10-K: NMI Holdings Reports Strong 2025 Growth, Boosted by Mortgage Insurance Demand

NMI Holdings, Inc. reported significant growth in net income and new insurance written for the fiscal year ended December 31, 2025, driven by expanding customer relationships and a high-quality insured portfolio.

Summary

• Net income increased 8% to $388.9 million in 2025.
• Diluted EPS rose 11% to $4.92 in 2025.
• New Insurance Written (NIW) grew 6% to $48.9 billion in 2025.
• Primary Insurance-in-Force (IIF) increased 5% to $221.4 billion as of December 31, 2025.
• Primary Risk-in-Force (RIF) increased to $59.3 billion as of December 31, 2025.
• PMIERs available assets exceeded required assets by 70% as of December 31, 2025.
• The company repurchased 2.8 million shares of common stock for $104.2 million in 2025.
• Activated 90 new lenders in 2025, bringing total Master Policies to 2,193.
• Persistency rate was 83.4% at December 31, 2025, remaining historically high due to slower mortgage refinancing activity.
• Claims severity increased to 76% in 2025, primarily due to a higher proportion of claims related to loans originated in more recent years with less accumulated equity.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, with significant growth in key financial metrics and a robust capital position, despite an increase in claims and default rates which are being actively managed.

Positives

• Net income increased 8% to $388.9 million in 2025.
• Diluted EPS increased 11% to $4.92 in 2025.
• New Insurance Written (NIW) grew 6% to $48.9 billion in 2025, driven by customer franchise growth and market presence.
• Primary Insurance-in-Force (IIF) increased 5% to $221.4 billion as of December 31, 2025.
• PMIERs available assets of $3.5 billion exceeded net risk-based required assets of $2.1 billion by 70% as of December 31, 2025, indicating a strong capital position.
• Activated 90 new lenders in 2025, expanding customer relationships.
• Persistency rate remained historically high at 83.4% at December 31, 2025, contributing to stable revenue.
• Recognized as a 'Great Place to Work' for the tenth consecutive year in 2025.
• Benefited from $57.9 million of favorable prior year development on claims in 2025.
• NMIC's financial strength is rated A by Fitch, A3 by Moody's, and Aby S&P, with positive/stable outlooks.
• The mortgage insurance tax deduction has been permanently reinstated starting with the 2026 tax year.

Negatives

• Insurance claims and claim expenses increased 83% to $57.6 million in 2025, primarily due to an increase in newly defaulted loans and higher average case reserves.
• Claims severity increased to 76% in 2025 from 61% in 2024, mainly due to claims from more recent loan vintages with less accumulated equity.
• The default rate increased to 1.12% at December 31, 2025, from 1.01% in 2024.
• Cash and cash equivalents decreased by 19% to $43.9 million.
• Other revenues (loan review services) decreased by 9% to $859 thousand.
• Net decrease in cash and cash equivalents of $10.371 million in 2025.

