NMI Q4 2024 Earnings Report

NMI EPS Results

• Actual EPS: $1.07
• Consensus EPS: $1.14
• Beat/Miss: Missed by -$0.07
• One Year Ago EPS: N/A

NMI Revenue Results

• Actual Revenue: $159.02 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

NMI Announcement Details

• Quarter: Q4 2024
• Date: 2/12/2025
• Time: After Market Closes
• Conference Call Date: Thursday, February 6, 2025
• Conference Call Time: 5:00PM ET

NMI (NASDAQ:NMIH) Holdings, Inc. (NASDAQ: NMIH) is a publicly traded mortgage insurance company that provides private mortgage insurance to lenders across the United States and Canada. Through its principal subsidiary, National Mortgage Insurance Corporation, NMI underwrites and issues policies that protect originators and investors against losses arising from borrower default on residential mortgage loans. By mitigating credit risk on higher‐loan‐to‐value mortgages, the company supports homebuyers’ access to financing and contributes to overall market liquidity.

Beyond its core mortgage insurance products, NMI offers credit risk‐sharing and reinsurance solutions designed to help clients optimize capital utilization and manage portfolio exposure. Utilizing proprietary analytics and underwriting tools, the company delivers tailored risk management services—including policy administration, claims handling, and performance monitoring—to a network of banks, independent mortgage companies, and national brokers. This integrated platform streamlines operational workflows and provides transparent insights into risk trends.

Serving lenders in all 50 U.S. states and select Canadian provinces, NMI leverages a broad geographic footprint combined with centralized risk management capabilities. Its flexible product offerings support a range of homebuyer segments, from first‐time purchasers to seasoned borrowers, while aligning with evolving regulatory requirements. By fostering strong relationships with both private‐sector partners and regulatory bodies, NMI positions itself as a key contributor to the stability and growth of the residential mortgage finance industry.

NMI Q4 2024 Earnings Call Transcript

Key Takeaways

• Record adjusted net income of $365.6 million, adjusted EPS of $4.50 and a 17.6% adjusted return on equity in 2024, up 13%, 17% and delivering industry-leading profitability.
• Generated $46 billion of new insurance written and closed the year with a record $210.2 billion of primary insurance in force, serving nearly 660,000 active policies.
• Repurchased $245 million of common stock in 2024 (9.3 million shares) and received board approval for an additional $250 million, bringing total buyback capacity to roughly $330 million.
• Maintained strong capital and risk management with $3.1 billion of available assets under PMIERs versus $1.8 billion required, and secured cost-effective reinsurance treaties to protect credit performance.
• Highlighted active, bipartisan discussions with the new U.S. administration to advance housing goals, emphasizing the private MI industry’s role in expanding homeownership while shielding taxpayers.

Presentation

[Operator]

Good day, and welcome to the NMI Holdings Inc. Fourth Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one, on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Jon Swenson of Management. Please go ahead.

[John Swenson, VP of Investor Relations and Treasury at NMI Holdings Inc]

Thank you, Operator. Good afternoon, and welcome to the 2024 Fourth Quarter Conference Call for National MI. I'm Jon Swenson, Vice President of Investor Relations and Treasury. Joining us on the call today are Brad Shuster, Executive Chairman, Adam Pollitzer, President and Chief Executive Officer, and Aurora Swithenbank, our Chief Financial Officer. Financial results for the quarter were released after the close today. The press release may be accessed on NMI's website located at nationmi.com under the Investors tab. During the course of this call, we may make comments about our expectations for the future. Actual results could differ materially from those contained in these forward-looking statements. Additional information about the factors that could cause actual results or trends to differ materially from those discussed on the call can be found on our website or through our regulatory filings with the SEC.

