NMI Holdings: Q4 Earnings Snapshot - A Mixed Bag of Results

NMI Holdings (NMIH) reported its fourth-quarter earnings on February 6, 2025, providing a snapshot of the company's performance for the quarter and the full year. The results were a mixed bag, with some positive developments and others warranting attention. Let's dive into the key takeaways from the earnings report.



Q4 Earnings Performance

NMI Holdings reported net income of $86.2 million, or $1.07 per diluted share, for the fourth quarter ended December 31, 2024. While this figure represents a 3% year-over-year (YoY) improvement, it fell short of Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was for earnings of $1.11 per share. The company's earnings per share (EPS) in Q4 2024 was lower than the EPS in Q3 2024 ($1.15) and Q4 2023 ($1.01).

Key Drivers and Trends

1. Increasing Loss Ratio and Insurance Claims: The loss ratio increased to 12.0% from 7.2% in Q3, suggesting growing pressure on underwriting performance. This was coupled with a 110% jump in insurance claims and expenses to $17.3 million. However, this should be viewed in context of the company's robust PMIERs available assets against required assets, indicating strong capital adequacy.
2. Strong Market Penetration: Despite challenging mortgage market conditions, NMI Holdings demonstrated strong market penetration with a 34% YoY growth in New Insurance Written (NIW) to $11.9 billion. This highlights the company's ability to maintain its market position and attract new business.
3. Book Value Per Share Increase: The book value per share (excluding unrealized gains/losses) increased by 17% YoY to $29.80, reflecting solid fundamental value creation. This indicates that the company's intrinsic value has grown, which is a positive sign for shareholders.
4. Share Repurchase Authorization: The company's Board authorized an additional $250 million share repurchase plan through December 2027. This reflects management's confidence in sustained cash flow generation and capital position. By repurchasing shares, the company can increase the value of each remaining share and signal to the market that it believes the stock is undervalued.
5. Return on Equity (ROE): NMI Holdings' ROE for 2024 was 17.4%, though it showed some quarterly moderation in Q4 (15.6%). The growing insurance-in-force portfolio of $210.2 billion provides a stable foundation for future earnings, while increased investment income (25% YoY) helps offset higher claims expenses.



Looking Ahead

While NMI Holdings' Q4 earnings performance did not meet analysts' expectations, the company's strong market penetration, book value increase, and share repurchase authorization indicate positive developments. The increase in the loss ratio and insurance claims expenses warrant attention, but the company's robust capital adequacy helps mitigate these concerns. As NMI Holdings continues to navigate the mortgage market and manage its risk profile, investors should monitor the company's financial performance and market conditions to ensure that the share repurchase is a sound decision.

In conclusion, NMI Holdings' Q4 earnings snapshot reveals a nuanced picture of the company's performance and strategic positioning. While quarterly net income showed a 3% YoY improvement, several key metrics warrant attention. As the company moves forward, investors should stay informed about its progress and remain vigilant in assessing the potential impact of market conditions and regulatory changes on its financial performance.