NMI Holdings, Inc. (NMIH) Bundle
Understanding NMI Holdings, Inc. (NMIH) Revenue Streams
Understanding NMI Holdings, Inc.’s Revenue Streams
The primary revenue sources for NMI Holdings, Inc. (NMIH) are categorized into net premiums earned, net investment income, and other revenues. Each revenue stream contributes significantly to the company's overall financial health.
Breakdown of Primary Revenue Sources
-
Net Premiums Earned:
- For the three months ended September 30, 2024: $143.3 million
- For the nine months ended September 30, 2024: $421.2 million
- For the three months ended September 30, 2023: $130.1 million
- For the nine months ended September 30, 2023: $377.8 million
-
Net Investment Income:
- For the three months ended September 30, 2024: $22.5 million
- For the nine months ended September 30, 2024: $62.6 million
- For the three months ended September 30, 2023: $17.9 million
- For the nine months ended September 30, 2023: $49.3 million
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Other Revenues:
- For the three months ended September 30, 2024: $0.3 million
- For the nine months ended September 30, 2024: $0.7 million
- For the three months ended September 30, 2023: $0.2 million
- For the nine months ended September 30, 2023: $0.6 million
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate has shown a positive trend:
- Net premiums earned increased by 10% for the three months ended September 30, 2024 compared to the same period in 2023.
- Net premiums earned increased by 11% for the nine months ended September 30, 2024 compared to the same period in 2023.
- Net investment income increased by 25% for the three months ended September 30, 2024 compared to the same period in 2023.
- Net investment income increased by 27% for the nine months ended September 30, 2024 compared to the same period in 2023.
Contribution of Different Business Segments to Overall Revenue
The following table summarizes the contributions of different revenue segments:
| Revenue Source | Q3 2024 ($ Millions) | Q3 2023 ($ Millions) | YTD 2024 ($ Millions) | YTD 2023 ($ Millions) |
|---|---|---|---|---|
| Net Premiums Earned | 143.3 | 130.1 | 421.2 | 377.8 |
| Net Investment Income | 22.5 | 17.9 | 62.6 | 49.3 |
| Other Revenues | 0.3 | 0.2 | 0.7 | 0.6 |
| Total Revenue | 166.1 | 148.2 | 484.5 | 427.6 |
Analysis of Significant Changes in Revenue Streams
The significant changes in revenue streams include:
- Growth in Monthly Insurance In-Force (IIF): Increased by 7% year-over-year as of September 30, 2024.
- Decline in Ceded Premiums: A decrease in total premiums ceded under reinsurance treaties positively impacted net premiums earned.
- Investment Portfolio Performance: Increased book yield and size of the investment portfolio contributed to higher net investment income.
A Deep Dive into NMI Holdings, Inc. (NMIH) Profitability
A Deep Dive into NMI Holdings, Inc. Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, net premiums earned were $143.3 million, compared to $130.1 million for the same period in 2023. For the nine months ended September 30, 2024, net premiums earned rose to $421.2 million, up from $377.8 million in 2023.
Net investment income for the three months ended September 30, 2024, was $22.5 million, an increase from $17.9 million in 2023. For the nine-month period, net investment income was $62.6 million in 2024, compared to $49.3 million in 2023.
The total revenues for the three months ended September 30, 2024, reached $166.1 million, compared to $148.2 million in 2023. For the nine months, total revenues increased to $484.5 million from $427.6 million in the previous year.
Trends in Profitability Over Time
Net income for the three months ended September 30, 2024, was $92.8 million, compared to $84.0 million in 2023. For the nine months, net income rose to $273.9 million from $238.7 million in the prior year.
Basic earnings per share (EPS) for the three months ended September 30, 2024, was $1.17 versus $1.02 in 2023. For the nine months, basic EPS increased to $3.42 from $2.88.
Comparison of Profitability Ratios with Industry Averages
The loss ratio for the three months ended September 30, 2024, was 7.2%, compared to 3.7% in 2023. For the nine months, the loss ratio was 3.4% in 2024 versus 3.8% in 2023.
The expense ratio for the three months ended September 30, 2024, was 20.3%, while for the nine months, it was 20.7%. In comparison, the industry average for the expense ratio typically hovers around 25%.
The combined ratio for the three months ended September 30, 2024, was 27.5%, compared to 25.0% in the previous year. For the nine months, the combined ratio was 24.1% in 2024 against 25.2% in 2023.
