NMIH - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the NMI Holdings, Inc. Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, John Swenson. Thank you, and please go ahead, sir.

John Swenson

you. Thank welcome fourth and for conference the MI. National to afternoon, quarter XXXX call Good Vice Investor President Swenson, John I'm of Relations Treasury. and

located Merkle, on Controller. our us released Executive Chief Investors on the today Officer; CEO; market Claudia Financial are our the Adam of website Julie tab. Financial the results accessed may Joining today. be and at Pollitzer, The close under Brad release call after www.nationalmi.com Chairman; Norberg, Shuster, the were NMI's press

call, this for of course may results make differ expectations the During those statements. our about we these the could comments forward-looking Actual future. contained materially from in

or the about our the with If discussed information any trends the we regulatory to and cause materially SEC. extent update the undertake future not to factors statements, Additional subsequent obligation website in actual statements forward-looking on results to found or company those developments. through that light could the of do be makes call filings those from can the differ our in on

no the today's to on statements a rely GAAP. call, time website, that refer the this measures this time measures. any non-GAAP of call. reconciliation that on and measures than of under other on fact should current most at these such Also comparable is we of press note provided guidance release the certain In Further, one our the we've to

turn over Now to call the I'll Brad.

Bradley Shuster

fourth reported best-in-class success and and quarter, Broad exceptionally Thank results, in MI development financial delivered everyone. In a the customer and National standout strong you, John, in success. year we insurance-in-force. NIW XXXX, good In afternoon, capping record growth of performance.

NIW, XXXX, We and underwriting billion XX% XXXX, the and discipline return the reinsurance continued to XXXX in customers over Rate $XXX.X year income the $XX of with up equity. We lead full approach. million our in XX.X% net and adjusted through year in individual are year generated XX on quarter to adjusted innovate and activated capital XX% exiting of up compared GPS in a fourth with markets risk delivered We new to compared

with XXXX GPS, to to a our develop loss high-returning high-quality X.X%. risk we and management spanning program innovative delivered with Rate insurance-in-force. underwriting credit XXXX, we performance closed deploy We of reinsurance year comprehensive and drive of value. The $XX credit have framework, investments individual billion a full risk made and ratio primary In industry-leading continue

Mae Shifting matters. to year, and Mac. Washington at we new Fannie the welcomed Last leadership FHFA, Freddie

the and with and other more Our in year. with conversations regulators constructive policymakers were broadly throughout each Washington

was The ensuring and important encouraged are continue insurance of made that towards will in the and health in mortgage the market by XXXX progress industry these We long-term mortgage XXXX. the efforts expect housing lenders, National of borrowers, that in MI a value system, and broad we in others. finance the central play see Washington to and taxpayers recognition role pleased to provides MI are the

with in last achieved we our I'm Overall, year, and I'm delighted what XXXX. about excited opportunity

With that, it Claudia. me let to over turn

Claudia Merkle

and $XX.X our in was adjusted million In XX% fourth compared XX XXXX. compared we new once return quarter up on to our fourth XX% driving I'm $XX.X down our GAAP insurance-in-force quarter third disciplined was fourth NIW pleased all volume while generated quarter, was insurance-in-force that income diluted of maintaining managing GAAP $XX.X return. X% share. $X.XX XXXX. per risk billion, diluted income approach fourth the share, lenders. net at for XX.X%. the equity and or net $XX.X to and was compared per quarter or third NIW and quarter $X.XX to of record million of the adjusted XXXX, billion to expanding We again the quarter we XX.X% ROE Thanks, growth activated performance, but the Primary delivering achieved for from fourth end, of the franchise, quarter, results, the quarter, quarter Brad. and customer up to in was seasonally financial strong quarter the record and record report

For from XXX. top activated the year lenders, XX the full including XXXX, X we

doing We group of are diverse high-quality business a X,XXX with nearly originators. broadly now

pipeline healthy, and expect is our franchise expanding continue customer XXXX. activation Our we to in

using than as are existing to relationships. volume market customer continuing point to with lenders mortgage consultative Equally important, their business is are our quarter value standout exciting in and with our consumer our NIW be to platform, lenders. of Rate processes. technology more fourth XX% are an our success change. than strengthen Lenders proposition a improvements XX% experience our approach to the and and service to at customers. the our delivered the continues The prioritizing currently grow was of engine. of certainty our GPS through we engagement Leveraging and More drive of further streamline

point-of-sale mortgage As they offer origination to connectivity response platforms drive meet to with for us to expect technology-enabled embedded efficiency for do, evolving. their They partners and with third-party expectations their insurance and accelerated times. process are their have systems solutions

