NMIH - Earnings call transcript Q4 2020

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Operator

Good afternoon, ladies and gentlemen, and welcome to the NMI Holdings, Inc. Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to turn the conference over to your host, Mr. Management. of Swenson John sir. ahead, go Please

John Swenson

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

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

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

on website SEC. If cause regulatory any results that in Company obligation to measures Additional information the on to this factors the or filings subsequent no to non-GAAP other light fact about of of on those and statements, be should with in the measures. to have undertake a or call. measures time we today's actual than provided makes rely that any the such do the current reconciliation found future on call refer GAAP. forward-looking these Further, developments. of the through that the the we the time note can statements those our Also of press release this our differ call, under statements is comparable we one on guidance the extent could discussed at and In trends materially update from not most certain our website, to

call the like to Now over to turn Brad. I'd

Bradley Shuster

pandemic, XXXX, us capped MI. when supporting afternoon, of our and time needed everyone. Thank and challenge, borrowers successfully market unprecedented the through year their customers you, a the In overall navigated reward COVID most. housing a of remarkable for stress and John, The at fourth they fully resiliency the good quarter National we and

environment the to primary $XX.X direction, stimulus book, pandemic. record look closed resiliency management access the comprehensive in as performance a through we which in-force high-quality, trend support in individual and housing that establish XXX,XXX year, risk XXXX, billion through one During secure spanning absorbing innovative the consistent strong additional the prioritize the portfolio $XXX.X of rate risk over day generated We risk optimistic the $XXX profitability in borrowers gain significant given our our a the GAAP and in the was encouraging million credit full-year of invaluable. and shelter potential pricing, COVID underwriting, income billion borrowers, are insurance-in-force. for forward housing in result safe, and to for continues helping decision underlying XXXX our program wrote with delivering our year. NIW, year of performing market. to of we increasingly with pandemic despite We of framework, impact establish responsibility to reinsurance and sustained an Credit And we our high quality proved from of net GPS a

million on $XXX.X the year XX.X% adjusted with efforts quarter fourth exited equity. and was net Our during year. return important we an income adjusted role stabilizing played the and Policy a

announced speed foreclosure lives of pandemic other social acute are strain this fault once homes policy. borrowers their in is who, the avoid has their help through Homeownership of bridge and pace programs applied past order helping with the the today forbearance and of timelines and homes We to to own, is they borrowers interruption assistance real in note passed. facing recent foreclosure and are so extension moratorium their are and the economic also of recovery. remain more and need limited FHFA. ultimate these foreclosure than efforts Forbearance, and ever to point by to shelter-in-place able before. the stress right in their essential, the People shelter no It ensure resume allowing will stay

provides We the administration bright leadership. been of congressional for than expanding environment wealth homeownership a against of guards spot establish risk virus, community is to a new safe for long-term in creation identity expect in the equitable Biden that market be an It access the appropriately all has will manner the to more ever important focus a from and before. pandemic an shelter the an area ability wake to systemic benefits the and that opportunity and a housing

and recognition risk I political were down customers crisis. of offers, with downturn. and come, for COVID me private also payment a it that front optimistic navigate to to opportunity will access equal achieved how difficult value the let able believe loss mortgage priorities and borrowers, our over for continue build delighted the is taxpayer we to in and our Overall, predict the hierarchy it may that there what I the and in turn value providing through borrowers while we am for that, employees, credit, our to Claudia. for With placing absorb effectively with support shareholders changes last While to private to insurance in about am to our year we of XXXX. capital specific continued of be mortgage

Claudia Merkle

It year. was Thank rewarding Remarkable remarkably XXXX. for challenging a description and remarkably Brad. an you, is apt

Our a work to transition was environment remote seamless.

and Our ways advance customer found innovative engagement. team connected to our

in markets, aspect capital for our was operating credit in prioritize to risk new a XX.X% selection standout discipline the homeowners reinforcing was our the buyers shift exceptionally in was and in demand. the to strong performance responsible are massive the or and supporting of level record increased of drawing we environment X% of in increasing consistently adjusted quarter strong. business effectively, and backdrop, home, The that both strong rates through the fuel, looking portfolio. platform slowdown strong business the first-time additional XX% for existing low Against record $X.XX income driving was $XX.X fourth duration share. in team readily quarter. Volume COVID have a production or by NIW of increase any billion, COVID fourth net and $XX.X per We diluted the and see business our per remains in emerges has a period GAAP million to quarter, generated and seasonal diluted was of the beginning our to the ROE on move performance million and was momentum share, carried from didn't the new importance our of net the space. of and of from purchase fueled XXXX. quarter. compared continued driven for quarter pandemic this provided the achieved mortgage of the of The Shelter-in-place third and decision XXXX. validated behavior adjusted volume. has up affordability, and our the market. in-force added interest Record We return scale every the the $XX.X typically $X.XX fourth into business GAAP directives income buyers up reinsurance equity more Our execution XX.X%.

levels business production and Our new the equally of our volume strong. is at value is record

to one on business well quarter, barrowers. deliver continued by returns to uniquely XX activated pricing help National Our is a situated this lenders continues for risk-adjusted important Overall, NIW business where new flow. and matched discipline, MI we lenders. valuable be solution underwriting new the In is record and environment, attractive standards, stringent new fourth

XXX For the lenders, the full-year from XXXX, activated XXX. eight top we including

