Q4 2024 NMI Holdings Inc Earnings Call
Good day and welcome to the N M. I Holdings, Inc. Fourth quarter 'twenty 'twenty four 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 todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on a touchtone phone too.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
Speaker Change: I would now like to turn the conference over to John Swenson of management. Please go ahead.
Speaker Change: Thank you operator, good afternoon, and welcome to the 2020 for fourth quarter conference call for National Mi.
Speaker Change: I'm, John Swenson, Vice President of Investor Relations and Treasury.
Speaker Change: Joining us on the call today are Brad Shuster Executive Chairman, Adam Pulitzer, President and Chief Executive Officer, and a war with Swift and bank, our Chief Financial Officer.
Speaker Change: Actual results for the quarter were released after the close today. The press release may be accessed at enterprise Web site located at National Mi Dot com under the investors tab.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Yeah and to the extent the company makes forward looking statements.
Speaker Change: Do not undertake any obligation to update those statements in the future in light of subsequent developments.
Speaker Change: Further no one should rely on the fact that the guidance of such statements as current at any time other than the time of this call.
Speaker Change: Also note that on this call we may refer to certain non-GAAP measures.
Speaker Change: Today's press release and on our website. We've provided a reconciliation of these measures to the most comparable measures under GAAP.
Brent: I'll turn the call over to Brent.
Brent: Thank you John and good afternoon, everyone.
Brent: I am pleased to report that in the fourth quarter National and my again delivered standout operating performance.
Brent: Continued growth in our insured portfolio and strong financial results capping a year of tremendous success.
Brent: We closed 2024 was 46 billion of total <unk> volume and a record $210 2 billion of high quality high performing primary insurance in force.
Brent: We delivered broad success and customer development.
Brent: Continue to innovate in the capital and reinsurance markets and once again achieved industry, leading credit performance.
Brent: In 2024, we generated record adjusted net income of $365 6 million.
Brent: Up 13% compared to 2023.
Brent: Record adjusted EPS of $4 50.
Brent: Up 17% compared to 2023.
Brent: And delivered a 17, 6% adjusted return on equity.
Brent: Looking ahead I'm excited at the opportunity we have to continue to build on our success.
Brent: As we plan for 2025, we will continue to focus on our people.
Brent: They are talented.
Brent: <unk> and dedicated.
Brent: And we will continue to invest in our culture with a focus on collaboration performance and impact.
Brent: We will continue to differentiate with our customers.
Brent: The mortgage market is connected and evolving.
Brent: And we will work to continue to stand out with our focus on customer service value added engagement and technology leadership.
Brent: We will continue to prioritize disciplined and risk responsibility as we grow our insured portfolio.
Brent: We're going to write a large volume of high quality high return business under the protective umbrella of our comprehensive credit risk management framework.
Brent: And we will continue to focus on building value for our shareholders.
Brent: Growing earnings compounding book value delivering strong mid teens returns and prudently distributing excess capital.
Brent: Before turning it over to Adam I would also like to comment on the current policy environment.
Adam: Our conversations in Washington, since the election have been active and constructive.
Adam: We have long noted that there is bipartisan recognition of the unique and valuable role that the private mortgage insurance industry plays.
Adam: Working to consistently expand access to homeownership.
Adam: 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 MRI in the broader private M. I 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.
Adam: With that let me turn it over to Adam.
Adam: Thank you, Brian and good afternoon, everyone National My mind continue to perform in the fourth quarter delivering significant new business production consistent growth in our insured portfolio and strong financial results.
Adam: We generated $11 $9 billion of Ni W. Volume and ended the period with a record $210 2 billion of high quality high performing primary insurance in force.
Adam: Total revenue in the fourth quarter was a record $166 5 million and we delivered adjusted net income of $86 1 million or $1 seven per diluted share and a 15, 6% adjusted return on equity.
Adam: Overall, we had a terrific quarter and closed 2024 in a position of real strength.
Adam: We generated $46 billion, then IW volume during the year and exited with $210 2 billion of primary insurance in force.
Adam: Our portfolio is the fastest growing highest quality and best performing in the semi industry and has enormous embedded value.
Adam: We now have nearly 660000 policies outstanding and it helped a record number of borrowers gain access to housing at a time when they needed us most.
Adam: We enjoyed continued momentum in growth in our customer franchise activating 118, new lenders in 2024 and ending the year with over 1600 active accounts.
