NMI Holdings, Inc. (NMIH) Earnings Call Transcript & Summary

Good day, and welcome to the NMI Holdings, Inc. 2026 Second Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to John Swenson, Vice President of Investor Relations and Treasury. Please go ahead.

Thank you, operator. Good afternoon, and welcome to the 2026 Second Quarter Conference Call for National MI. I'm John Swenson, Vice President of Investor Relations and Treasury. Joining us on the call today are Brad Shuster, Executive Chairman; Adam Pollitzer, President and Chief Executive Officer; and Aurora Swithenbank, Chief Financial Officer. Financial results for the quarter were released after the close today. The press release may be accessed on NMI's website located at nationalmi.com under the Investors tab. During the course of this call, we may make comments about our expectations for the future. Actual results could differ materially from those contained in these forward-looking statements. Additional information about the factors that could cause actual results or trends to differ materially from those discussed on the call can be found on our website or through our filings with the SEC. If and to the extent the company makes forward-looking statements, we do not undertake any obligation to update those statements in the future in light of subsequent developments. Further, no one should rely on the fact that the guidance of such statements is current at any time other than the time of this call. Also note that on this call, we may refer to certain non-GAAP measures. In today's press release and on our website, we've provided a reconciliation of these measures to the most comparable measures under GAAP. Now I'll turn the call over to Brad.

Thank you, John, and good afternoon, everyone. I'm pleased to report that in the second quarter, National MI again delivered standout operating performance, continued growth in our insured portfolio and record financial results. Our lenders and their borrowers continue to turn to us for critical down payment support. And in the second quarter, we generated $16 billion of NIW volume, ending the period with a record $227.1 billion of high-quality, high-performing primary insurance in force. We also surpassed $500 billion of insurance ever written during the quarter, a notable milestone that serves to highlight the consistent and significant success we've been delivering for so long. National MI was formed with a goal to provide a differentiated commitment and standard of service and a clear vision as to how we should engage in the market to drive value for our borrowers, our lender customers, our employees and our shareholders. And it's remarkable to reflect on all that we have achieved to date. We've helped nearly 2.2 million borrowers gain access to a mortgage and open the door to affordable and sustainable homeownership in communities across the country. We've established a broadly diversified national customer franchise, serving over 1,700 lenders from a foundation of partnership, trust and innovation. We've attracted a talented, dedicated team who drive our success every day and have built a culture of collaboration, integrity and performance. And we have consistently outperformed, delivering exceptionally strong operating and financial results quarter after quarter. The long-term private MI market opportunity is compelling, and I'm as excited as I've ever been about how we're positioned to continue to outperform as we go forward. With that, let me turn it over to Adam.

Thank you, Brad, and good afternoon, everyone. I'm delighted to talk to you today as I share Brad's excitement about our milestone success and his confidence in the opportunity we have as we look ahead. National MI continued to outperform in the second quarter, delivering significant new business production, consistent growth in our insured portfolio and record financial results. We generated $16 billion of NIW volume and ended the period with a record $227.1 billion of high-quality, high-performing primary insurance in force. Total revenue in the second quarter was a record $187.9 million, and we delivered record adjusted net income of $106 million or $1.38 per diluted share and a 15.9% return on equity. Overall, we had a terrific quarter and are confident as we look ahead. The macro environment and housing market have remained resilient. Our lender customers and their borrowers continue to rely on us in size for critical down payment support, and we see an attractive and sustained new business opportunity fueled by long-term secular trends. We have an exceptionally high-quality insured portfolio covered by a comprehensive set of risk transfer solutions, and our credit performance continues to stand ahead. We're delivering consistent growth and embedded value gains in our insured book, and we continue to manage our expenses and capital position with discipline and efficiency, building a robust balance sheet that's supported by the significant earnings power of our platform. Taken together, we see a clear opportunity for continued outperformance. Notwithstanding these strong positives, however, macro risks do remain, and we've maintained a proactive stance with respect to our pricing, risk selection and reinsurance decisioning. It's an approach that has served us well and continues to be the prudent and appropriate course. More broadly, we've been encouraged by the continued discipline that we see across the private MI market. Overall, we had a terrific quarter, delivering strong operating performance, consistent growth in our insured portfolio and record financial results. We're in the market every day with a clear mandate and purpose, offering a low-cost, high-value solution that makes homeownership more affordable and achievable for millions of deserving Americans in communities across the country with coverage that serves to insulate the GSEs and taxpayers from risk and loss in a downturn. Looking ahead, we're well positioned to continue to serve our customers and their borrowers, invest in our employees and their success, drive growth in our high-quality insured portfolio and deliver through-the-cycle growth, returns and value for our shareholders. With that, I'll turn it over to Aurora.