[John Swenson, VP of Investor Relations and Treasury at NMI Holdings Inc]

If and to the extent the company makes forward-looking statements, we do not undertake any obligation to update those statements in the future in light of subsequent developments. Further, no one should rely on the fact that the guidance of such statements is current at any time other than the time of this call. Also note that on this call, we may refer to certain non-GAAP measures. In today's press release and on our website, we provided a reconciliation of these measures to the most comparable measures under GAAP. Now I'll turn the call over to Brad.

[Brad Shuster, Executive Chairman at NMI Holdings Inc]

Thank you, Jon, and good afternoon, everyone. I'm pleased to report that in the fourth quarter, National MI again delivered standout operating performance, continued growth in our insured portfolio, and strong financial results, capping a year of tremendous success. We closed 2024 with $46 billion of total NIW volume and a record $210.2 billion of high-quality, high-performing primary insurance in force. We delivered broad success in customer development, continued to innovate in the capital and reinsurance markets, and once again achieved industry-leading credit performance. In 2024, we generated record adjusted net income of $365.6 million, up 13% compared to 2023. Record adjusted EPS of $4.50, up 17% compared to 2023. And delivered a 17.6% adjusted return on equity. Looking ahead, I'm excited at the opportunity we have to continue to build on our success. As we plan for 2025, we'll continue to focus on our people.

[Brad Shuster, Executive Chairman at NMI Holdings Inc]

They are talented, innovative, and dedicated, and we'll continue to invest in our culture with a focus on collaboration, performance, and impact. We'll continue to differentiate with our customers. The mortgage market is connected and evolving, and we'll work to continue to stand out with our focus on customer service, value-added engagement, and technology leadership. We'll continue to prioritize discipline and risk responsibility as we grow our insured portfolio, working to write a large volume of high-quality, high-return business under the protective umbrella of our comprehensive credit risk management framework. And we'll continue to focus on building value for our shareholders, growing earnings, compounding book value, delivering strong mid-teens returns, and prudently distributing excess capital. Before turning it over to Adam, I'd also like to comment on the current policy environment. Our conversations in Washington since the election have been active and constructive.

[Brad Shuster, Executive Chairman at NMI Holdings Inc]

We have long noted that there is bipartisan recognition of the unique and valuable role that the private mortgage insurance industry plays, working to consistently expand access to homeownership and all the benefits it provides, while also placing private capital in front of the taxpayer to ensure the safety and soundness of the conventional mortgage market. National MI and the broader private MI industry have never been stronger or better positioned to provide support than we are today, and we're looking forward to working with the new administration to advance their important housing goals. With that, let me turn it over to Adam.

[Adam Pollitzer, CEO at NMI Holdings Inc]

Thank you, Brad, and good afternoon, everyone. National MI continued to perform in the fourth quarter, delivering significant new business production, consistent growth in our insured portfolio, and strong financial results. We generated $11.9 billion of NIW volume and ended the period with a record $210.2 billion of high-quality, high-performing primary insurance in force. Total revenue in the fourth quarter was a record $166.5 million, and we delivered adjusted net income of $86.1 million, or $1.07 per diluted share, and a 15.6% adjusted return on equity. Overall, we had a terrific quarter and closed 2024 in a position of real strength. We generated $46 billion of NIW volume during the year and exited with $210.2 billion of primary insurance in force. Our portfolio is the fastest growing, highest quality, and best performing in the MI industry and has enormous embedded value.

[Adam Pollitzer, CEO at NMI Holdings Inc]

We now have nearly 660,000 policies outstanding and have helped a record number of borrowers gain access to housing at a time when they needed us most. We enjoyed continued momentum and growth in our customer franchise, activating 118 new lenders in 2024 and ending the year with over 1,600 active accounts. We were once again recognized as a great place to work, our ninth consecutive award, which we view as a reflection of our unique corporate culture and a testament to the hard work and dedication of our talented team. We continue to innovate and find broad success and support in the reinsurance market, securing a series of new quota share and excess of loss treaties that extend our comprehensive credit risk management framework and are amongst the best we have ever achieved in terms of their cost, capacity, and duration.