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

to the COVID many respects, Our consumer evolving underway. customers improvements their drive already processes. experience were that pandemic streamline prioritizing in technology and are and are business accelerated the changes in has Lenders

expect technology-enabled broader have embedded rate systems As solutions for efficiency. this and key connectivity they lead do, mortgage to advantage. platforms process their insurance us enjoy offer to with drive their third-party to their GPS and the provide that In are context, point-of-sale we evolving. technology and a expectations for support partners They origination

is We needs existing our attract are team to our and customers innovative deepen customer's every ways and day. relationships our new finding meeting sales remotely

right XXXX. done and our business, and customers expect company built all cycles build customer pipeline expenses with franchise we the our durable a continue in retaining and remain coming to into across position is Our in positioned stress we profitable through way to perform healthy market activation consultative fully strength managing recruiting to everything and talent, risk, our us and and establishing this engaging us lead capital great culture, allowed COVID have of expanding a We to the to pandemic. throughout. customer-focused The

throughout. the our consistent our been COVID mid-teen We brunt We our management. sales significant our our high-quality franchise, with rate sheet. the of absorbed delivered growing strong and XXXX, amount achieved GPS have a message, NIW profitability insured and price delivery tremendous our balance in and focus our volume, pandemic risk returns on and We portfolio through

As and house market ahead expect demand the will price robust XXXX, sustained in appreciation. we look we housing with remain

mortgage our expect value. we market We what and with to path do we best, pricing Adam. and dynamics. strong a favorable NIW will continue deploying customers insurance it And responsibly to remain equally see to With constructive over doing risk and volume turn clear capital conditions support that, drive I'll

Adam Pollitzer

We fourth quarter $X.XX premiums housing billion or primary was diluted the earned production, included net and $XX.X billion of delivered billion adjusted XX% Net equity per monthly on December of Total adjusted $XXX.X We was quarter strong Claudia. backdrop NIW quarter. originations reported the in million XX. market. in against of $XX.X share, of results our and in accounted $XX.X fourth the the for financial XX.X%. of were in $XXX.X continued volume Thank of NIW resiliency return $XX.X you, billion million, generated income purchase insurance-in-force the at

environment mentioned, remains Claudia As new business strong. exceptionally the

the will production achieving We current this we've rates the flow, on returns strong volume, note ever be record risk because we originated. are low expect business and adjusted of our most on new persistent record

to compared $XXX.X at our value production results. quarter. of in volume, the together, of insured seed and stickiness to value billion third our are and $XXX.X portfolio the serve end was the growth future financial Taken driving Primary embedded business billion of will insurance-in-force our new the

business rates turnover. exceptionally resiliency new our strong While to the to persistency also of have XX-month record an low as drive level continued primary XX. in housing refinancing was and interest contributed December overall spur the activity XX% they've and portfolio portfolio of of volume market, elevated helped

extended compared from impact for compared part connection basis fourth in million premium cancellation to fourth with most we single $XXX.X fifth from the XX.X included ceded increase outlook in an million expenses yield in expect October. the the volume recent the of we were quarter writing an environment to for Net the in and in We the million and Investment interest reflecting as compared the the our $XX.X primarily the in quarter period-to-period. books third turnover quarter. offering quarter, million was quarter, incurred stays given $X.X XX.X premiums rates. premium Underwriting million, reflecting to in costs million expect our points, near-term, in $X.X was persistency on in remain to points third million the our $XX portfolio the the for ILNs. current however, including time, in third rebound the persistency income earned operating $X.X period. of strong NIW Over $XX rate fourth also in quarter Expenses will will will quarter our Reported are ILN basis in growth policies. were slow low business

ILN-related expenses million. operating underwriting and adjusted were Excluding $XX.X costs,

defaults fourth quarter. September X.X% the our our declined to the ratio expense December XX% XX, our We rate XX.X%, primary to and in expense adjusted portfolio XX,XXX during period. compared and was at GAAP ratio Our XX,XXX at default from for had XX X.X% was

at XX,XXX to level XX. of our of with rate our that status. in now population and default number September X.X% indicator leading Our enrolled strongest loans to near-term favorable least portfolio These since payment, month April. in of a trends or January August at are quarter not since X.X% portfolio the one have lowest primary compared of performance end, has every into is January credit default declined but our our and forbearance default default progressed or at missed portfolio in declining program to At our X.X% continued The the its at our loans XX,XXX loans population XX,XXX declining in XX.

rebounding we forward, macro to economy, continued in path in while improvement the performance house acceleration we a contribute as our dislocation, support, see timeline, virus that stimulus credit accelerating an borrowers benefit price optimistic current impacted and broad forbearance exacerbate of the additional appreciation. housing Looking in the extended additional will market issues and are resiliency could and from

quarter normalcy of We for in underpinning million outlook. fourth the quarter. $X.X every in new distribution million return also hopeful from the assumptions in administration $XX.X third and to the vaccines expense credit We are analysis solidify our the will our that near-term allow further down the reevaluate broad Claims reserve was and quarter.