Risks

• Intense competition in the MI industry from other private mortgage insurers and government programs (FHA, USDA, VA) could lead to loss of customers, lower premiums, or riskier credit guidelines.
• Lenders and investors may select alternatives to private MI (e.g., government mortgage insurance, self-insuring, piggy-back loans, GSE credit enhancements), reducing NIW volumes.
• Inability to attract and retain the most significant mortgage originators as customers could negatively impact business goals.
• A decline in high-LTV loan originations due to higher interest rates, stricter underwriting standards, economic downturns, or housing affordability issues could reduce NIW.
• Underwriting and credit risk management policies and practices may not anticipate all risks or the magnitude of potential losses, leading to inadequate premiums for risk.
• Unexpected material increases in borrower defaults could cause actual losses to materially exceed expected rates, including in geographically concentrated areas.
• Premiums charged may be insufficient to cover future claim payments and operating costs, as premiums are generally fixed after policy issuance.
• Changes in factors that impact policy persistency (e.g., interest rates, home equity, GSE policies) could adversely affect future revenues and claims experience.
• Rising inflation and interest rates may negatively impact the expense base, consumer spending, housing affordability, and home prices, leading to lower NIW and increased defaults.
• Reliance on third-party Underwriting Service Providers (USPs) for underwriting carries risks of inadequate performance, leading to increased claims on ineligible loans and negative customer relationships.
• Master Policies contain restrictions on the ability to rescind coverage for certain material misrepresentations (including fraud) and underwriting defects, which could lead to increased losses on loans with unacceptable risk characteristics if not discovered timely.
• The mix of business written (e.g., higher LTVs, lower FICO scores, higher DTI ratios) affects the revenue stream and the likelihood of losses occurring.
• Claims are expected to increase as the insured loan portfolio grows and matures.
• Business depends, in part, on effective and reliable loan servicing; failures by servicers could unexpectedly increase losses.
• If estimates used in establishing claims reserves are incorrect, actual claim payments may materially exceed corresponding claims reserves, resulting in unexpected charges to income.
• The occurrence of natural or man-made disasters or pandemics could adversely affect business, financial condition, and operating results through increased defaults, reduced new business, and adverse home price effects.
• Climate risk and efforts to manage or regulate climate risk by government agencies could affect business and operations.
• Exposure to certain risks associated with third-party reinsurance transactions, including the possibility that reinsurers will fail to perform their obligations or that capital credit will be lost due to future GSE or Wisconsin OCI action or reinsurer downgrades.
• Operational risk from fraud, malfeasance, or error by borrowers, employees, and third-party service providers, potentially exacerbated by remote and hybrid work arrangements.
• If technological connectivity with customers is not maintained or the proprietary technology platform is not developed, enhanced, and maintained, business and financial performance could be adversely affected.
• Inability to prevent the unauthorized disclosure or misuse of confidential, personal, or proprietary information due to cyber threats, system failures, or employee malfeasance.
• Adverse investment performance may affect financial results and ability to conduct business.
• Regulatory and litigation risks associated with offering loan review services, including potential liability for material errors or regulatory scrutiny under the SAFE Act.
• No assurance that the GSEs will continue to treat the company as an approved insurer in the future, and changes to, or failure to maintain compliance with, the GSEs' PMIERs, could adversely impact business.
• Changes in the business practices of the GSEs, including a decision to decrease or discontinue the use of private MI, or changes in the terms on which mortgage insurance coverage may be canceled, federal legislation that changes their charters, or a restructuring of the GSEs or changes in loan delivery pricing imposed by the GSEs could reduce the private MI market opportunity, reduce revenues, or increase losses.
• Subject to comprehensive state insurance regulations and capital adequacy requirements, which must be satisfied to continue operating the MI business.
• The private MI industry is subject to litigation and regulatory enforcement risk generally.
• Business prospects and operating results could be adversely impacted if, and to the extent that, the Consumer Financial Protection Bureau's Ability-to-Repay (ATR) Rules defining a Qualified Mortgage (QM) negatively impact the size of the origination market.
• The implementation of the Basel rules (Basel IV) may discourage the use of mortgage insurance by large banks, potentially decreasing demand.
• Holding company structure and certain regulatory and other constraints could affect the ability to satisfy obligations and potentially require raising more capital.
• Substantial indebtedness ($417.0 million as of December 31, 2025) could adversely affect financial condition.
• Existing, and any future, variable rate indebtedness subjects the company to interest rate risk, which could cause annual debt service obligations to increase significantly.
• Ability to incur more debt despite substantial existing debt could exacerbate risks.
• Current credit ratings may adversely affect the ability to access capital and the cost of such capital.
• No current payment of dividends on common stock, and may not do so in the future, with payment of any declared dividends potentially delayed.
• The market price of common stock may be volatile, which could cause the value of an investment to decline.
• The large number of outstanding shares of common stock eligible for future sale, and future issuances, may depress share price and dilute book value.
• Future issuance of debt or preferred stock, which would rank senior to common stock upon liquidation, may adversely affect the market value of common stock.
• Provisions contained in organizational documents, as well as provisions of Delaware law and Wisconsin insurance law, could delay or prevent a change of control.

Future Outlook

The company expects to continue building its position in the private MI market, expanding its customer base, and growing its insured portfolio of high-quality residential loans. This strategy focuses on long-term customer relationships, disciplined risk selection and pricing, fair claims practices, responsive service, and financial strength. The company also anticipates continued evaluation of reinsurance opportunities. The mortgage insurance tax deduction has been permanently reinstated starting with the 2026 tax year, which could positively impact demand.

Management Comments

• We believe that our success in acquiring a large and diverse group of lender customers and growing a portfolio of high-quality IIF traces to our founding principles, whereby we aim to help qualified borrowers achieve their homeownership goals, ensure that we remain a strong and credible counter-party, deliver a high-quality customer service experience, establish a differentiated risk management approach, utilize our proprietary Rate GPS pricing platform to dynamically evaluate risk and price our policies, and foster a culture of collaboration and excellence that helps us attract and retain experienced industry leaders.
• We believe that Rate GPS provides us with a more granular and analytical approach to evaluating and pricing risk, and that it enhances our ability to continue building a high-quality mortgage insurance portfolio and delivering attractive risk-adjusted returns.
• We believe the existing U.S. implementation of the Basel IV capital framework supports continued use of private MI by portfolio lenders as a risk and capital management tool.
• We believe that we have sufficient liquidity available at both NMIH and NMIC to meet our operating cash and capital obligations over the next 12 months.

Industry Context

StockSavvy.ai notes that NMI Holdings' strong performance in NIW and IIF growth, despite an increase in claims and default rates, reflects a resilient private mortgage insurance market. The historically high persistency rate, driven by a slowdown in mortgage refinancing due to elevated interest rates, benefits the company's revenue stability. However, the increase in claims severity, particularly from newer loan vintages, suggests a need for continued vigilance in risk selection. The ongoing debate and potential administrative reforms regarding GSEs and the implementation of Basel IV rules pose significant uncertainties for the broader housing finance system and the private MI industry, potentially impacting demand for mortgage insurance from large banks. The permanent reinstatement of the mortgage insurance tax deduction for 2026 and beyond is a positive development for the industry, potentially boosting demand.

