NMI (NMIH) - 2025 Q2 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements This section cautions that forward-looking statements are estimates of future results, subject to material differences due to various factors, and are not updated after their initial date - Forward-looking statements are estimates of future results, and actual results may differ materially from expectations due to various factors. The company undertakes no obligation to update or revise any forward-looking statement[9] - Important factors that could cause actual results to differ include changes in general economic, market, and political conditions (e.g., interest rates, inflation, housing market, recession), changes in GSE policies (Fannie Mae and Freddie Mac), ability to meet PMIERs requirements, actions of competitors, new laws/regulations, and potential legal/regulatory claims[9] - Additional risks include the ability to execute capital plans, market participants seeking alternatives to private mortgage insurance, ability to implement business strategy, failure of risk management, decrease in policy duration, unexpected claims, natural/man-made disasters, counterparty inability to meet obligations, IT system failures, and ability to retain key personnel[12] PART I Item 1. Financial Statements This section presents NMI Holdings, Inc.'s unaudited condensed consolidated financial statements for Q2 2025 and FY2024 Condensed Consolidated Balance Sheets (Unaudited) These balance sheets present the company's financial position, showing increased total assets and shareholders' equity as of June 30, 2025 Condensed Consolidated Balance Sheets (Unaudited) - Key Figures | Metric | June 30, 2025 (In Thousands) | December 31, 2024 (In Thousands) | Change (In Thousands) | % Change | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $3,591,085 | $3,349,973 | $241,112 | 7.2% | | Total Liabilities | $1,170,978 | $1,132,541 | $38,437 | 3.4% | | Total Shareholders' Equity | $2,420,107 | $2,217,432 | $202,675 | 9.1% | - Fixed maturities, available-for-sale, at fair value increased from $2.72 billion to $2.93 billion, a 7.5% increase[18] - Cash and cash equivalents increased significantly from $54.31 million to $84.01 million, a 54.7% increase[18] Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) These statements show increased net income and comprehensive income for Q2 and H1 2025, driven by revenues despite higher claims Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) - Key Figures | Metric (In Thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Net premiums earned | $149,066 | $141,168 | 5.6% | $298,432 | $277,825 | 7.4% | | Net investment income | $24,949 | $20,688 | 20.6% | $48,635 | $40,124 | 21.2% | | Total revenues | $173,779 | $162,122 | 7.2% | $347,025 | $318,375 | 9.0% | | Insurance claims and claim expenses | $13,445 | $276 | 4771.4% | $17,923 | $3,970 | 351.5% | | Total expenses | $50,178 | $43,478 | 15.4% | $92,053 | $85,164 | 8.1% | | Net income | $96,151 | $92,079 | 4.4% | $198,710 | $181,129 | 9.7% | | Basic EPS | $1.23 | $1.15 | 7.0% | $2.54 | $2.25 | 12.9% | | Diluted EPS | $1.21 | $1.13 | 7.1% | $2.50 | $2.22 | 12.6% | | Comprehensive income | $117,422 | $90,530 | 29.7% | $250,757 | $169,675 | 47.8% | - Insurance claims and claim expenses significantly increased from $0.28 million to $13.45 million for Q2 2025, and from $3.97 million to $17.92 million for H1 2025[21] Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) This section details shareholders' equity movements, showing an increase from December 2024 to June 2025, driven by net income Changes in Shareholders' Equity (Unaudited) - Key Figures | Metric (In Thousands) | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :-------------------- | :---------------- | :------------- | :------------ | | Total Shareholders' Equity | $2,217,432 | $2,321,571 | $2,420,107 | | Net Income | - | $102,559 | $96,151 | | Repurchase of common stock | - | $(26,053) | $(23,400) | | Change in unrealized investment gains/losses, net of tax | - | $30,776 | $21,271 | - Total shareholders' equity increased by $202.68 million from $2.22 billion at December 31, 2024, to $2.42 billion at June 30, 2025[23] - Treasury Stock, at cost, increased from $(246.59) million to $(296.05) million, reflecting $26.05 million in Q1 2025 and $23.40 million in Q2 2025 share repurchases[23] Condensed Consolidated Statements of Cash Flows (Unaudited) Cash flow statements show stable operating cash, decreased investing cash use, and increased financing cash use for H1 2025 Condensed Consolidated Statements of Cash Flows (Unaudited) - Key Figures | Cash Flow Activity (In Thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | % Change (YoY) | | :-------------------------------- | :--------------------------- | :--------------------------- | :----------- | :------------- | | Net cash provided by operating activities | $229,507 | $229,363 | $144 | 0.1% | | Net cash used in investing activities | $(141,786) | $(212,366) | $70,580 | -33.2% | | Net cash used in financing activities | $(58,016) | $(51,057) | $(6,959) | 13.6% | | Net increase (decrease) in cash, cash equivalents and restricted cash | $29,705 | $(34,060) | $63,765 | -187.2% | | Cash, cash equivalents and restricted cash, end of period | $84,013 | $62,629 | $21,384 | 34.1% | - Net cash used in investing activities decreased by $70.58 million, primarily due to lower purchases of fixed-maturity investments and higher proceeds from maturities and sales of investments[27] - Net cash used in financing activities increased by $6.96 million, mainly due to increased repurchases of common stock and taxes paid related to net share settlement of equity awards, partially offset by the absence of debt refinancing activities seen in the prior year[27] Notes to Condensed Consolidated Financial Statements (Unaudited) These notes provide essential details and explanations for the condensed consolidated financial statements, covering key accounting areas 1. Organization, Basis of Presentation and Summary of Accounting Principles NMIH provides private mortgage insurance through NMIC, operating as a single segment, with no material changes to accounting principles - NMI Holdings, Inc. (NMIH) provides private mortgage guaranty insurance through its wholly-owned insurance subsidiary, National Mortgage Insurance Corporation (NMIC), which is licensed in all 50 states and D.C[28] - The company operates as a single segment for performance assessment and operating decisions[28] - NMIH adopted ASU 2023-09 (Income Taxes) on January 1, 2025, enhancing tax disclosure, and is evaluating ASU 2024-03 for future adoption[31][32] 2. Investments All investments are available-for-sale at fair value, with a $2.9 billion portfolio and $109.9 million gross unrealized losses - All investments are held on an available-for-sale basis at fair value, with impairment recognized through the statement of operations if a sale is intended or likely required, or if credit-related factors are present[33] Total Investments at Fair Value | Metric | June 30, 2025 (In Thousands) | December 31, 2024 (In Thousands) | Change (In Thousands) | % Change | | :-------------------- | :--------------------------- | :------------------------------- | :-------------------- | :------- | | Total investments | $2,929,117 | $2,723,541 | $205,576 | 7.5% | | Gross Unrealized Gains | $22,992 | $5,820 | $17,172 | 295.0% | | Gross Unrealized Losses | $(109,907) | $(158,622) | $48,715 | -30.7% | - As of June 30, 2025, gross unrealized losses totaled $109.9 million, primarily driven by interest rate fluctuations, not credit factors[38][41] Net Investment Income | Metric (In Thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Net investment income | $24,949 | $20,688 | 20.6% | $48,635 | $40,124 | 21.2% | 3. Fair Value of Financial Instruments The company uses a fair value hierarchy (Level 1, 2, 3) for financial instruments, with most assets in Level 1 or 2 - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[44][45][46] Fair Value Measurements of Assets (In Thousands) | Asset Type | June 30, 2025 (Level 1) | June 30, 2025 (Level 2) | December 31, 2024 (Level 1) | December 31, 2024 (Level 2) | | :------------------------------------------ | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | U.S. Treasury securities and obligations of U.S. government agencies | $0 | $115,988 | $116,060 | $0 | | Municipal debt securities | $634,962 | $0 | $0 | $635,245 | | Corporate debt securities | $2,019,333 | $0 | $0 | $1,847,640 | | Asset-backed securities | $38,557 | $0 | $0 | $41,980 | | Cash, cash equivalents and short-term investments | $0 | $204,290 | $136,924 | $0 | | Total assets | $2,692,852 | $320,278 | $252,984 | $2,524,865 | - The 2024 Senior Unsecured Notes, carried at $416.1 million, had a fair value of $437.2 million as of June 30, 2025, assessed under Level 2[50] 4. Debt The company holds $425 million in senior unsecured notes and a $250 million undrawn credit facility, complying with covenants - NMIH has $425 million in senior unsecured notes outstanding, issued May 21, 2024, with a 6.00% interest rate maturing August 15, 2029[51][52] - A new $250 million unsecured revolving credit facility, maturing May 21, 2029, was undrawn as of June 30, 2025[56] - The company complied with