In this lead and technology the context, broader we key provide enjoy GPS advantage. a Rate that

needs meeting the and landscape doing expect and mortgage efficiency continue for our evolves. are customers' We to speed as so

volume underwriting and MI risk customers low the performance. drive strong rates comprehensive industry-leading performance. reinsurance driving growth demographic market to a underwriting, credit strength broadly, driving consumer continues remain Rate standard loss origination continues to in conditions to commitment tailwind with private our risk favorable and program healthy, and drive with millennial broad-based And management More our success solutions rigorous GPS spanning insured Our portfolio. individual and

backdrop, this fourth delivering our plan are about our in excited the on we performance Against and business are quarter. record

going our risk create in on return significant confident value maintaining focused forward. We the shareholder to ability balance right and are are

With turn that, it to me let over Adam.

Adam Pollitzer

XX.X%. per million share rapid achieved financial everyone. record record afternoon, net million, $XX.X had another the premiums persistency of up and on This $X.XX strong of a diluted insurance-in-force record $XX.X equity XX% record $XX.X adjusted of the the end, income compared growth quarter of was to up of good results high-quality generated quarter billion or earned return and our in was current from insured continued NIW in market. the at net NIW XX-month portfolio. of the rate and has MI X% The drove third interest drive down XXXX. $XX.X and quarter adjusted into Claudia, portfolio We environment the $XX.X Primary XX%, end quarter you, the incremental fourth from quarter quarter. fourth billion billion We third Thank helped key and XX% at primary across of of number metrics.

also portfolio has to it the in spurred activity. turnover due However, refinancing increased in-force

and of volume from originations million, the single-premium of third were third $XX.X down continue XXXX. rebound our quarter the Assuming earned interest current end holds, the trend XX% the of through to expect and from quarter XX% Purchase premiums in the year. policies to the the Notwithstanding Net forward, fourth second cancellation quarter. we XX% total volume. continue with expect of in quarter persistency up contributing quarter. begin insurance-in-force $X.X quarter given turnover, will to view the compared to as NIW Total represented fourth in XX% strong of increased we our billion million $XX.X growth of the to NIW products delivering or to compared the rate X% was $XX.X our third we the earned We in potential. compared million through $X our environment monthly then billion, go future

to the quarter. XX.X Reported was the basis XX.X compared yield basis points in third points for quarter

the yield requirements down lower to XXXX, net of rates, with between lower points reflecting prior NIW XX focus We cohorts, capital to expected trend the along premium expect carry reform the originated and risk by growth to of volume end basis runoff tax and higher-quality to lower volatility which in of XX strong of our we implementation U.S. business that and priced XXXX. the on

ILN and premiums expectations during the related reflects for year. reinsurance also guidance impact the net activity yield and Our our on

mid-teens Overall, that we business continue of objective. strong our capture at supportive to return are rates

third our to X.X%, well Underwriting GPS $XX.X compared manage and third actively the operating XX all respectively, production than in volume X.X% of volume concentration DTI $X risk overall to below XXX the to and continue market. LTV business expenses We million, quarter, from were of the was new our fourth FICO of X.X%, use greater the the XX mix of mix income characteristics. Investment layered credit concentration million with In in quarter. and quarter. our below our million and $XX.X was shape million up $X.X and were Rate

noninsurance have we paid quarter, underwriting activities support period service relate fourth expenses to These other incurred are the offset service and we recognize as subsidiary basis fees reported in expenses the the lenders. our by by generally to provides which separately fee-for-service to certain In revenue. same which NMIS, third-party on contract NMIS, a

driving on overall business and quickly business, other while organizational the revenue that our times growth leverage with a all the growing relationships. increased to expenses at of to in technology in customers We're service of work XXXX, respond needs to our scaling way focused customer actively and our us Our efficiency and along footprint. rapidly and the expense our allows in possible smallest maintaining