our have appreciation on experience position forbearance with beneficial programs Our and and most of the the and impact view assistance borrower reserve at December forms expected XX other to other going views of reflects forward. our price conservative current a factors are house claims of ultimate macroeconomic balances path

of the additional a of quarter warrant change loss achieving $X.X standout fair income in pretax GAAP Adjusted million over of we cost value assess further path income, $XX.X position as appreciation announced assumptions to in and changes, per excludes in reported of been gains continue share. XXXX, of for expense year Interest that will The capital $X.X the capital production net completed borrowers, a of new other In progress reserve the year. treaty quarter. capital. periodic investment resiliency We the the reserving and providing support, million, housing share $XX.X share liability realized or and in million to reinsurance was of our the and our compared house factors, period. our $XX.X or we new underlying to share agreement changes to that million COVID the underlying diluted the stimulus covering to XXXX. million was the the and quota among determine assumptions during third January, $X.XX X%, net during up business reserve a necessary equivalent in are the carries through what billion of transaction $X.XX our prior roughly approximately $X.XX considering, the into estimate seven the new we've deals, agreement onset the share fair availability net quarter diluted success of diluted costs, performance we we whether the of reinsurance per capped markets. quota $X.X of a existing from position per to market value was the and entered losses price warrant in XX% We We our growth XX.X% pandemic. or which

Shareholders’ Our the to of strength provides our and support success and in investors cash expansive Total cash and end approach. $XX.XX investments of investments share holding the an our were reinsurance have $X.X billion at quarter billion, funding end, share, end confidence profile And the with including market quarter going and at $XX and highlights company. per million in that our their comprehensive and XX% program $XX.XX at to the fourth per of us capital up ability at $X.X equal XXXX. uniquely the lenders from of equity nature of the forward. our the disciplined expanded reinsurance borrowers was

of remains total delivered Overall, under the undrawn portfolio, billion, PMIERs $X.X for outstanding encouraging of were we production million of assets million value our $XXX available. end, a risk-based revolver required quarter and assets significant strong At return. $XXX $XXX reported Excess $XXX strong have mid-teens and We profitability in-force and and with record million. senior business available notes our fully available a results of million. quarter and driving volume new performance credit we assets in and

that the capital drive economic of normalization sector to are the it attractive are with expenses will expect risk size pace me that forward, our housing we We continue broadly Claudia. approach let our our that, of growing management, day-to-day performance. insured portfolio and credit of activity, along opportunity. of back to and about turn disciplined optimistic to we Looking With profile and recovery, MI and resiliency the prospects for the well-positioned market believe

Claudia Merkle

sharp brought important finance National works insurance a cycles. private all Thanks, housing taxpayers has Adam. healthy focus, supporting and MI and COVID in play the the broader that role into system mortgage borrowers, market lenders for industry that across functioning and

managed business profitability and position with remarkable the insurance-in-force, capped provide year. pandemic and in We of Our by primary into performance points NIW value with volume record to quarter we build the came at innovation all and in and conservatism the significant support, mid-teens have return bolstered strength, our strong with lead which year. continue the fourth a through a

take come believe risk we so growth can questions. customers, in the we balance, our operator drive continue and deliver we high-quality maintain win are positioned your ahead, with our for return back insured portfolio, Looking now today. well to for results you to right Thank strong the to joining us shareholders. ask on I'll

Operator

Thank We you. from your DeVries [Operator Instructions] first Barclays. question have Mark from

is open. Your line

Mark DeVries

Yes. Thank you.

we've come like in large improvement as worst for a you've continued excess scenario indicated, about been position optimistic looking capital the and pass. you've won't pretty bracing built So the case pretty And obviously you're for to outlook credit. it's

excess could So here? talk thinking you you're all about the how about deploying just capital

Adam Pollitzer

in is expectation our Mark, deploy the in capital to in Sure. our near-term. goal growth that's look our the and support as of forward we business

significant. business given long-term, the through of The and out have in as of the deploying started who way the around are focus in on near-term, capital of capital mentioned, to borrowers borrowers return around is support right using thinking several this and about growth The we'll geared balance the continues performance, expectations opportunities years. point. Claudia this capital profile meaningful NIW a as distribution greater potential That's opportunity, new over support production, really for the in on focus XXXX. that Over in stickiness our now the is we've that But at market. it's primary quite coming

Mark DeVries

it pricing the should but is business have it looks I up in that just written expect yet for seems you better, And obviously a the holding. of stress much like guys What we returns on pricing the holding of the kind as return think, is like I the XXXX? result potential, industry pandemic, mean, raise on from Okay. anticipated credit

Adam Pollitzer

Yes.

but I'd range price for market price, potential So obviously, when the a not base that might for to just say risk we that take. outcome, of path might price, case account the We right? take we and volatile

greater is dispersion to risk risk that an ahead. outcomes volatility call in now just see acknowledge greater, returns there over the that potential much increase the still outcomes, pricing a able price February too really to That's certainly of goal those will year I'll around or our to still year. tell the achieve we business to reflected the from price we performance mid-teens macro case either last early appropriate strong But return so and business we’ve in It's in XX. that environment. in It's an our was the that the what in generated our And early, a the we differ also was risk-adjusted right? We're centers perceived on expectation positive might generated be if negative for return. base risk-adjusted increase it last generally of expectation. meaningfully a that business, When

Mark DeVries

it But that credit higher range of performing at Okay. end is potential maybe the observing based that the on and could safe better maybe of that what towards in come least to returns say you're outcomes?

Adam Pollitzer

Again, it's too early to tell.

had on you're what the had far environment up terms profile the anticipated. stronger. originally think were be expectations, new coming we I of pre-early that better ends But shifted in we meaningfully than than the better returns though, price if that through borrowers credit spot-on, the of credit knew performing will

that our performance does the were. be also so with factor expectations those loss will original that line we're in price still what expectations. And now, into expecting Right

Mark DeVries

it. Thank Got Okay. you.

