NMI Holdings: A High-Performing Mortgage Insurance Play in a Resilient Housing Market

NMI Holdings (NMIH) has emerged as a standout performer in the mortgage insurance sector, leveraging a resilient housing market and disciplined capital management to deliver exceptional results in Q2 2025. With a net income of $96.2 million, or $1.21 per share, the company not only outperformed analyst expectations but also demonstrated a rare combination of top-line growth, cost efficiency, and shareholder-friendly policies. For investors seeking exposure to a sector poised for long-term demand, NMIH's Q2 results offer compelling evidence of its strategic advantages.

A Resilient Housing Market Fuels Revenue Growth

The U.S. housing market has shown remarkable resilience in 2025, driven by low inventory levels, persistent refinancing demand, and a shift toward longer-term mortgage products. NMI Holdings capitalized on this environment, reporting a 7.2% year-over-year revenue increase to $173.8 million in Q2 2025. This growth was underpinned by a 6% rise in net premiums earned, which climbed to $149.1 million as the company's primary insurance-in-force (PIF) expanded to $214.7 billion.

The housing market's strength is not a temporary phenomenon. With homeownership rates stabilizing and demographic tailwinds (such as millennials entering peak homebuying years), demand for mortgage insurance—NMIH's core product—is well positioned to remain robust. For NMIH, this means a durable revenue stream that can withstand macroeconomic volatility.

Disciplined Cost Management: A Shield Against Margin Pressure

While revenue growth is critical, NMIH's ability to maintain profitability in a competitive sector hinges on its cost structure. The company's Q2 2025 expense ratio of 19.8%—calculated by dividing underwriting and operating expenses ($29.5 million) by net premiums earned—remained stable compared to 20.1% in Q2 2024. This consistency is no accident. NMIH has implemented a disciplined approach to cost management, including a 0.4% reduction in operating expenses year-over-year, despite a 900% spike in claims and claim expenses ($13.4 million).

The company's cost efficiency is a key differentiator. In an industry where margins can erode quickly due to underwriting risks, NMIH's ability to keep its expense ratio in check ensures that profitability remains intact. For example, even as claims expenses surged, the combined ratio (underwriting expenses plus claims costs divided by net premiums earned) held at 28.8%, a level consistent with industry benchmarks. This operational discipline allows NMIH to allocate capital strategically, whether to reinvest in its portfolio or return it to shareholders.

Strategic Buybacks: Compounding Value for Shareholders

NMIH's Q2 2025 buyback program further underscores its commitment to long-term value creation. The company repurchased $23.2 million in shares, retiring 628,000 shares at an average price of $36.90. This activity aligns with a broader $294 million buyback program executed through mid-2025, with $281 million in remaining capacity.

The impact of these repurchases is twofold. First, they directly increase earnings per share (EPS) by reducing the share count. At current valuation multiples, this is a potent way to enhance shareholder returns. Second, the buybacks act as a hedge against market volatility. With NMIH's book value per share (excluding investment portfolio gains/losses) rising to $32.08—a 16% increase from Q2 2024—the company is effectively purchasing its own shares at a discount to intrinsic value.

CEO Adam Pollitzer's emphasis on maintaining a $25 million quarterly buyback cadence, while remaining flexible to accelerate repurchases in favorable conditions, highlights a balanced approach to capital allocation. For investors, this strategy signals confidence in NMIH's ability to generate returns both through its core operations and by reinvesting in its own equity.

A Sector Poised for Sustained Demand

The housing market's resilience in 2025 is not just anecdotal. Data from the National Association of Realtors (NAR) shows that existing home sales have averaged 5.1 million units year-to-date, a 4% increase from 2024. Meanwhile, the Federal Reserve's accommodative stance on interest rates has kept refinancing activity alive, indirectly boosting mortgage insurance demand as lenders seek to protect against default risk.

For NMIH, these trends create a virtuous cycle: a growing insured portfolio, stable premium income, and a capital base that can be reinvested or returned to shareholders. The company's PMIERs available assets ($3.2 billion at quarter-end) and net risk-based required assets ($1.9 billion) also underscore its regulatory compliance and financial strength, critical factors in a highly regulated sector.

Investment Implications: A Buy for the Long-Term

NMIH's Q2 2025 results highlight a company that is both a beneficiary of favorable sector dynamics and a master of its own operational destiny. The earnings beat, revenue growth, and disciplined cost management reinforce its position as a high-quality player in a niche but essential industry. Meanwhile, the buyback program adds a layer of value compounding that is rare in today's market.

For investors, the question is not whether NMIH can deliver returns, but how aggressively it can compound them. With a P/E ratio of 12.5x (as of July 2025) and a forward ROE of 16.3%, the stock appears attractively priced relative to its earnings trajectory. The company's ability to grow book value (up 16% year-over-year) and maintain a low expense ratio further strengthens its case as a long-term holding.

In a market where many investors chase fleeting growth stories, NMIH offers a more grounded but equally compelling opportunity: a business that generates consistent cash flow, reinvests prudently, and rewards shareholders through buybacks. As the housing market continues to evolve in 2025, NMIH is well positioned to outperform both its peers and broader market indices.

Final Take: NMI Holdings is a rare combination of a resilient business model and a capital-efficient strategy. For investors with a 3–5 year horizon, the company represents a high-conviction buy in a sector that remains critical to the U.S. economy.