Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes thereto included below in Item 8 of this report and the Risk Factors included above in Part I, Item 1A of this report. In addition, investors should review the “Cautionary Note Regarding Forward-Looking Statements” and the “Glossary of Abbreviations and Acronyms” above.
Overview
We provide private MI through our primary insurance subsidiary, NMIC. NMIC is wholly-owned, domiciled in Wisconsin and principally regulated by the Wisconsin OCI. NMIC is approved as an MI provider by the GSEs and is licensed to write coverage in all 50 states and D.C. Our subsidiary, NMIS, provides outsourced loan review services to mortgage loan originators and our subsidiary, Re One, historically provided reinsurance coverage to NMIC in accordance with certain statutory risk retention requirements. Such requirements have been repealed and the reinsurance coverage provided by Re One to NMIC has been commuted. Re One remains a wholly-owned, licensed insurance subsidiary; however, it does not currently have active insurance exposures.
MI protects lenders and investors from default-related losses on a portion of the unpaid principal balance of a covered mortgage. MI plays a critical role in the U.S. housing market by mitigating mortgage credit risk and facilitating the secondary market sale of high-LTV ( i.e., above 80%) residential loans to the GSEs, who are otherwise restricted by their charters from purchasing or guaranteeing high-LTV mortgages that are not covered by certain credit protections. Such credit protection and secondary market sales allow lenders to increase their capacity for mortgage commitments and expand financing access to existing and prospective homeowners.
NMIH, a Delaware corporation, was incorporated in May 2011, and we began start-up operations in 2012 and wrote our first MI policy in 2013. Since formation, we have sought to establish customer relationships with a broad group of mortgage lenders and build a diversified, high-quality insured portfolio. As of December 31, 2025, we had issued master policies with 2,193 customers, including national and regional mortgage banks, money center banks, credit unions, community banks, builder-owned mortgage lenders, internet-sourced lenders and other non-bank lenders. As of December 31, 2025, we had $221.4 billion of primary IIF and $59.3 billion of primary RIF.
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 individuals 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 that emphasizes the individual underwriting review or validation of the vast majority of the loans we insure, utilizing 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.
Our strategy is to continue to build on our position in the private MI market, expand our customer base and grow our insured portfolio of high-quality residential loans by focusing on long-term customer relationships, disciplined and proactive risk selection and pricing, fair and transparent claim payment practices, responsive customer service, and financial strength and profitability.
Our common stock trades on the Nasdaq under the symbol “NMIH.” Our headquarters is located in Emeryville, California. As of December 31, 2025, we had 225 employees. Our corporate website is located at www.nationalmi.com . Our website and the information contained on or accessible through our website are not incorporated by reference into this report.
We discuss below our results of operations for the periods presented, as well as the conditions and trends that have impacted or are expected to impact our business, including new insurance writings, the composition of our insurance portfolio and other factors that we expect to impact our results.
Conditions and Trends Affecting Our Business
Macroeconomic Developments
Macroeconomic factors, including persistent inflation, elevated interest rates, flagging consumer confidence and increasing jobless claims could have a pronounced impact on the housing market, the mortgage insurance industry and our business in future periods. A marked decline in housing demand, a significant and protracted decrease in house prices or a sustained increase in unemployment could reduce the pace of new business activity in the private mortgage insurance market and negatively impact our future NIW volume, or contribute to an increase in our future default and claim experience.
Key Factors Affecting Our Results
Customer Development
We have important relationships with customers across all categories and allocation profiles, including National Accounts and Regional Accounts, and centralized and decentralized lenders. Our sales and marketing efforts are broadly focused on expanding our presence with existing customers and activating new customer relationships. We consider an activation to be the point at which we have signed a Master Policy, established IT connectivity and generated a first application or first dollar of NIW from a customer. During the year ended December 31, 2025, we activated 90 lenders, compared to 118 and 70 for the years ended December 31, 2024 and 2023, respectively. We also continued to expand our business with existing customers, deepening our existing relationships and capturing what we believe to be an increasing portion of their annual MI volume. At December 31, 2025, we had issued 2,193 Master Policies, compared to 2,086 and 1,974, as of December 31, 2024 and 2023, respectively.
New Insurance Written, Insurance-In-Force and Risk-In-Force
NIW is the aggregate unpaid principal balance of mortgages underpinning new policies written during a given period. Our NIW is affected by the overall size of the mortgage origination market and the volume of high-LTV mortgage originations. Our NIW is also affected by the percentage of such high-LTV originations covered by private versus government MI or other alternative credit enhancement structures and our share of the private MI market. NIW, together with persistency, drives our IIF. IIF is the aggregate unpaid principal balance of the mortgages we insure, as reported to us by servicers at a given date, and represents the sum total of NIW from all prior periods less principal payments on insured mortgages and policy cancellations (including for prepayment, nonpayment of premiums, coverage rescission and claim payments). RIF is related to IIF and represents the aggregate amount of coverage we provide on all outstanding policies at a given date. RIF is calculated as the sum total of the coverage percentage of each individual policy in our portfolio applied to the unpaid principal balance of such insured mortgage. RIF is affected by IIF and the LTV profile of our insured mortgages, with lower LTV loans generally having a lower coverage percentage and higher LTV loans having a higher coverage percentage. Gross RIF represents RIF before consideration of reinsurance. Net RIF is gross RIF net of ceded reinsurance.
Net Premiums Written and Net Premiums Earned
We set our premium rates on individual policies based on the risk characteristics of the underlying mortgage loans and borrowers, and in accordance with our filed rates and applicable rating rules. We primarily price our policies through a proprietary risk-based pricing platform, which we refer to as Rate GPS ® . Rate GPS ® considers a broad range of individual and layered risk variables, including borrower credit, loan-level, product and lender attributes, as well as market and geographic factors, and provides us with the ability to set and charge premium rates commensurate with the underlying risk of each loan that we insure. We also offer a rate card pricing option to a limited number of lender customers when required for business process reasons. We believe that the utilization of Rate GPS ® provides us with a more granular and analytical approach to evaluating and pricing risk, and that this approach enhances our ability to continue building a high-quality mortgage insurance portfolio and delivering attractive risk-adjusted returns.
Premiums are generally fixed for the duration of our coverage of the underlying loans. Net premiums written are equal to gross premiums written minus ceded premiums written under our reinsurance arrangements, less premium refunds and premium write-offs. As a result, net premiums written are generally influenced by:
• NIW;
• premium rates and the mix of premium payment type, which are either single, monthly or annual premiums, as described below;
• cancellation rates of our insurance policies, which are impacted by payments or prepayments on mortgages, refinancings (which are affected by prevailing mortgage interest rates as compared to interest rates on loans underpinning our in force policies), levels of claim payments and home prices; and
• cession of premiums under third-party reinsurance arrangements.
Premiums are paid either by the borrower (BPMI) or the lender (LPMI) in a single payment at origination (single premium), on a monthly installment basis (monthly premium) or on an annual installment basis (annual premium). Our net premiums written will differ from our net premiums earned due to policy payment type. For single premiums, we receive a single premium payment at origination, which is earned over the estimated life of the policy. Substantially all of our single premium policies in force as of December 31, 2025 were non-refundable under most cancellation scenarios. If non-refundable single premium policies are canceled, we immediately recognize the remaining unearned premium balances as earned premium revenue. Monthly premiums are recognized in the month billed and when the coverage is effective. Annual premiums are earned on a straight-line basis over the year of coverage. Substantially all of our policies provide for either single or monthly premiums.
The percentage of IIF that remains on our books after any twelve-month period is defined as our persistency rate. Because our insurance premiums are earned over the life of a policy, higher persistency rates can have a significant impact on our net premiums earned and profitability. Generally, faster speeds of mortgage prepayment lead to lower persistency. Prepayment speeds and the relative mix of business between single and monthly premium policies also impact our profitability. Our premium rates include certain assumptions regarding repayment or prepayment speeds of the mortgages underlying our policies. Because premiums are paid at origination on single premium policies and our single premium policies are generally non-refundable on cancellation, assuming all other factors remain constant, if single premium loans are prepaid earlier than expected, our profitability on these loans is likely to increase and, if loans are repaid slower than expected, our profitability on these loans is likely to decrease. By contrast, if monthly premium loans are repaid earlier than anticipated, we do not earn any more premium with respect to those loans and, unless we replace the repaid monthly premium loan with a new loan at the same premium rate or higher, our revenue is likely to .
