NMI Holdings, Inc. (NASDAQ: NMIH)

NMI Holdings, Inc., commonly known as NMIH, operates in the mortgage insurance (MI) industry in the United States. Its common stock is listed on the Nasdaq under the symbol "NMIH". The company's primary business involves providing MI coverage to mortgage lenders and investors, protecting them from default-related losses on a portion of the unpaid principal balance of a covered mortgage. NMI Holdings operates through its wholly-owned subsidiaries, National Mortgage Insurance Corporation (NMIC) and National Mortgage Reinsurance Inc. One (Re One).

NMI Holdings' main business activities involve providing MI coverage to mortgage lenders and investors. This coverage protects these entities from default-related losses on a portion of the unpaid principal balance of a covered mortgage. NMIH's MI coverage is primarily designed to facilitate the secondary market sale of high-loan-to-value (LTV) residential loans to government-sponsored enterprises (GSEs), such as Fannie Mae and Freddie Mac. These GSEs are restricted by their charters from purchasing or guaranteeing high-LTV mortgages that are not covered by certain credit protections. NMIH's mortgage insurance products are designed to provide lenders and investors with a means to mitigate their exposure to mortgage credit risk.

The company generates revenue through its primary MI product, which is written on a flow basis. This means that mortgages are insured on an individual, loan-by-loan basis at the time of origination. NMIH also offers pool insurance, which provides additional credit enhancement for certain secondary market mortgage transactions. The company's customers are classified into two primary categories: National Accounts and Regional Accounts. National Accounts are the most significant residential mortgage originators, while Regional Accounts are smaller, local lenders.

Within the industry, NMI Holdings operates in a highly competitive market, with six active private mortgage insurers, including Arch Capital Group Ltd., Essent Group Ltd., Enact Holdings, Inc., MGIC Investment Corporation, and Radian Group Inc. The company's competitive advantages include its strong financial position, experienced management team, and reputation for providing high-quality MI products and services.

NMIH's sales and marketing efforts are designed to establish and maintain high-quality customer relationships. The company's sales force consists of qualified mortgage professionals who have well-established relationships with industry-leading lenders and significant experience in both MI and mortgage lending. NMIH also maintains a dedicated customer service team, known as the Solution Center, which offers support in loan submission and underwriting services, as well as risk management and technology to support its sales efforts.

NMIH's underwriting and risk management guidelines are designed to evaluate loans and issue policies based on a comprehensive analysis of borrower creditworthiness, loan-to-value ratios, debt-to-income ratios, and other factors. NMIH's underwriting guidelines are continuously refined and adapted to reflect changes in the risk environment and to ensure that the company's MI products remain competitive and attractive to lenders and investors.

In terms of its products and services, NMIH offers post-close underwriting reviews, known as "independent validations," for both non-delegated and delegated loans. Upon satisfactory completion of an independent validation, NMIH agrees to not rescind coverage under most circumstances. The company's Master Policies provide for a "closing document exception," which permits eligible non-delegated lenders to obtain early rescission relief without post-close independent validations of qualifying loans. NMIH utilizes a proprietary risk-based pricing platform, Rate GPS, to establish individualized premium rates for most new loans that it insures. Rate GPS considers a broad range of variables, including property type, type of loan product, borrower credit characteristics, and lender and market factors, and provides NMI with the ability to set and charge premium rates commensurate with the underlying risk of each loan that it insures.

NMIH's Policy Servicing Department is responsible for various servicing activities related to its Master Policies and certificate administration, premium billing and payment processing. The company's Policy Servicing Department primarily interfaces with its insureds' mortgage loan servicers. NMIH assigns servicing specialists to its servicers to assist with day-to-day transactions and monitoring of insured loans. NMIH's default and claims process begins with the receipt of a default notice for an insured loan from a loan servicer. The company reviews loan and servicing files to determine the appropriateness of the claim submission and claim amount, and to ensure that it only pays for expenses covered under the applicable Master Policy. NMIH periodically receives claims submissions that include costs and expenses not covered by its Master Policies, such as mortgage insurance premiums, hazard insurance premiums for periods after the claim date and losses resulting from property damage that has not been repaired, and denies coverage for such items.

NMIH utilizes third-party reinsurance to actively manage its risk, ensure compliance with PMIERs, state regulatory and other applicable capital requirements, and support the growth of its business. The company has both excess-of-loss and quota share reinsurance agreements in place. Excess-of-loss reinsurance agreements provide NMIH with aggregate excess-of-loss reinsurance coverage on a defined portfolio of mortgage insurance policies. Quota share reinsurance agreements require NMIH to cede a percentage of its premiums written to the reinsurer.