to third excludes fourth in the had the expense they calculation of of in of the quarter. $X.X quarter to Claims GAAP the at the service The expense at compared Our third the and to the We of relate in was quarter the XX% in was fourth notices default primary of X,XXX activities. portfolio ratio end quarter end X,XXX as million compared quarter. XXXX. noninsurance expense ratio XX.X% fourth and expenses XX.X% NMIS GAAP revenue

fourth in-force strong, loss expected claims our divided X.X%. ratio, quarter and by and continues remains better Our to defined premiums portfolio expense was net than as initially Credit priced. earned perform

in $X the we portfolio. strong value we further in in loss to the our was expansion change liability. from fixed expect performance continued expense million, the our in Interest and underwriting and we improvement base of as warrant realize insured lever XXXX and credit a quarter our million had combined Overall, in margin our ratio fair $X.X deliver expense

quarter $X.XX for line. was to income $X.XX XXXX. share bottom fourth income per by or share the in to Adjusted income net per and GAAP diluted net in share. net $XX.X Year-on-year, grew $XX.X of was we per or the or or than third per diluted share compared $X.XX adjusted million Moving $X.XX million XX%. $XX.X $XX.X diluted more the quarter million quarter million diluted the

to value end the quarter to fourth million of organically accelerated Total Year-over-year, million the of per at end cash third compares the at quarter and per fourth or of at capital were investments $XX.XX position of book XX%. and equity holding billion of including $XX.XX share end, XXXX. $XXX equal investments share we $XX per or base million $XXX the at pace. $XXX share, million, an to the at our $X.X and at than the Shareholders' company. grew was by more quarter quarter cash continue which end the We grow equity $XX.XX and

expense, stock-based and company's also holding the total expense $XXX operating course million course In our XXXX, from available compensation incremental received end, meaningfully first we to going of company at fourth dividend quarter we regulatory liquidity approval compares holding end. million. The and the in have which for allocation will ordinary assets the $X operating under risk-based to dividend profile Beginning of to capacity $XXX our the quarter, financial primary Excess over forward. stock-based ordinary required available billion, time. provide of flexibility compensation available us grew to our allocate quarter assets subsidiaries. were with At subsidiary enhance PMIERs capacity assets

earned, In summary, adjusted net and net premiums insurance-in-force, in results record income and ratio we EPS. achieved expense

cost significantly are believe in delivering are Looking we capital. well continue of to forward, positioned our that that mid-teen strong excess of we returns

expect growing continue approach expenses performance. our and to We our along risk credit capital attractive disciplined with drive and that broadly portfolio, will management, of to our insured optimization profile the size

to turn I'll that, it With Claudia for closing remarks. over her

Claudia Merkle

Adam. Thank you,

a across quarter fourth outperformance capped of our sustained record Our year platform.

in significant year, on margin the capital industry-leading underwriting insurance remains conditions and delivered strong, markets. broader and equity NIW credit and volume the are our growth best-in-class and continued economic in innovation and market mortgage environment expansion performance, The healthy. in private For we reinsurance insurance-in-force, return

strong shareholders. our In the return win results customers, portfolio, in deliver for well balance this with positioned maintain setting, we believe high-quality are to risk our drive to insured growth right continue we and

I'll to we on, your take can questions. so that, ask back With the come operator

Operator

[Operator first our from comes Instructions]. of Mark DeVries with the And question line Barclays.

Mark DeVries

lost Anything call there have in a still of may share in the peers. quarter little NIW little it you to on bit quarter? It's early but out like to looks the relative a

Claudia Merkle

Yes. Mark, note. specific nothing to

feel $XX.X grew business in achieved in approach to results. that's way past. successful billion be NIW to and We for the continue about proven of the our XX% us We good year-over-year. same in the really QX We

excited we're of So in and really our XXXX. opportunities team, we're proud the also about

there. note to specific nothing So

Mark DeVries

House White fee. around recommendation today Okay. saw in XX sure And from G increase I'm the the you the the bps

that, for your for GSE Just the around there'd private curious similar at loans on kind And a implications FHA? in of the with be pricing the of are are increase what longer-term a recommendation whether competitiveness what expectations MI?