Comparison to Industry Standards

• The company's claims severity of 76% in 2025, while increased, is noted as 'still below long-term industry norms,' benefiting from house price appreciation.
• NMIC's Risk-to-Capital (RTC) ratio of 13.0:1 is well below the common maximum permitted ratio of 25:1, indicating strong statutory capital relative to risk, and is generally stricter than PMIERs.
• The PMIERs sufficiency ratio of 70% (available assets exceeding required assets) demonstrates a robust capital position compared to GSE requirements.
• The private MI industry is highly competitive, with six approved participants including Arch Capital Group Ltd., Essent Group Ltd., Enact Holdings, Inc., MGIC Investment Corporation, and Radian Group Inc. NMIH competes based on terms, underwriting, pricing, customer service, financial strength, and technology.
• Private MI and government-run MI programs (FHA, USDA, VA) accounted for 38% and 62% of total high-LTV loan origination volume in 2025, respectively, indicating significant competition from government entities.

Management Changes

Corporate Governance

Legal Proceedings

• No material accrual liability recognized for lawsuits and claims filed or pending against the company to date.
• No reasonable expectation that current matters will result in a material liability to the Company.
• The outcome of litigation and other legal and regulatory matters is inherently uncertain, and it is possible that one or more of such matters currently pending or threatened could have an unanticipated material adverse effect on liquidity, consolidated financial position, results of operations, and/or business as a whole, in the future.

Related Party Transactions

• NMIH and its subsidiaries entered into a tax sharing agreement effective August 23, 2012, subsequently amended on September 1, 2016. The Wisconsin OCI has approved the allocation of interest expense on the 2024 Notes and 2024 Revolving Credit Facility to NMIC, to the extent proceeds are distributed to NMIC or used to repay prior credit arrangements.
• The Parent Company provides certain services to its subsidiaries and allocates corporate expenses based on an allocated percentage of time spent or internally allocated capital. Charges are based on actual cost, without any mark-up, and subsidiaries reimburse these costs in a timely manner.

Stakeholder Impact

• Shareholders: Positive impact from increased net income, EPS, and share repurchase programs. Potential for future dividends, though none currently paid. Risks include market volatility, dilution from future issuances, and debt ranking senior to common stock.
• Employees: Positive impact from competitive salaries, comprehensive benefits, annual equity grants, mortgage assistance for first-time homebuyers, and professional development support. Recognized as a 'Great Place to Work'.
• Customers (Lenders/Originators): Benefit from expanded customer relationships, high-quality customer service, differentiated risk management, and proprietary pricing platform (Rate GPS). Risks include potential loss of customers due to competition or if the company's IT systems are inferior.
• Policyholders (Borrowers): Benefit from MI protecting lenders, facilitating access to high-LTV mortgages, and fair/transparent claims payment practices. Risks include potential for increased mortgage costs due to higher interest rates or changes in MI policy terms.
• Creditors: Impacted by the company's substantial indebtedness ($417.0 million) and associated covenants, though the company is currently in compliance. NMIC's strong financial strength ratings (A/A3/A-) are positive for creditors.

Next Steps

• Continue to build position in the private MI market.
• Expand customer base and grow insured portfolio of high-quality residential loans.
• Focus on long-term customer relationships, disciplined risk selection and pricing, fair and transparent claim payment practices, responsive customer service, and financial strength and profitability.
• Evaluate reinsurance opportunities in the normal course of business.
• NMIC has capacity to pay aggregate ordinary dividends of $101.0 million to NMIH during the twelve-month period ending December 31, 2026.
• New XOL and QSR reinsurance treaties will incept and provide coverage in 2026, 2027, and 2028.
• The updated PMIERs will be fully implemented on September 30, 2026.
• The mortgage insurance tax deduction is permanently reinstated starting with the 2026 tax year.

Key Dates

Recommendation

The company demonstrates strong financial performance with significant year-over-year growth in net income, EPS, and new insurance written. Its robust capital position, evidenced by a 70% PMIERs sufficiency ratio and a healthy RTC ratio, provides a solid foundation. While claims and default rates have increased, they remain within manageable levels and are actively monitored. The company's strategic focus on customer relationships, risk management, and technological innovation, coupled with the permanent reinstatement of the mortgage insurance tax deduction, positions it well for continued growth in the U.S. housing market. The ongoing share repurchase programs also signal confidence in future value creation for shareholders.

Keywords

Mortgage Insurance, MI, Private Mortgage Insurance, NMIH, Financial Results, Earnings, Capital, PMIERs, Risk Management, Housing Market, Reinsurance, Loan Origination, Credit Risk, GSEs, Fannie Mae, Freddie Mac, Regulation, Cybersecurity, Share Repurchase, Debt, Interest Rates, Inflation, Underwriting, Claims, Default Rate, EPS, IIF, RIF