Analysis of Operational Efficiency
Underwriting and operating expenses for the three months ended September 30, 2024, totaled $29.2 million, up from $27.7 million in 2023. For the nine months, expenses increased to $87.3 million from $81.0 million.
Insurance claims and claim expenses for the three months ended September 30, 2024, were $10.3 million, compared to $4.8 million in 2023. For the nine-month period, claims expenses were $14.3 million, slightly down from $14.4 million in the previous year.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Premiums Earned | $143.3M | $130.1M | $421.2M | $377.8M |
| Net Investment Income | $22.5M | $17.9M | $62.6M | $49.3M |
| Total Revenues | $166.1M | $148.2M | $484.5M | $427.6M |
| Net Income | $92.8M | $84.0M | $273.9M | $238.7M |
| Basic EPS | $1.17 | $1.02 | $3.42 | $2.88 |
| Loss Ratio | 7.2% | 3.7% | 3.4% | 3.8% |
| Expense Ratio | 20.3% | 21.3% | 20.7% | 21.4% |
| Combined Ratio | 27.5% | 25.0% | 24.1% | 25.2% |
Debt vs. Equity: How NMI Holdings, Inc. (NMIH) Finances Its Growth
Debt vs. Equity: How NMI Holdings, Inc. Finances Its Growth
As of September 30, 2024, NMI Holdings, Inc. reported total debt of $414.7 million, an increase from $397.6 million at December 31, 2023.
The company has a debt-to-equity ratio of 0.19, which is below the industry average of approximately 0.5. This indicates a conservative approach to leveraging compared to peers.
Recent debt activities include the issuance of $425 million in senior unsecured notes on May 21, 2024. The net proceeds of $414.1 million from this offering were utilized to redeem $400 million of 2020 Notes.
As part of its financing strategy, the company maintains a $250 million revolving credit facility that matures on May 21, 2029. The facility has a variable interest rate based on corporate credit ratings.
| Debt Type | Amount (in Millions) | Maturity Date | Interest Rate |
|---|---|---|---|
| 2024 Notes | $425.0 | August 15, 2029 | 6.00% |
| 2020 Notes (Redeemed) | $400.0 | Redeemed | N/A |
| Revolving Credit Facility | $250.0 | May 21, 2029 | Variable (1.00% floor + margin) |
The company has been proactive in managing its debt levels, as evidenced by a $6.8 million loss recorded during the redemption of the 2020 Notes.
Overall, NMI Holdings balances its financing strategy through the use of both debt and equity, with a focus on maintaining a solid equity base while leveraging debt for growth opportunities.
Assessing NMI Holdings, Inc. (NMIH) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for NMI Holdings, Inc. as of September 30, 2024, is calculated as follows:
- Current Assets: $148.3 million
- Current Liabilities: $110.97 million (Accounts Payable and Accrued Expenses: $111.0 million)
- Current Ratio = Current Assets / Current Liabilities = $148.3 million / $110.97 million = 1.34
The quick ratio, which excludes inventories, is also calculated:
- Quick Assets: Current Assets - Inventories (assuming inventories are negligible)
- Quick Ratio ≈ Current Assets / Current Liabilities = $148.3 million / $110.97 million = 1.34
Working Capital Trends
Working capital has shown positive trends over the past year:
- Working Capital (as of September 30, 2024): $148.3 million - $110.97 million = $37.33 million
- Working Capital (as of December 31, 2023): $143.0 million - $92.3 million = $50.7 million
The decrease in working capital indicates a slight tightening of liquidity but remains positive.
Cash Flow Statements Overview
The consolidated cash flows for NMI Holdings, Inc. for the nine months ended September 30, 2024, are summarized in the table below:
| Cash Flow Activity | 2024 (In Thousands) | 2023 (In Thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $357,783 | $312,566 |
| Net Cash Used in Investing Activities | ($253,156) | ($117,908) |
| Net Cash Used in Financing Activities | ($67,997) | ($62,621) |
| Net Increase in Cash and Cash Equivalents | $36,630 | $132,037 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, NMI Holdings, Inc. had:
- Cash and Investments: $148.3 million
- Undrawn Revolving Credit Capacity: $250 million
- Ordinary Course Dividend Paid: $96.3 million on May 30, 2024
Liquidity concerns are mitigated by strong cash reserves and significant credit availability. The company is not subject to any limitations on dividend payments except those applicable to Delaware corporations.
