NMI Holdings Becomes Profitable for the First Time

NMI Holdings has recorded its first ever quarterly profit, with net income of $2 million, compared with a net loss of $10.4 million for the second quarter of 2015.

This is slightly ahead of schedule; in its first-quarter results, the Emeryville, Calif.-based parent of National MI said it expected to be profitable in the second half of the year. The company was an April 2012 startup.

New insurance written was $5.8 billion, up 129% over $2.6 billion one year ago.

Insurance-in-force grew by 27% during the second quarter and by 228% from June 30, 2015 to $23.6 billion. "Now that we're profitable [insurance-in-force] will be a key metric and a leading indicator of the trajectory of our growth in both premiums and profitability," Chairman and CEO Bradley Shuster said during the company's conference call.

NMIH has entered into a quota-share reinsurance agreement with eight firms. The mortgage insurer will get a 20% commission for ceding 23% of its existing policies, 23% of future policies written through Dec. 31, 2017 and 95% of the company's pool insurance agreement with Fannie Mae.

With this agreement, NMIH will have the capacity to grow IIF to $50 billion and still comply with the secondary market capital requirements, said Chief Financial Officer Glenn Farrell during the call.

Separately, the U.S. mortgage insurance business of Genworth Financial had second-quarter net operating income of $61 million, up from $49 million for same period last year, as its NIW increased 39% due to a larger purchase origination market and growth in market share.

Genworth's NIW totaled $11.4 billion, compared with $8.2 billion for the second quarter of 2015.

Meanwhile, United Guaranty Corp.'s NIW fell by 15%, to $13 billion from $15.2 billion one year ago.

On the other hand, Radian had a 10% increase to $12.9 billion and MGIC increased by 7% to $12.6 billion.

The sale of the European MI business completed during the quarter resulted in $50 million in net proceeds to the U.S. MI business. At the time it announced the sale, Genworth Financial anticipated proceeds of $55 million.

UGC, the Raleigh, N.C.-based mortgage insurance subsidiary of American International Group, saw a 19% year-over-year increase in its second-quarter pretax income as its delinquency ratio dropped by 19% and net premiums earned increased by 6%.

AIG is in the process of spinning-out UGC.

UGC's pretax operating income was $187 million, up from $157 million for the second quarter last year.

Even with the slowdown in NIW, UGC's insurance-in-force grew by 7% to $186 billion, leading to the increase in net premiums earned to $239 million from $226 million one year ago.

Meanwhile, the delinquency ratio fell to 2.9%, compared with 3.6% one year ago.