Operator

your Rich We next JPMorgan. from question Shane from have

line open. is Your

Richard Shane

one rates related looking signs seeing mortgage this questions Thanks morning coverage maybe early some taking that reaching Are heard the the activity. burnout in indicators are the about for our my conversation there infection? Look, guys you is you we've way? that are guys. – Hey, any When at to of of refi that suggest remit afternoon. things this in any leading that terms reports, of the of persistency

Adam Pollitzer

the in our necessarily Remember, portfolio that data – day-to-day. it's is that not question, the dynamic different, come through a good little We're of not though and a seeing performance persistency bit It's that Rick. the we for that look turn reported is the we day-out. it, provide, I and XX% really persistency quarter stat measuring, call the The day-in portfolio XX-month fourth the in a XX-month back.

our of of that that's So percentage the for XX/XX/XXXX business X as on of was XX/XX/XXXX. was books there as us,

will even earlier slowdown XXXX book year in improve so persistency dynamic I'll simply progress a be them expect as into And turnover we'll we our pace that rate doesn't this calculus. if the lower what amounts of we years those, in because note through call production we environment bringing the on in generated of

so slowdown in turnover little in And a be see we if pockets will bit a the portfolio. even some different our dynamic of rate the don't of

Richard Shane

I sort basis, and and it look understand a Got it. appreciate XXXX given a math the that monthly any seeing the But I a when guys on look you you on why at inflection way. and where makes and sense we to of burning that to a But there? obviously off at – the XXXX that it vintages in quarterly lesser fast, XXXX relatively and basis Are are and are. coupons

Adam Pollitzer

tomorrow's are candidly, that to rate. we've And when December our rates out we're it, refinancing was indicator we've persistency same generally continue was in performance. the would portfolio price going, on in And forecast stock we've with looked generally at if persistency turnover the chunks same performance that do made the will recent with in ripest that the a we've November, turnover pace of in those accelerated periods. the at is continue when very the the and seen so which assumed exact that where for October turnover We've value turnover the we consistent the the of all assumption consistent best trying rates No. way or yesterday's is modeled at will most

Richard Shane

Hey you very Adam, much. it. thank Got

Adam Pollitzer

Welcome.

Operator

next Harter Suisse. from Doug We have your question Credit from

open. is line Your

Douglas Harter

be support capital about growth you're you much capital talk versus the quite Your a in might How about strong. year your think you need to to think thinking excess PMIERs guys is return? coming Can how in do you level? position about Thanks. do you you just think

Adam Pollitzer

right support now, us; there, business certainly, really doing. new let’s that We the have that ability into what our question. an gives which borrowers, we've we a will capital attractive we expectations do been and is lean of have say, is the We year. one, lenders it replenish continue deploying to obviously Great prosecute, tremendously Yes. their course and And equitizing of do capital excess that earnings now and continue we'll be have Obviously, have the to we're excess the our course in capital everyday. be expectations ILN through the the as market we we sheet through generating we'll and to active balance the opportunity year.

don't For be a plans capital to any distributor. XXXX, we have

I of also for one, to our distribution. and capital, really equity our we're resilient we'll think over is road, What and This need in year we out those market is beyond to new generating of profitability the standpoint, size how the strong down management how excess long-term, from see; performing. as opportunity see organically. what tremendously so to generating business a is get and this capital environment but calibrate the we're the develop credit housing further potential plans a is capital items all how want and we'll much

Douglas Harter

Adam. Great. you, Thank

Operator

from We have next question Riley. B. your Binner Randy from

Your open. line is

Randy Binner

evening. around cuts. mortgage if the most spent there's – one all about Good FHA with spent on hypothetical price clients insurance a MIs – you concern Hi. talking topic I've I’ve address time Could is

I'd administration, forum broadly, perspective And can more so you over kind but now talked that to talk a of it's something the lot a it's new just where probably like that in think time, a with and we're issue. on reasonable about to your hear we've about thing

Claudia Merkle

more by It's it's also risk-adjusted Broadly MI But are good returns Yes. FHA and and Sure, to different on growing the a of That's we important price market. speaking, than we influenced operate further and a the the it's quality. public in on particular, appropriate with returns by served shift certain risk-adjusted private where to our an believe NMI others view the the COVID in where important one. achieve pricing. and bifurcation even Randy. best market at appropriate that are question, the we risk market is sits. This FHA spectrum recognize what execution private by market a since point the barrowers

significant in cut private were their expect best FHA market. of if continue the the today serve the will an So that find rate majority through, we barrowers to execution come we to

Randy Binner

back Thank you versus how thinking does the how Then you to maybe – is that. overlap Good. since for a follow-up but that the much mentioned change PMI COVID, then? now different market of the been FHA be, XXXX, the would there's even versus

Claudia Merkle

Yes. overlap obviously shift. say any credit have it there's I today and than private coming The credit as but there, far is Randy, scenario, numbers sector. to the quality as I exact the certainly the would less don't with into XXXX, overlap more more higher

Randy Binner

you. All right. I'll Thank leave it there.

Claudia Merkle

Sure.