Effect of Reinsurance on Our Results
We utilize third-party reinsurance to actively manage our risk, ensure compliance with PMIERs, state regulatory and other applicable capital requirements, and support the growth of our business. We currently have both quota share and excess-of-loss reinsurance agreements in place, which impact our results of operations and regulatory capital and PMIERs asset positions. Under a quota share reinsurance agreement, the reinsurer receives a premium in exchange for covering an agreed-upon portion of incurred losses. Such a quota share arrangement reduces premiums written and earned and also reduces RIF, providing capital relief to the ceding insurance company and reducing incurred claims in accordance with the terms of the reinsurance agreement. In addition, reinsurers typically pay ceding commissions as part of quota share transactions, which offset the ceding company's acquisition and underwriting expenses. Certain quota share agreements include profit commissions that are earned based on loss performance and serve to reduce ceded premiums. Under an excess-of-loss agreement, the ceding insurer is typically responsible for losses up to an agreed-upon threshold and the reinsurer then provides coverage in excess of such threshold up to a maximum agreed-upon limit. We expect to continue to evaluate reinsurance in the normal course of business.
See Item 8, “ Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 6, Reinsurance ” for further discussion of these third-party reinsurance arrangements.
Portfolio Data
The following table presents NIW and primary IIF as of the dates and for the periods indicated. Unless otherwise noted, the tables below do not include the effects of our third-party reinsurance arrangements described above.
NIW and primary IIF
As of and for the years ended December 31,
NIW
IIF
NIW
IIF
NIW
IIF
(In Millions)
Monthly
Single
Total
NIW increased 6% and 14%, respectively, for the years ended December 31, 2025 and 2024, primarily due to growth in our customer franchise and market presence tied to the increased penetration of existing customer accounts and new customer activations as well as an increase in the size of the total mortgage insurance market.
Primary IIF increased 5% at December 31, 2025 compared to December 31, 2024, which in turn grew 7% compared to December 31, 2023, primarily due to the NIW generated between such measurement dates, partially offset by the run-off of in-force policies.
Our persistency rate was 83.4%, 84.6% and 86.1% at December 31, 2025, 2024 and 2023, respectively. Persistency remained historically high due to a continued slowdown in the pace of mortgage refinancing activity tied to the prevailing interest and mortgage rate environment.
The following table presents net premiums written and earned for the periods indicated:
Net premiums written and earned
For the years ended December 31,
(In Thousands)
Net premiums written
Net premiums earned
Net premiums written increased 9% and 12%, respectively, and net premiums earned increased 7% and 11%, respectively, during the years ended December 31, 2025 and 2024, primarily driven by growth in our monthly IIF and direct monthly pay premium receipts, partially offset by the impact of ceded premiums written and earned under our third-party reinsurance transactions.
Portfolio Statistics
Unless otherwise noted, the portfolio statistics tables presented below do not include the effects of our third-party reinsurance arrangements described above. The table below highlights trends in our primary portfolio as of the dates and for the periods indicated.
Primary portfolio trends
As of and for the years ended December 31,
($ Values In Millions, except as noted below)
New insurance written
Percentage of monthly premium
Percentage of single premium
New risk written
Insurance-in-force (1)
Percentage of monthly premium
Percentage of single premium
Risk-in-force (1)
Policies in force (count) (1)
Average loan size ( $ value in thousands ) (1)
Coverage percentage (2)
Loans in default (count) (1)
Default rate (1)
Risk-in-force on defaulted loans (1)
Average net premium yield (3)
Earnings from cancellations
Annual persistency (4)
Quarterly run-off (5)
(1) Reported as of the end of the period.
(2) Calculated as end of period RIF divided by end of period IIF.
(3) Calculated as net premiums earned divided by average primary IIF for the period.
(4) Defined as the percentage of IIF that remains on our books after a given twelve-month period.
(5) Defined as the percentage of IIF that is no longer on our books after a given three-month period. Figures shown represent fourth quarter values for the respective years.
The table below presents a summary of the change in total primary IIF for the dates and periods indicated.
Primary IIF
As of and for the years ended December 31,
(In Millions)
IIF, beginning of period
NIW
Cancellations, principal repayments and other reductions
IIF, end of period
We consider a “book” to be a collective pool of policies insured during a particular period, normally a calendar year. In general, the majority of underwriting profit, calculated as earned premium revenue minus claims and underwriting and operating expenses, generated by a particular book year emerges in the years immediately following origination. This pattern generally occurs because relatively few of the claims that a book will ultimately experience typically occur in the first few years following origination, when premium revenue is highest, while subsequent years are affected by declining premium revenues, as the number of insured loans decreases (primarily due to loan prepayments), and by increasing losses.
The table below presents a summary of our primary IIF and RIF by book year as of the dates indicated.
Primary IIF and RIF
As of December 31,
IIF
RIF
IIF
RIF
IIF
RIF
Book year
(In Millions)
2020 and before
Total
We utilize certain risk principles that form the basis of how we underwrite and originate NIW. We have established prudential underwriting standards and loan-level eligibility matrices which prescribe the maximum LTV, minimum borrower FICO score, maximum borrower DTI ratio, maximum loan size, property type, loan type, loan term and occupancy status of loans that we will insure and memorialized these standards and eligibility matrices in our Underwriting Guideline Manual that is publicly available on our website. Our underwriting standards and eligibility criteria are designed to limit the layering of risk in a single insurance policy. “Layered risk” refers to the accumulation of borrower, loan and property risk. For example, we have higher credit score and lower maximum allowed LTV requirements for investor-owned properties, compared to owner-occupied properties. We monitor the concentrations of various risk attributes in our insurance portfolio, which may change over time, in part, as a result of regional conditions or public policy shifts.
The tables below present our NIW by FICO, LTV and purchase/refinance mix for the periods indicated. We calculate the LTV of a loan as the percentage of the original loan amount to the original purchase value of the property securing the loan.
NIW by FICO
For the years ended December 31,
(In Millions)
Total
Weighted average FICO
NIW by LTV
For the years ended December 31,
(In Millions)
95.01% and above
85.00% and below
Total
Weighted average LTV
NIW by purchase/refinance mix
For the years ended December 31,
(In Millions)
Purchase
Refinance
Total
The tables below present our total primary IIF and RIF by FICO and LTV, and total primary RIF by loan type as of the dates indicated.
Primary IIF by FICO
As of December 31,
($ Values In Millions)
Total
Primary RIF by FICO
As of December 31,
($ Values In Millions)
Total
Primary IIF by LTV
As of December 31,
($ Values In Millions)
95.01% and above
85.00% and below
Total
Primary RIF by LTV
As of December 31,
($ Values In Millions)
95.01% and above
85.00% and below
Total
Primary RIF by Loan Type
As of December 31,
Fixed
Adjustable rate mortgages:
Less than five years
Five years and longer
Total
The table below presents selected primary portfolio statistics, by book year, as of December 31, 2025.
As of December 31, 2025
Book Year
Original Insurance Written
Remaining Insurance in Force
% Remaining of Original Insurance
Policies Ever in Force
Number of Policies in Force
Number of Loans in Default
# of Claims Paid
Incurred Loss Ratio (Inception to Date) (1)
Cumulative Default Rate (2)
Current Default Rate (3)
($ Values In Millions)
2016 and prior
Total
(1) Calculated as total claims incurred (paid and reserved) divided by cumulative premiums earned, net of reinsurance.
(2) Calculated as the sum of the number of claims paid ever to date and number of loans in default divided by policies ever in force.
(3) Calculated as the number of loans in default divided by number of policies in force.
