Nmi Holdings' Q3 2025: Contradictions Emerge on Reinsurance Strategy, Interest Rate Sensitivity, Default Trends, and Market Dynamics

Date of Call: November 4, 2025

Financials Results

• Revenue: $178.7M, record total revenue in Q3; vs $173.8M in Q2 (≈+2.8% sequential) and $166.1M in Q3 2024 (≈+7.6% YOY)
• EPS: $1.22 per diluted share GAAP ($96M net income); adjusted diluted EPS $1.21

Business Commentary:

* Record Financial Performance: - National MI Holdings reported total revenue of $178.7 million for Q3 2025, marking a record high and up 3.4% from the previous quarter, with GAAP net income of $96 million. - The growth was driven by strong new business production and consistent growth in the insured portfolio.

• ** defaults and Credit Performance:**
• The company's new defaults increased by 5% year-over-year, but this was a notable decrease from previous periods, with a default rate of 1.05% at quarter-end.

• The improvement in credit performance was attributed to broad macroeconomic resiliency, high-quality insured books, and seasoning of the portfolio.

• Macroeconomic Resilience:

• Despite headline volatility, National MI's primary insurance-in-force grew to $218.4 billion, marking a record high and up 2% from the previous quarter.

• The resilience in the housing market was driven by continued low unemployment rates, cooled inflation, and strong consumer spending, supporting sustained new business opportunity.

• Reinsurance Market Strength:

• The company's reinsurance market showed robust conditions, with the best pricing achieved year-to-date, providing a strong foundation for risk transfer and capitalization.

• This was due to favorable market conditions, allowing National MI to lock in coverage for multiple forward years.

• Persistent Market Dynamics:

• Despite some rumors of a new market entrant, National MI remains confident in its competitive position due to the challenges of building a private MI business and the strong performance of existing players.
• The company's market share and customer relationships are seen as barriers to new entrants, making it difficult for them to gain traction.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management repeatedly described the quarter as "terrific" with "record" revenue of $178.7M, GAAP net income of $96M ($1.22/sh) and record $218.4B primary insurance-in-force. CFO highlighted a record-low expense ratio (19.3%) and strong capital (excess available assets $1.4B), and management said they are "confident" and see continued outperformance.

Q&A:

• Question from Terry Ma (Barclays Bank PLC): New defaults were up ~5% YOY — any color on what happened this quarter and how new defaults should emerge going forward factoring in seasoning?
  Response: Portfolio performance remains encouraging; the muted seasonal impact this year is positive, but some seasonality and continued seasoning of the book will drive additional defaults in Q4 while longer-term normalization is expected.

• Question from Terry Ma (Barclays Bank PLC): Any color on the competitive environment and potential new entrants into the private MI market?
  Response: Management is skeptical a new entrant can clear the high capital, operational and PMIERs hurdles given incumbents' capacity and strong market performance; barrier to entry is high.

• Question from Bose George (Keefe, Bruyette, & Woods): Update on consumer strength and any geographies you are monitoring for housing weakness?
  Response: Economy and housing remain broadly resilient (low unemployment, cooled inflation) though hiring has slowed; watch Florida, Texas, Sunbelt and Mountain West for softening, while Northeast and Midwest remain stronger.

• Question from Bose George (Keefe, Bruyette, & Woods): What are you seeing in reinsurance markets and why more active on XOL vs ILN?
  Response: Reinsurance markets are robust with strong pricing; NMI prefers traditional reinsurance (XOL/quota share) for forward coverage, cost flexibility and speed, though they remain open to ILN and other capital markets over time.

• Question from Mark Hughes (Truist Securities): Core yield has held around 34 bps — is that a good run rate and what moves it?
  Response: Core yield (~34 bps) has been stable driven by strong persistency in-force; expect it to hold roughly in that range, while net yield can shift with claims and reinsurance pass-throughs.

• Question from Mark Hughes (Truist Securities): If rates drop and refis ramp, how will persistency be affected and what are the puts and takes?
  Response: There are both puts (higher prepayments) and takes (many refis may still need MI and lower rates can boost NIW); persistency was 83.9% and refinancings could both reduce persistency and increase new-business opportunity.

• Question from Mark Hughes (Truist Securities): Any one‑timers in the record-low expense ratio or is that sustainable?
  Response: Nothing material in the quarter — raw expense dollars were similar to prior quarter; note Q4 and Q1 historically run higher due to people-related accruals.