Operator

have from Bose We KBW. George your question next from

is open. line Your

Bose George

of the February forbearances? for Brad FHFA question, you your XX. first not who deadline clarify the to the by it's Actually new announcements seem to week GSE directly afternoon. that understanding referred Good three-month last extension that. And borrowers did for forbearance, the Could are address in

Adam Pollitzer

it's of that's Bose. perfectly favorable not dynamic there a the interesting an point, I'll call there's other programs. some Yes, it, with overlapped

months GSE read borrower enters is up to conversations borrowers program depending forbearance on will a hardship last Our that understanding week's have they run have XX and February that February XX announcement their to obviously, program, who that with XX, and any the after can by servicers. of But under XX will an amount can you program. they to there's after date run, February still you backed if instead of indeterminate access months loan when to XX But months having if on no forbearance GSE they of have time, that access. a forbearance XX, run access for on end have

Bose George

well. Okay. our understanding sense. that That was makes as Yes,

then to to switching over good hear. And premiums. that's So

downward on pressure especially extremely about terms light which much think way obviously you're In that is is quality? premiums, the how the business of in left and of core high there to a doing, margin just is

Adam Pollitzer

Yes.

really I to to pricing you It's me. also When is, to importantly our persistency going the and specific we're loss down and that through line will the say mid-teens difference extent achieve rates and level as experience QX from obviously ILN strong risk in Through to without try portfolio you profile the ceded that in-force expect period, bottom on in And steer our year, commission. pick given profit fluctuate which additional to do net the I’d our to we're give the growth the impacts is want turnover to return. yield we results, production, production risk XXXX, excuse every have, our premium steer, general active profile the our that that expect in give on in Okay. – that also guidance, because we current progress running continued general the a the market. based and line some pace we the off. we bottom of it trend really price, up year course what and costs is volume the a of versus we through the

some year. to through the side expect do we So see yield movement continued on the

Bose George

I Okay. helpful. know And Thanks. a default-to-claim don’t actually Great. then one you That's credit. quick on just the gave assumptions.

claims curious So hold. I’m actually we on that. on [indiscernible] what just claims. the paid just actions are foreclosures if And not, paid get then currently,

Adam Pollitzer

our the answer heard the rate yours up approximately second part second But repeating the I'll mind was first on it, quarter fourth or quarter. consistent of claim is in though? to but the we third in notices Bose, you Would claim the line new your the made repeat and question, of not notices then I'm the part both part. on I'm the question which the that new you assumption sorry, sure X%, with assumption second rate if I did. so ask broke I'll

Bose George

given small Yes, curious, sure. to there's loan paid moratorium, was claims triggering claim Yes. foreclosure obviously paid currently. a gets a just curious what is number, a a It's how status? I’m was I that but just

Adam Pollitzer

Yes.

are majority the foreclosure a in sustainable that which Those on are that coordination on imposed from in to progress we home I claim two which And are So lies their title saw loans workout but take in activity sale. be That's exiting the the borrower. default through say process the ahead thinking the of very, there of very It the done those that borrower could for servicer by progress amounts deed after own and limited overwhelming of be are to process to really is, not be mechanisms called lieu. those short servicer It process. a pieces, part would could takes other them. property. and the for the may of lender are as title, what with not what the something a

Bose George

Great. Thanks. Okay.

Operator

your have from Micenko We next question from SIG. Jack

Your line is open.

Jack Micenko

Good afternoon, everybody. Hi.

talked moved four pricing I come on it of across a maybe And the initial and higher of the we've buckets. onset know raised perspective the sort three, pricing move that board, maybe of like of industry question, prices pretty pandemic. beginning it bit was stands what's average But at in about a the Have from – Are XX% the certainly your there? industry where of sounds quarters prudently as sort that the held different ago? on flat? in we or on level we kind price First

Adam Pollitzer

of to the We've speak. in Jack, of outbreak terms pandemic right. put the pricing been onset much today that prior that the than and protective that's still the had think it, we the so achieving the it to of place higher Yes. onset to is today was of, in increases appropriate, virus. following rate call pricing higher is are I'll COVID how We

I it's for dispersion early might pricing for days, that base still outcomes We're develop. isn't about the just pricing earlier, As case, mentioned potential the pricing right. but of

the the hopeful. environment, least ahead. think rebound resilience that the of in I still market, the feeling better. all We're seeing of macro We're lies rolling We're a seeing vaccines uncertainty but strength at the lot we're there's all housing out. or

so we've way borrowers. also a increases rate think that but both appropriate, supportive highly those in for of is been we protective And of us,

note there's at of rates mortgage is, look pricing the today are single our of you MI credit where out there we that coverage. believe isn't don't and access able a where because to If borrower cost who

COVID that been much pandemic. the so same of us the we've since And balance that it balance. to was early really working for And is the onset really find as

Jack Micenko

end And towards about your end Okay. the on thinking tend on LTV. model, then Got FICO you higher to and the skew lower it.

appetite. your was you the on seem like saw just bit a curious maybe it risk that though, of returns a something Looking charter relatively quarter, this more in context where NIW at if And does little I'm attractive you've the taken just process shift you've this both the the or – outlook, quarter. you pricing that of if saw optimistic NIW prepared become question your of the comments and in prior through in on behind around thinking thought Claudia pretty some were we

