Business Context and Reporting Period
Company: NMI Holdings, Inc. (NMIH)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: NMIH is a private mortgage insurer operating primarily through its subsidiary, National Mortgage Insurance Corporation (NMIC). The company provides mortgage insurance (MI) to protect lenders and investors from default-related losses on high loan-to-value (LTV) residential mortgages. NMIC is approved by the Government-Sponsored Enterprises (GSEs) and licensed in all 50 states and D.C. The company utilizes a proprietary risk-based pricing platform, Rate GPS, to underwrite and price policies.
Key Financial Metrics
| Metric | 2025 | 2024 | Change |
|---|---|---|---|
| Net Premiums Earned | $602.2 million | $564.7 million | +7% |
| Net Investment Income | $102.9 million | $85.3 million | +21% |
| Total Revenues | $706.4 million | $651.0 million | +9% |
| Net Income | $388.9 million | $360.1 million | +8% |
| Diluted EPS | $4.92 | $4.43 | +11% |
| Combined Ratio | 29.5% | 26.6% | +2.9 pts |
| Loss Ratio | 9.6% | 5.6% | +4.0 pts |
| Total Assets | $3.84 billion | $3.35 billion | +15% |
| Total Debt | $417.0 million | $415.1 million | Flat |
| Shareholders' Equity | $2.59 billion | $2.22 billion | +17% |
Portfolio Data (Year-End 2025):
- New Insurance Written (NIW): $48.9 billion (+6% vs 2024)
- Insurance-in-Force (IIF): $221.4 billion (+5% vs 2024)
- Risk-in-Force (RIF): $59.3 billion (+6% vs 2024)
- Default Rate: 1.12% (vs 1.01% in 2024)
Material Changes vs. Prior Period
- Profitability: Net income increased by $28.8 million (8%) driven by growth in total revenues, partially offset by higher insurance claims and income tax expenses. Adjusted net income increased by $23.0 million (6%).
- Claims Experience: Insurance claims and claim expenses rose significantly by 83% ($26.1 million) to $57.6 million. This increase was due to a higher volume of newly defaulted loans and increased case reserves on aging defaults, partially offset by favorable development on prior-year defaults ($57.9 million release).
- Investment Performance: Net investment income grew 21% to $102.9 million, attributed to a larger invested asset base and higher book yields from reinvesting maturities at higher rates. The portfolio held gross unrealized losses of $86.3 million, primarily driven by interest rate fluctuations rather than credit deterioration.
- Capital Position: Available assets under GSE Private Mortgage Insurer Eligibility Requirements (PMIERs) increased to $3.5 billion, exceeding the net risk-based required assets of $2.1 billion. The PMIERs sufficiency ratio remained strong.
- Share Repurchases: The company repurchased 2.8 million shares in 2025 at a total cost of $104.2 million. As of year-end, $225.9 million of repurchase authority remained.
Guidance, Outlook, and Risks
Management Commentary: Management attributes growth to expanded customer relationships and market penetration. The company continues to focus on disciplined risk selection and pricing. Persistency rates remained historically high (83.4%) due to elevated mortgage interest rates slowing refinancing activity.
Key Risks and Contingencies:
- Regulatory Environment: The company is subject to GSE oversight (PMIERs) and state insurance regulations. Changes in GSE policies, charter reforms, or capital requirements could impact business operations. The company certified full compliance with PMIERs as of December 31, 2024.
- Macroeconomic Factors: Rising inflation, interest rates, and unemployment could increase default rates and claim severity. Conversely, declining interest rates could accelerate refinancing, reducing persistency and future premium revenue.
- Competition: The private MI market is competitive with five other private insurers and government programs (FHA, VA, USDA). Competition may pressure pricing or market share.
- Reinsurance Counterparty Risk: The company relies on third-party reinsurance (Quota Share, Excess-of-Loss, and ILN transactions) for capital relief. Failure of reinsurers to perform could impact capital adequacy.
- Cybersecurity: As a technology-dependent business, the company faces risks related to data breaches and system failures, though it maintains robust security protocols and insurance coverage.
Investor Verification Checklist
- Claims Reserve Adequacy: Verify the assumptions used for claim frequency and severity, particularly given the 83% increase in incurred claims and the reliance on favorable prior-year development to offset current-year increases.
- PMIERs Compliance: Confirm the company's continued ability to meet GSE capital requirements as the portfolio grows and defaults age, noting the $3.5 billion in available assets vs. $2.1 billion required.
- Investment Portfolio Quality: Review the $86.3 million in gross unrealized losses to ensure they are driven by interest rate movements (non-credit) rather than credit deterioration, as stated by management.
- Reinsurance Counterparty Strength: Assess the financial strength of reinsurers under Quota Share and Excess-of-Loss treaties, as the company retains direct liability if reinsurers fail to pay.
- Persistency Trends: Monitor the impact of potential interest rate declines on refinancing activity, which could reduce the duration of monthly premium policies and impact future revenue.