Geographic Dispersion
The following table shows the distribution by state of our primary RIF as of the dates indicated. The distribution of our primary RIF as of December 31, 2025 is not necessarily representative of the geographic distribution we expect in the future.
Top 10 primary RIF by state
As of December 31,
California
Texas
Florida
Georgia
Illinois
Virginia
Washington
Pennsylvania
Ohio
New York
Total
Insurance Claims and Claim Expenses
Insurance claims and claim expenses incurred represent estimated future payments on newly defaulted insured loans and any change in our claim estimates for previously existing defaults. Claims incurred are generally affected by a variety of factors, including:
• future macroeconomic factors, including national and regional unemployment rates, which affect the likelihood that borrowers may default on their loans and probability of claims, and interest rates, which tend to drive increased persistency as they rise, thereby extending the average life of our insured portfolio and increasing expected future claims and decrease persistency as they fall, thereby shortening the average life of our insured portfolio and moderating future expected claims;
• changes in housing values, as such changes affect loss mitigation opportunities (available to us and a borrower) on loans in default, as well as borrowers' behaviors and willingness to default if the values of their homes are below or perceived to be below the balance of their mortgage;
• borrowers' FICO scores, with lower FICO scores tending to have a higher probability of claims;
• borrowers' DTI ratios, with higher DTI ratios tending to have a higher probability of claims;
• LTV ratios, with higher average LTV ratios tending to increase the probability of claims;
• the size of loans insured, with higher loan amounts tending to result in higher incurred claim amounts than smaller loan amounts;
• the percentage of coverage on insured loans, with higher percentages of insurance coverage tending to result in higher incurred claim amounts than lower percentages of insurance coverage;
• other borrower, property-type and loan level risk characteristics, such as cash-out refinancings, second homes or investment properties; and
• the level and amount of reinsurance coverage maintained with third parties.
Reserves for claims and claim expenses are established for mortgage loans that are in default. A loan is considered to be in default as of the payment date at which a borrower has missed the preceding two or more consecutive monthly payments. We establish reserves for loans that have been reported to us in default by servicers, referred to as case reserves, and additional loans that we estimate (based on actuarial review and other factors) to be in default that have not yet been reported to us by servicers, referred to as IBNR. We also establish reserves for claim expenses, which represent the estimated cost of the claim administration process, including legal and other fees and other general expenses of administering the claim settlement process. Reserves are not established for future claims on insured loans which are not currently reported or which we estimate are not currently in default.
Reserves are established by estimating the number of loans in default that will result in a claim payment, which is referred to as claim frequency, and the amount of the claim payment expected to be paid on each such loan in default, which is referred to as claim severity. Claim frequency and severity estimates are established based on historical observed experience regarding certain loan factors, such as age of the default, cure rates, size of the loan and estimated change in property value. Reserves are released the month in which a loan in default is brought current by the borrower, which is referred to as a cure. Adjustments to reserve estimates are reflected in the period in which the adjustment is made. Reserves are also ceded to reinsurers under the QSR Transactions, XOL Transactions and ILN Transactions as applicable under each treaty. We have not yet ceded reserves under any of the XOL Transactions or ILN Transactions as incurred claims and claim expenses on each respective reference pool remain within our retained coverage layer for each transaction.
Our reserve setting process considers the beneficial impact of forbearance, foreclosure moratorium and other assistance programs that may be made available to certain defaulted borrowers. The effectiveness of forbearance and other such assistance programs can be further enhanced by the availability of various repayment and loan modification options which typically allow borrowers to amortize or, in certain instances, outright defer payments otherwise missed during a period of dislocation over an extended length of time. We generally observe that forbearance, repayment and modification, and other assistance programs are an effective tool to bridge dislocated borrowers from a time of acute stress to a future date when they can resume timely payment of their mortgage obligations, and note higher cure rates on defaults benefitting from broad-based assistance programs than would otherwise be expected on similarly situated loans that did not from such programs.
The actual claims we incur as our portfolio matures are difficult to predict and depend on the specific characteristics of our current in-force book (including the credit score and DTI ratio of the borrower, the LTV ratio of the mortgage and geographic concentrations, among others), as well as the risk profile of new business we write in the future. In addition, claims experience will be affected by macroeconomic factors such as housing prices, interest rates, unemployment rates and other events, such as natural disasters or global pandemics, and any federal, state or local governmental response thereto.
Macroeconomic factors, including persistent inflation, elevated interest rates, flagging consumer confidence and increasing jobless claims could have a pronounced impact on the housing market, the mortgage insurance industry and our business in future periods. A marked decline in housing demand, a significant and protracted decrease in house prices, or a sustained increase in unemployment could contribute to an increase in our future default and claims experience.
The following table provides a reconciliation of the beginning and ending gross reserve balances for insurance claims and claim expenses:
For the years ended December 31,
(In Thousands)
Beginning balance
Less reinsurance recoverables (1)
Beginning balance, net of reinsurance recoverables
Add claims incurred:
Claims and claim expenses incurred:
Current year (2)
Prior years (3)
Total claims and claim expenses incurred (4)
Less claims paid:
Claims and claim expenses paid:
Current year (2)
Prior years (3)
Reinsurance terminations (5)
Total claims and claim expenses paid
Reserve at end of period, net of reinsurance recoverables
Add reinsurance recoverables (1)
Ending balance
(1) Related to ceded losses recoverable under the QSR Transactions. See Item 8, “ Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 6, Reinsurance ” for additional information.
(2) Related to insured loans with their most recent defaults occurring in the current year. For example, if a loan defaulted in a prior year and subsequently cured and later re-defaulted in the current year, the default would be included in the current year. Amounts are presented net of reinsurance and included $102.0 million attributed to net case reserves and $10.8 million attributed to net IBNR reserves for the year ended December 31, 2025, $83.5 million attributed to net case reserves and $8.1 million attributed to net IBNR reserves for the year ended December 31, 2024, and $70.6 million attributed to net case reserves and $6.3 million attributed to net IBNR reserves for the year ended December 31, 2023.
(3) Related to insured loans with defaults occurring in prior years, which have been continuously in default before the start of the current year. Amounts are presented net of reinsurance and included $48.4 million attributed to net case reserves and $8.1 million attributed to net IBNR reserves for the year ended December 31, 2025, $54.1 million attributed to net case reserves and $6.3 million attributed to net IBNR reserves for the year ended December 31, 2024, and $50.9 million attributed to net case reserves and $4.5 million attributed to net IBNR reserves for the year ended December 31, 2023.
(4) Excludes aggregate fees of $0.8 million and $0.7 million for the years ended December 31, 2025 and 2023, respectively, incurred in connection with the termination or amendment of certain QSR Transactions.
(5) Represents the settlement of reinsurance recoverables in conjunction with the termination and amendment of certain QSR transactions.
The “claims incurred” section of the table above shows claims and claim expenses incurred on defaults occurring in current and prior years, including IBNR reserves and is presented net of reinsurance. We may increase or decrease our claim estimates and reserves as we learn additional information about individual defaulted loans and continue to observe and analyze loss development trends in our portfolio. Gross reserves of $55.7 million related to prior year defaults remained as of December 31, 2025.
The following table provides a reconciliation of the beginning and ending count of loans in default:
For the years ended December 31,
Beginning default inventory
Plus: new defaults
Less: cures
Less: claims paid
Less: rescission and claims denied
Ending default inventory
The sequential increase in ending default inventory at each successive year end was primarily due to the growth and seasoning of our insured portfolio, partially offset by cure activity within our default population during the intervening periods.
The following table provides details of our claims paid, before giving effect to claims ceded under the QSR Transactions for the periods indicated:
For the years ended December 31,
($ Values In Thousands)
Number of claims paid (1)
Total amount paid for claims
Average amount paid per claim
Severity (2)
(1) Count includes 71, 88 and 70 claims settled without payment during the years ended December 31, 2025, 2024 and 2023, respectively.
(2) Severity represents the total amount of claims paid including claim expenses divided by the related RIF on the loan at the time the claim is perfected, and is calculated including claims settled without payment.