Adam Pollitzer

what's Yes. of XX greater already we It's for of a XXX had the volume. in and facing pandemic, equity rein really below already been comes historical a and that low in difference Jack. looked LTV become that high-risk high FICO issues. would of beyond issues, borrowers us point dealing cohorts lower by good Through the course And pandemic, DTI with expected for versus that the It's design, to data FICO, in what through high are broadly are a have on production DTI borrowers. At XX expectations level who certain borrowers based to is income note. clear the in outset stress the notable loss LTV than what not we

environment the market has prudently volume. in dramatically significant note some so opportunity was additional I additional such production portfolio, lower with a design an into macro high demonstrated profile is would today doing it the resiliency, risk recovered, is And and new as our that overall our natural still had of amount the modest than the that and spot production on layer we've if housing our in by to risk has pre-COVID. LTV

concentration above rest most not LTV XX focused we third the the points line was of quarter something And it. concentration remain risk we the industry, of in in layered think I to looks our on of as basis be Our roughly the quarter. which now production, the just loans with like in of certainly managing risk XX which importantly, as same in had layered

market, design, cautious, based as And it’s going have to an it's have don't pandemic we on be was clarity we impact still by to want it observing on. So we're as its around greater certainly. the but on that the dynamics some moves area housing we're an outsized concentration,

Jack Micenko

Thanks. Great. right. All

Claudia Merkle

Thanks, Jack.

Operator

your Giuliano have Compass Point. question Bologna We from next from

open. is line Your

Giuliano Bologna

a potential been in my think it of cost have was that businesses Thanks of currently so we come topic Because the of I overlap a of it questions. a with push having the scale I that overlap more different where buyer on people for a FHA, get angle. times, few that your obviously could is more the is but up similar a come And about lower FICO when so on have things has or $XX,XXX LTVs sense and of out When your you LTV different the bucket we up an of scale that the in few people a I've overlap, what was is the about first-time funnel bit that lot that's was be a one on it higher market? both benefit of think credit. that the continue of predisposed more And conversations and home some PMI moves FHA in impact push trying taking a towards them to to obviously, are from currently ways. of to little perspective a cases. guess,

impact I'd So the be overlap how industry. that might curious

Adam Pollitzer

how not That in for and perhaps of information how Yes. mechanically would domain a implemented long, some it specified around is work typically That's public would the different right. also from there's one window. others where I program, say a lot

it's actually borrowers how and in will for structured you long effect the how mechanically, impact cash that. get to so is upfront how And program

negative. FHA – but tax it's were instinct not though credit. FHA Broadly actions all possibility speaking, your of $XX,XXX some questions now think about rate earlier I right, just there is a about

view and housing been of the is increase benefits thus housing the able to to that to advantage all take these really programs that of haven't access Our for of market yet segments are designed access of far.

the more origination new demand designed to buyers really and And into dollars. new so with market bring it’s

lower maybe And who reallocation far though $XXX,XXX, a of support the perhaps out our now doesn’t have coming might over give are average is there to already just pie reallocation will MI market. offered sense, support otherwise of size our of the is those a programs our at LTV is going little profile as that between profile if in risk market. market. we they served the is change better perhaps profile. LTV private where we're That piece into is roughly the for really their weighted a would you the when pie, with loan probably shifted $XX,XXX insuring new with it think not credit the a to it just X%. if looking market that's this biggest private that can bit buyers drag FHA for could at be between But expands a as the What of the a by and into and LTV you a for do be market buyers point obviously that, some noted, who profile average they pie. best And X% origination FHA higher XX, MI borrowers of needing some not all us of the our To these move be a

Giuliano Bologna

a queue. the makes in jump sense. That lot I'll of it. I really back appreciate And

Operator

from have Ryan BTIG. Gilbert next question We from your

is line open. Your

Ryan Gilbert

everyone. Thanks, Hi.

it I is think remarks XXXX guess, mentioned is prepared quarter NIW of XQ just dollar that carried demand hadn't in and kind that of into a January. you on that's to NIW, fourth seasonal in consistent fair XXXX? you of say question First I seen the tracking with in slowdown volume the

Claudia Merkle

to – unfold how to we But really and Yes. quarter. haven't post-COVID continue a application that much early persist of see increased We've affordability of nature. ultimately The midway strong the the seasonal weather. through demand regardless seen that right, low slowdown of rate seen drivers are not you're tied towards It's we've the still the will emotional and seen should comes how to drive volume so in too, the through. little QX far. seasonal homeownership Remember, tell

a an about this with QX in origination is mean, we But about have. I fourth our would otherwise quarter. may see, than stronger yield the in beyond we'll typically momentum record So environment and we our both delivered future strong really and our unprecedented volume that and feel positive it we

Ryan Gilbert

with change ability any there I been XXXX in volume? component XQ Has refi quarter been in capture XXXX? in XXXX. Okay, another great. refi And also strong pretty NIW, really Or stronger then to about guess, that just has of the consistent thinking your

Adam Pollitzer

That borrowers. the have market We I at we're in refi our one But have our I supporting breakdown breakdown. success purchase, don't so fingertips. the XX% defer XX% I'm my speaking, to on. don't going in QX. were having broadly

as We are borrowers expect suspect standpoint and that they a equally refi purchase busy from from standpoint. a our are

the And is those there. momentum get splits so first but call, quarter when to we we'll provide our

Ryan Gilbert

Okay. Thanks much. Great. very

Claudia Merkle

Welcome.