Bradley Shuster

Brad. is this Mark, So

So been proposed. pass never proposal budget was it's that's very just the has first it an first ago, enacted. increase the time and increase part the of at kind was same that that, not X in the and of years

early it's conservatorship. ultimately days. think will amount likely be GSE in which LLPA enacted And package, kind overall incorporated likely the as to changes reform there. proposed more think and very we to So an it's that and of framework not any of g-fees get considered We gets

Operator

comes from of our question And next line Deutsche with Stefano Bank. the Phil

Philip Stefano

there with of about a adverse that the perform even and in talk expected. development It's the in business remarks think comment to continues better than prepared the trend hoping out to quarter. the was I was something it's feel peers, to I

maybe, could help any what that is get drove on comfortable And persisting. that worried thoughts to the something this should development? provide be about can comment adverse So you us you we

Adam Pollitzer

Yes.

it's bit I a So mechanical. think

important like exposures, do. of loan many it's peers legacy to set note, don't So have of we a our

we that borrowers a so default likely to will of And then population means and serially default don't that have again. cure

absorb Ours is high-quality rate a portfolio, we're in the in types assumptions of the achieving some insured we of It's loss, that now profile. meaningfully loss to And experience, business. ratios the But it we're a when why we will much of experience, is than are we default naturally these claims outcomes business. events. cleaner have embedded terms that's better amount resoundingly priced

book borrower a provision see like defaults has once anticipated prior And allowed book we should rule, loss We're only as reserves and in period loan a defaulted. strengthening of general do. an amount don't because lenders a not our reserves for we

reserve delinquency book we we we then a reserve the and reported as a delinquency once So the have increase ages.

past reserve a due. XXX days, past For due will XX higher loan us, carry a days alone, that's at charge than

our And so older a progression default population in of any see given of portion will period, we to status. some age

amount QX, -- well. Now the -- our case. in just are offsetting, other see that. it's we of the of there fully increase cure periods through sometimes, or offset defaulting cure came redefaulters population where will reported other But going changes Without periods, cure a will that in defaults there We previously is our reserve, and defaults will to in of of assumptions. be result in be dips underlying the on dynamic activity. activity There have be generally cures that the significant a portfolio modest that that's aging was the what not and in that's previously seasonally as of an that's the And frequency by that severity serial activity fourth and be aging natural reported. and that again. quarter of then just That's

Philip Stefano

last X explain? Is I would was 'XX quarter of seasonality the there process believe. Or in and noticed fourth reserving different the 'XX, quarters something the the was guess, adverse development QX? Is that help in I QX I seasonality is -- there

Adam Pollitzer

QX. in process No. reserving There's different nothing the in

in If the and nothing the saw. seasonal you the how of are we fourth you those reserve 'XX differences was at is rewind that going we hurricane there 'XX, 'XX that be But and approach activity the a unique coming or look bit setting tape through. distorted in to about by quarter dynamic numbers

Philip Stefano

business change change or Okay. NIW in switching conversations pricing some the expecting? sign NIW as has been is you new I thinly -- was kind have translated in do than question. to algorithm up the and risk-based there that there customers current maybe, customers, this may of an we gears, And a more differently with don't maybe but a veiled were

Claudia Merkle

risk-adjusted Phil. There return change. pricing. a always we're hasn't been We our No, at when look

we've The past. for signing the really nothing I still is done it's at same wallet a approach. as the doing the far building think on and looking And drivers There's new things good as different momentum share. the that really changes, customers, we're the here. We're are in just in value -- low really level. strategy from remains healthy good us. a rates this of strong We've got with of a GPS, are a all MI And the prop. market combined focused We've mortgage really response customer compelling and is healthy backdrop a unemployment. got XXXX Rate for low drivers that with with

we're doing nothing So differently.