Adam: 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 and extend our comprehensive credit risk management framework and are amongst the best we've ever achieved in terms of their cost capacity and duration, we completed a successful debt refinancing as an investor.
Adam: Great issuer and continues to consistently return capital and drive value for shareholders under our repurchase program and.
Adam: 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, adjusted EPS up 17% compare.
Adam: 2023, and a 17, 6% adjusted return on equity.
Adam: As we begin 2025, we are 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 industry.
Adam: Total MLP industry in IW volume was an estimated $300 billion in 2024 with the market demonstrating real strength. Despite the continued headwind of elevated interest rates.
Adam: Our lender customers and their borrowers continue to rely on us in size for critical downpayment support and we expect that the private market will remain just as strong in 2025 with long term secular trends continuing to drive an attractive new business opportunity.
Adam: The 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 mall.
Adam: <unk> market and existing borrowers well positioned against the backdrop of a broadly resilient U S economy.
Adam: As we look ahead, we're confident the macro outlook is encouraging the private <unk> market opportunity is compelling and we are well positioned to continue to deliver value for our people our customers and their borrowers and our shareholders.
Adam: We have a strong customer franchise, a talented team driving us forward everyday and 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. Thank you Adam we again delivered strong.
Aurora: 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.
Aurora: And adjusted return on equity was 15, 6%.
Aurora: Generated $11 9 billion of <unk>.
Aurora: At our primary insurance in force grew to $210 2 billion.
Aurora: Up 1% from the end of the third quarter, and 7% compared to the fourth quarter of 2023.
Aurora: 12 month Persistency was 84, 6% in the fourth quarter compared to 85, 5% in the third quarter.
Aurora: 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 billion in the fourth quarter of 2023.
Aurora: 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.
Aurora: <unk> from the third quarter.
Aurora: 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.
Aurora: 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.
Aurora: 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%.
Aurora: We had 6642 defaults at December 31, including 471, new notices for loans in FEMA declared disaster areas, primarily related to hurricane Hermine and Milton.
Aurora: And our default rate was 1% at year end.
Aurora: Claims expense in the fourth quarter was $17 3 million compared to $10 3 million in the third quarter.
Aurora: 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.
Aurora: Yep that income in the quarter was $86 2 million and diluted earnings per share was $1.07.
Aurora: Total cash and investments were $2 8 billion at quarter end, including $132 million of cash and investments at the holding company.
Aurora: Shareholders' equity at December 31 was $2 2 billion and book value per share was $28 and trying to find tenants.
Aurora: 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.
Aurora: In the fourth quarter, we repurchased $27 9 million of common stock retiring 722000 shares at an average price of $38 72.
Aurora: Through year end, we have repurchased a total of $245 million of common stock retiring nine 3 million shares at an average price of $26.33.
Aurora: 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.
Aurora: At quarter end, we reported $3 1 billion of total available assets under P mirrors, and $1 8 billion of risk based required asset excess available assets were $1 3 billion.
Aurora: 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 return.
With that let me turn it back to Adam Thank you Rory.
Adam: 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 and significant growth in book value per share and a <unk>.
Adam: Eight 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.
Adam: <unk> 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.
Adam: We will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: 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.
Speaker Change: Okay.
The first question today comes from Doug Harter with UBS. Please go ahead.
Speaker Change: Share repurchase authorization.
Speaker Change: How should we think about the pacing.
Speaker Change: Of capital return.
Speaker Change: Yes.
Speaker Change: I think.
Speaker Change: Broadly speaking I'll, maybe I'll touch on both sizing of the program and pacing expectations going forward to give you a little bit of perspective.
Speaker Change: Sure.
Speaker Change: 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 were generating day to day, the sizing of the program at $250 million.
Speaker Change: We think really strikes the right balance, allowing us to.
Speaker Change: We 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 I'll anchor on that point of consistency. If you look back to date over the last three years that we've had a program in place we've averaged about $25 million per quarter of <unk>.
We purchased a little bit of movement up or down obviously, depending on the market environment, our view of risk where were trading, but roughly that $25 million and if you take the $250 million authorization today, plus the $80 million remaining.
Speaker Change: 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.
Speaker Change: The incremental capacity also will allow us to be opportunistic.
Speaker Change: We see.
Speaker Change: If we see the opportunity to develop.
Speaker Change: I guess just on that point.
Speaker Change: Since you started the buyback program your earnings power in the portfolio size of.
Speaker Change: Have increased.
Speaker Change: What point would you consider kind of increasing the run rate of about that.
Speaker Change: Yeah right.