Operator

your Mark Hughes next Truist. from have We question from

open. line Your is

Mark Hughes

to another what generated share the and sort say would support with Adam, what Yes. of you need capital with in you kind excess capital order a there eat approach way your of to into could growth quota support, start ILN growth internally Good Thank afternoon. to you. internally situation. Is way to that capital?

Adam Pollitzer

It's Yes. thought. a good

to necessarily we also we generating that get we distribution are And have we a a we the of can't that to of because to of all make production could to times, matter, obviously where amount of an that's us, be go of plus And to that difficult transaction. goes assumption our support calibrate. warehouse through with excess. point our ILN. obviously that until next As one our prudential our that going for that, a able that And be keep XXX% a today a assumption have we to needs at all not more reinsurance producing in would theoretical is through business excess everything fashion we're XXX%

every fair excess additional for really results generating seed ultimately able our that support portfolio. and to our think that by us, have and it's year, to that significant borrowers to in of our insured future we this in in helps be say support financial I growth our customers, expectation way a we'll deploy

our some from not organic get into harvest beyond distribution dynamics can more acute XXXX. around we come market be that's opportunity may generation, and those deployment versus we the of but what in versus out going As to focus, XXXX,

Mark Hughes

think deploy months? of XX to in all or opportunity your that much so that do can excess, And you you

Adam Pollitzer

Well, I'll sense. you a give

but So production a time, agreement I in charge We at had and the of our little over fingertips, our a don't on billion fourth a math, XX% amount could as quarter a you of $XX.X production roughly if wrote quota quarter you my with get to have share in place, in the roughly but you timeline. NIW a constant the numbers was the at share X.X%. – took PMIERs place. can roll want and quota do forward we XX% charge, that PMIERs agreement you I just equivalent fourth the a

do that analysis back I a of a got think and bit pathway or amount bit bit of over that more a we a – We’ve and on something could of like little come little us on excess to you. consuming puts period a XX-month more it so. math

Mark Hughes

predicated share That's what think that number. appreciation on good. Very helpful. are conservative that price losses Thank you you. your a you mentioned home And Can you then is?

Adam Pollitzer

share house over it well annual what of default even historical averages muted in what won’t is the tend see terms suffice I loss developed population price house they prices and basis path because we number what below it about the for to on assumptions for call current But constant us, an the to say, take nationally. specific time. on it's developed It's a long-term not quite number I'll growth a is.

Mark Hughes

price home below current well be would appreciation, Which presumably? Right.

Adam Pollitzer

right. That’s Yes.

Mark Hughes

you much. Okay. Thank very

Operator

your have question Bank. Deutsche next Stefano Phil We from from

is line Your open.

Philip Stefano

Yes. good afternoon. Thanks and

you of about mean, forbearance that's four Investor I And kind default the that in So you extent five it's that drill of Adam, inventory was the presented, changed I in could the a the to had think were in could talked there were policies slide of inventory about November in have so your Day, I you appreciate scenario. that updated you that I forbearance. percentage talk had thoughts any doing only in think if hoping in-force exiting proportions were your since loans were about that in stress slide or total months forbearance. prepared X% you the on how remarks, indicated the of a it. your I down was that

Adam Pollitzer

Sure.

think forbearance, the remaining There's – number. recorded, isn't from It as but us or the the of think, so got we I the around that in are population reporting at that exact quite XX,XXX get servicers was, December, I roughly end comes into chunk were that in I you the forbearance. suspect of the default to of So defaults we another way precise. X,XXX XX,XXX

And early same that – but the of you mind that But necessarily those so XX% that an at borrowers population we in were pre-COVID question. I'll the part of call out the right forbearance. population And out, default forbearance chunk tally have. And of in that second wouldn't the or stress are year, the looking the degree of Phil, year, we're in out. to caution, from that in not this those access over having default just terms of of what largest that post-COVID forbearance abundance end defaults, the sort something that's the scoped repeating it, having if the then last now

Philip Stefano

Yes.

So of in feel at the not the a is stressed that does scenario, environment? stress exit people they who people when Day, has X% the generally, at they're Investor were – exiting like there a in Or it so was forbearance, forbearance that number shifted doing all?

Adam Pollitzer

the thus far. of who actually in largest payments GSE be deferral from up then continue, all continue the has May. exiting chunk, of next to that not progressing for want forbearance cohort status of the are and Yes. payment towards look how The in borrowers But to I be to overwhelming majority a the I to back forbearance And option taking the Many that missed exit simply majority back a and advantage are claim at want performing borrowers point. that are at of exiting continue go forbearance. another terms introduced into slide. this make the bit split those careful. would

Philip Stefano

it. Got

Adam last Okay. think And about. the talked was one you, for it I I had have that

quarter setting when reserves, assumptions constant. assumption the the So during incidence revised relatively rate the it's feels like X%

is anything you is to this simple maybe saw else could not And to what assumptions and reserves? Or favorable trying home with that is simplistic? And slowly we're me there guess expectation as you're of to appreciation guess hoping that it as some release – vaccinations in to I as of development price the start was talk the of I that just look, these to we and pool so development economic quarter. I going point revised the about

Adam Pollitzer

Yes.

reserve So population. entirely And development came the we reserves prior didn't any relates through million release year on in default defaults pre-COVID we've those to in mean I along continued carried to we're the pandemic. age adjustments is that of COVID-related all exactly The portfolio. $X.X the of done there we to the what as quarter our or roughly that prior And corresponding had to cure, reserves. making we've defaults as outset that the population, identified

comes As – develop, into our actual latest analysis. house it’s that incorporating prices we're the appreciation

So XX. defaults reason from $X.X the prior release. XXX accounts in And have the the million alongside strength because that but of population at we the is that seen that are XX development favorable at that December year to not the of driven in HPA had last strength actually over we forecasting, months HPA decline we've several has pre-COVID September of the that XXX declined the

have cures reserves meaningful COVID-related the as a come released even for, in through in say, way defaults quarter. and of third second haven't reserved We already any that we've the the for

Philip Stefano

Okay. Good. Thank you.