We continue to we've with the what do us very which successful. makes in done past,

Operator

line the from comes question JPMorgan. next with Shane our And Rich of

Richard Shane

of development at sheet, balance matter it. to no look how we at the When you the want look

an is the the where faster point and approaching be Let's would focus how the where capital than risk consider capital. of of returning point XXXX capital. is in-force rate considering at And formation formation capital? to inflection look Are are at a use on the likely that? we you you growing guys we of

Adam Pollitzer

a approaching it's not that Rick, Yes. great question. We're point.

amount I significant we SBC certainly stock-based pace. NIW think capital customer as at the and capacity every holding opco comp company, flexibility is are this of increased expanding think day. a dividend allocation. allocation, our at runway our we've in got and our a given growing the And it, emerging have rapid franchise portfolio in-force about But

forward. also capital our we needs are as So growing roll

X, that to think, XX% returns we at we're invest business. we continuing emerge when the a that to capital will point delivering of time think and that in one, a valuable self-sufficient being we're need in on capital that consistent not it's we won't XXXX; Altogether, equity and plus the be

distribute for or Certainly, us. common best to the the either to we today XXXX the have deploy to don't going dividend program. in That's capital, plans a not long we focus be term, invest it. item need business to a ways about initiate so think And or over repurchase

Operator

with KBW. from next the And question George Bose our line comes of

Bose George

the in you on ask basis XX contribution the the Actually, slows? activity cancellations of guidance premiums declines back about points. as assume year refi that to the half I the of that to Does gave XX from wanted

Adam Pollitzer

both. It does. Yes,

it priced call volatility, quality, So that they our its today rates the a And core reform. worthwhile I brings effectiveness lower to going with vintages those some it's earlier rate. risk, assumes lower we that high runoff think lower that generating right, the significant yield, a lower what were pressure premium do very to have combination we're and to things, had also quality, few assume we're given the capital NIW of go U.S. of that through. and We some of the of prior tax premium because on

a of yield. see there's ILN bit an market expectation we'll do for So the and earnings. the both anticipate in in in relates do, it included. We our And reduction our core reinsurance that contribution XXXX, that's and to we also, cancellation that the then from certain have activity a

In we million dollar that premium of started come deferred of $XXX -- Even a look, with growing that smaller a exited if from terms balance, premium unearned those XXXX, XXXX we entering right? ended balance, It's how single policy. represent static premiums percentage component with yield portfolio. premium we had contribution dynamic, That's that of we million XXXX we're And through at the a reserve look pool cancellation you cancellation unearned the of if upon acceleration XXXX a of insurance-in-force. $XXX whereas have reserve earnings, would the balance. insured

from terms in a expect cancellations. component the contribution of yield we lower So

dollar that coming we'll smaller anticipating are cancellation actually a XXXX. of through also in see amount We earnings

Bose George

based current on on premiums? early too do then, in can is on pricing, you tell pressure it to the mean, it just is And that? helpful. Or see I XXXX, further just That's Great. Okay. you tell --

Adam Pollitzer

guidance. we longer-term ultimately, by the to our of production persistency Our a right? our question. and our do and portfolio, also, It's the things, new the then Yes. business And to volume, in-force risk whole reinsurance the of new and great extension, going we rate of market. choose profile a on so in yield say, bunch the depend don't NIW on what long-term provide I'd is generally

beyond. give us early to where And in on a or so likely really it's for is just XXXX to yield too you head steer

Bose George

the And Fair one slightly remind then actually, Okay. rate tax us What the of just the you tax can tax on drove normalized lower And rate? enough. sort rate. next just year?

Adam Pollitzer

Yes. a good question. It's

that sort a muni are establish for rate. investment when XX% And point rate. the starting our for revenue of income scale aren't provide portfolio we've it that of us, we XX% down So source We like when provision we deductible. we guidance, statutory up that for and start on and scale expenses excludable also we got with it certain

have effective at balance, And on so that us to around rate. estimated XX% XX% will

of we items equity highlighted any exercise in quarter, past, reflects what impact discrete certain, Our the that We vesting in of fair particular in discrete the that items a value options. the RSUs equity occur actual through liability notable call, X though, a given rate period. we've the are tax The fluctuations in in our activity most item and and had come QX. warrant of awards, as some of

And exercised, of positive and had we options rate. our an so that tax effective impact being a saw on amount

come through You that's typically may year. we what see the recall first of quarter each in that,

X we rates as XX%. be to our at year year of see guidance our to and XXXX, full look full but XX%. we bit be expect XX% modestly so of would we to tax expect QX, And we effective that X And lower a expect around around our tax than rate above a QX rate into

Operator

from next our And Douglas Harter Suisse. Crédit of the with comes line question

Douglas Harter

as more is insurance-in-force overall talk growth bit you the Can of at growing How about little expenses? a dollars around healthy the expense guidance a still clip? think to