We paid 445, 276 and 199 claims during the years ended December 31, 2025, 2024 and 2023, respectively. The number of claims paid in each year was modest relative to the size of our insured portfolio and we generally observe that the borrowers of the loans we insure are well-situated with strong credit profiles, stable 30-year fixed rate mortgages, manageable debt service obligations and significant appreciated equity in their homes. An increase in the value of the homes collateralizing the mortgages we insure provides defaulted borrowers with alternative paths and incentives to cure their loan prior to the development of a claim.
Our claims severity for the years ended December 31, 2025, 2024 and 2023 was 76%, 61% and 55%, respectively. The increase in claims severity for the year ended December 31, 2025, was primarily due to an increase in the proportion of claims related to loans originated in more recent years. These loans generally have less accumulated equity than loans from earlier vintages, which typically results in higher claims payments and an increase in claims severity.
Our claims severity was still below long-term industry norms and benefited from the same house price appreciation that supported our claims paid experience. An increase in the value of the homes collateralizing the mortgages we insure provides additional equity support to our risk exposure and raises the prospect of a third-party sale of a foreclosed property, which can mitigate the severity of our settled claims.
The number of claims paid and our severity experience in future periods may be impacted if developing economic cycles impose financial strain on borrowers, and each could increase if house price declines serve to limit the alternative paths and incentives to cure delinquencies that are available to defaulted borrowers or erode the equity value of the homes collateralizing the mortgages we insure.
The following table provides detail on our average reserve per default, before giving effect to reserves ceded under the QSR Transactions, as of the dates indicated:
Average reserve per default:
As of December 31,
(In Thousands)
Case (1)
IBNR (1) (2)
Total
(1) Defined as the gross reserve per insured loan in default.
(2) Amount includes claims adjustment expenses.
Average reserve per default increased from December 31, 2024 to December 31, 2025, primarily due to changes in the composition of our default inventory as measured by the size, vintage and current estimated LTV of defaulted loans between measurement dates. Average reserves per default were further impacted by changes in observed and forecasted housing market conditions and macroeconomic factors between the measurement dates.
Average reserve per default decreased from December 31, 2023 to December 31, 2024, primarily due to an increase in the proportion of defaults that trace to storm-related activity year-on-year. We generally observe that storm-related defaults cure at higher rates than other similarly situated loans in default (in non-disaster zones) and scale our reserves accordingly. Average reserves per default were further impacted by changes in observed and forecasted housing market conditions and macroeconomic factors between the measurement dates.
Seasonality
Historically, our business has been subject to modest seasonality in both NIW production and default experience. Consistent with the seasonality of home sales, purchase origination volumes typically increase in late spring and peak during the summer months, leading to a rise in NIW volume during the second and third quarters of a given year. Refinancing volume, however, does not follow a set seasonal trend and is instead primarily influenced by mortgage rates. Fluctuations in refinancing volume (driven by changes in prevailing mortgage rates) may serve to mute or magnify the seasonal effect of home purchase patterns on mortgage insurance NIW. Default experience is also subject to seasonality due to seasonal patterns in household cash flows, with certain borrowers benefiting from inflows related to bonus payments and tax refunds in the first half of the year and certain borrowers more strained in the second half of the year given the lack of these inflows and increased discretionary spending through the year-end holiday season. Housing market conditions and macroeconomic factors may serve to mute or magnify these seasonal default trends.
GSE Oversight
As an approved insurer , NMIC is subject to ongoing compliance with the PMIERs established by each of the GSEs ( italicized terms have the same meaning that such terms have in the PMIERs, as described below). The PMIERs establish operational, business, remedial and financial requirements applicable to approved insurers . The PMIERs financial requirements prescribe a risk-based methodology whereby the amount of assets required to be held against each insured loan is determined based on certain loan-level risk characteristics, such as FICO, vintage (year of origination), performing vs. non-performing ( i.e., current vs. delinquent), LTV ratio and other risk features. In general, higher-quality loans carry lower asset charges.
Under the PMIERs, approved insurers must maintain available assets that equal or exceed minimum required assets , which is an amount equal to the greater of (i) $400 million or (ii) a total risk-based required asset amount.
Available assets reflect the financial resources of a mortgage insurer available to pay claims, and includes the most readily liquid assets held, such as cash, investments and other items as stipulated in the PMIERs. The credit provided for such assets is subject to adjustment based on several factors, including asset class, credit rating and portfolio concentration.
The risk-based required asset amount is a function of the risk profile of an approved insurer's RIF, assessed on a loan-by-loan basis and considered against certain risk-based factors derived from tables set out in the PMIERs, which is then adjusted on an aggregate basis for reinsurance transactions approved by the GSEs, such as with respect to our QSR Transactions, XOL Transactions and ILN Transactions. The aggregate gross risk-based required asset amount for performing, primary insurance is subject to a floor of 5.6% of performing primary adjusted RIF .
By April 15th of each year, NMIC must certify it met all PMIERs requirements as of December 31st of the prior year. We certified to the GSEs by April 15, 2025 that NMIC was in full compliance with the PMIERs as of December 31, 2024. NMIC also has an ongoing obligation to immediately notify the GSEs in writing upon discovery of a failure to meet one or more of the PMIERs requirements. We continuously monitor NMIC's compliance with the PMIERs.
The following table provides a comparison of the PMIERs available assets and net risk-based required asset amount as reported by NMIC as of the dates indicated:
As of December 31,
(In Thousands)
Available assets
Net risk-based required assets
Available assets were $3.5 billion at December 31, 2025, compared to $3.1 billion at December 31, 2024 and $2.7 billion at December 31, 2023. The sequential increase in available assets between the dates presented was primarily driven by NMIC's positive cash flow from operations during the intervening periods, partially offset by the payment of ordinary course dividends from NMIC to NMIH during each year.
Net risk-based required assets were $2.1 billion at December 31, 2025, compared to $1.8 billion at December 31, 2024 and $1.5 billion at December 31, 2023. The increase in the net r isk-based required asset amount between the dates presented was primarily due to the growth in our gross RIF and aggregate gross risk-based required asset amount, and was further impacted by the growth in our default inventory and defaulted RIF.
Competition
The MI industry is highly competitive and currently consists of six private mortgage insurers, including NMIC, as well as government MIs such as the FHA, USDA or VA. A range of factors influence a lender's and borrower's decision to choose private over government MI, including among others, premium rates and other charges, loan eligibility requirements, the cancelability of private coverage, loan size limits and the relative ease of use of private MI products compared to government MI alternatives. Private MI companies compete based on service, customer relationships, underwriting and other factors, including price, credit risk tolerance and IT capabilities. We expect the private MI market to remain competitive, with pressure for industry participants to maintain or grow their market share.
Cybersecurity
We rely on technology to engage with customers, access borrower information and deliver our products and services. We have established and implemented security measures, controls and procedures to safeguard our IT systems, and prevent and detect unauthorized access to such systems or any data processed and/or stored therein. We periodically engage third parties to evaluate and test the adequacy of such security measures, controls and procedures. In addition, we have a business continuity plan that is designed to mitigate the operational impact of certain disruptive events, including disruptions to our IT systems, and we have an incident response plan that is designed to address information security incidents, including any breaches of our IT systems. Despite these safeguards, disruptions to and breaches of our IT systems are possible and may negatively impact our business.
We maintain a cybersecurity errors and omissions insurance policy to limit our exposure to loss in the event of an incident. This policy provides coverage for (i) claims related to, among other things, unauthorized network or computer access, unintentional disclosure or misuse of personally identifiable information in our possession, and unintentional failure to disclose a breach, and (ii) certain costs related to privacy notification, crisis management, cyber extortion, data recovery, business interruption and reputational harm. For further information, see Part I, Item 1C, “ Cybersecurity. ”
Information Technology
Effective April 1, 2025, we renewed and extended our existing seven-year IT service agreement with TCS, dated March 31, 2020, through March 31, 2032. Under the agreement, TCS provides IT services across such functions as application development and support, infrastructure support, and information security. Our engagement with TCS has enhanced our ability to provide innovative IT solutions for our internal and external constituents, and has allowed us to realize cost efficiencies by leveraging TCS’s global platform.