[Adam Pollitzer, CEO at NMI Holdings Inc]

We completed a successful debt refinancing as an investment-grade issuer and continued to consistently return capital and drive value for shareholders under our repurchase program, and we achieved record full-year financial results, generating $651 million of total revenue, up 12% compared to 2023, $366 million of adjusted net income, up 13% compared to 2023, $4.50 of adjusted EPS, up 17% compared to 2023, and a 17.6% adjusted return on equity. As we begin 2025, we're encouraged by both the broad resiliency that we've seen in the macro environment and housing market and by the continued opportunity and discipline that we see across the private MI industry. Total MI industry NIW volume was an estimated $300 billion in 2024, with the market demonstrating real strength despite the continued headwind of elevated interest rates.

[Adam Pollitzer, CEO at NMI Holdings Inc]

Our lender customers and their borrowers continue to rely on us in size for critical down payment support, and we expect that the private MI market will remain just as strong in 2025, with long-term secular trends continuing to drive an attractive new business opportunity. The MI pricing environment remains balanced and constructive as well, allowing us to fully and fairly support our lenders and their borrowers while at the same time appropriately protect risk-adjusted returns and our ability to deliver long-term value for our shareholders. And credit continues to perform, with underwriting discipline across the mortgage market and existing borrowers well positioned against the backdrop of a broadly resilient U.S. economy. As we look ahead, we're confident. The macro outlook is encouraging, the private MI market opportunity is compelling, and we're well positioned to continue to deliver value for our people, our customers and their borrowers, and our shareholders.

[Adam Pollitzer, CEO at NMI Holdings Inc]

We have a strong customer franchise, a talented team driving us forward every day, an exceptionally high-quality book covered by a comprehensive set of risk transfer solutions, and a robust balance sheet supported by the significant earnings power of our platform. With that, I'll turn it over to Aurora.

[Aurora Swithenbank, CFO at NMI Holdings Inc]

Thank you, Adam. We again delivered strong financial results in the fourth quarter. Total revenue was a record $166.5 million. Adjusted net income was $86.1 million, or $1.07 per diluted share, and adjusted return on equity was 15.6%. We generated $11.9 billion of NIW, and our primary insurance in force grew to $210.2 billion, up 1% from the end of the third quarter and 7% compared to the fourth quarter of 2023. Twelve-month persistency was 84.6% in the fourth quarter compared to 85.5% in the third quarter. Net premiums earned in the fourth quarter were a record $143.5 million compared to $143.3 million in the third quarter and $132.9 million in the fourth quarter of 2023. Net yield for the quarter was 27 basis points. Core yield, which excludes the cost of our reinsurance coverage and the contribution from cancellation earnings, was 34 basis points, unchanged from the third quarter.

[Aurora Swithenbank, CFO at NMI Holdings Inc]

Investment income was $22.7 million in the fourth quarter compared to $22.5 million in the third quarter and $18.2 million in the fourth quarter of 2023. Total revenue was a record $166.5 million in the fourth quarter compared to $166.1 million in the third quarter and $151.4 million in the fourth quarter of 2023. Underwriting and operating expenses were $31.1 million in the fourth quarter compared to $29.2 million in the third quarter, and our expense ratio was 21.7%. We had 6,642 defaults at December 31st, including 471 new notices for loans in FEMA declared disaster areas, primarily related to hurricanes Helene and Milton, and our default rate was 1% at year-end. Claims expense in the fourth quarter was $17.3 million compared to $10.3 million in the third quarter.

[Aurora Swithenbank, CFO at NMI Holdings Inc]

We have a uniquely high-quality insured portfolio, and our credit experience continues to benefit from the discipline with which we have shaped our book, the strong position of our existing borrowers, and the broad resiliency we've seen in the housing market. GAAP net income in the quarter was $86.2 million, and diluted earnings per share was $1.07. Total cash and investments were $2.8 billion at quarter-end, including $132 million of cash and investments at the holding company. Shareholders' equity at December 31st was $2.2 billion, and book value per share was $28.21. Book value per share, excluding the impact of net unrealized gains and losses in the investment portfolio, was $29.80, up 4% compared to the third quarter and 17% compared to the fourth quarter of last year. In the fourth quarter, we repurchased $27.9 million of common stock, retiring 722,000 shares at an average price of $38.72.

