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NMI Holdings Soars 87% in a Year: What's Behind the Rally?

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That NMIH Holdings, Inc. (NMIH - Free Report) stock is favored by investors is clearly validated by its share price movement. Shares of the company have soared nearly 87% in a year’s time, outperforming its industry's rally of roughly 13%.



Reasons Behind the Rally

The property and casualty (P&C) insurer has been witnessing premium growth over a considerable period of time with the company registering a substantial 63.8% increase in the first half of 2018. This upside was attributable to the favorable performance displayed by new insurance written (NIW). Given the rising trend of NIW across the company’s product line as well as its compelling portfolio mix, we expect this momentum to continue going forward.

Banking on the climbing interest rates, the company has been experiencing better investment results over the past few years and this momentum was consistent during the first half of 2018 as well, indicating nearly 34% improvement. On the back of higher money rates along with enhanced yields and increase in the size of total investment portfolio, we anticipate investment results to continue showing progress in the near term.

Riding on improved investment results and premium growth, the company has been experiencing higher revenues over the past few years and the trend continued into the first half as well with the metric surging about 60.3%. We expect this top-line improvement to further accelerate the company’s overall growth.

Notably, the P&C insurer anticipates to deliver strong mid-teens returns throughout the rest of 2018 and is well-positioned to achieve its objectives.  

Further, with the introduction of Rate GPS (Granular Pricing System) representing an important evolution in pricing approach and risk-selection capabilities, the company aims at making substantial enhancements to the pricing process. We can expect this improved pricing process to reflect on the insurer’s overall results.

Solid market conditions and a growing in-force portfolio have allowed the company to maintain underwriting profitability and we expect this metric to deliver a favorable performance in the upcoming quarters.

The company has been able to sustain a strong liquidity position, which in turn, has helped it fund strategic initiatives and see through the execution, boosting its product pricing, risk management and technology capabilities.

Other Noteworthy Factors

NMIH Holdings sports a Zacks Rank #1 (Strong Buy). With a bullish sentiment surrounding the stock’s healthy performance, the Zacks Consensus Estimate for 2018 and 2019 earnings has been revised about 6.2% and 8.3% upward, respectively, over the past 60 days.

The Zacks Consensus Estimate for current-year earnings per share is pegged at $1.55, representing a whopping year-over-year surge of about 171.9%. For 2019, the bottom line per share stands at $2.21, reflecting a year-over-year rise of 42.9%.

Also, the company delivered a positive earnings surprise in all the last four quarters with an average beat of 29.85%.  

Other Stocks to Consider

Investors interested in other top-ranked stocks from the same space can also consider Alleghany Corporation , The Progressive Corporation (PGR - Free Report) and The Navigators Group, Inc. , each sporting a Zacks Rank of 1.You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprises in three of the trailing four quarters with an average beat of 17.61%.

Progressive Corporation provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance and related services, primarily in the United States. The company came up with positive surprises in all the preceding four quarters with an average earnings surprise of 9.19%.  

Navigators Group underwrites marine, property and casualty plus professional liability insurance products and services in the United States and globally. The company came up with positive surprises in three of the preceding four quarters with an average positive surprise of 19.54%.

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