Consolidated Results of Operations
Comparisons between the years ended December 31, 2024 and 2023 have been omitted within “Consolidated Results of Operations” from this Form 10-K, but can be found in Part II, Item 7, “ Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC.
Consolidated statements of operations
For the years ended December 31,
$ Change
% Change
Revenues
($ In Thousands, except for per share data)
Net premiums earned
Net investment income
Net realized investment gains
Other revenues
Total revenues
Expenses
Insurance claims and claim expenses
Underwriting and operating expenses
Service expenses
Interest expense
Total expenses
Income before income taxes
Income tax expense
Net income
Earnings per share - Basic
Earnings per share - Diluted
Loss ratio (1)
Expense ratio (2)
Combined ratio (3)
For the years ended December 31,
$ Change
% Change
Non-GAAP financial measures (5)
($ In Thousands, except for per share data)
Adjusted income before tax
Adjusted net income
Adjusted diluted EPS
(1) Loss ratio is calculated by dividing insurance claims and claim expenses by net premiums earned.
(2) Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.
(3) Combined ratio may not foot due to rounding.
(4) Not meaningful
(5) See “ Explanation and Reconciliation of Our Use of Non-GAAP Financial Measures, ” below.
Revenues
Net premiums earned increased during the year ended December 31, 2025 primarily due to growth in our monthly IIF and direct monthly pay premium receipts, partially offset by the impact of ceded premiums under our third-party reinsurance transactions.
Net investment income increased during the year ended December 31, 2025 primarily due to growth in the size of our total invested asset base, as well as an increase in the book yield of our investment portfolio tied to the deployment of new cash flows and reinvestment of rolling maturities at incrementally higher rates.
Other revenues represent underwriting fee revenue generated by our subsidiary, NMIS, which provides outsourced loan review services to mortgage loan originators. Changes in other revenues primarily reflect changes in NMIS' outsourced loan review volume. Amounts recognized in other revenues generally correspond with amounts incurred as service expenses for outsourced loan review activities in the same periods.
Expenses
We recognize insurance claims and claim expenses in connection with the loss experience of our insured portfolio and incur other underwriting and operating expenses, including employee compensation and benefits, policy acquisition costs, and technology, professional services and facilities expenses, in connection with the development and operation of our business. We also incur service expenses in connection with NMIS' outsourced loan review activities.
Insurance claims and claim expenses increased during the year ended December 31, 2025 primarily due to an increase in the number of newly defaulted loans that emerged during the year and the establishment of initial reserves against such loans, as well as an increase in the average case reserve held against previously defaulted loans that aged in their delinquency status, partially offset by the release of a portion of the reserves we established for anticipated claims payments in prior periods in connection with cure activity and the ongoing analysis of recent loss development trends.
Underwriting and operating expenses increased marginally during the year ended December 31, 2025 primarily due to an increase in certain technology expenses and premium taxes, largely offset by a decrease in employee compensation costs, amortization and depreciation expenses, and certain contract and professional fees.
Service expenses represent third-party costs incurred by NMIS in connection with the services it provides. Changes in service expenses primarily reflect changes in NMIS' outsourced loan review volume. Amounts incurred as service expenses generally correspond with amounts recognized in other revenues in the same periods.
Interest expense primarily reflects the carrying costs of the 2024 Notes. Interest expense for the year ended December 31, 2024 includes $7.0 million of non-recurring costs related to the refinancing of the 2020 Notes and 2021 Revolving Credit Facility with the 2024 Notes and 2024 Revolving Credit Facility. For further information, see Item 8, “ Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 5, Debt. ”
Income tax expense increased during the year ended December 31, 2025 primarily due to the growth in our pre-tax income. As a U.S. taxpayer, we are subject to a U.S. federal corporate income tax rate of 21%. Our effective income tax rate on pre-tax income was 22.2% and 22.3% for the years ended December 31, 2025 and 2024, respectively. For further information regarding income taxes and their impact on our results of operations and financial position, see Item 8, “ Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 11, Income Taxes. ”
Net Income
Net income and adjusted net income increased during the year ended December 31, 2025 primarily due to the growth in our total revenues, partially offset by increases in our insurance claims and claim expenses and income tax expense. Adjusted net income for the year ended December 31, 2024 reflects a $7.0 million adjustment for non-recurring costs incurred in connection with the refinancing of the 2020 Notes and 2021 Revolving Credit Facility.
Diluted and adjusted diluted EPS increased during the year ended December 31, 2025 primarily due to the growth in our net income and adjusted net income, as well as a decline in the number of weighted average diluted shares outstanding tied to share repurchase activity.
The non-GAAP financial measures of adjusted income before tax, adjusted net income and adjusted diluted EPS are presented to enhance the comparability of financial results between periods.
Non-GAAP Financial Measure Reconciliations
For the years ended December 31,
$ Change
% Change
($ In Thousands, except for per share data)
As reported
Income before income tax
Income tax expense
Net income
Adjustments
Net realized investment gains
Capital market transaction costs
Adjusted income before tax
Income tax (benefit) expense on adjustments (1)
Adjusted net income
Weighted average diluted shares outstanding
Adjusted diluted EPS
(1) Marginal tax impact of non-GAAP adjustments is calculated based on our statutory U.S. federal corporate income tax rate of 21%, except for those items that are not eligible for an income tax deduction.
(2) Not meaningful.
Explanation and Reconciliation of Our Use of Non-GAAP Financial Measures
We believe the use of the non-GAAP measures of adjusted income before tax, adjusted net income and adjusted diluted EPS enhance the comparability of our fundamental financial performance between periods, and provide relevant information to investors. These non-GAAP financial measures align with the way the company's business performance is evaluated by management. These measures are not prepared in accordance with GAAP and should not be viewed as alternatives to GAAP measures of performance. These measures have been presented to increase transparency and enhance the comparability of our fundamental operating trends across periods. Other companies may calculate these measures differently; their measures may not be comparable to those we calculate and present.
Adjusted income before tax is defined as GAAP income before tax, excluding the pre-tax effects of net realized gains or losses from our investment portfolio, periodic costs incurred in connection with capital markets transactions, and other infrequent, unusual or non-operating items in the periods in which such items are incurred.
Adjusted net income is defined as GAAP net income, excluding the after-tax effects of net realized gains or losses from our investment portfolio, periodic costs incurred in connection with capital markets transactions, and other infrequent, unusual or non-operating items in the periods in which such items are incurred. Adjustments to components of pre-tax income are tax effected using the applicable federal statutory tax rate for the respective periods.
Adjusted diluted EPS is defined as adjusted net income divided by adjusted weighted average diluted shares outstanding. Adjusted weighted average diluted shares outstanding is defined as weighted average diluted shares outstanding, adjusted for changes in the dilutive effect of non-vested shares that would otherwise have occurred had GAAP net income been calculated in accordance with adjusted net income. There will be no adjustment to weighted average diluted shares outstanding in the years that non-vested shares are anti-dilutive under GAAP.
Although adjusted income before tax, adjusted net income and adjusted diluted EPS exclude certain items that have occurred in the past and are expected to occur in the future, the excluded items: (1) are not viewed as part of the operating performance of our primary activities; or (2) are impacted by market, economic or regulatory factors and are not necessarily indicative of operating trends, or both. These adjustments, and the reasons for their treatment, are described below.
• Net realized investment gains and losses . The recognition of net realized investment gains or losses can vary significantly across periods as the timing is highly discretionary and is influenced by factors such as market opportunities, tax and capital profile, and overall market cycles that do not reflect our current period operating results.
• Capital markets transaction costs . Capital markets transaction costs result from activities that are undertaken to improve our debt profile or enhance our capital position through activities such as debt refinancing and capital markets reinsurance transactions that may vary in their size and timing due to factors such as market opportunities, tax and capital profile, and overall market cycles.