Thank you, Adam. We delivered record financial results in the second quarter. Total revenue was a record $187.9 million. Adjusted net income was a record $106 million or $1.38 per diluted share and return on equity was 15.9%. We generated $16 billion of NIW and our primary insurance in force grew to $227.1 billion. 12-month persistency was 81.4% in the second quarter compared to 82.2% in the first quarter. Net premiums earned in the second quarter were a record $157.5 million compared to $154.8 million in the first quarter and $149.1 million in the second quarter of 2025. Net yield for the quarter was 28 basis points, consistent with the first quarter. Core yield, which excludes the cost of our reinsurance coverage and the contribution from cancellation earnings was 34 basis points, also unchanged from the first quarter. Investment income was $30.3 million in the second quarter compared to $28.6 million in the first quarter and $24.9 million in the second quarter of 2025. Total revenue was a record $187.9 million in the second quarter, up 2.4% compared to the first quarter and 8.1% compared to the second quarter of 2025. Underwriting and operating expenses were $30.5 million in the second quarter compared to $30.6 million in the first quarter. Our expense ratio was 19.4% in the quarter compared to 19.8% in the first quarter. We had 8,020 defaults at June 30 compared to 8,044 at March 31, and our default rate was 1.16% at quarter end. Claims expense in the second quarter was $13.1 million compared to $20.7 million in the first quarter and $13.4 million in the second quarter of 2025. Adjusted net income was a record $106 million, up 7% compared to $99.4 million in the first quarter and 10% compared to $96.5 million in the second quarter of 2025. Adjusted diluted earnings per share was a record $1.38, up 8% compared to $1.28 in the first quarter and 14% compared to $1.22 in the second quarter of 2025. Shareholders' equity as of June 30 was $2.7 billion, and book value per share was $35.89. Book value per share, excluding the impact of our net unrealized gains and losses in the investment portfolio was $36.88, up 4% compared to the first quarter and 15% compared to the second quarter of last year. In the second quarter, we repurchased $31.4 million of common stock, retiring 827,000 shares at an average price of $37.99. Since starting our buyback program in 2022, we've repurchased a total of $408 million of common stock, retiring 13.6 million shares at an average price of $29.95. We have $167 million of repurchase capacity remaining under our existing program. At quarter end, we reported $3.7 billion of total available assets under PMIERs and $2.1 billion of risk-based required assets. Excess available assets were $1.6 billion. Overall, we achieved record financial results during the quarter, delivering consistent growth in our high-quality insured portfolio, record top line performance, standout credit experience, continued expense efficiency and record bottom line profitability. With that, let me turn it back to Adam.

Thank you, Aurora. We had a terrific quarter, once again delivering significant new business production, continued growth in our high-quality insured portfolio and record financial results. We have a strong customer franchise, a talented team driving us forward every day, an exceptionally high-quality book covered by a comprehensive set of risk transfer solutions and a robust balance sheet supported by the significant earnings power of our platform. Taken together, we're well positioned to continue to serve our customers and their borrowers, invest in our employees and their success, drive growth in our high-quality insured portfolio and deliver through-the-cycle growth, returns and value for our shareholders. Thank you for joining us today. I'll now ask the operator to come back on so we can take your questions.

[Operator Instructions] The first question comes from Bose George with KBW.

Starting with credit, can you discuss home price trends in your various markets? Are there areas where you're seeing things being better or worse than your expectations coming into the year?

Yes. No, I'd say in terms of the path of house prices, broadly speaking, nationally, we continue to be encouraged month after month on a national basis, house prices are setting records. And so obviously, that's supportive for us in terms of need for our product as house prices move higher, the need for affordability support increases. It obviously bolsters credit performance. And so it's a big positive. In terms of geo-by-geo local markets, nothing new is really developing. We continue to see the strongest markets in the Northeast and the Midwest. There continues to be degrees of pressure that are emerging in Florida, Texas, parts of the rest of the Sunbelt, Mountain West and a little bit on the West Coast. But the -- from an encouraging standpoint, what we're seeing in some of those -- and those markets are the same that where we've seen pressure building, inventories building a little bit of pressure on house prices for a while now. The most recent readings are showing that, in fact, some of the MSAs within that sort of broad regional footprint are actually bottoming and beginning to move off of their lows. And so overall, nothing surprising or dramatic, generally consistent with what we've been seeing for a while now.

Okay. Great. And then actually, from a capital return standpoint, I guess, a couple of years, your pull to par, as you call it, will be done, your growth will look more similar to the others. In that scenario, it looks like some peers returned a lot of capital, others look outside the industry. Early thoughts on which camp you might fall into?