all 2024 Revolving Credit Facility covenants at June 30, 2025, including a maximum 35% debt-to-total capitalization ratio[59] 5. Reinsurance Reinsurance, including QSR, XOL, and ILN, is used for risk management, PMIERs compliance, and business growth, with recent QSR terminations and new XOL treaties - Reinsurance is used to manage risk, ensure PMIERs compliance, meet state regulatory capital requirements, and support business growth, with all transactions approved by the Wisconsin OCI and non-objected by the GSEs[60] Effect of Reinsurance on Premiums (In Thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Net premiums written | $144,053 | $133,814 | 7.6% | $287,439 | $264,059 | 8.9% | | Net premiums earned | $149,066 | $141,168 | 5.6% | $298,432 | $277,825 | 7.4% | | Ceded premiums earned | $(33,865) | $(32,465) | 4.3% | $(64,955) | $(65,526) | -0.9% | - Effective April 1, 2025, NMIC terminated most 2016 and 2018 QSR transactions, recapturing approximately $180.1 million and $59.7 million of ceded risk-in-force[71][72] - NMIC entered into new XOL treaties for 2026 and 2027, providing aggregate coverage for future mortgage insurance policies[74][89][90] 6. Reserves for Insurance Claims and Claim Expenses Gross reserves for insurance claims totaled $163.0 million at June 30, 2025, with a 1.00% default rate on 668,638 policies - As of June 30, 2025, gross reserves for insurance claims and claim expenses totaled $163.0 million[102] Loans in Default and Default Rate | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Loans in default | 6,709 | 6,642 | | Total policies in-force | 668,638 | 659,567 | | Default rate | 1.00% | 1.01% | Reconciliation of Gross Reserve Balances (In Thousands) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :--------------------------- | :--------------------------- | | Beginning balance | $152,071 | $123,974 | | Total claims and claim expenses incurred | $17,590 | $3,970 | | Total claims and claim expenses paid | $7,073 | $2,323 | | Ending balance | $163,033 | $125,443 | - Claims incurred relating to current year defaults increased during the six months ended June 30, 2025, primarily due to an increase in new delinquencies tied to portfolio growth and seasoning, partially offset by a decrease in average case reserve per newly defaulted loan[109] 7. Earnings per Share (EPS) The basic and diluted EPS for the three and six months ended June 30, 2025, increased compared to the prior year, reflecting higher net income Earnings per Share (EPS) | Metric | 3 Months Ended June 30, 2025 (USD) | 3 Months Ended June 30, 2024 (USD) | % Change (YoY) | 6 Months Ended June 30, 2025 (USD) | 6 Months Ended June 30, 2024 (USD) | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Basic EPS | $1.23 | $1.15 | 7.0% | $2.54 | $2.25 | 12.9% | | Diluted EPS | $1.21 | $1.13 | 7.1% | $2.50 | $2.22 | 12.6% | 8. Segment Reporting The company operates as a single Mortgage Insurance segment, with the CEO evaluating performance based on consolidated results - The company manages its business activities on a consolidated basis under a single reportable operating segment: Mortgage Insurance, which also provides ancillary loan review services[112][113] - The CODM evaluates performance and allocates resources based on consolidated financial results, including revenue, expenses, net income, assets, and shareholders' equity[113] 9. Income Taxes The effective tax rate for Q2 and H1 2025 was 22.2% and 22.1%, respectively, reflecting changes in deferred tax liability Effective Tax Rate on Pre-Tax Income | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Effective tax rate | 22.2% | 22.4% | 22.1% | 22.3% | - The company is eligible for a tax deduction for its statutory contingency reserve, holding $322.2 million in tax and loss bonds[118] - New tax reform legislation (One Big Beautiful Bill Act) enacted on July 4, 2025, is not expected to have a material impact on the consolidated financial statements[119] 10. Stockholders' Equity The Board authorized a new $250 million share repurchase program in February 2025; $281.0 million repurchase authority remains available - On February 5, 2025, the Board authorized a new $250 million 2025 Repurchase Program (effective through December 31, 2027) and extended the $200 million 2023 Repurchase Program to align its tenor[120] Share Repurchase Activity | Metric | 6 Months Ended June 30, 2025 | | :-------------------- | :--------------------------- | | Shares repurchased | 1.3 million | | Average price per share | $36.49 | | Total cost | $49.5 million | | Repurchase authority remaining | $281.0 million | 11. Litigation Litigation regarding mortgage insurance