Is NMI Holdings, Inc. (NMIH) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine the following metrics: price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The diluted earnings per share (EPS) for the nine months ended September 30, 2024, was $3.36. The current stock price is approximately $32.38 as of October 2024. The P/E ratio is calculated as follows:
P/E Ratio = Stock Price / Diluted EPS = $32.38 / $3.36 = 9.65
Price-to-Book (P/B) Ratio
As of September 30, 2024, the total shareholders' equity was $2.195 billion. The book value per share is calculated using the number of shares outstanding, which is 79.3 million:
Book Value per Share = Total Shareholders' Equity / Total Shares Outstanding = $2,195,186,000 / 79,321,000 = $27.67
The P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $32.38 / $27.67 = 1.17
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To calculate the EV/EBITDA ratio, we first need to determine the enterprise value (EV). The formula for EV is:
EV = Market Capitalization + Total Debt - Cash and Cash Equivalents
Market Capitalization = Stock Price Shares Outstanding = $32.38 79.3 million = $2.570 billion
Total Debt (as of September 30, 2024) = $414.7 million
Cash and Cash Equivalents = $148.3 million
Thus, EV = $2.570 billion + $414.7 million - $148.3 million = $2.836 billion
EBITDA for the nine months ended September 30, 2024, was $357.8 million.
EV/EBITDA Ratio = EV / EBITDA = $2.836 billion / $357.8 million = 7.91
Stock Price Trends
The stock price over the last 12 months has exhibited the following trends:
- October 2023: $25.00
- January 2024: $28.50
- April 2024: $30.00
- July 2024: $32.00
- October 2024: $32.38
Dividend Yield and Payout Ratios
For the fiscal year ending December 31, 2024, the company declared a dividend of $96.3 million on May 30, 2024. The annual dividend per share is:
Annual Dividend per Share = Total Dividends / Shares Outstanding = $96.3 million / 79.3 million = $1.22
Dividend Yield = Annual Dividend per Share / Stock Price = $1.22 / $32.38 = 3.77%
The payout ratio is:
Payout Ratio = Annual Dividend per Share / EPS = $1.22 / $3.36 = 36.3%
Analyst Consensus
As of October 2024, the consensus among analysts is Buy based on the following ratings:
- Buy: 10 analysts
- Hold: 5 analysts
- Sell: 2 analysts
| Metric | Value |
|---|---|
| P/E Ratio | 9.65 |
| P/B Ratio | 1.17 |
| EV/EBITDA Ratio | 7.91 |
| Current Stock Price | $32.38 |
| 12-Month Stock Price Range | $25.00 - $32.38 |
| Dividend Yield | 3.77% |
| Payout Ratio | 36.3% |
| Analyst Consensus | Buy |
Key Risks Facing NMI Holdings, Inc. (NMIH)
Key Risks Facing NMI Holdings, Inc.
As of 2024, NMI Holdings, Inc. faces several internal and external risks impacting its financial health. These include industry competition, regulatory changes, and market conditions that can significantly affect its operations and profitability.
Industry Competition
The mortgage insurance industry is highly competitive, with several established players. As of September 30, 2024, NMI Holdings reported a total insurance-in-force (IIF) of $207.5 billion, up from $194.8 billion a year prior. This growth indicates a robust market presence but also highlights the competitive pressures from both traditional and new entrants in the mortgage insurance sector.
Regulatory Changes
NMI Holdings is subject to various regulatory requirements that can impact its operations. The company has entered into tax and expense-sharing agreements with its subsidiaries, which have been approved by the Wisconsin Office of the Commissioner of Insurance (OCI). However, these approvals are subject to change, which poses a risk to financial stability. The statutory capital and risk-to-capital ratio stood at 12.6:1 as of September 30, 2024, compared to 11.4:1 at the end of 2023, reflecting the regulatory scrutiny over capital adequacy.
Market Conditions
The prevailing interest rate environment poses a significant risk. The company's persistency rate was reported at 85.5% as of September 30, 2024, down from 86.2% a year earlier, attributed to a slowdown in mortgage refinancing activity. This decline may impact future premium income if interest rates remain high, affecting overall profitability.