Yes. Look, I guess, one, I would say, thus far, we're really delighted with the consistency and success that we've achieved with our repurchase program. I think Aurora mentioned it, we've retired $408 million of stock, and that represents 16% of our total outstanding. As we roll forward, pace of NIW, the organic opportunity that will certainly factor into how we size our excess capital position. But that pull to par that we've talked about, which is really just as a reminder for everybody, that's the fact that our share of new business production is still meaningfully higher than our share of industry insurance in force. And so we've got this embedded growth engine. It's a powerful one. Over the last 4 years since we launched our repurchase program, we've grown our insurance in force by 49% compared to 13% growth for the rest of the industry. And so we'll make decisions and evaluate what the right allocation of capital is at all times. It's one of the most critical roles that we have. But we still see a lot of tailwind from that embedded growth engine as we look forward.

The next question comes from Rick Shane with JPMorgan.

I probably need to get in the queue just a little bit faster. I thought Bose asked the right questions, but I will follow up just briefly. When you think about -- we're now halfway through '26. And it does feel like you guys picked up a little bit of market share in the second quarter. I'm curious what you guys are seeing in the market, how aggressive you want to be. And I'm also curious to sort of benchmark how you feel about the '26 vintage from a credit perspective versus the '25 vintage, which actually is showing hallmarks of performing pretty well.

Yes. Well, maybe I'll break them into 3 pieces. What we're seeing broadly in the market in terms of competitive dynamics. I said how competitive do we want to be, what we're observing about the success we're having day-to-day with customers, and then we could talk about the credit environment and what we're seeing. I'd say, broadly speaking, from a competitive standpoint, our view, what we observe in the market is that it looks like the industry is really at a point of balance in a very constructive way. I think we continue to be highly encouraged by the unit economics that we are achieving on new business. And I think when we say we're where we should be, what we really mean is I think the industry overall and certainly our approach and where we are is that we want to make sure we are at a point where we could fully and fairly support our customers and their borrowers, but at the same time, use rate, among all the other tools that we have to appropriately protect our balance sheet, our returns and our ability to deliver long-term value for shareholders. And so that's always going to be our focus is making sure we're at a point of balance and nothing has really changed. In terms of relative growth in NIW this quarter, and I think we're the third out of six to report. So it's difficult to draw too many conclusions. I think we've had a little more growth in our NIW volume than the others who have reported. And so we're delighted with the result that we've achieved in the quarter, right? We wrote $16 billion of high-quality high-return new business. We're working hard to support everybody who's turning to us in the market. But as for a specific market share read-through, I think this is all just sort of in the normal plus/minus, right? There's always going to be fluctuations up or down that happen at any point in time. It could be because volume may have moved from one originator to another where we happen to have greater wallet share, right? MI relationships aren't even across the board. And so there's really, I think, nothing of note that I would point out. And it's -- there's really nothing we do to manage the market share. What we do is to manage how we engage and show up for our customers every day. Rick, I'll pause and see if you had any follow-up there before I talk about the 2026 credit environment.

No, that's very helpful. And yes, I realize my question was long. So go ahead, please. Sorry.

No, no problem. I'd say in terms of 2026 credit, most important, the underlying characteristics of the production that we're bringing on to the portfolio now are still incredibly high quality. We're still using all the tools that we've invested to develop individual risk underwriting, rate GPS, the broad use of reinsurance on the back end to shape the profile of our portfolio. And I'd say as we're doing that, what we've really been most encouraged by is the resiliency that we're seeing in the economy and housing market as a backdrop that sets the stage for a constructive environment today and hopefully strong performance as we carry from here. It's obviously very early, but we're not seeing anything in our portfolio experience on the early payment default side or other markers of underwriting strain that are emerging, and we think it's another high-quality productive year.

The next question comes from Mihir Bhatia with Bank of America.

Adam, I was wondering if you could just follow up on the last point on credit and just in terms of the production you're seeing. I guess, I think you talked about your portfolio and not seeing any signs, but maybe just talk a little bit about competition and just pricing activity in the market. Are there any markets or pockets of the market where you feel things have gotten a little irrational or you've had to move away from or pull back in?

Mihir, it's a good question. Look, I'd reiterate, I'd say, broadly speaking, we think the industry is at a point of constructive balance right now. We're not seeing any notable moves. I think the industry overall and certainly when we're bringing volume into our books is where we should be and providing that sort of balanced support for customers and borrowers and making sure, obviously, that we're building a high-quality portfolio that can generate adequate returns and meet our thresholds. That's still broadly the case in the market. The areas, I would say, where we see a little more pressure are nothing new. It's in the -- some of the larger transactionally oriented business, but that's not a new development in the market. That's been the case for going on 10 years at this point.