[Aurora Swithenbank, CFO at NMI Holdings Inc]

Through year-end, we have repurchased a total of $245 million of common stock, retiring 9.3 million shares at an average price of $26.33. We have 80 million of repurchase capacity remaining under our existing program, and today's incremental $250 million authorization provides us with significant additional capacity to continue driving value and returning capital to our shareholders. At quarter-end, we reported 3.1 billion of total available assets under PMIERs and 1.8 billion of risk-based required assets. Excess available assets were 1.3 billion. Overall, we achieved standout financial results during the quarter, delivering consistent growth in our high-quality insured portfolio, record top-line performance, continued expense efficiency, and strong bottom-line profitability and returns. With that, let me turn it back to Adam.

[Adam Pollitzer, CEO at NMI Holdings Inc]

Thank you, Aurora. Overall, we had a terrific quarter, capping a record year in which we delivered broad success in customer development, continued to innovate in the reinsurance and capital markets, once again achieved industry-leading credit performance, and generated exceptionally strong financial results with record profitability, significant growth in book value per share, and a 17.6% adjusted return on equity. Looking ahead, we're confident. We're well positioned to continue to serve our customers and their borrowers, invest in our employees and their success, drive growth in our high-quality insured portfolio, and deliver through the cycle growth, returns, and value for our shareholders. Thank you for joining us today. I'll now ask the operator to come back on so we can take your questions.

[Operator]

We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Doug Harter with UBS. Please go ahead.

[Doug Harter, Analyst at UBS]

Repurchase authorization, how should we think about the pacing of capital return?

[Adam Pollitzer, CEO at NMI Holdings Inc]

Yes, Doug. I think, broadly speaking, maybe I'll touch on both sizing of the program and pacing expectations going forward to give you a little bit of perspective. The repurchase has obviously been a source of real value for us, allowing us, in our minds, to provide investors with the ability to directly participate in all of the value that we're generating day-to-day. The sizing of the program at $250 million, we think, really strikes the right balance, allowing us to prudently manage our funding needs, but also providing us with ample runway to continue repurchasing stock with consistency over the next several years. And so I'll anchor on that point of consistency. If you look back, to date, over the last three years that we've had our program in place, we've averaged about $25 million per quarter of repurchase.

[Adam Pollitzer, CEO at NMI Holdings Inc]

A little bit of moving up or down, obviously, depending on the market environment, our view of risk, where we're trading, but roughly that $25 million, and if you take the $250 million authorization today plus the $80 million remaining, that gives us about $330 million over the next 12 quarters. It works out to call it roughly that $25 million. Certainly, though, the incremental capacity also will allow us to be opportunistic if we see the opportunity develop.

[Doug Harter, Analyst at UBS]

I guess just on that point, since you started the buyback program, your earnings power and the portfolio size have increased. At what point would you consider kind of increasing the run rate of buyback?

[Adam Pollitzer, CEO at NMI Holdings Inc]

Yeah. Right now, I think the program gives us the flexibility to do both, right, to stick with the consistency that we've established, but also to be opportunistic should the environment change, should something in our outlook change. But right now, we expect that we'll be operating at a roughly similar cadence.

[Doug Harter, Analyst at UBS]

Thank you, Adam.

[Operator]

The next question comes from Terry Ma with Barclays. Please go ahead.

[Terry Ma, Analyst at Barclays Capital]

Hey, thank you. Good afternoon. Maybe just to start off with credit, your reserve release this quarter for prior period defaults was one of the lower amounts over the last two years. Is there any color you can just provide on just the makeup of cures within the quarter?