Operator

We Geoffrey from Dowling Dunn & question have Partners. your from next

Your line open. is

Geoffrey Dunn

questions for Thanks. you. Good a few Got evening.

in the provision First, was this there quarter? any period current IBNR development

Adam Pollitzer

No.

constant the was through factor from IBNR third to – Our quarter. the the quarter fourth

noted So from that reserves but quarter. movements movement to prompted second third the in the like have would case the we any modest the nothing changes IBNR, in the

Geoffrey Dunn

Okay.

change? on maybe backing explain math that And the So XX,XXX your of like about correct? to maybe into severity relative factor last XX I’m get Is significantly. the based looks provision, north average it dropped quarter. can you

Adam Pollitzer

Yes.

defaults So was on But our it XX%, offline. new about factor XX%. was talk it QX isn't in we'll – severity in QX about average

event our equity specifically population. XX% underpinning course same we're at right, helping develop year, that work level and by analysis towards strength happy more make go had providing the to and that equity you LTV to the default their default at an well that just are of mortgage. traces. bolstering portfolio, just equity least happened factors, the the we've movement forecasting, the during current broadly, as estimated some At into not on offline obviously is XX% HPA the obviously claims environment look the the that's to basis, performance. say ability from the our the of and – you HPA loans in XX% comforted there's it. that the What just to So overall Geoff, understand that estimate we're of one the is exposure XX% default on curtail with embedded most but the but actually of what LTV that you of do when seen the that not severity the months. again, some severity population the the at And seeing that of movement was claim borrower's in progress as to things I’d to of had end One our a way amounts goes environment, sure long over That we we're three they as last quarter, us and a in with matter. an least

Geoffrey Dunn

Okay.

change the been we look the all in that part, down. forbearance with the the are year, has MIs my need coming go as about that the incident there's consider goes there on in loans at rates think we you the that that coming would and trend no up? at go Or new assumption of macro other outlook? the things fair assumption percent as delinquencies is that, new is and it As assumption, incidence up to incidence If your

Adam Pollitzer

Yes.

not – is rates all that the about we basis. be internally that's performance would where – model the the on it a a very the I for just that developed borrower want factor don't happy to loan, claim quarter in new point. assumption, notices one individual whatever the blanket or very expectations much on rate is a in come frequency and We developed call at disclosing this for in, of profile based particular X% we're So It's claim assumption we it. the apply highlight, to we but do how talk aggregate, a

got of we're to just continues one be came that and the the in on macro also our but at incurring – that happens those both X%. factor, underlying X,XXX went depend risk that quarter it the trends the defaulted borrowers. single in every the average So future through to its own through number those new frequency model, risk defaults, will the in which Where profile greatly of environments new run defaults

Geoffrey Dunn

on what's about Roughly last then business? average asset or runoff speaking, QX is And average cancel Okay. mentioned the the X.X%. in I charge on PMIERs NIW you think question, charge

Adam Pollitzer

don't a quarter business to COVID come to in a fingertips. the Geoff, with standpoint it on production I our terms in new from to have at my prior I'm of new happy you of The onset the of back – fourth it. charge so X.X%, it a, it, though originated was the I'll seasoning therefore, a a was benefited have XXXX about at characteristics, running in credit. carry portfolio, charge with that higher higher will risk call in-force on but charge itself and from even risk

but to fingertips, come to So my it. I don't with have on happy you it back

Geoffrey Dunn

you. Great. Okay. Thank

Operator

conference management. time. now the like would this questions further no the back I continue. turn to Please to showing I'm at

Claudia Merkle

us. joining for again you Thank

We Suisse will EFA on March XX, Credit be by March participating hosted on in RBC and X. Conferences Virtual on Investor X, February

We JPMorgan of We will X. events Conference and Income healthy. with in are you speaking Fixed these one also and to hope of safe look participating at March forward on be all staying you

Operator

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

now may You disconnect.

John Swenson	Vice President of Investor Relations and Treasury
Bradley Shuster	Executive Chairman
Claudia Merkle	Chief Executive Officer
Adam Pollitzer	Executive Vice President and Chief Financial Officer
Julie Norberg	Senior Vice President and Controller
Mark DeVries	Barclays Bank PLC
Richard Shane	JPMorgan Chase & Co.
Douglas Harter	Credit Suisse Securities LLC
Randy Binner	B. Riley FBR, Inc.
Bose George	Keefe, Bruyette, & Woods, Inc.
Jack Micenko	Susquehanna International Group, LLP
Giuliano Bologna	Compass Point Research & Trading, LLC
Ryan Gilbert	BTIG, LLC
Mark Hughes	Truist Securities, Inc.
Philip Stefano	Deutsche Bank AG
Geoffrey Dunn	Dowling & Partners Securities, LLC

NMI (NMIH) 17 Feb 212020 Q4 Earnings call transcript