Operational Risks
Operationally, NMI Holdings faces risks associated with claims and expenses. For the three months ended September 30, 2024, insurance claims and claim expenses were reported at $10.3 million, a notable increase from $4.8 million in the same period of the previous year. This surge indicates potential operational challenges in managing claims effectively amidst changing market dynamics.
Financial Risks
Financially, NMI Holdings reported a net income of $92.8 million for the three months ended September 30, 2024, compared to $84.0 million for the same period in 2023. While this reflects growth, the company also faces rising interest expenses, which were $7.1 million for the three months ended September 30, 2024, compared to $8.1 million in the same period of the previous year. This increase in interest expense is partly due to the refinancing of existing debt, which can pressure margins if not managed carefully.
Strategic Risks
NMI Holdings has initiated a share repurchase program, with 2.1 million shares repurchased at a total cost of $69.4 million during the nine months ended September 30, 2024. While this strategy can enhance shareholder value, it also poses risks if it leads to reduced liquidity or if market conditions deteriorate.
Mitigation Strategies
To mitigate these risks, NMI Holdings has implemented various strategies. The company maintains a diversified portfolio, with a total cash and investments amounting to $2.8 billion as of September 30, 2024. This liquidity enables the company to navigate challenges effectively. Additionally, NMI Holdings has $250 million of undrawn revolving credit capacity under its 2024 Revolving Credit Facility, providing further financial flexibility.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Increased competition in the mortgage insurance market. | IIF increased to $207.5 billion as of September 30, 2024. |
| Regulatory Changes | Potential changes in regulations affecting capital requirements. | Risk-to-capital ratio at 12.6:1. |
| Market Conditions | Impact of interest rates on mortgage refinancing. | Persistency rate decreased to 85.5%. |
| Operational Risks | Increased insurance claims and claim expenses. | Claims expenses rose to $10.3 million. |
| Financial Risks | Rising interest expenses from debt refinancing. | Interest expense at $7.1 million. |
| Strategic Risks | Share repurchase program affecting liquidity. | Repurchased 2.1 million shares for $69.4 million. |
Future Growth Prospects for NMI Holdings, Inc. (NMIH)
Future Growth Prospects for NMI Holdings, Inc.
Analysis of Key Growth Drivers
The growth of NMI Holdings, Inc. is significantly influenced by various factors including product innovations, market expansions, and strategic acquisitions. The company reported net premiums earned of $421.2 million for the nine months ended September 30, 2024, up from $377.8 million in the same period of 2023, reflecting a year-on-year increase of 11%.
Future Revenue Growth Projections and Earnings Estimates
Analysts project continued growth in revenue driven by increased customer acquisition and retention. The company’s net investment income also saw an increase, reaching $62.6 million for the nine months ended September 30, 2024, compared to $49.3 million in the previous year. This growth trend is expected to continue, supported by a favorable interest rate environment and strategic investment decisions.
Strategic Initiatives or Partnerships
NMI Holdings has actively engaged in strategic initiatives to bolster growth. The completion of a $425 million sale of 2024 Notes in May 2024 raised net proceeds of $414.1 million, which were primarily used to redeem the $400 million aggregate principal amount of 2020 Notes. Additionally, the company has entered into tax and expense-sharing agreements with its subsidiaries to optimize operational efficiency.
Competitive Advantages
NMI Holdings possesses several competitive advantages that position it favorably for growth. As of September 30, 2024, the company reported a statutory capital of $2.8 billion and a risk-to-capital ratio of 12.6:1, indicating robust financial health. Furthermore, the company’s financial strength ratings have been upgraded, with ratings of A- by Fitch and A3 by Moody's, enhancing its credibility in the market.
| Metric | 2024 Q3 | 2023 Q3 | Change (%) |
|---|---|---|---|
| Net Premiums Earned | $421.2 million | $377.8 million | 11% |
| Net Investment Income | $62.6 million | $49.3 million | 27% |
| Statutory Capital | $2.8 billion | $2.5 billion | 12% |
| Risk-to-Capital Ratio | 12.6:1 | 11.4:1 | 10.5% |
Conclusion
With a solid financial foundation and strategic growth initiatives, NMI Holdings, Inc. is well-positioned to capitalize on emerging opportunities in the mortgage insurance sector.
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Resources:
- NMI Holdings, Inc. (NMIH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of NMI Holdings, Inc. (NMIH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View NMI Holdings, Inc. (NMIH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.