premium refunds was dismissed in September 2023 and affirmed in June 2025, with no material loss expected - A litigation case concerning mortgage insurance premium refunds under the Homeowners Protection Act (HPA) was dismissed in September 2023, and the dismissal was affirmed on appeal in June 2025[123] - The company does not currently expect to incur a material loss in connection with the case and has not recorded a litigation liability[123] 12. Premiums Receivable, Net Premiums receivable are written off after 120 days, with a $1.6 million reserve for write-offs at June 30, 2025 - Premiums receivable are written off if unpaid for more than 120 days, or earlier for non-credit events like loan modification or refinancing[124] Reserve for Premium Write-Offs (In Thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Reserve for premium write-offs | $1,600 | $2,200 | - The allowance for credit loss established on premium receivables was deemed immaterial at June 30, 2025, and December 31, 2024, due to the nature and short duration of the receivables[125] 13. Regulatory Information NMIC's statutory capital was $3.0 billion with a 13.1:1 RTC ratio at June 30, 2025, after paying a $98.4 million dividend Statutory Financials (In Thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Combined statutory net income | $30,500 | $36,000 | $67,300 | $70,700 | NMIC Statutory Capital and Risk-to-Capital Ratio (In Thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Statutory surplus | $951,592 | $984,362 | | Contingency reserve | $2,076,510 | $1,905,990 | | Statutory capital | $3,028,102 | $2,890,352 | | Risk-to-capital | 13.1:1 | 12.7:1 | - NMIC paid a $98.4 million ordinary dividend to NMIH on June 2, 2025, exhausting its 2025 ordinary dividend capacity[132] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses NMI Holdings, Inc.'s financial condition and results, covering business overview, key factors, and performance analysis Overview NMIH provides private mortgage insurance through NMIC, mitigating mortgage credit risk and focusing on disciplined risk selection - NMIH provides private mortgage insurance (MI) through NMIC, which is approved by GSEs and licensed in all 50 states and D.C[134] - MI mitigates mortgage credit risk and facilitates secondary market sales of high-LTV residential loans to GSEs, expanding financing access for homeowners[135] Primary Insurance-in-Force (IIF) and Risk-in-Force (RIF) | Metric | June 30, 2025 (In Billions) | | :-------------------- | :------------ | | Primary IIF | $214.7 | | Primary RIF | $57.5 | - The company's strategy focuses on long-term customer relationships, disciplined risk selection using Rate GPS®, and financial strength[137] Conditions and Trends Affecting Our Business Macroeconomic factors like inflation and high interest rates are expected to impact the housing market, reducing new business and increasing claims - Macroeconomic factors, including persistent inflation, elevated interest rates, flagging consumer confidence, and increasing jobless claims, could significantly impact the housing market and mortgage insurance industry[140] - A decline in housing demand, a significant decrease in house prices, or a sustained increase in unemployment could reduce new insurance written (NIW) volume and increase future default and claim experience[140] Key Factors Affecting Our Results This section details critical operational and financial metrics influencing performance, including NIW, IIF, RIF, premiums, and claims New Insurance Written, Insurance-In-Force and Risk-In-Force New Insurance Written (NIW) is influenced by the overall mortgage origination market and the company's market share. NIW, along with persistency, drives Insurance-In-Force (IIF), which in turn determines Risk-In-Force (RIF) - New Insurance Written (NIW) is the aggregate unpaid principal balance of mortgages underpinning new policies and is affected by the overall mortgage origination market, high-LTV originations, and the company's private MI market share[141] - Insurance-In-Force (IIF) is the aggregate unpaid principal balance of insured mortgages, while Risk-In-Force (RIF) represents the aggregate coverage amount on outstanding policies, calculated as the coverage percentage applied to the unpaid principal balance[141] Net Premiums Written and Net Premiums Earned Premium rates are set using Rate GPS®, with net premiums influenced by NIW, rates, cancellations, and reinsurance, impacting profitability - Premium rates are set using a proprietary risk-based pricing platform, Rate GPS®, which considers various individual variables to price policies commensurate with underlying