• Other infrequent, unusual or non-operating items . Items that are the result of unforeseen or uncommon events, and are not expected to recur with frequency in the future. Identification and exclusion of these items provides clarity about the impact special or rare occurrences may have on our current financial performance. Past adjustments under this category include infrequent, unusual or non-operating adjustments related to severance, restricted stock modification and other expenses incurred in connection with the CEO transition announced in 2021, effects of the release of the valuation allowance recorded against our net federal and certain state net deferred tax assets in 2016 and the re-measurement of our net deferred tax assets in connection with tax reform in 2017. We believe such items are infrequent or non-recurring in nature, and are not indicative of the performance of, or ongoing trends in, our primary operating activities or business.
Consolidated balance sheets
December 31, 2025
December 31, 2024
$ Change
% Change
(In Thousands)
Total investment portfolio
Cash and cash equivalents
Premiums receivable, net
Deferred policy acquisition costs, net
Software and equipment, net
Reinsurance recoverable
Prepaid federal income taxes
Other assets
Total assets
Debt
Unearned premiums
Accounts payable and accrued expenses
Reserve for insurance claims and claim expenses
Deferred tax liability, net
Other liabilities
Total liabilities
Total shareholders' equity
Total liabilities and shareholders' equity
Total cash and investments increased at December 31, 2025 with the addition of incremental cash provided by operating activities and a decrease in the unrealized loss position of our fixed income portfolio primarily tied to changes in interest rates during the year ended December 31, 2025, partially offset by share repurchase activity during the period. Cash and investments at December 31, 2025 included $130.6 million held by NMIH.
Net premiums receivable represents premiums due on our mortgage insurance policies and may fluctuate based on changes in our monthly premium policies in force, where premiums are generally paid one month in arrears, and the pace of settlement of previously outstanding receivables.
Net deferred policy acquisition costs increased at December 31, 2025 due to the deferral of certain costs associated with the origination of new policies, largely offset by the recognition of previously deferred policy acquisition costs during the year ended December 31, 2025.
Net software and equipment decreased at December 31, 2025 due to the amortization of previously capitalized amounts, partially offset by the capitalization of certain software and equipment expenditures during the year ended December 31, 2025.
Reinsurance recoverable increased at December 31, 2025 as a result of an increase in ceded losses recoverable under our QSR Transactions tied to an increase in our gross reserve for insurance claims and claim expenses during the year ended
December 31, 2025, partially offset by the settlement of loss recoverable in conjunction with the termination and amendment of certain QSR transactions.
Prepaid federal income taxes increased at December 31, 2025 due to the purchase of $78.1 million of tax and loss bonds during the year ended December 31, 2025. For further information, see Item 8, “ Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 11, Income Taxes. ”
Other assets increased at December 31, 2025 primarily due to an increase in accrued investment income and income taxes receivable, partially offset by a reduction in our ROU assets tied to the amortization of the operating lease for our corporate headquarters and the amortization of deferred debt issuance costs incurred in connection with the establishment of the 2024 Revolving Credit Facility during the year ended December 31, 2025.
Unearned premiums decreased at December 31, 2025 driven by the amortization of existing unearned premiums through earnings in accordance with the expiration of risk on related single premium policies and the cancellations of other single premium policies, partially offset by single premium policy originations during the year ended December 31, 2025.
Accounts payable and accrued expenses decreased at December 31, 2025 primarily due to a reduction in accrued interest on the 2024 Notes, which is payable semi-annually beginning in February 2025, a decrease in taxes payable and the settlement of previously accrued compensation expenses, partially offset by an increase in reinsurance premiums payable during the year ended December 31, 2025.
Reserve for insurance claims and claim expenses increased at December 31, 2025 in connection with the establishment of initial reserves on newly defaulted loans, as well as an increase in the average case reserve held against previously defaulted loans that aged in their delinquency status during the year ended December 31, 2025. The increase in the reserves for insurance claims and claim expenses was partially offset by the release of a portion of the reserves we established for anticipated claims payments in prior periods (in connection with cure activity and ongoing analysis of recent loss development trends), as well as the payment of previously reserved claims during the year. See “ Insurance Claims and Claim Expenses ,” above for further details.
Net deferred tax liability increased at December 31, 2025 due to an increase in the claimed deductibility of our statutory contingency reserve, as well as a decrease in the aggregate unrealized loss position of our fixed income portfolio recorded in other comprehensive income during the year ended December 31, 2025. For further information regarding income taxes and their impact on our results of operations and financial position, see Item 8, “ Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 11, Income Taxes. ”
The following table summarizes our consolidated cash flows from operating, investing and financing activities:
Consolidated cash flows
For the years ended December 31,
$ Change
% Change
Net cash provided by (used in):
(In Thousands)
Operating activities
Investing activities
Financing activities
Net decrease in cash and cash equivalents
Net cash provided by operating activities increased year-on-year primarily due to an increase in our net premium receipts, growth in our investment income and a reduction in the purchase of tax and loss bonds, partially offset by an increase in cash taxes paid, an increase in the interest payments made on the 2024 Notes and an increase in net claims paid during the year.
Cash used in investing activities for the years ended December 31, 2025 and 2024 reflects the purchase of fixed and short-term maturities with cash provided by operating activities, and the reinvestment of coupon payments, maturities, redemptions and sales proceeds within our investment portfolio.
Cash used in financing activities primarily relates to the repurchase of common stock and taxes paid on the net share settlement of equity awards for certain employees. Cash used in financing activities for the year ended December 31, 2024 further reflects the net impact of the issuance of the 2024 Notes and redemption of the 2020 Notes during the period.
Liquidity and Capital Resources
NMIH serves as the holding company for our insurance subsidiaries and does not have any significant operations of its own. NMIH's principal liquidity demands include funds for (i) payment of certain corporate expenses; (ii) payment of certain reimbursable expenses of its insurance subsidiaries; (iii) payment of the interest related to the 2024 Notes and 2024 Revolving Credit Facility; (iv) tax payments to the Internal Revenue Service; (v) capital support for its subsidiaries; (vi) repurchase of its common stock; and (vii) payment of dividends, if any, on its common stock. NMIH is not subject to any limitations on its ability to pay dividends except those generally applicable to corporations that are incorporated in Delaware. Delaware law provides that dividends are only payable out of a corporation's surplus or recent net profits (subject to certain limitations).
As of December 31, 2025, NMIH had $130.6 million of cash, cash equivalents and investments. NMIH ’ s principal sources of net cash are dividends from its subsidiaries and investment income. NMIC paid a $98.4 million ordinary course dividend to NMIH on June 2, 2025, representing its full ordinary course dividend capacity payable under Wisconsin insurance laws for the twelve-month period ending December 31, 2025. NMIH also has access to $250 million of undrawn revolving credit capacity under the 2024 Revolving Credit Facility.
On July 31, 2023, our Board of Directors authorized a $200 million repurchase program (the 2023 Repurchase Program), effective through December 31, 2025. On February 5, 2025, our Board of Directors authorized a new $250 million repurchase program (the 2025 Repurchase Program), effective through December 31, 2027, and extended the effectiveness of the 2023 Repurchase Program through December 31, 2027 to align its remaining tenor with that of the 2025 Repurchase Program. The authorizations provide NMIH with the flexibility, based on market and business conditions, stock price and other factors, to repurchase stock, from time to time, through open market repurchases, privately negotiated transactions, or other means, including pursuant to Rule 10b5-1 trading plans.
During the year ended December 31, 2025, NMIH repurchased 2.8 million shares of common stock at a total cost of $104.2 million, excluding associated costs and applicable taxes. As of December 31, 2025, NMIH had $225.9 million of repurchase authority remaining.
NMIH has entered into tax and expense-sharing agreements with its subsidiaries which have been approved by the Wisconsin OCI, with such approvals subject to change or revocation at any time. Among such agreements, 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 from such offering and facility are contributed to NMIC or used to repay, redeem or otherwise defease amounts raised by NMIC under prior credit arrangements that have previously been distributed to NMIC.