Adam Pollitzer

question. Yes. a Doug, it's great

pace. striking same base that that levering growth accelerating at our business we we you And and the needs, and Let the really Balance the think today against those time, expense supporting for while to to it's expense need discipline. a say, right we always XXXX. fully grow. we items in to operating staff us me for supporting need additions, investments technology, We're at balance balance. us, we're look other things maintain investing a I'd steer offer we like upon into bit that an our incumbent where think overall, are right, of seeing,

coming see we dynamic expect so And ratio. that right, we and XXXX, In our the that improvements through, in expense to continue.

base, continue less to term that compared fixed levering operating grow to into expense pointedly, adjusted by expenses, anticipate that we and adjusted expect overall, using driving We I'd and will expenses improvement. XXXX. ratio or operating expense I'm say, XX% our

how terms through our through sequentially we plays typically and quarter-to-quarter, QX employee reset the payroll out because expenses than match like we of that modestly the year, of In higher we benefit the remainder do items XXX(k) see year in certain taxes.

And developing so that tends to drive than of year. see slightly higher we expenses the in then remainder the QX through

Operator

question SunTrust. Hughes our next And from of the comes Mark line with

Mark Hughes

On down, lot the timing a And the further what will of drives the turnover see lot what How the is you do persistency, much it how you are the impacts, -- that? of activity, think in a go? refi -- when market? what

Adam Pollitzer

Yes.

of in I'll those Mark. both turn, So answer

XX% persistency So will rebound will low we below the our guidance. terms specific dip XX-month go, how reported then We but going the in in expect it the in of half do we're to providing of guidance, year. that QX not that be second

we expectations tied insurance-in-force, growth continue potential. expect future in that, with industry-leading certainly to our If do delivering we given NIW for it our

persistency of terms that itself. calculation related really it's dynamic this, to In drives the the

So that ago. was at our books looks the primary, persistency, reported XX-month months if, our total XX on

XX, XXXX. look and the portfolio at months insurance-in-force remains at instance, December December at later. in that of XX much XXXX, in In this how XX, So instance, this

portfolio any wrote that we that ratio since we doesn't ago. business XX persistency. the set XX% XXXX in of or months reported That business persistency wasn't percentage the so in And consider the

heavily What's it. note rate heavily And also persistency by underlying so that when profile influenced wrote, we influenced but a our few right? wrote things, by of It's we right? is the the the business

see the is 'XX business that to because into forward then we the quarters, right? the that XXXX high-quality, XXXX second second look of that the calculation, to fourth begin the include quarter we And persistency be production. we more highly wrote first XXXX, note the the but X/XX/XX, quarter on really in now of be will developed reported and Roll you and beginning as if our quarter, to comes so originated, include what XX-month of So will we second rates in how production. the incredibly that that we more through in as and expect in to expect persistent. expect rates to XXXX, at have node underlying third And business persistent

calculation, we'll expect rise. persistency starts ratio to see our As that the into to come

Operator

comes question from next Jack of Micenko the SIG. line our And with

John Micenko

to you you're ILN I'm you about XX But yield XX, in a maybe, you've I on XX, versus yourself? like bit how it to understand more know curious Or just the Adam, that that XX. that thinking is pronounced on range sensitivities And the a given to XX got premium a XX. are thinking timing? competition, gets total

Adam Pollitzer

No.

we've return. seen seen But some broad today, As percent the ways rate risk-adjusted competition our see same for the risk-adjusted is generally we've a general a of still all to business same return now. time achieve being that matter, environment we where pricing stable we right? of There's few are in XX-plus pockets the small

are we not we're we that. see or dynamic fully observing pricing don't because And on equity. that as, cost us, shift. for consider the in us an market No, Importantly unlevered to today is really don't changing with PMIERs We we're of supports going that loading think the though, that capital the basis. anything that to causes source

the Where by does What the portfolio? In be to really happens but outcomes we'll is also, does through? come to our rate are happens in-force terms uncertainties, trend exactly? that cancellation always year right? What during environment? going extension right? persistency then, there see of the to Where broader extension, risk by going And be not appetite interest the static. contribution what is, Our our with risk rate and appetite

things that transactions reinsurance terms as the will that maybe, reported the so drive expect to in pursue And And we the then exact achieve and we are timing on we also you this different all items yield. those expect noted, outcomes of the year. that

those of pricing just All in that seeing doesn't broader will because today. contemplate we're come changes environment through. It not the