[Aurora Swithenbank, CFO at NMI Holdings Inc]

Sure. And in the table in the press release, we split things out into prior years and current year. And so the reserve release associated with prior years is $4.4 million. And so what's in that number is effectively anything that went into default in 2023 or earlier and cured out in the fourth quarter of this past year. What is not in that and what is the majority of our cures in the quarter are loans that went into default in Q1, Q2, or Q3 of last year. Those cures are all embedded in the current year line. And so, again, the presentation in the table masks some of that since it's embedded in the current year. If we had bifurcated out those cures, the total cure population would have been $16.3 million. So I'd say our cure rate quarter over quarter was broadly similar.

[Aurora Swithenbank, CFO at NMI Holdings Inc]

In the third quarter, we had a cure rate of 31%. And in the fourth quarter, we had a cure rate of 29%.

[Doug Harter, Analyst at UBS]

Got it. Okay. That's helpful. And then in terms of the claims activity in the quarter, that's ticked up a little bit. It looks like almost 30% of the claims activity this quarter came from the 2022 vintage, kind of similar to last quarter, and that's kind of ticked up. Any color you can kind of provide on just the loan to claim versus what you've kind of assumed in your underwriting?

[Adam Pollitzer, CEO at NMI Holdings Inc]

Yeah. And maybe if it's helpful, because obviously with the movement in claims expense in the quarter and the loss ratio, maybe I'll offer just a broader perspective on claims experience and, I wouldn't say guidance, but at least a bit of perspective on how we see things developing going forward. And so in the quarter, we reported $17.3 million of claims expense and a 12% loss ratio. And while our credit experience trended higher compared to Q3, it's in line with our expectations, and we remain greatly encouraged by the credit performance of our book. We spent time last quarter on the call and really have long talked about the seasonality of credit performance accelerating from Q3 into Q4.

[Adam Pollitzer, CEO at NMI Holdings Inc]

We've also noted that we're seeing a natural normalization in our claims experience given the growth and seasoning of our book, right, as our more recent production years come into a period of typical loss incurrence, the 2022 book included. Aurora in her remarks also noted that we had a number of new notices that emerged in the fourth quarter related to storm activity. While we do adjust our reserving assumptions for those notices, given the exceptionally high cure experience that we've seen on them, we did still see some amount of those NODs translate through to claims expense. It was roughly $1.5 million of our fourth quarter claims expense traces to those storm-related NODs. Overall, we have an exceptionally high-quality book, and we ended the quarter with a 1% default rate.

[Adam Pollitzer, CEO at NMI Holdings Inc]

That perspective, though, on the go forward, right, broadly speaking, our existing borrowers are well situated and continue to benefit from the resiliency that we've seen in the macro environment and the housing market. But we do expect that our default experience and our claim costs will continue to trend, particularly as our most recent production years continue to age to that point of normal loss incurrence. Again, 2022 book that you asked about included. I parsed, though, some of the underlying data from the quarter as you think about where things and as certainly when we look internally as to where things are going. And some of this underlying data is actually encouraging, quite encouraging. So in the fourth quarter, if we adjust out the new storm-related defaults, our new notices actually declined compared to the third quarter. They were down about 4% period to period.

[Adam Pollitzer, CEO at NMI Holdings Inc]

As a point of comparison, our new notices in Q4 of 2023, instead of declining as they did this year, they increased by 17%, which we'd expect with seasonality. The fact that we didn't see a similar trend this year is really encouraging. Then the other element that I'd note is that the average age of our portfolio is extending with every passing month because of the strength of our persistency experience. As the age of our portfolio draws closer and closer to that three-year point of typical loss incurrence, we'd expect that we'll continue to see things normalize. Net-net, as we look forward, whether it's the 2022 book year or the portfolio overall, we're incredibly happy with how we've built our book and how it's performing, and we're encouraged as we look ahead.

[Doug Harter, Analyst at UBS]

Got it. Super helpful. Thank you.

