Why Is NMI Holdings (NMIH) Down 1.7% Since Last Earnings Report?

A month has gone by since the last earnings report for NMI Holdings (NMIH). Shares have lost about 1.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is NMI Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

NMI Holdings Q3 Earnings Top, Insurance in Force Rises

NMI Holdingsreported a third-quarter 2023 operating net income per share of $1.00, which beat the Zacks Consensus Estimate by 6.4%. The bottom line increased 11.1% year over year.

The quarterly results reflected higher premiums and net investment income and increased persistency, which drove growth in the company’s high-quality insured portfolio.

Operational Update

NMI Holdings’ total operating revenues of $148 million increased 13% year over year on higher net premiums earned (up 10%) and net investment income (up 49.5%). Revenues beat the Zacks Consensus Estimate by 1.2%.

Primary insurance in force increased 8.7% to $164.8 billion. Annual persistency was 86.2%, up 610 basis points (bps) year over year.

New insurance written was $11.3 billion, down 34% year over year.

Underwriting and operating expenses totaled $27.74 million, up 2% year over year. Insurance claims and claim expenses were $4.8 million compared with a benefit of $3.4 million in the year-ago quarter.

The loss ratio was 3.7 against (2.9) in the year-ago quarter.

The adjusted expense ratio of 21.3 improved 160 bps year over year, while the adjusted combined ratio of 25 deteriorated 480 bps year over year.

 Financial Update

Book value per share, a measure of net worth, was up 20.5% year over year to $21.94 as of Sep 30, 2023.

NMI Holdings had $176.5 million in cash and cash equivalents, up nearly fourfold from the 2022 end. The debt balance of $397.2 million increased 0.3% from the 2022 end.

Annualized adjusted return on equity was 19%, which contracted 110 bps year over year.

Total PMIERs available assets were $2.6 billion and net risk-based required assets totaled $1.4 billion at third-quarter 2023 end.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, NMI Holdings has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, NMI Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

NMI Holdings is part of the Zacks Insurance - Property and Casualty industry. Over the past month, W.R. Berkley (WRB), a stock from the same industry, has gained 7%. The company reported its results for the quarter ended September 2023 more than a month ago.

W.R. Berkley reported revenues of $3.07 billion in the last reported quarter, representing a year-over-year change of +10.1%. EPS of $1.35 for the same period compares with $1.01 a year ago.

For the current quarter, W.R. Berkley is expected to post earnings of $1.32 per share, indicating a change of +13.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +2.2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for W.R. Berkley. Also, the stock has a VGM Score of B.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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