John Micenko

higher trending 'XX's prior then vintage incurred the incurred XXXX prior I'm numbers they're are trend. why is? similar All higher think date like than that reported you That curious sooner and than vintages? the right. hitting Radian also you loss to And loss vintages for a looking are

Adam Pollitzer

models I still speaking, Look, both originated these for the better that anticipating credit for When reinsurance, is performance we out we've the got at model cover. we quota exceptionally book would in way completely time we're our lifetime business. -- us. vintage what meaningfully covered us, share think assumptions were XXXX that an price losses, right? perform are by than low broadly to say, ILN strong Yes. And Also, and going and small so numbers, we

So means forward. that progress with comfortable really as we're we what

terms the early play. think, specifics, a look X really In market, when late it items a beginning pronounced higher right? 'XX, more the risk that that is, I One but of proliferation profile at if underlying was some business, you in 'XX in in saw of way coming business through of that's the that there's we

June we And get until NIW increase start genesis out few suboptimal The getting Rate the in GPS. engine. the XXXX. later. of of high layer rolled we the We NIW risk That coming apps, We Rate concentration X, DTI GPS get don't through we get commitments with but through a characteristics. on months borrowers actually some was don't

was production time that address in recognized a we the XXXX risks card chunk tool perfect the and the rate card that So of wasn't to our a at market. that large on originated were rate basis, that

of some a rates that plateau we of GPS performing book the to seeing through had appreciation. 'XX, pace introduce of is had a relative as price bit of are we a little And went when decision a Rate you think also, in and end saw, in validation interest home a dip the rise how others. we we our in to back I

And so now has reaccelerated. -- that

to get expect things So we'll broadly and speak better.

So the in particularly temporary vintages tailwinds that business, you the certainly to two you have in when 'XX XXXX years. year relative into a dip in had that come HPA, you've early a book after the of performance, do expect originated first through HPA or their to and

Operator

Chris with our the next from of comes line the And Compass question Gamaitoni Point.

Chris Gamaitoni

your gave adjusted you answered. or been you when of what operating did less? outlook XX% expenses, by have Most of Adam, kind mean

Adam Pollitzer

Sure.

our the hearing So that one service to I things. you'll that the expenses make we our two and which we that disclosed mean, beginning for of recall, is items fourth when the then sure we in excludes we from expenses. we quarter, report how reporting earnings, NMIS expenses you're third-party adjust I One, operating also, -- transaction-related are want

so And in of expenses. we million XXXX, about had $X.X transaction-related

look GAAP expenses. tuned total our service expense your exclude at So models may yet be you profile and to not if

point of that at expenses, transaction I'm back talking growing back the you if less. that's the service look So GAAP total or out reference the out just XX% about the costs, expenses,

third-party have looking will will NMIS make expenses, then We to we have transaction-related to pursue you're sure for activity but starting expenses right expect XXXX. at separately also in service And the we scaling, separately the want ILN that may I point. that's

Chris Gamaitoni

Okay. include ceding And does Sure. adjusted number impact commission? that the the of

Adam Pollitzer

It does.

Chris Gamaitoni

type color just realize of capital the flexibility I about nature I business, had consumptive then think the in so capacity dividend if on the And just now of what wondering Okay. any potential future? we the you is still. was

Adam Pollitzer

Yes.

The holding expenses allow that that We've allocation. I agreements the of with stock-based between company a the in expense and benefit in incurs compensation, reason is allocation. about holding place that, robust company really, a highlight though, company rich the concert I comp and for have company. noncash expense. the So we operating arrangement it really got our sharing the the that operating think Stock-based

we settled will -- will, the but potential about The $XX up relates One that that, to NMIC item million. cash expect be all we've do. free we'd to bit stock-based something little that the wanted And component that necessarily increases the allocate the the that that XXXX to to cash from I'll it, that's of, between sort expense a noncash and opco, a that flow, and total, Re we'll of is the along the operating an with we extent to. free with we of liquidity so a cash have in payment extract will expense company. allocating, it's not holdco the from The and ability a whether items we opco in company the over allocation, dividend from will That's $XX expense the yield extract free flow, available call dividend compensation capacity comp to been about, cash flow, the operating million opco stock-based available the

Chris Gamaitoni

that's stock-based numbers, whether cash what expenses holdco, -- now the -- rough out in of, kind comp right? is but just And the are of cash

Bradley Shuster

cash mean, You flow out, Chris or...

