National MI (NMIH) Q1 2026 earnings review
Top-Line Expansion Meets Credit Normalization
National MI delivered a quarter of mixed trajectories. Total Revenue hit a record $183.5 million (+6% YoY), fueled by a primary insurance-in-force (IIF) portfolio that compounded to $222.3 billion. However, this volume growth did not reach the bottom line. Net Income fell 3% YoY to $99.3 million, marking a reversal in earnings growth. This divergence is driven entirely by the normalization of credit: the loss ratio climbed to 13.3% from an abnormally low 3.0% a year ago. While the company's 15.2% ROE and capital position remain robust, investors must weigh the steadily expanding portfolio against slowly creeping default rates and lower persistency.
🐂 Bull Case
Primary Insurance-in-Force (IIF) grew 5% YoY to $222.3 billion. The fundamental engine of the business is healthy, driving record net premiums earned of $154.8 million.
Operating leverage remains a bright spot. The expense ratio tightened to 19.8%, ensuring that top-line growth is protected from administrative bloat.
🐻 Bear Case
Net income shrank YoY because claims expenses jumped from $4.5 million in 25Q1 to $20.7 million in 26Q1. Credit normalization is eating into margins.
Annual persistency dropped to 82.2% from 84.3% a year ago. A faster-turning book forces the company to write more new business just to tread water.
⚖️ Verdict: ⚪
Neutral. Management is executing flawlessly on what they can control (expenses, capital returns, new originations), but macro-driven credit normalization and declining persistency are structurally capping bottom-line growth.
Key Themes
Credit Normalization Biting the Bottom Line
The loss ratio is Accelerating (worsening). While management frequently touts strong operating performance, the data shows credit normalization is fully underway. The default rate climbed steadily to 1.17% (8,044 loans) from 1.04% (6,859 loans) a year ago. Consequently, insurance claims and claim expenses multiplied by more than 4x YoY to $20.7 million. The era of near-zero loss ratios (3.0% in 25Q1) that heavily padded EPS in previous quarters has ended.
Relentless Portfolio Expansion
Primary Insurance-in-Force (IIF) is Stable, growing reliably quarter after quarter. IIF reached a record $222.3 billion, up 5% YoY. This is the core engine of National MI's business model, creating a vast base of recurring net premiums earned, which grew 4% YoY to $154.8 million.
Macro Impact: Persistency Headwinds
Annual persistency is Decelerating, falling to 82.2% in 26Q1 from 84.3% in 25Q1 and 83.4% in 25Q4. As interest rate environments shift, refinance activity pulls loans out of the portfolio faster. This is a double-edged sword: it forces the company to originate more New Insurance Written (NIW) just to replace the run-off, increasing acquisition efforts and acting as a headwind to net premium growth.
Sequential Drop in New Business Production
New Insurance Written (NIW) is Reversing. Despite the positive narrative around overall market strength, Q1 NIW came in at $12.3 billion. While this is up an impressive 33% YoY from a weak 25Q1, it represents a 14% sequential drop from $14.2 billion in 25Q4. A sequential slowdown in originations combined with falling persistency poses a threat to future IIF compounding.
Investment Income Tailwinds
Net Investment Income is Accelerating, up 21% YoY to $28.6 million. The company is effectively capitalizing on the higher interest rate environment by reinvesting cash flows from operations and maturing assets at higher current yields. This provides a crucial buffer to offset the normalization of claims expenses.
Unforgiving Expense Discipline
Operating leverage is Stable. The company's expense ratio tightened to 19.8% in Q1, down from 20.4% in Q4 and 20.2% a year ago. Underwriting and operating expenses were essentially flat YoY at $30.6 million despite a 5% larger portfolio, demonstrating excellent scalability.
Rate GPS and Risk Selection
The company continues to lean on its 'Rate GPS' proprietary pricing tool. This technology allows National MI to actively manage its geographic mix across 950 MSAs, avoiding risk concentrations in softening housing markets while optimizing unit economics on new policies.
Other KPIs
The balance sheet is fortress-like. The company ended Q1 with $3.63 billion in total PMIERs available assets against just $2.17 billion in net risk-based required assets. This massive 67% cushion provides flexibility for both aggressive share repurchases and navigating any severe macroeconomic shocks.
Accelerating. Up 3% sequentially and an impressive 15% YoY from $30.85 in 25Q1. This metric proves the underlying compounding power of the business model, heavily aided by ongoing share repurchases shrinking the denominator.
Stable. While down from the unusually high 18.1% seen in 25Q1 (which benefited from minimal claims), a 15.2% ROE represents an extremely healthy baseline profitability for a capital-intensive insurance business in a normalizing credit environment.
Guidance
Stable. While management does not provide explicit numerical guidance for operating KPIs, prior commentary sets a baseline expectation of approximately $25 million in quarterly share buybacks. The company remains highly opportunistic in deploying its excess PMIERs capital to support EPS.
Key Questions
Floor for Persistency
Annual persistency fell further to 82.2% this quarter. Given current interest rate forecasts and the aging of pandemic-era vintages, where does management see persistency bottoming out, and how does that impact the targeted IIF growth rate?
Credit Normalization Trajectory
With the loss ratio jumping to 13.3% and the default rate climbing to 1.17%, at what point does management expect the credit normalization of the 2022-2024 vintages to peak?
Reinsurance Pricing Impacts
Given the increase in primary loss ratios across the industry, what pricing dynamics are you anticipating for the next cycle of Quota Share and XOL reinsurance renewals?