The 2024 Notes mature on August 15, 2029 and bear interest at a rate of 6.00%, payable semi-annually on February 15 and August 15. The 2024 Revolving Credit Facility matures on May 21, 2029, and accrues interest at a variable rate equal to, at our discretion, (i) a Base Rate (as defined in the 2024 Revolving Credit Facility, subject to a floor of 1.00% per annum) plus a margin of 0.375% to 1.875% per annum, or (ii) the Adjusted Term SOFR Rate (as defined in the 2024 Revolving Credit Facility) plus a margin of 1.375% to 2.875% per annum, with the margin in each of (i) or (ii) based on our applicable corporate credit rating at the time. Borrowings under the 2024 Revolving Credit Facility may be used for general corporate purposes, including to support the growth of our new business production and operations.
Under the 2024 Revolving Credit Facility, NMIH is required to pay a quarterly commitment fee on the average daily undrawn amount of 0.175% to 0.525%, based on the applicable corporate credit rating at the time. As of December 31, 2025, the applicable commitment fee was 0.225%.
We are subject to certain covenants under the 2024 Revolving Credit Facility, including: a maximum debt-to-total capitalization ratio of 35%, a minimum consolidated net worth requirement (as defined therein), and a requirement to maintain compliance with the financial standards prescribed by the PMIERs (subject to any GSE approved waivers). We were in compliance with all covenants at December 31, 2025.
NMIC and Re One are subject to certain capital and dividend rules and regulations prescribed by jurisdictions in which they are authorized to operate and by the GSEs. Under Wisconsin insurance laws, NMIC and Re One may pay dividends up to specified levels (i.e., “ordinary” dividends) with 30 days' prior notice to the Wisconsin OCI. Dividends in larger amounts, or “extraordinary” dividends, are subject to the Wisconsin OCI's prior approval. Under Wisconsin insurance laws, an ordinary dividend is defined as any payment or distribution that, together with other dividends and distributions made within the preceding twelve months, is less than the lesser of (i) 10% of the insurer's statutory policyholders' surplus as of the preceding December 31 or (ii) adjusted statutory net income for the twelve-month period ending the preceding December 31. During the year ended December 31, 2025, NMIC paid a $98.4 million ordinary dividend to NMIH. NMIC has the capacity to pay aggregate ordinary dividends of $101.0 million to NMIH during the twelve-month period ending December 31, 2026.
As an approved insurer under PMIERs, NMIC would generally be subject to additional restrictions on its ability to pay dividends to NMIH if it failed to meet the financial requirements prescribed by PMIERs. Approved insurers that fail to meet the prescribed PMIERs financial requirements are not permitted to pay dividends without prior approval from the GSEs.
NMIH may require liquidity to fund the capital needs of its insurance subsidiaries. NMIC’s capital needs depend on many factors including its ability to successfully write new business, establish premium rates at levels sufficient to cover claims and operating costs, access the reinsurance markets and meet minimum required asset thresholds under the PMIERs and minimum state capital requirements (respectively, as defined therein).
As an approved mortgage insurer and Wisconsin-domiciled carrier, NMIC is required to satisfy financial and/or capitalization requirements stipulated by each of the GSEs and the Wisconsin OCI. The financial requirements stipulated by the GSEs are outlined in the PMIERs. Under the PMIERs, NMIC must maintain available assets that are equal to or exceed a minimum risk-based required asset amount, subject to a minimum floor of $400 million.
Available assets reflect the financial resources of a mortgage insurer available to pay claims, and includes the most readily liquid assets held, such as cash, investments and other items as stipulated in the PMIERs. The credit provided for such assets is subject to adjustment based on several factors, including asset class, credit rating and portfolio concentration.
The risk-based required asset amount under PMIERs is determined at an individual policy-level based on the risk characteristics of each insured loan. Loans with higher risk factors, such as higher LTVs or lower borrower FICO scores, are assessed a higher charge. Non-performing loans that have missed two or more payments are generally assessed a significantly higher charge than performing loans, regardless of the underlying borrower or loan risk profile; however, special consideration is given under PMIERs to loans that are delinquent on homes located in an area declared by the Federal Emergency Management Agency to be a Major Disaster zone eligible for Individual Assistance.
NMIC’s PMIERs minimum risk-based required asset amount is also adjusted for its reinsurance transactions (as approved by the GSEs). Under NMIC’s quota share reinsurance treaties, it receives credit for the PMIERs risk-based required asset amount on ceded RIF. As its gross PMIERs risk-based required asset amount on ceded RIF increases, the PMIERs credit for ceded RIF automatically increases as well (in an unlimited amount). Under NMIC’s ILN and XOL Transactions, it generally receives credit for the PMIERs risk-based required asset amount on ceded RIF to the extent such requirement is within the subordinated coverage (excess of loss detachment threshold) afforded by the transaction.
On August 21, 2024, the GSEs and FHFA updated PMIERs to revise the Available Asset credit mortgage insurers will receive for certain assets based on several factors, including asset class and credit rating. The updated PMIERs took effect on a phased basis on March 31, 2025 and will be fully implemented on September 30, 2026. We do not expect the updated PMIERs to have a material impact on our available assets and risk-based required assets , and we expect to remain in full compliance with the existing and updated PMIERs, as applicable, prior to, on and after September 30, 2026.
NMIC is also subject to state regulatory minimum capital requirements based on its RIF. Formulations of this minimum capital vary by state, however, the most common measure allows for a maximum ratio of RIF to statutory capital (commonly referred to as RTC) of 25:1. The RTC calculation does not assess a different charge or impose a different threshold RTC limit based on the underlying risk characteristics of the insured portfolio. Non-performing loans are treated the same as performing loans under the RTC framework. As such, the PMIERs generally imposes a stricter financial requirement than the state RTC standard.
As of December 31, 2025, NMIC had a RTC ratio of 13.0:1 with $42.4 billion of primary RIF, net of reinsurance, and $3.3 billion of total statutory capital, including contingency reserves. Re One has no RIF remaining and no longer reports a RTC ratio.
NMIC’s principal sources of liquidity include (i) premium receipts on its insured portfolio and new business production, (ii) interest income on its investment portfolio and principal repayments on maturities therein, and (iii) existing cash and cash equivalent holdings. At December 31, 2025, NMIC had $3.0 billion of cash and investments, including $15.0 million of cash and cash equivalents. NMIC's principal liquidity demands include funds for the payment of (i) reimbursable holding company expenses, (ii) premiums ceded under our reinsurance transactions, (iii) claims payments, and (iv) taxes as due or otherwise deferred through the purchase of tax and loss bonds. NMIC’s cash inflow is generally significantly in excess of its cash outflow in any given period. During the twelve-month period ended December 31, 2025, NMIC generated $414 million of cash flow from operations and received an additional $425 million of cash flow on the maturities, redemptions and sales of securities held in its investment portfolio. NMIC is not a party to any contracts (derivative or otherwise) that require it to post an increasing amount of collateral to any counterparty and NMIC’s principal liquidity demands (other than claims payments) generally develop along a
scheduled path ( i.e. , are of a contractually predetermined amount and due at a contractually predetermined date). NMIC’s only use of cash with the potential to develop along an unscheduled path is claims payments. Given the relatively small size of our current population of defaulted policies, the generally extended duration of the default-to-foreclosure-to-claim cycle, and the potential availability of forbearance, foreclosure moratorium and other borrower assistance programs (which serve to further extend the default-to-foreclosure-to-claim cycle timeline), we do not expect NMIC to use a meaningful amount of cash to settle claims in the near-term.
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.
Debt and Financial Strength Ratings
NMIC’s financial strength is rated “A” by Fitch Ratings (Fitch), “A3” by Moody’s, and “A-” by S&P. NMIH’s 2024 Notes are rated “BBB” by Fitch and “Baa3” by Moody’s. The outlook for all ratings provided by Moody’s is positive and the outlook for all ratings provided by Fitch and S&P is stable.
Consolidated Investment Portfolio
The primary objectives of our investment activity are to generate investment income and preserve capital, while maintaining sufficient liquidity to cover our operating needs. We aim to achieve diversification by type, quality, maturity, and industry. We have adopted an investment policy that defines, among other things, eligible and ineligible investments; concentration limits for asset types, industry sectors, single issuers, and certain credit ratings; and benchmarks for asset duration.