Chris Gamaitoni

Any cash holding to that paid flow be company? have expenses out the of the parent,

Bradley Shuster

essentially Yes. Chris. That's neutral now,

Operator

Riley question line FBR. of from with the next Randy our comes And B. Binner

Randolph Binner

couple. a had I

an quarter? kind right grows that company? that the static expense is service figure? around Or a excluded, with that at of the that Is that item pretty was the size that $X of Just million is fee item

Adam Pollitzer

than just utilize our Yes, so will services on depending with. customers grow. not contract Yes. going Certain It's necessarily grow, lenders more also, standpoint it which company contract to that others. we underwriting want a invest doesn't size It's the it lenders offer but that growth From forward, what we customers business it with tends it's for engage We're in I would service guide of in other support. we're be when in and us. by because environment, you, getting going of those say drives that fully in underwriting we refi for contribution overall, incurrence I on like higher refi our it And reimbursed paired offset environment, forecasting that's our getting looks the that to be heavy it need to growth expenses. NMIS But value for don't matter, will fees. expect and revenue the any we expenses depends

Randolph Binner

it's little and the also capital the reinsurance, And forms on of yield, ILN of support. It then quota it. then bit Got but use impacting both of incredibly efficient source just reinsurance. printing a the share is

kind of to much the being how years in market? syndicated of the X, you business X, So next reinsurance do the see out X

Adam Pollitzer

but of the being than we cost us, us reinsurance and obviously in comprehensive theoretical matter, all those reinsurance funding see majority reinsurance a But that we lot it's But get X%. more out markets a for as sort just It's Yes. us. far With structures. the risk value. having a of There's we absorption core Look, out matter, and pillar individual we as that end funding, a see I the of to loss significant with of expensed of events. matter years. program also GPS. talk use the strategy a risk a -- risk And instances, its We forms, is program characteristics. as a syndicated management in underwriting business not absorption several think, management do on next about important for Rate better front the below of over gives tail right, characteristics, it's debt-like great many equity-like sub-X%, loss in are as into particular, broadly

reinsurance want And so to have we in place. structures will

want our program. of could contours have may reinsurance things. always cost risk over time. enhanced exact we the may extent do to may actually We share something program of the evaluate loss capital we'll a excess that traditional a a do change was and from standpoint program We not that quota of those Now and additive to our both to look protection,

our on uniform of cut so up for paste And uniform that going it's gets scaled and sort growth yield be impact in book. our a not the to just cost

central going But I as to nuanced markets. be them to forward. going do in are we see those do being utilize how what We we

Randolph Binner

a capital that. multiple Well. higher Yes, use it's of appreciate good in I stocks. a agree, could I for And the argue and

how is perspective? still from market broadly capacity Just available reinsurance and those ongoing are conversations going? kind negotiations the of -- Is that a

Adam Pollitzer

in pools we we the now this worse disclosing far year. traditional look that be generally objectively ILN We're having has Yes, in would good we're We'll broadly, terms is. ILN as but market some offered going it not point market, working We're at with market. anything so out then where to issuers where to the more reference see favorable we at conversations. the particular, observe land. we're And really a on quality something of

And when able optimistic once market, XXXX. that to, transact be we're positively differentiate so again, in come to when that ready to we we'll we're

Operator

And & our line with the the Geoffrey Dunn last question Partners. from of Dowling comes

Geoffrey Dunn

and asked been have questions My answered.

Operator

I call And session. question-and-answer that like the turn back remarks. management does to for closing today's would to conclude now

Claudia Merkle

conference today. for you Services be Financial RBC Global at February on Forum on Crédit Financial XX. to the then. call on the Institution's look March We Thank you us We'll seeing joining forward XX and the Suisse

Operator

gentlemen, conference you Ladies today's participating. Thank this for and concludes call.

You may now disconnect.

NMI (NMIH) 11 Feb 202019 Q4 Earnings call transcript