Speaker Change: Right now I think the program gives us the flexibility to do both right to stick with.
Speaker Change: The consistency that we've established but also to be opportunistic should the environment change, it's something in our outlook change, but right now we expect that we'll be operating at a roughly similar cadence.
Adam: Thank you Adam.
Terry MA: The next question comes from Terry MA with Barclays. Please go ahead.
Terry MA: Hey, Thank you good afternoon.
Speaker Change: Maybe just to start off with credit you know your reserve released this quarter for prior period defaults was one little lower amounts over the last two years is there any color you can provide on just the makeup of peers within the quarter.
Speaker Change: Sure and and in the table in the press release.
Speaker Change: We let things out into prior years and current here and so the reserve release associated with prior years, it's $4 4 million.
Speaker Change: So.
Speaker Change: That that is what's within.
Speaker Change: Within that number is effectively anything that went into default in 2023 or earlier and carried out in the fourth quarter of this past year, what is not in that and what is the majority of our <unk> in the quarter or loans that went into default in Q1, and Q2 or Q3 of <unk>.
Speaker Change: 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 care population would've been $16 3 million.
Speaker Change: So I'd say, our cure rate quarter over quarter was broadly similar in the third quarter, we had a cure rate of 31% and in the fourth quarter, we had a cure rate of 29%.
Speaker Change: Got it Okay. That's helpful. And then in terms of the claims activity in the quarter, that's ticked up a little bit.
Speaker Change: It looks like almost 30% claims activity. This quarter came from the 2022 vintage kind of similar to last quarter, and that's kind of ticked up.
Speaker Change: Any color you can kind of provide on just the rota claim versus what you've kind of assumed in your underwriting.
Speaker Change: Yeah, and maybe I'll, 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.
Speaker Change: He has experience in.
Speaker Change: I won'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 is in line with our expectations and we remain greatly encouraged by the credit performance of <unk>.
Speaker Change: 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 and we've also noted that we're seeing a natural normalization in our claims experience given the growth and seasoning of our book rate as our more recent production years come into a period of.
Speaker Change: Typical loss incurrence of the 2022 book included.
Speaker Change: Aurora in her remarks also noted that we had a number of new notices that emerged in the fourth quarter related to storm activity and while we do adjust our reserving assumptions for <unk>.
Speaker Change: Those notices given the exceptionally high cure experience that we've seen on them.
Speaker Change: We did still see some amount of those nov's translate through the claims expense. It was roughly $1 5 million of our fourth quarter claims expense traces to those storm related <unk> overall, we have an exceptionally high quality book and we ended the quarter with a 1% default rate that perspective, though on the go forward right.
Speaker Change: 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 at our claim cost will continue to trend, particularly as our most recent production years continue to age two.
Speaker Change: That point of normal loss incurred again 2022 book that you asked about included.
Speaker Change: First though.
Speaker Change: Some of the underlying data from the quarter as you think about where things and have certainly when we look internally as to where things are going in some of this underlying data is actually encouraging quite encouraging so in the fourth quarter. If we adjust out the new storm related defaults are new notices actually.
Speaker Change: <unk> declined compared to the third quarter, they were down about 4% period to period and as a point of comparison, our new notice is in Q4 of 2023 instead of declining as they did this year they increased by 17%, which we would expect with seasonality. The fact that we didn't see a similar trend this year.
Speaker Change: It's really encouraging and in the other elements.
Speaker Change: That I'd note.
Speaker Change: Is that the average age of our portfolio is extending with every passing month because of the strength of our persistency experience and at the age of our portfolio draws closer and closer to that three year point of typical loss incurrence, we'd expect that we will continue to see things normalize and so net net as we look forward whether it's for 'twenty.
Speaker Change: 22 book year or the portfolio overall.
Speaker Change: We're incredibly happy with how we built our book and how it's performing and we're we're encouraged as we look ahead.
Speaker Change: Got it Super helpful. Thank you.
Speaker Change: The next question comes from Bose, George with K P. W. Please go ahead.
Speaker Change: Hey, everyone. Good afternoon.
Speaker Change: Just wanted to follow up on Doug's questions about the capital return, but can you just talk about dividends when that might.
Speaker Change: Become part of the picture and then just how do you think about the <unk>.
Speaker Change: Pull to par happens.
Speaker Change: I have to quote close means that when the dividend might become part of the capital.
Speaker Change: Yeah, I'd say look right now we're focused on our repurchase program in today's refresh really does provide us with significant incremental capacity.