risk[142] - Net premiums written are influenced by NIW, premium rates, mix of payment types (single, monthly, annual), policy cancellation rates (affected by interest rates, refinancings, home prices), and ceded premiums under reinsurance[142][144] - Higher persistency rates significantly impact net premiums earned and profitability, as premiums are earned over the life of a policy. Prepayment speeds also affect profitability, especially for single premium policies[146] Effect of Reinsurance on Our Results Reinsurance (quota share, excess-of-loss) manages risk, ensures PMIERs compliance, and supports growth by reducing premiums and RIF - Third-party reinsurance (quota share and excess-of-loss) is utilized for risk management, PMIERs compliance, capital requirements, and business growth[147] - Quota share reinsurance reduces premiums written/earned and RIF, provides capital relief, and offsets acquisition/underwriting expenses through ceding commissions and profit commissions[147] - Excess-of-loss agreements provide coverage above an agreed-upon threshold, with the ceding insurer retaining losses up to that threshold[147] Portfolio Data NIW for Q2 and H1 2025 was $12.5 billion and $21.7 billion, respectively, with primary IIF growing 5% to $214.7 billion New Insurance Written (NIW) and Primary Insurance-In-Force (IIF) (In Millions) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | NIW | $12,464 | $12,503 | -0.3% | $21,685 | $21,901 | -1.0% | | Primary IIF (end of period) | $214,653 | $203,501 | 5.5% | $214,653 | $203,501 | 5.5% | - Primary IIF increased 5% at June 30, 2025, compared to June 30, 2024, primarily due to NIW generated and a historically high persistency rate of 84.1% (down from 85.4% YoY) due to a slowdown in mortgage refinancing[151] Portfolio Statistics The primary portfolio shows consistent NIW, growing IIF and RIF, and a 1.00% default rate at June 30, 2025 Primary Portfolio Trends (As of June 30, 2025) | Metric | June 30, 2025 (In Millions) | June 30, 2024 (In Millions) | | :-------------------- | :------------ | :------------ | | New insurance written | $12,464 | $12,503 | | Insurance-in-force | $214,653 | $203,501 | | Risk-in-force | $57,496 | $53,956 | | Policies in force (count) | 668,638 | 645,276 | | Loans in default (count) | 6,709 | 4,904 | | Default rate | 1.00% | 0.76% | | Annual persistency | 84.1% | 85.4% | NIW by FICO and LTV (6 Months Ended June 30, 2025) | NIW by FICO (In Millions) | 2025 | 2024 | NIW by LTV (In Millions) | 2025 | 2024 | | :------------------------ | :--- | :--- | :----------------------- | :--- | :--- | | >= 760 | $11,494 | $11,685 | 95.01% and above | $2,691 | $2,830 | | 740-759 | $4,034 | $3,951 | 90.01% to 95.00% | $9,760 | $10,059 | | 720-739 | $2,762 | $2,757 | 85.01% to 90.00% | $6,638 | $6,670 | | 700-719 | $1,726 | $1,864 | 85.00% and below | $2,596 | $2,342 | | 680-699 | $1,003 | $1,165 | Total | $21,685 | $21,901 | | <=679 | $666 | $479 | | | | | Total | $21,685 | $21,901 | | | | | Weighted average FICO | 757 | 757 | Weighted average LTV | 92.1% | 92.3% | - The top 3 states for primary RIF as of June 30, 2025, were California (10.1%), Texas (8.4%), and Florida (7.2%), collectively accounting for 25.7% of the portfolio[169] Insurance Claims and Claim Expenses Insurance claims and expenses increased due to new defaults and higher case reserves, with ending default inventory at 6,709 loans - Insurance claims and claim expenses incurred increased due to a rise in newly defaulted loans and higher average case reserves for aging delinquencies, partially offset by reserve releases from cure activity[207] Loans in Default Reconciliation | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Beginning default inventory | 6,859 | 5,109 | 6,642 | 5,099 | | New defaults | 2,169 | 1,728 | 4,590 | 3,604 | | Cures | (2,215) | (1,869) | (4,309) | (3,686) | | Claims paid | (93) | (59) | (188) | (101) | | Ending default inventory | 6,709 | 4,904 | 6,709 | 4,904 | Claims Paid and Severity (Before Reinsurance) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Number of claims paid | 93 | 59 | 188 | 101 | | Total amount paid for claims (In Thousands) | $5,512 | $1,877 | $10,737 | $3,022 | | Average amount paid per claim (In Thousands) | $59 | $32 | $57 | $30 | | Severity | 82% | 54% | 75% | 54% | - Claims severity increased for Q2 and H1 2025, primarily due to claims on newer vintage loans with less accumulated equity[187] GSE Oversight NMIC complies with PMIERs, with available assets increasing to $3.2 billion and net risk-based required assets to $1.9 billion - NMIC must comply with PMIERs, maintaining available assets exceeding minimum required assets (greater of $400 million or total risk-based amount)[192][193] - NMIC certified full compliance with PMIERs as of December 31, 2024, and continuously monitors compliance[196] PMIERs Available Assets and Net Risk-Based Required Assets (In Thousands) | Metric | June 30, 2025 | June 30, 2024 | Change (YoY) | % Change (YoY) | | :-------------------- | :------------ | :------------ | :----------- | :------------- | | Available assets | $3,244,517 | $2,827,721 | $416,796 | 14.7% | | Net risk-based required assets | $1,926,517 | $1,651,569 | $274,948 | 16.7% | Information and Technology Support Function The company renewed its IT service agreement with TCS through March 31, 2032, for application development and infrastructure support - The IT service agreement with Tata Consultancy Services (TCS) was renewed and extended through March 31, 2032, covering application development, infrastructure support, and information security[199] - The engagement with TCS aims to enhance innovative IT solutions and realize cost efficiencies through TCS's global platform[199] Consolidated Results of Operations Consolidated results show increased total revenues and net income for Q2 and H1 2025, driven by premiums and investment income Revenues Total revenues increased by 7% (Q2) and 9% (H1) for June 30, 2025, driven by net premiums and investment income Revenue Performance (In Thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Net premiums earned | $149,066 | $141,168 | 5.6% | $298,432 | $277,825 | 7.4% | | Net investment income | $24,949 | $20,688 | 20.6% | $48,635 | $40,124 | 21.2% | | Other revenues | $164 | $266 | -38.4% | $334 | $426 | -21.6% | | Total revenues | $173,779 | $162,122 | 7.2% | $347,025 | $318,375 | 9.0% | - Net premiums earned increased primarily due to growth in monthly IIF and monthly pay premium receipts, partially offset by increased ceded premiums under reinsurance treaties[203] - Net investment income increased due to growth in the total invested asset base and an increase in the book yield of the investment portfolio from new cash flows and reinvestment at higher rates[204] Expenses Total expenses increased by 15% (Q2) and 8% (H1) for June 30, 2025, driven by higher claims and operating expenses Expense Performance (In Thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Insurance claims and claim expenses | $13,445 | $276 | 4771.4% | $17,923 | $3,970 | 351.5% | | Underwriting and operating expenses | $29,508 | $28,330 | 4.2% | $59,683 | $58,145 | 2.6% | | Service expenses | $110 | $194 | -43.3% | $226 | $331 | -31.7% | | Interest expense | $7,115 | $14,678 | -51.5% | $14,221 | $22,718 | -37.5% | | Total expenses | $50,178 | $43,478 | 15.4% | $92,053 | $85,164 | 8.1% | - Insurance claims and claim expenses increased significantly due to a rise in newly defaulted loans and higher average case reserves for aging delinquencies, partially offset by reserve releases from cure activity[207] - Interest expense decreased due to the refinancing of the 2020 Notes and 2021 Revolving Credit Facility in the prior year, which included $7.0 million of non-recurring costs[210] Net Income Net income increased by 4% (Q2) and 10% (H1) for June 30, 2025, driven by revenue growth and share repurchases Net Income and EPS Performance (In Thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Net income | $96,151 | $92,079 | 4.4% | $198,710 | $181,129 | 9.7% | | Diluted EPS | $1.21 | $1.13 | 7.1% | $2.50 | $2.22 | 12.6% | | Adjusted diluted EPS | $1.22 | $1.20 | 1.7% | $2.50 | $2.28 | 9.6% | - Net income growth was primarily driven by increased total revenues, partially offset by higher insurance claims and claim expenses, income tax expense, and underwriting and operating expenses[211] - Diluted and adjusted diluted EPS increased due to net income growth and a decline in weighted average diluted shares outstanding from share repurchase activity[212] Explanation and Reconciliation of Our Use of Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures (adjusted income, net income, diluted EPS) to GAAP, excluding specific items - Non-GAAP measures (adjusted income before tax, adjusted net income, adjusted diluted EPS) are used to enhance comparability of fundamental financial performance by excluding net realized investment gains/losses and capital markets transaction costs[217][218][219][220] Non-GAAP Financial Measure Reconciliations (In Thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Income before income taxes (GAAP) | $123,601 | $118,644 | $254,972 | $233,211 | | Adjustments: Net realized investment losses | $400 | $0 | $376 | $0 | | Adjustments: Capital markets transaction costs | $0 | $6,966 | $0 | $6,966 | | Adjusted income before tax | $124,001 | $125,610 | $255,348 | $240,177 | | Adjusted net income | $96,467 | $97,582 | $199,007 | $186,632 | | Adjusted diluted EPS | $1.22 | $1.20 | $2.50 | $2.28 | Consolidated Balance Sheets Total assets increased 7% to $3.59 billion, liabilities 3% to $1.17 billion, and equity 9% to $2.42 billion at June 30, 2025 Consolidated Balance Sheets - Key Changes (In Thousands) | Metric | June 30, 2025 | December 31, 2024 | $ Change | % Change | | :--------------------------------- | :------------ | :---------------- | :------- | :------- | | Total investment portfolio | $2,929,117 | $2,723,541 | $205,576 | 8% | | Cash and cash equivalents | $84,013 | $54,308 | $29,705 | 55% | | Total assets | $3,591,085 | $3,349,973 | $241,112 | 7% | | Unearned premiums | $54,159 | $65,217 | $(11,058) | -17% | | Reserve for insurance claims and claim expenses | $163,033 | $152,071 | $10,962 | 7% | | Deferred tax liability, net | $441,389 | $386,192 | $55,197 | 14% | | Total liabilities | $1,170,978 | $1,132,541 | $38,437 | 3% | | Total shareholders' equity | $2,420,107 | $2,217,432 | $202,675 | 9% | - Total cash and investments increased due to positive cash flow from operations and a decrease in unrealized losses on the fixed income portfolio, partially offset by share repurchase activity[223] - Unearned premiums decreased due to amortization and cancellations of single premium policies, partially offset by new originations[228] Consolidated Cash Flows Operating cash flow was stable at $229.5 million (H1 2025); investing cash use decreased 33%, financing cash use increased 14% Consolidated Cash Flows - Key Changes (In Thousands) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | $ Change | % Change | | :--------------------------------- | :--------------------------- | :--------------------------- | :------- | :------- | | Net cash provided by operating activities | $229,507 | $229,363 | $144 | 0% | | Net cash used in investing activities | $(141,786) | $(212,366) | $70,580 | -33% | | Net cash used in financing activities | $(58,016) | $(51,057) | $(6,959) | 14% | | Net increase (decrease) in cash and cash equivalents | $29,705 | $(34,060) | $63,765 | -187% | - Cash used in investing activities decreased due to lower purchases of fixed and short-term maturities and higher proceeds from maturities, sales, and redemptions within the investment portfolio[232] - Cash used in financing activities increased primarily due to common stock repurchases and taxes paid on net share settlement of equity awards, with the prior year benefiting from debt refinancing proceeds[233] Liquidity and Capital Resources NMIH manages liquidity with $168.8 million cash and a $250 million credit facility; NMIC paid a $98.4 million dividend and maintains PMIERs compliance - NMIH's principal liquidity demands include corporate expenses, debt interest, tax payments, subsidiary capital support, stock repurchases, and dividends[234] - As of June 30, 2025, NMIH had $168.8 million in cash and investments and access to a $250 million undrawn revolving credit facility[235] - NMIC paid a $98.4 million ordinary dividend to NMIH on June 2, 2025, exhausting its 2025 ordinary dividend capacity[243] - NMIC maintains PMIERs compliance with $3.2 billion in available assets, $1.9 billion in required assets, and a 13.1:1 RTC ratio[197][251] Debt and Financial Strength Ratings NMIC holds financial strength ratings of A- (Fitch), A3 (Moody's), A- (S&P); NMIH's 2024 Notes are rated BBB- (Fitch), Baa3 (Moody's) Financial Strength and Debt Ratings | Entity | Rating Type | Fitch | Moody's | S&P | Outlook (Fitch) | Outlook (Moody's & S&P) | | :----- | :---------- | :---- | :------ | :-- | :-------------- | :---------------------- | | NMIC | Financial Strength | A- | A3 | A- | Positive | Stable | | NMIH | 2024 Notes | BBB- | Baa3 | N/A | Positive | Stable | Consolidated Investment Portfolio The $2.9 billion fixed maturity investment portfolio aims for income and capital preservation, with a 3.2% pre-tax book yield - The investment portfolio's primary objectives are to generate investment income and preserve capital, while maintaining sufficient liquidity, with diversification by type, quality, maturity, and industry[254] Investment Portfolio Composition (Fair Value) | Investment Type | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Corporate debt securities | 67% | 67% | | Municipal debt securities | 21% | 23% | | Cash, cash equivalents, and short-term investments | 7% | 5% | | U.S. treasury securities and obligations of U.S. government agencies | 4% | 4% | | Asset-backed securities | 1% | 1% | | Total | 