[Operator]

The next question comes from Bose George with KBW. Please go ahead.

[Bose George, Analyst at KBW]

Hey, everyone. Good afternoon. So I just wanted to follow up on Doug's questions about the capital return. Can you just talk about dividends, when that might become part of the picture, and then just how you think about the assets that pull-to-par happens and IIF growth slows? I mean, is that when a dividend might become part of how you return capital?

[Adam Pollitzer, CEO at NMI Holdings Inc]

Yeah. I'd say, look, right now, we're focused on our repurchase program, and today's refresh really does provide us with significant incremental capacity. We do see a lot of value in the repurchase program, particularly given, obviously, where we sit relative to book value on a trading basis. The repurchase program allows us to maintain really that right funding balance optimized between equity, debt, reinsurance usage, and obviously, it supports future EPS and ROE outcomes. I'd say we're really pleased with the execution that we've seen to date and now have over $300 million of runway between what we previously had and then the new authorization.

[Adam Pollitzer, CEO at NMI Holdings Inc]

I'd say in terms of a dividend over time, as we continue to perform and grow the dividend stream from our operating company up to the holding company, we may have an ability to introduce the common dividend, but for right now, repurchase really is our primary focus.

[Bose George, Analyst at KBW]

Okay. Makes sense. Thanks. And then actually switching over to credit, I think in the second quarter, Paul, there was some discussion about a couple of markets, I think Texas, Florida, where there was a buildup of inventory and you were keeping an eye on. Can you just give us an update and then any markets now that you're focused on from that standpoint?

[Adam Pollitzer, CEO at NMI Holdings Inc]

Yeah. I think we really haven't seen and that continued also into Q3. We haven't seen the fundamental changes, I'd say, in terms of either new markets coming into a risk spotlight or others that are moving out. And so we continue to actively manage our mix of business by both borrower risk attributes, but also by geography through the use of Rate GPS and haven't made any fundamental changes by risk cohort or geography. We still see inventory levels being a bit higher in those markets and the prospect for some pressure from an HPA standpoint.

[Bose George, Analyst at KBW]

Okay. Great. Thanks.

[Operator]

The next question comes from Rick Shane with J.P. Morgan. Please go ahead.

[Rick Shane, Analyst at JP Morgan]

Hey, guys. Thanks for taking my questions. Most have been asked and answered, but just curious from sort of a competitive landscape what you're seeing, curious what you're hearing from mortgage originators in terms of their any pushback on pricing or any sort of efforts to, in a challenging environment, get PMIs to open the credit aperture just a little bit?

[Adam Pollitzer, CEO at NMI Holdings Inc]

Yeah. Rick, it's a good question. I'd say we really don't hear much direct feedback on our pricing from lenders. I think our customers rightly expect us to support them and their borrowers. And so we do that every day, and we always aim to strike the right balance. And also, importantly, with the use of a rate engine, we never say no. We just say most often, right? We're always saying yes, but it's yes at a price that we believe is appropriate given the risk that we're being asked to take on. And at the end of the day, really, it is our balance sheet. We own the exposure, and it's important that we're able to make the changes and decisions around pricing that we deem appropriate. But we really don't get much pushback on lenders.

[Adam Pollitzer, CEO at NMI Holdings Inc]

And I'd say, though, importantly, because when we look at it, not just our pricing, but broadly across the industry, we use the phrase balanced and constructive for a reason. And the balanced part of that is really to signal that we do have to find balance, right? It can't just be about, I would say, taking simply for value. We have to make sure that we are offering a low-cost, consistent, and valuable solution for our lenders and their borrowers. And that is our primary goal. Doing so in a way that allows us to obviously protect returns and shareholder value is critically important. But we think that the industry overall and certainly the way that we engage really focuses on that point of balance.

[Rick Shane, Analyst at JP Morgan]

Got it. Okay. Thank you, guys.

[Operator]

The next question comes from Mark Hughes with Truist. Please go ahead.