Speaker Change: 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 rate funding balance optimize between equity debt reinsurance usage and obviously it supports future EPS and Roe.
Speaker Change: Outcomes I'd say, we're really pleased with the execution that we've seen to date and and now have.
Speaker Change: Over $300 million of runway between what we previously had and then the new authorization. It take 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.
Speaker Change: Our primary focus.
Speaker Change: Okay makes sense. Thanks, and then just switching over to credit I think in the second quarter call. 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 any other any markets that you're focused on from that standpoint.
Speaker Change: Yeah, I think we really haven't seen that continued also into Q3 and we haven't seen the fundamental changes I would say in terms of.
Speaker Change: Either new markets coming into a a risk spotlight or others that are that are moving out and so we we continued to actively manage our mix of business by both borrower risk attributes, but also by geography through the use of rate GPS and Havent made any fundamental changes by risk cohort or geography, we still see.
Speaker Change: <unk>.
Speaker Change: Inventory levels being a bit higher in those markets and the prospect for some some pressure from an HVA standpoint.
Speaker Change: Okay, great. Thanks.
The next question comes from Rick Shane with J P. Morgan. Please go ahead.
Speaker Change: Hey, guys. Thanks for taking my questions most have been asked and answered but just curious.
Speaker Change: Curious from sort of a competitive landscape.
Speaker Change: What youre seeing with <unk>.
Speaker Change: Curious, what you're hearing from mortgage originators in terms of.
Speaker Change: You know there any pushback on pricing or.
Speaker Change: Any sort of.
Speaker Change: Efforts to in a challenging environment.
Speaker Change: Okay.
Speaker Change: Pmi's to open.
Speaker Change: Credit aperture, just a little bit.
Speaker Change: Yes, Rick it's a it's a good question.
Speaker Change: I'd say, we really don't hear much direct feedback on our pricing from lenders I think our customers.
Speaker Change: <unk> expect us to support them in their borrowers and so we do that every day and we always aim to want to strike the right balance.
Speaker Change: And also importantly, with the use of our <unk> 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 is our balance sheet, we only exposure and it's important that we're able to make the changes.
Speaker Change: And decisions around pricing that we deem appropriate, but we really don't get much pushback on lenders and I say importantly, because when we look at it not just our pricing, but broadly across the industry.
Speaker Change: We use the phrase balanced and constructive for a reason in the balance part of that is really the 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 <unk>.
Speaker Change: 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.
Speaker Change: Got it okay. Thank you guys.
Mark Hughes: The next question comes from Mark Hughes with Truest. Please go ahead.
Mark Hughes: Yes. Thank you good afternoon.
Speaker Change: Any reason to think the premium yield will.
Speaker Change: Trend up or down from this quarter I think the 34 bps before.
Speaker Change: The reinsurance ceded premium.
Speaker Change: And then the 27 Bips afterwards.
Speaker Change: Pretty stable here.
Speaker Change: Yeah, the core yield was flat quarter over quarter, and our net debt ticked down modestly.
Speaker Change: The core yield we feel good that that is clearly demonstrate.
Speaker Change: Stability, especially with the persistency of the underlying book obviously the.
Speaker Change: The net yield is going to vary in line with Clayton's experience and the primary reason it ticked down modestly through the quarter is the way that the reinsurance claims expense flows through those treaties in through the income statement.
Speaker Change: Okay.
Speaker Change: If credit.
Speaker Change: Deteriorates, a little bit does that impact.
Speaker Change: Impact the yield was that net yield.
Speaker Change: You can see a little bit of pressure is that your point.
Speaker Change: That's correct that's correct. So in a benign environment, we get a large profit commission DNA as credit.
Speaker Change: Claims go up we still get that money back from reinsurers, but it comes through as a clayton's reimbursement and that directly offset the.
Speaker Change: The profit commission that we get.
Speaker Change: And so that that interacts with.
Speaker Change: The net yield calculation.
Speaker Change: That last point, there where it makes is really important and it's a geography issue with claims increase and 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.
Speaker Change: Understood and then from a regulatory perspective, it sounds like the <unk>.
Speaker Change: Climate, it's probably improving are there any specific plans that any of the <unk>.
Speaker Change: New folks in the administration have talked.
Speaker Change: <unk> talked about in the past that would be beneficial for M I or is it.
More of just a broad though.
Speaker Change: But productive view.
Speaker Change: Yes, I would say.
Speaker Change: 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 homeowners homeownership opportunities for millions of Americans and we do that while placing private capital in the first loss position to absorb.
