NMI Holdings (NMIH) Q4 2025 earnings review
Volume Accelerates, Earnings Compress
NMI Holdings delivered a mixed Q4. Top-line performance was robust, with New Insurance Written (NIW) accelerating to a record $14.2 billion (+19% YoY). However, this volume growth did not translate into immediate earnings momentum. Adjusted Net Income declined sequentially for the third straight quarter ($93.8M vs $95.7M in Q3) as credit normalization took hold—the loss ratio climbed to 13.9%, and expenses ticked up. Despite the earnings compression, book value compounding remains a standout, with Adjusted Book Value per Share growing 16% YoY.
🐂 Bull Case
New Insurance Written (NIW) accelerated significantly to $14.2B, up 19% YoY and 9% sequentially. This marks the highest volume in recent quarters, driving Insurance-in-Force (IIF) to a record $221.4B.
Despite margin headwinds, the book value compounding engine is intact. Adjusted Book Value per Share rose 16% YoY to $34.58, supported by active share repurchases (diluted share count down ~3% YoY).
🐻 Bear Case
The credit environment is normalizing rapidly. The loss ratio deteriorated to 13.9% from 12.3% in Q3 and just 3.0% in Q1. Claims expenses rose 23% YoY, and the default rate ticked up to 1.12%.
Operational efficiency took a step back. The expense ratio rose sequentially to 20.4% from 19.3% in Q3, contributing to the sequential decline in net income.
⚖️ Verdict: ⚪
Neutral. The acceleration in new business volume is a strong leading indicator, but the sequential erosion in earnings power due to rising credit costs and expenses demands caution. The 16% book value growth offers a solid floor.
Key Themes
NIW Acceleration
New business volume is accelerating sharply, defying broader housing market stagnation concerns. NIW grew from $9.2B in Q1 to $14.2B in Q4, a clear trajectory of market share gains or improved demand.
Loss Ratio Normalization
The era of benign credit is ending. The loss ratio has steadily climbed throughout FY25, moving from 3.0% in Q1 to 13.9% in Q4. While 13.9% is historically manageable, the velocity of the increase suggests headwinds for 2026 earnings growth.
Book Value Compounding
NMIH continues to generate steady shareholder value. Adjusted Book Value per Share grew 16% YoY to $34.58. Even with earnings compression, the ROE of ~14.8% supports continued double-digit book value expansion.
Rising Default Inventory
The number of loans in default rose to 7,661, up 15% from 6,642 a year ago. The default rate increased to 1.12%, signaling that the portfolio is seeing increased stress as vintages season.
Capital Return
The company continues to shrink its float. Diluted weighted average shares outstanding dropped to 78.2 million from 80.6 million a year ago (-3%), providing a tailwind to EPS.
Other KPIs
Stable. Up 5% YoY and 1% QoQ. The growth in IIF provides a growing base for premium revenue, though it lags the rapid acceleration seen in NIW due to portfolio runoff.
Decelerating. While up 12% YoY, EPS was virtually flat vs Q3 ($1.21) and down from the peak of $1.28 in Q1, reflecting the margin squeeze from higher claims.
Reversing. After hitting a low of 19.3% in Q3, the expense ratio ticked back up above 20%. While lower than the 21.7% seen a year ago, the sequential rise added to margin pressure.
Key Questions
Loss Ratio Ceiling
With the loss ratio climbing from 3% to nearly 14% in one year, where does management see this metric stabilizing in FY26? Are we approaching a peak, or is this a return to a structurally higher norm?
NIW Drivers
Q4 NIW growth of 19% was impressive. Was this driven by specific market share gains, pricing actions, or broader market activity, and is this $14B+ quarterly run-rate sustainable?
Expense Trajectory
After a record low expense ratio in Q3, Q4 saw a significant tick up. Was Q3 an anomaly, and should we model ~20.5% as the baseline going forward?