NMI Holdings, Inc. Q2 FY2025 earnings call

• National MI delivered standout operating performance in the second quarter, with continued growth in the insured portfolio and strong financial results.
• Generated $12.5 billion of NIW volume and ended with a record $214.7 billion of primary insurance in force.
• Recognized as a Great Place to Work for the tenth consecutive year, highlighting the company's strong workplace culture.
• Possesses a uniquely high-quality insured portfolio with credit performance standing out, including a decline in defaults and a lower default rate.
• Achieved record total revenue, low expense ratio, and strong adjusted net income, demonstrating significant operating leverage and efficient cost management.

In the second quarter, National MI generated $12.5 billion of NIW volume and ended the period with a record $214.7 billion of high-quality, high-performing primary insurance in force. Total revenue for the quarter was a record $173.8 million, and adjusted net income was $96.5 million or $1.22 per diluted share. Underwriting and operating expenses were $29.5 million in the second quarter, resulting in a record low expense ratio of 19.8%. The company had 6,709 defaults at June 30 with a default rate of 1% at quarter end. Total cash and investments were $3 billion at quarter end, and shareholders' equity at June 30 was $2.4 billion with a book value per share of $31.14.

• Broadly pleased with capital return execution to date, with approximately $25 million of stock buyback per quarter as a good assumption.
• Open market stock buyback program with potential fluctuations based on risk environment, operating performance, and valuation.
• Ample capacity to be more opportunistic with buybacks if opportunities arise or to slow down if circumstances dictate, while remaining disciplined in capital return efforts.

• Macro risks remain, and the company is proactively managing pricing, risk selection, and reinsurance decisions.
• Geographical market differences, particularly in certain regions like Florida and Texas, but the team is prepared as anticipated due to long-term planning.
• Need to balance protecting the balance sheet while continuing to serve customers effectively across all markets.

Q: Pacing of capital return and impact of economy/resilience on it.

A: Broadly pleased with execution, ~$25 million buyback per quarter is a good assumption; open market program with potential fluctuations based on risk environment, operating performance, and valuation.

Q: Rising home supply, price depreciation impact on underwriting and risk transfer.

A: Market resilient with differences in geographies, but team prepared as anticipated; forward flow reinsurance already secured for 2025 and 2026 production, will continue to use tools to manage mix.

Q: Competitive environment, OpEx, investment income, defaults.

A: Industry pricing balanced; OpEx decline due to FICA/401(k) reset; investment income growth from portfolio; defaults influenced by macro, seasonality, and factors like tax refunds and holiday spending.

Q: Regulatory impact on MI footprint, MI tax deduction.

A: Regulatory changes like FHFA's equitable housing program not expected to impact business; MI tax deduction benefits some borrowers but limited impact due to high standard deduction prevalence