfolio is approximately 73%, which has decreased slightly due to seasoning effects [40] Question: Competitive dynamics for NIW - Management observed stable and rational pricing in the industry, with a disciplined approach across the market [44][46] Question: Expense trends and expectations - Management indicated that while they expect natural growth in expenses, they are focused on maintaining efficiency and discipline in their operations [49][50] Question: Mortgage activity trends in Q4 - Management expects new business opportunities in the MI market to remain strong, with favorable long-term secular drivers continuing [54] Question: Profit commission threshold on quota share - The profit commission for the 2025 quota share treaty is up to 62%, with similar levels for subsequent treaties [55][56] Question: Cumulative default formation over time - Management explained that peak loss incurrence typically occurs between years three and six after origination, influenced by various borrower circumstances [59][60]