• Question from A.J. Denham (JPMorgan Chase & Co., on for Rick): If refis pick up, what can you proactively do to recapture MI on those loans?
  Response: Focus on broad market distribution and customer connectivity—NMI's share of NIW exceeds its share of insurance‑in‑force, creating an opportunity to capture refi MI by being present and offering valuable lender solutions.

Contradiction Point 1

Reinsurance Market and Preferred Strategy

It involves a shift in the company's preference regarding reinsurance markets, which could impact their risk management strategy and capital deployment.

What are your observations in the reinsurance markets? Why is your execution focused on XOL rather than ILN? - Bose George (Keefe, Bruyette, & Woods, Inc., Research Division)

2025Q3: In particular, because it offers that forward coverage, which isn't available in the debt capital markets. And so that's been our recent preference just from a cost flexibility and speed of execution perspective. - Aurora Swithenbank(CFO)

How are you adjusting underwriting and risk transfer strategies in response to rising home supply, longer days on market, and price depreciation, particularly given the year-to-date QSR/XOL activity and whether pricing trends in these markets cause concern or influence directional shifts? - Richard Barry Shane (JPMorgan)

2025Q2: We're engaged, as you know, with our reinsurance partners. Some of that will come from some of the, I will say, more traditional markets where we do have forward coverage, some of it will come from the debt capital markets. - Aurora Swithenbank(CFO)

Contradiction Point 2

Interest Rate Sensitivity and New Business Activity

It addresses the company's expectations regarding the impact of interest rates on new business activity, which affects their revenue growth forecast.

How might lower interest rates affect persistency, considering increased purchase activity and refinance-driven market dynamics? Could there be multiple rounds of refinancing given recent borrowers' current rates? - Mark Hughes (Truist Securities, Inc., Research Division)

2025Q3: If we saw refinancings accelerate, it's most likely just because of where the underlying note rates are that, that will come from our more recent vintages. And those are the vintages that we're looking at for that normalizing credit experience. - Adam Pollitzer(CEO)

Adam, can you provide an update on the competitive environment and pricing relative to your peers? Are there any new developments? - Mark Douglas Hughes (Truist)

2025Q2: Well, you're seeing the spread between the note rate that, and what's available on the mortgage today, and that spread is now wider than between 1% and 2% in many cases. And so that does tend to lead to demand by prospective buyers who are waiting on the sidelines for their opportunity to buy something. And so we think that that's a good opportunity for us as well because that means a wider spread that means more of a need for mortgage insurance as well. - Adam Pollitzer(CEO)

Contradiction Point 3

Default Trends and Seasonality

It involves different perspectives on the reasons behind the seasonal uptick in default experience and the expected normalization of credit performance, which could impact risk management strategies and investor expectations.

What caused the 5% year-over-year increase in new defaults this quarter compared to the past 10 quarters? How will new defaults evolve when considering seasoning effects? - Terry Ma(Barclays Bank PLC)

2025Q3: We do expect that seasonality will continue to come through, and so we'll see an additional impact seasonally in Q4. And we do also expect that as we roll forward over the longer term, we'll continue to see that normalization in our credit experience. - Adam Pollitzer(CEO)

Are there any concerns or signs of normalization in the performance of newer vintages? - Mihir Bhatia(Bank of America)

2025Q1: We're encouraged that this trend has evolved nicely in the first quarter. We think there's a real opportunity for further normalization in our credit experience. - Adam Pollitzer(CEO)

Contradiction Point 4

Reinsurance Market Dynamics

It involves differing perspectives on the reinsurance market conditions and strategic decisions, which could impact risk management and investor expectations regarding financial performance.

What are the current conditions in the reinsurance market? And why are you more active in XOL compared to ILN? - Bose George(Keefe, Bruyette, & Woods, Inc., Research Division)

2025Q3: Reinsurance markets remain very robust, and we look at the pricing achieved by some of our competitors in the marketplace year-to-date, it's the best pricing that's ever been achieved. - Aurora Swithenbank(CFO)

Did you repurchase shares this quarter, and is there any risk of adverse selection due to PMI extinguishment in strong vintages? - Rick Shane(JPMorgan Chase & Co, Research Division)

2025Q1: We've placed our full XOL and quota share coverage for 2025, 2026, and a portion of the 2027 year. And so we have a really nice runway in terms of our locked-in capacity in the traditional reinsurance market. - Aurora Swithenbank(CFO)