NMI Holdings (NMIH)

Mortgage insurance provider NMI Holdings (NASDAQ:NMIH) met Wall Street’s revenue expectations in Q4 CY2025, with sales up 8.5% year on year to $180.7 million. Its non-GAAP profit of $1.20 per share was in line with analysts’ consensus estimates.

Company Overview

Founded in the aftermath of the 2008 housing crisis to bring new capacity to the mortgage insurance market, NMI Holdings (NASDAQ:NMIH) provides mortgage insurance that protects lenders against losses when homebuyers default on their mortgage loans.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

NMI Holdings competes with other private mortgage insurers including MGIC Investment Corporation (NYSE:MTG), Essent Group (NYSE:ESNT), Radian Group (NYSE:RDN), and Enact Holdings (NASDAQ:ACT), as well as government-backed mortgage insurance provided by the Federal Housing Administration (FHA).

Insurance companies earn revenue from three primary sources: 1) The core insurance business itself, often called underwriting and represented in the income statement as premiums 2) Income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities 3) Fees from various sources such as policy administration, annuities, or other value-added services. Over the last five years, NMI Holdings grew its revenue at a solid 10.3% compounded annual growth rate. Its growth surpassed the average insurance company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. NMI Holdings’s annualized revenue growth of 10.5% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.

This quarter, NMI Holdings grew its revenue by 8.5% year on year, and its $180.7 million of revenue was in line with Wall Street’s estimates.

Net premiums earned made up 88.2% of the company’s total revenue during the last five years, meaning NMI Holdings barely relies on non-insurance activities to drive its overall growth.

Markets consistently prioritize net premiums earned growth over investment and fee income, recognizing its superior quality as a core indicator of the company’s underwriting success and market penetration.

Net premiums earned are net of what’s paid to reinsurers (insurance for insurance companies), which are used by insurers to protect themselves from large losses.

NMI Holdings’s net premiums earned has grown at a 8.7% annualized rate over the last five years, slightly better than the broader insurance industry but slower than its total revenue.

When analyzing NMI Holdings’s net premiums earned over the last two years, we can paint a similar picture as it recorded an annual growth rate of 8.6%. Since two-year net premiums earned grew slower than total revenue over this period, it’s implied that other line items such as investment income grew at a faster rate. These additional streams do play a key role in the bottom line, but their impact can vary. While some firms have excelled in consistently investing their float, sudden shifts in the fixed income and equity markets can heavily sway short-term performance.

In Q4, NMI Holdings produced $152.5 million of net premiums earned, up 6.2% year on year and in line with Wall Street Consensus estimates.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at the combined ratio rather than the operating expenses and margins that define sectors such as consumer, tech, and industrials.

The combined ratio sums the costs of underwriting (salaries, commissions, overhead) as well as what an insurer pays out in claims (losses) and divides it by net premiums earned. If a company boasts a combined ratio under 100%, it is underwriting profitably. If above 100%, it is losing money on its core operations of selling insurance policies.

Given the calculation, a lower expense ratio is better. Over the last five years, NMI Holdings’s combined ratio has swelled by 18.7 percentage points, going from 34.8% to 29.5%. However, the company gave back some of its expense savings as its combined ratio worsened by 3.4 percentage points on a two-year basis.

In Q4, NMI Holdings’s combined ratio was 34.3%. This result was in line with the same quarter last year.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

NMI Holdings’s EPS grew at a remarkable 17.3% compounded annual growth rate over the last five years, higher than its 10.3% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its combined ratio didn’t improve.

We can take a deeper look into NMI Holdings’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, NMI Holdings’s combined ratio was flat this quarter but improved by 18.7 percentage points over the last five years. On top of that, its share count shrank by 9.3%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For NMI Holdings, its two-year annual EPS growth of 13.1% was lower than its five-year trend. This wasn’t great, but at least the company was successful in other measures of financial health.

In Q4, NMI Holdings reported adjusted EPS of $1.20, up from $1.07 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects NMI Holdings’s full-year EPS of $4.91 to grow 3.8%.

Insurance companies are balance sheet businesses, collecting premiums upfront and paying out claims over time. The float – premiums collected but not yet paid out – are invested, creating an asset base supported by a liability structure. Book value captures this dynamic by measuring:

• Assets (investment portfolio, cash, reinsurance recoverables) - liabilities (claim reserves, debt, future policy benefits)

BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality because it reflects long-term capital growth and is harder to manipulate than more commonly-used metrics like EPS.

NMI Holdings’s BVPS grew at an incredible 16.1% annual clip over the last five years. BVPS growth has also accelerated recently, growing by 19.5% annually over the last two years from $23.81 to $33.98 per share.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

NMI Holdings currently has $417 million of debt and $2.59 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.2×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for an insurance business. Anything below 0.5× is a bonus.

Return on equity, or ROE, represents the ultimate measure of an insurer's effectiveness, quantifying how well it transforms shareholder investments into profits. Over the long term, insurance companies with robust ROE metrics typically deliver superior shareholder returns through a balanced approach to capital management.

Over the last five years, NMI Holdings has averaged an ROE of 17.4%, excellent for a company operating in a sector where the average shakes out around 12.5% and those putting up 20%+ are greatly admired. This shows NMI Holdings has a strong competitive moat.

We struggled to find many positives in these results. Overall, this was a softer quarter. The stock remained flat at $40.20 immediately following the results.

Updated: February 10, 2026 at 4:14 PM EST

Before making an investment decision, investors should account for NMI Holdings’s business fundamentals and valuation in addition to what happened in the latest quarter.

There are multiple reasons why we think NMI Holdings is an amazing business. For starters, its revenue growth was solid over the last five years. And while its projected EPS for the next year is lacking, its improving combined ratio shows the business has become more productive. On top of that, NMI Holdings’s BVPS growth was exceptional over the last five years.

NMI Holdings’s P/B ratio based on the next 12 months is 1x. Scanning the insurance space today, NMI Holdings’s fundamentals really stand out, and we like it at this price.

Wall Street analysts have a consensus one-year price target of $45.14 on the company (compared to the current share price of $40.20), implying they see 12.3% upside in buying NMI Holdings in the short term.