Speaker Change: <unk> and loss.
Speaker Change: You know, 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.
Speaker Change: More and more with the new administration.
Speaker Change: And understand even.
Speaker Change: Even more about their priorities and where we can be helpful.
Speaker Change: Thank you.
Speaker Change: As a reminder, if you would like to ask a question. Please press Star then one to join the question queue.
Speaker Change: The next question comes from Mihir Bhatia with Bank of America. Please go ahead.
Mihir Bhatia: Hi, good afternoon. Thank you for taking my questions.
Mihir Bhatia: First question on write offs is just about the P. Myers excess like what what do you think the right amount of B mind as access to offset it with is.
Mihir Bhatia: And like I guess, what would be to happen for you to for that to change.
Mihir Bhatia: Yeah. It's a good question I would say.
Mihir Bhatia: When we think about our excess capital position I guess I'll use the phrase balance a lot, but we want to be balanced on the one hand, right theres value in conservatism and 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.
Mihir Bhatia: There is 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 a rich.
Mihir Bhatia: 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. If we look at the total authorization to date I think this latest this latest authorization brings us to 525.
Mihir Bhatia: Million of total authorization and.
Mihir Bhatia: And at the same time, we've been able to maintain obviously, a significant <unk> excess position and extended amount of funding runway and and we think we think we're at a point, where we found that balance it doesn't mean that I'd say normal in perpetuity for us is carrying a 70% <unk> excess position, but when we're able to carry that position funding.
Mihir Bhatia: Efficiently still progress.
Mihir Bhatia:
Mihir Bhatia: With our goals around capital distribution and value creation for shareholders. We think that is quite a comfortable position, we'll see where things trend relative to the risk environment going forward.
Got it.
Mihir Bhatia: And then just switching to expenses for a second.
Speaker Change: I know you don't manage to an expense ratio, but it seems.
Mihir Bhatia: No.
Speaker Change: Scuttle about 'twenty, one ish percent range and my question is as.
Speaker Change: I have your insurance in force continues to grow shouldn't there be a natural tendency for the expense ratio to come down.
Speaker Change: Why is that not happening.
Speaker Change: So we were first of all very focused on managing the business with efficiency and discipline and as you point out there are benefits of scale.
Speaker Change: We have articulated a target again this isn't guidance.
Speaker Change: Or anything of that nature, but we have articulated a target of the low to mid twenties.
Speaker Change: So our in quarter expense ratio of $21 seven on the year.
Speaker Change: <unk> expense ratio of 21% flat are both consistent with that.
Speaker Change: So we we continue to look for.
Speaker Change: There are ways to optimize those expenses going forward, but I think you should expect us to stay in that low 20 zone, yes.
Speaker Change: Here's the other one is a couple of points I'd note.
Speaker Change: One remember we talked a bit about how the net yields and therefore, our net premiums earned can be impacted by claims experience because of.
Speaker Change: The workings of the profit commission on our quota share agreements and so there is a little bit of an element of that rate. The expense ratio was a very specific measure of efficiency. Obviously operating expense divided by net premium earned when we think about efficiency we do.
Speaker Change: We care and focus on expense ratio in a classic sense, but we also think about it I would say is relative to what we're achieving in terms of our total revenue and there we would expect that we'll continue to see.
Continue to see efficiency gains.
Speaker Change: An interesting one right. 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 increasing contribution and benefit that we get from our.
Speaker Change: 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.
Speaker Change: Alright, and then just my last question what are the like.
Speaker Change: Due to the Hurricane defaults I know you don't use like a claim rate.
Speaker Change: Across the defaults, but I guess.
Speaker Change: When you model goes up when you resolve for those views, though at a lower rate for hurricane related default. So is your.
Speaker Change: Oh, okay.
Speaker Change: Credit for that no. We are absolutely we do so the number I gave it we had about 1 million and a half of our claims expense in the fourth quarter related to the storms, but because all of those storms. The default 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 and if you look more broadly.
Speaker Change: At 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 a dramatically higher right.
Speaker Change: Okay makes sense, thank you and thanks for taking my questions.
Speaker Change: Yeah.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to the company for any closing remarks.
Speaker Change: Well. Thank you all again for joining us will be participating in the UBS financial services conference on February 10th.
Speaker Change: Bank of America Financial Services Conference on February 11, and the RBC financial institutions Conference on March four we look forward to speaking with you all again soon.
Speaker Change: Okay.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].