100% | 100% | - Pre-tax book yield on the investment portfolio for H1 2025 was 3.2%[255] - Gross unrealized losses of $109.9 million as of June 30, 2025, were primarily due to interest rate fluctuations[259][260] Critical Accounting Estimates Critical accounting estimates include revenue recognition, investments, deferred policy acquisition costs, and insurance claims reserves, with no material changes - Critical accounting estimates include revenue recognition, the investment portfolio, deferred policy acquisition costs, and reserves for insurance claims and claim expenses, which require significant judgment and material estimates[262] - There have been no material changes to the critical accounting policies and estimates compared to the 2024 10-K[262] Item 3. Quantitative and Qualitative Disclosures About Market Risk The investment portfolio faces interest rate risk, managed by duration matching; fixed income portfolio duration was 3.52 years at June 30, 2025 - The primary market risk to the investment portfolio is interest rate risk, mitigated by matching the duration of fixed maturity securities with the expected duration of liabilities[264] - As of June 30, 2025, the fixed income portfolio's duration was 3.52 years, implying a 3.52% fair value change for a 100 basis point yield shift[265] - The 2024 Revolving Credit Facility bears interest at a variable rate, and ILN Transactions' risk premiums are linked to one-month SOFR, exposing the company to interest rate fluctuations[266][267] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025, ensuring timely and accurate reporting under the Exchange Act[271] - There was no change in internal control over financial reporting during the period that materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting[272] PART II Item 1. Legal Proceedings Litigation regarding mortgage insurance premium refunds was dismissed in September 2023 and affirmed in June 2025, with no material loss expected - A litigation case concerning mortgage insurance premium refunds under the Homeowners Protection Act (HPA) was dismissed by the District Court in September 2023, and this dismissal was affirmed by the Fourth Circuit in June 2025[277] - The company has not recognized a material accrual liability for this matter and does not currently expect it is reasonably possible that these matters will result in a material liability[277] Item 1A. Risk Factors This section refers to the 2024 10-K for risk factors, noting no material changes as of this report's date - Risk factors affecting the business and financial results are discussed in Part I, Item 1A of the 2024 10-K[278] - As of the date of this report, the company is not aware of any material changes in its risk factors from those disclosed in the 2024 10-K[278] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 627,911 shares for Q2 2025; $281.0 million repurchase authority remains as of June 30, 2025 Issuer Purchases of Equity Securities (3 Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share (USD) | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Program (In Thousands) | | :-------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------------------- | | 4/1/2025 to 4/30/2025 | 258,814 | $33.90 | $295,418 | | 5/1/2025 to 5/31/2025 | 198,180 | $37.84 | $287,919 | | 6/1/2025 to 6/30/2025 | 170,917 | $40.37 | $281,019 | | Total | 627,911 | | | - As of June 30, 2025, $281.0 million of repurchase authority remained under the 2023 and 2025 Repurchase Programs[280] Item 5. Other Information No Section 16 officers or directors adopted, modified, or terminated "Rule 10b5-1 trading arrangements" or "non-Rule 10b5-1 trading arrangements" during the quarter ended June 30, 2025 - No Section 16 officers or directors adopted, modified, or terminated Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[281] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including agreements, corporate documents, and certifications - The exhibits include the Underwriting Agreement, Amended and Restated Certificate of Incorporation and Bylaws, Indenture for Senior Unsecured Notes, various Stock Incentive Plan agreements, Indemnification Agreement, Severance Benefit Plans, Offer Letters, and certifications (302 and 906)[282][283] - Financial information formatted in XBRL (eXtensible Business Reporting Language) is included as Exhibit 101[285] Signatures The report is signed by Aurora Swithenbank, Chief Financial Officer and Duly Authorized Signatory, on behalf of NMI Holdings, Inc. on July 29, 2025 - The Form 10-Q was signed by Aurora Swithenbank, Chief Financial Officer and Duly Authorized Signatory, on July 29, 2025[289]