[Mark Hughes, Analyst at Truist]

Yeah. Thank you. Good afternoon. Any reason to think the premium yield will trend up or down from this quarter? I think the 34 basis points before the reinsurance or ceded premium and then the 27 basis points afterwards. Is that pretty stable here?

[Aurora Swithenbank, CFO at NMI Holdings Inc]

Yeah. The core yield was flat quarter over quarter, and our net yield did tick down modestly. So the core yield, we feel good that that is going to demonstrate stability, especially with the persistency of the underlying book. Obviously, the net yield is going to vary in line with claims experience. And the primary reason it ticked down modestly through the quarter is the way that the reinsurance claims expense flows through those treaties and through the income statement.

[Mark Hughes, Analyst at Truist]

If credit deteriorates a little bit, does that impact the yield? Does that net yield see a little bit of pressure? Is that your point?

[Aurora Swithenbank, CFO at NMI Holdings Inc]

That's correct. That's correct. So in a benign environment, we get a large profit commission. As credit claims go up, we still get that money back from reinsurers, but it comes through as a claims reimbursement, and that directly offsets the profit commission that we get. And so that interacts with the net yield calculation.

[Adam Pollitzer, CEO at NMI Holdings Inc]

Yeah. I think that last point that Aurora makes is really important, right? It's a geography issue. If claims increase, we still get the same net benefit from our reinsurance treaties. But instead of getting a profit commission back through premium revenue, we get a reimbursement of our claims experience, but all of it flows through in the same way to our bottom-line performance.

[Mark Hughes, Analyst at Truist]

Understood. And then from a regulatory perspective, it sounds like the climate is probably improving. Are there any specific plans that any of the new folks in the administration have talked about in the past that would be beneficial for MI, or is it more of just a broad positive view?

[Adam Pollitzer, CEO at NMI Holdings Inc]

Yeah. I'd say the most important piece, as Brad mentioned, is that there really is broad bipartisan recognition of the value that we and the rest of the industry bring, right? We provide a low-cost solution that helps to open the door to homeownership opportunities for millions of Americans. And we do that while placing private capital in a first-loss position to absorb risk and loss, which ultimately protects taxpayers. And so I think it's really that. There is just broad recognition on both sides of the aisle of what we're doing and the consistency that we bring every day. I think we're excited to engage more and more with the new administration and understand even more about their priorities and where we can be helpful.

[Mark Hughes, Analyst at Truist]

Thank you.

[Operator]

As a reminder, if you would like to ask a question, please press star, then one to join the question queue. The next question comes from Mihir Bhatia with Bank of America. Please go ahead.

[Mihir Bhatia, Analyst at Bank of America]

All right. Good afternoon. Thank you for taking my questions. First question I wanted to ask is just about the PMIERs excess. What do you think the right amount of PMIERs excess to operate with is? And I guess what would need to happen for that to change?

[Adam Pollitzer, CEO at NMI Holdings Inc]

Yeah. Look, Mahir, it's a good question. I'd say when we think about our excess capital position, I guess I use the phrase balance a lot, but we want to be balanced. On the one hand, right, there's value and conservatism in making sure that we are prudently managing our balance sheet, our needs, building access across as many markets as possible, which is also why you see us accessing different flavors of reinsurance and capital markets. But obviously, there's an impact to that, and we need to make sure that we're also striking the right balance to minimize our cost of capital and ultimately our ability to deliver returns. I think most importantly, we have done exactly that, right? We've just delivered another record year with a 17.6% adjusted ROE. We've been returning a significant amount of capital to shareholders under our repurchase program.

[Adam Pollitzer, CEO at NMI Holdings Inc]

If we look at the total authorizations to date, I think this latest authorization brings us to $525 million of total authorization. And at the same time, we've been able to maintain, obviously, a significant PMIERs excess position, an extended amount of funding runway. And we think we're at a point where we have found that balance. It doesn't mean that I'd say normal in perpetuity for us is carrying a 70% PMIERs excess position. But when we're able to carry that position, fund it efficiently, still progress with our goals around capital distribution and value creation for shareholders, we think that's quite a comfortable position. We'll see where things trend relative to the risk environment going forward.

