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NMI Holdings NMIH is well-poised for growth on new primary insurance written, direct primary insurance in force and an improving risk-based capital ratio.
Return on equity, reflecting the company’s efficiency in utilizing shareholders’ fund, has been improving over the years. Also, its ROI of 21.9% in the trailing twelve months was better than the industry average of 6.5%.
The company’s VGM Score of A is also encouraging. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
Per the U.S. Federal Reserve, the U.S. residential mortgage market is one of the largest in the world, with more than $11 trillion of mortgage debt outstanding as of Dec 31, 2019.
NMI Holdings’ mortgage insurance portfolio is expected to create a strong foundation for future earnings. While its new primary insurance written has increased at a five-year (2015-2019) CAGR of 29.4%, direct primary insurance in force grew at a five year (2015-2019) CAGR of nearly 50%. This Zacks Rank #3 (Hold) mortgage insurer should continue to benefit from strong mortgage origination market and increased private mortgage insurance penetration rates. Nonetheless, given the pandemic, the company expects total U.S. mortgage insurance origination volume to decline modestly in 2020 but stabilize thereafter.
Recently, National Mortgage Insurance Corporation, its wholly-owned insurance subsidiary, entered into a new quota share reinsurance arrangement that aided the company in securing additional reinsurance capacity.
The stock carries an impressive Growth Score of B. Growth Score analyzes a company’s growth prospects.
NMI Holdings boasts a strong capital position, which helps it to return capital to its shareholders. The company aims to generate solid mid-teens returns for its shareholders.
The company has been effectively lowering its leverage over the years. At the end of first- quarter 2020, it had $147 million of outstanding debt under term loan and leverage ratio of 13, down 50 basis points from 2019 end and better than the industry average of 21.8, providing with significant incremental capacity to carry additional indebtedness. Further, on Mar 20, the company amended its revolving credit facility, increasing its size to $100 million from $85 million.
Nonetheless, the company’s times interest earned ratio has been improving over the years and is currently better than the industry average. The improvement in this ratio indicates that the firm will be able to meet obligations in the near future without any difficulties. At a time when every entity is looking forward to preserve liquidity amid uncertainty as a result of the COVID-19 outbreak, an improving ratio is reassuring for investors. The company enjoys strong credit ratings from credit rating agencies. The company has also improved its risk-to-capital ratio.
The company has a stellar history of delivering positive earnings surprise in the last eleven reported quarters, reflecting operational excellence.
Shares of NMI Holdings’ have lost 49.6% year to date compared with the industry's decrease of 19.7%.
Stocks to Consider
Some better-ranked companies in the insurance industry are CNO Financial Group CNO, Palomar Holdings, Inc. PLMR and Kinsale Capital Group KNSL, each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CNO Financial develops, markets, and administers health insurance, annuity, individual life insurance, and other insurance products for senior and middle-income markets in the United States. Its earnings beat estimates in two of the last four quarters, the average positive surprise being 12.51%.
Palomar Holdings provides specialty property insurance. The company surpassed estimates in two of the last four quarters, the average positive surprise being 10.93%.
Kinsale Capital. provides casualty and property insurance products in the United States. The company surpassed estimates in two of the last four quarters, the average positive surprise being 3.44%.
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CNO Financial Group, Inc. (CNO) : Free Stock Analysis Report
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