NMI Holdings Loses $28M in 2015, But Expects Profits This Year

NMI Holdings Inc. reported a $27.8 million loss for 2015, an improvement over the loss of $48.9 million recorded in 2014.

However, as its book of business continues to grow, the Emeryville, Calif.-based private mortgage insurer expects to achieve profitability for the first time ever in the second half of this year.

For the fourth quarter, NMI lost $4.8 million, compared with a $10 million loss for the same period one year ago.

New insurance written in the fourth quarter was $4.5 billion, up from $1.7 billion on a year-over-year basis. For 2015, NIW was $12.4 billion, compared with $3.5 billion for all of 2014.

As of Dec. 31, NMI had $14.8 billion of insurance-in-force, compared with $10.6 billion at the end of the third quarter and $3.4 billion at the end of 2014.

During the company's conference call, Chief Financial Officer Glenn Farrell said NMI needs to reach between $21 billion and $23 billion of insurance-in-force to be profitable under generally accepted accounting principles. The company, which started writing business in 2013, expects to reach that level in the second half of this year.

Brad Shuster, NMI's chairman and CEO, discussed the company's insurance pricing philosophy during the call. To get the returns it is seeking that allow it to meet the government-sponsored enterprises' minimum capital requirements, the company has raised rates for borrowers with lower credit scores and higher loan-to-value ratios and lowered rates for those with higher credit scores and lower LTVs. Those capital standards, known as the Private Mortgage Insurer Eligibility Requirements, took effect on Jan. 1, and all seven MI companies must meet (and are meeting) them to issue policies on loans sold to Fannie Mae and Freddie Mac.

"We believe our new rates are rational because they correlate to the very clear and granular risk-based capital requirements," Shuster said.

He added that NMI's rate card is easy for its customers to understand and more transparent than the black box pricing used by competitors United Guaranty Corp. and Arch MI U.S., "which we believe is attractive in a post-TRID environment. Most importantly, our balanced risk-based pricing allows us to be relatively agnostic about the mix of loans we receive."