[Mihir Bhatia, Analyst at Bank of America]

Got it. And then just switching to expenses for a second. I know you don't manage to an expense ratio, but it seems to have settled down here in this 21-ish% range. And my question there is, as your insurance in force continues to grow, shouldn't there be a natural tendency for the expense ratio to come down? Why is that not happening?

[Aurora Swithenbank, CFO at NMI Holdings Inc]

We're, first of all, very focused on managing the business with efficiency and discipline. As you point out, there are benefits of scale. We have articulated a target. Again, this isn't guidance or anything of that nature, but we have articulated a target of the low to mid-20s. Our in-quarter expense ratio of 21.7% and the year-long expense ratio of 21% flat are both consistent with that. We continue to look for ways to optimize those expenses going forward, but I think you should expect us to stay in that low 20s zone.

[Adam Pollitzer, CEO at NMI Holdings Inc]

Yeah. And Mahir, the other one is a couple of points I'd note. One, remember we talked a bit about how the net yield and therefore our net premiums earned can be impacted by claims experience because of the workings of the profit commission on our quota share agreements. And so there's a little bit of an element of that, right? The expense ratio is a very specific measure of efficiency. It's obviously operating expense divided by net premium earned. When we think about efficiency, we do care and focus on expense ratio in a classic sense, but we also think about it, I would say, as relative to what we're achieving in terms of our total revenue. And there we would expect that we'll continue to see efficiency gains. And it's an interesting one, right?

[Adam Pollitzer, CEO at NMI Holdings Inc]

The insurance industry is when you think about expense efficiency, it's one of the only pockets that will pick out a single line item of revenue and say, "What's our efficiency relative to this particular line of revenue, not the aggregate amount of revenue?" And so when we look, though, as to where our revenue is going, the increase in contribution and benefit that we get from our investment yield and investment income plus normalizing for the profit commission dynamic that flows through in any given quarter, we certainly do have a goal to continue to achieve efficiencies, and we'll see where we land.

[Mihir Bhatia, Analyst at Bank of America]

Got it. And then just my last question. To the hurricane defaults, I know you don't use a claim rate across the defaults, but I guess when you model those or when you reserve for those, do you reserve at a lower rate for hurricane-related defaults, or is your, I guess, process not ready for that?

[Adam Pollitzer, CEO at NMI Holdings Inc]

No. Absolutely, we do. So the number I gave, we had about $1.5 million of our claims expense in the fourth quarter related to those storms. But because all of those storms, the defaults emerged in the fourth quarter, that's roughly the net reserve that we established against them. And that's a much lower reserve per default than if you look more broadly at the rest of the defaults that emerged in the fourth quarter. So we absolutely do make an adjustment based on our historical experience because we expect them to cure at a dramatically higher rate.

[Mihir Bhatia, Analyst at Bank of America]

Got it. Okay. Makes sense. Thank you. Thanks for taking my questions.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to the company for any closing remarks.

[Adam Pollitzer, CEO at NMI Holdings Inc]

Thank you all again for joining us. We'll be participating in the UBS Financial Services Conference on February 10th, the Bank of America Financial Services Conference on February 11th, and the RBC Financial Institutions Conference on March 4th. We look forward to speaking with you all again soon.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Aurora Swithenbank, CFO
• John Swenson, VP of Investor Relations and Treasury
• Brad Shuster, Executive Chairman
• Adam Pollitzer, CEO

Analysts

• Terry Ma, Analyst at Barclays Capital
• Mark Hughes, Analyst at Truist
• Rick Shane, Analyst at JP Morgan
• Mihir Bhatia, Analyst at Bank of America
• Bose George, Analyst at KBW
• Doug Harter, Analyst at UBS