NMIH

NMI Holdings, Inc. (NMIH) - Q2 2026 10-Q Summary

Business Context and Reporting Period

This report covers the quarterly period ended June 30, 2026. NMI Holdings, Inc. operates as a single segment providing private mortgage insurance (MI) through its subsidiary, National Mortgage Insurance Corporation (NMIC), and outsourced loan review services through NMIS. The company is a large accelerated filer listed on Nasdaq under the symbol NMIH.

Key Financial Metrics

Key Ratios (Six Months 2026): Loss Ratio: 10.8%; Expense Ratio: 19.6%; Combined Ratio: 30.4%.

Material Changes vs. Prior Period

• Revenue Growth: Net premiums earned increased 5% year-over-year (YoY) driven by growth in monthly insurance-in-force (IIF) and direct monthly premium receipts. Net investment income rose 21% YoY due to a larger asset base and higher book yields.
• Expense Increases: Insurance claims and claim expenses surged 89% YoY to $33.8 million. This increase was primarily due to a higher volume of new defaults and increased case reserves on aging defaults, partially offset by $40.6 million in favorable prior-year development.
• Portfolio Growth: New Insurance Written (NIW) increased 31% YoY to $28.3 billion. Primary IIF grew 6% to $227.1 billion, while Risk-in-Force (RIF) reached $60.8 billion.
• Default Metrics: The default rate increased to 1.16% (8,020 loans in default) from 1.00% in the prior year period. Claims severity rose to 88% for the six-month period, attributed to a higher proportion of claims from recent vintages with less accumulated equity.

Guidance, Outlook, and Risks

Management Commentary: Management attributes the increase in claims to the natural seasoning of the portfolio and macroeconomic factors. However, they noted significant favorable development on prior-year defaults ($40.6 million) due to cure activity. The company continues to utilize reinsurance (Quota Share and Excess-of-Loss) to manage risk and maintain capital compliance.

Liquidity and Capital:

• NMIC paid a $101.0 million ordinary dividend to NMIH in June 2026.
• NMIH repurchased 1.5 million shares for $59.1 million during the six months ended June 30, 2026, with $166.8 million of authorization remaining.
• Available assets under PMIERs were $3.7 billion, well above the $2.1 billion net risk-based required assets.

Risks and Contingencies:

• Macroeconomic Sensitivity: Persistent inflation, elevated interest rates, and potential unemployment increases could negatively impact housing demand and default rates.
• Regulatory Changes: The GSEs updated PMIERs in July 2026 to include VantageScore 4.0 credit factors, effective September 30, 2026. Management does not expect a material impact.
• Investment Portfolio: The portfolio held gross unrealized losses of $99.1 million, primarily driven by interest rate fluctuations rather than credit deterioration. No allowance for credit losses was recorded.

Investor Verification Checklist

• Claims Development: Verify the sustainability of the $40.6 million favorable prior-year development and monitor if the 89% YoY increase in claims incurred stabilizes.
• Default Rate Trajectory: Monitor the 1.16% default rate and the composition of the default inventory (vintage and LTV) to assess future severity risks.
• Reinsurance Adequacy: Confirm that current Quota Share and Excess-of-Loss treaties remain sufficient to cover potential spikes in defaults given the recent increase in severity.
• Investment Yield vs. Duration: Assess the impact of the 3.56-year portfolio duration on fair value if interest rates continue to fluctuate, given the $99.1 million in unrealized losses.
• PMIERs Compliance: Ensure continued compliance with the updated PMIERs requirements effective September 30, 2026, particularly regarding VantageScore 4.0 loans.