Our investment portfolio is comprised entirely of fixed maturity instruments. As of December 31, 2025, the fair value of our investment portfolio was $3.1 billion and we held an additional $43.9 million of cash and cash equivalents. Pre-tax book yield on the investment portfolio for the year ended December 31, 2025 was 3.3%. Book yield is calculated as period-to-date net investment income divided by the average amortized cost of the investment portfolio. The yield on our investment portfolio is likely to change over time based on movements in interest rates, credit spreads, the duration or mix of our holdings and other factors.
The following tables present a breakdown of our investment portfolio and cash and cash equivalents by investment type and credit rating:
Percentage of portfolio's fair value
December 31, 2025
December 31, 2024
Corporate debt securities
Municipal debt securities
U.S. treasury securities and obligations of U.S. government agencies
Cash, cash equivalents, and short-term investments
Asset-backed securities
U.S agency mortgage-backed securities
Total
Investment portfolio ratings at fair value (1)
December 31, 2025
December 31, 2024
AAA (2)
BBB (3)
Total
(1) Excluding certain operating cash accounts.
(2) Includes short-term securities rated A-1+.
(3) Includes +/– ratings.
(4) We held one security with a BB rating at December 31, 2024, which is not identifiable in the table due to rounding.
All of our investments are rated by one or more nationally recognized statistical rating organizations. If three or more ratings are available, we assign the middle rating for classification purposes, otherwise we assign the lowest rating.
Investment Securities - Allowance for credit losses
We did not recognize an allowance for credit loss for any security in the investment portfolio as of December 31, 2025 or 2024, and we did not record any provision for credit loss for investment securities during the years ended December 31, 2025, 2024 or 2023.
As of December 31, 2025, the investment portfolio had gross unrealized losses of $86.3 million, of which $84.3 million were associated with securities that had been in an unrealized loss position for a period of twelve months or longer. As of December 31, 2024, the investment portfolio had gross unrealized losses of $158.6 million, of which $150.8 million were associated with securities that had been in an unrealized loss position for a period of twelve months or longer.
We evaluated the securities in an unrealized loss position as of December 31, 2025, assessing their credit ratings as well as any adverse conditions specifically related to the security. Based upon our assessment of the amount and timing of cash flows to be collected over the remaining life of each instrument, we believe the unrealized losses as of December 31, 2025 are not indicative of the ultimate collectability of the current amortized cost of the securities. Rather, the unrealized losses on securities held as of December 31, 2025 were primarily driven by fluctuations in interest rates, and to a lesser extent, movements in credit spreads following the purchase of those securities.
Taxes
We are a U.S. taxpayer and are subject to a statutory U.S. federal corporate income tax rate of 21%. Our holding company files a consolidated U.S. federal and various state income tax returns on behalf of itself and its subsidiaries.
Our effective income tax rate on pre-tax income was 22.2%, 22.3% and 22.0% for the years ended December 31, 2025, 2024 and 2023, respectively. Our effective income tax rate may vary from the statutory tax rate in a given period due to the inclusions and exclusions of income and deductions for tax purposes. Inclusions of tax deductions may include tax benefits from excess share-based compensation for vested RSUs and exercised stock options.
At December 31, 2025, we had a federal net operating loss carryforward of $0.7 million, which expires in varying amounts in 2030 and 2031, and state net operating loss carryforwards of $133.1 million, which begin to expire in varying amounts in 2032. Our ability to utilize our remaining federal net operating loss carryforward is restricted by Section 382 of the Internal Revenue Code (IRC), which imposes annual utilization limitations in the event of an “ownership change.” As a result of the acquisition of our insurance subsidiaries in 2012, $7.3 million of federal net operating losses were subject to annual utilization limitations of $0.8 million through 2016, $0.5 million in 2017 and $0.3 million, thereafter through 2028. Our remaining federal net operating loss carryforward balance is a result of this limitation.
As a mortgage guaranty insurance company, we are eligible to claim a tax deduction for our statutory contingency reserve balance, subject to certain limitations outlined under Section 832(e) of the IRC, and only to the extent we acquire tax and loss bonds in an amount equal to the tax benefit derived from the claimed deduction. As of December 31, 2025, we held $400.3 million of tax and loss bonds in “ Prepaid Federal Income Taxes” on our consolidated balance sheets.
We record a valuation allowance against the state net operating losses generated by NMIH as NMIH has historically operated at a loss, and we do not expect to utilize such net deferred tax assets in the future. We continue to evaluate the realizability of our state net deferred tax asset position, and our examination of results through December 31, 2025 and review of future expectations support the continued application of a valuation allowance against such state net deferred tax assets.
NMIH and its subsidiaries entered into a tax sharing agreement effective August 23, 2012, which was subsequently amended on September 1, 2016. Under original and amended agreements, each of the parties agreed to file consolidated federal income tax returns for all tax years beginning in and subsequent to 2012, with NMIH as the direct tax filer. The tax liability of each subsidiary that is party to the agreement is limited to the amount of the liability it would incur if it filed separate returns.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with GAAP. In preparing our consolidated financial statements, management has made estimates and assumptions, and applied judgments that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. As a result, actual results could differ materially from those estimates. A summary of the accounting estimates that management believes are critical to the preparation of our consolidated financial statements is set forth below.
Insurance Premium Revenue Recognition
Premiums for primary mortgage insurance policies may be paid on a single, monthly or annual premium basis, with such election and payment type fixed at policy inception. Premiums written at origination for single premium policies are initially deferred as unearned premiums and amortized into earnings over the estimated policy life in accordance with the anticipated expiration of risk, which is derived on an individual policy basis primarily from the term, original LTV and interest rate of the underlying insured mortgage. Monthly premiums are recognized as revenue in the month billed and when coverage is effective. Annual premiums are initially deferred and earned on a straight-line basis over the year of coverage. Upon cancellation of a policy, all remaining non-refundable deferred and unearned premium is immediately earned, and any refundable deferred and unearned premium is returned to the policyholder and recorded as a reduction to written premium and unearned premium reserve in the period paid.
Reserve for Insurance Claims and Claim Expenses
We establish reserves for claims based on our best estimate of the ultimate claim costs for defaulted loans. A loan is considered to be in “default” as of the payment date at which a borrower has missed the preceding two or more consecutive monthly payments. We establish reserves for loans that have been reported to us in default by servicers, referred to as case reserves, and additional loans that we estimate (based on actuarial review and other factors) to be in default that have not yet been reported to us by servicers, referred to as IBNR reserves. We also establish reserves for claim expenses, which represent the estimated cost of the claim administration process, including legal and other fees, as well as other general expenses of administering the claim settlement process. Claim expense reserves are either allocated ( i.e. , associated with a specific claim) or unallocated ( i.e. , not associated with a specific claim).
The establishment of claims and claim expense reserves is subject to inherent uncertainty and requires significant judgment by management. Reserves are established by estimating the number of loans in default that will result in a claim payment, which is referred to as claim frequency, and the amount of claim payment expected to be paid on each such loan in default, which is referred to as claim severity. Claim frequency and severity estimates are established based on historical observed experience regarding certain loan factors, such as age of the default, size of the loan and LTV ratios, and are strongly influenced by assumptions about the path of certain economic factors, such as house price appreciation, trends in unemployment and mortgage rates. We consider the appropriateness of such inputs at each fiscal quarter and conduct an actuarial review annually to evaluate and, if necessary, update these assumptions.
It is possible that a relatively small change in our estimates of claim frequency or claim severity could have a material impact on our reserve position and our consolidated results of operations, even in a stable macroeconomic environment. At December 31, 2025, assuming all other estimates remain constant, a one percentage point increase/decrease in our average claim frequency factor would have caused approximately a +/- $6.3 million change in our reserve position and a one percentage point increase/decrease in our average claim severity factor would have caused approximately a +/- $1.8 million change in our reserve position.
