NMI Holdings, Inc. Class A Stock

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.

Great. And then maybe just on the default inventory. The loans in default this quarter ticked a little bit lower, I guess, just marginally. Was that just seasonality and tax refunds? Or should we read more into it? I guess anything to call out in terms of cures that has changed in the last few months that we should just keep an eye on? And if you can even just comment on where you think default rates head from here?

Yes. In terms of the activity in the quarter, I think you're right that there is a seasonal component to that. And just as a reminder, we tend to see with tax refunds, year-end bonuses and getting through the holidays in the first half of the year, there tends to be more positive credit experience and then the tide tends to turn on that in the back half of the year. So there was certainly some component of that. Some of that falls in the first quarter, some of that falls into the second quarter. There's also the broader macroeconomic environment and the macro data, notwithstanding some headlines continues to be very strong.

The employment data is very strong. HPA continues to perform, as Adam just spoke about. So I think that's all very supportive of the default performance. And in terms of outlook going forward, as you know, we don't provide any guidance. But what I'd say is just point to the fact that some of those seasonal tailwinds that we have in the first part of the year become seasonal headwinds as we head into the back part of the year. And we're keenly, as I know everyone is watching the macroeconomic environment since I think that will be a key determinant of outcomes.

Yes. We'd expect our default population to trend a bit higher from here. One, we talked for a while that we're seeing just a natural normalization of our credit experience given the growth and seasoning of the portfolio. And then as Aurora pointed to, seasonal dynamics, we always see a trend higher first in the third quarter and then again as we get into the back end of the year in the fourth quarter.

The next question comes from Mark Hughes with Truist.

The core yield of 34 basis points, given what you're seeing with pricing and the new business you're bringing on, is that sustainable at that level?

As you're aware, we don't provide any forward-looking guidance. Obviously, the yield will be supported by the persistency of the in-force book. And so that tends to be a pretty stable number. It is influenced by the persistency of the in-force and the premium that we're bringing on in the new business. So I'd expect that to be reasonably stable plus/minus, but it can be influenced by things like rate movements, which might cause a greater cohort of, say, refinancing activity to come through.

Refinancing activity tends to be a little bit higher quality and therefore, lower premium because you have borrowers who have higher FICO scores, they've been making payments on their mortgage. They may have embedded equity in those transactions. And so there's a number of things that can influence it. But given the large and stable in-force that we have and the strong persistency in the book, we would expect that to be broadly stable.

Very good. And then the prior year reserve gains continue to be strong. Adam, is there anything structurally when we think back at the timing of the different vintages, COVID, post-COVID, you name it, anything that you would call out as potentially influencing the trajectory of those prior year gains? I know they're obviously influenced by underlying credit trends, but anything else structurally or timing-wise that we ought to think about?

No, it's a good question, and we always probe on this as we're doing our own internal analysis, but there really isn't anything. It's the fact that we're still in quite a constructive environment in terms of macro and housing market dynamics. And our existing borrowers remain really well situated, even those that are falling behind because of the strength in the labor market, because of the embedded equity in their homes, a lot of them are able to catch up and cure out a default at admittedly a faster and more successful pace than what we had anticipated when we established the initial reserves, which is why we then have favorable development. But nothing that's structural or tied to a specific vintage. It's still just -- what we're seeing is really a constructive credit environment.

Very good. And then maybe just one more, if I could. The expense ratio, net expense ratio continues to show nice improvement. Anything around timing on that, that could change that trajectory?

I think there's always seasonal fluctuations to expenses. We've talked about in the first quarter, there's the FICA reset and 401(k) contributions. And depending on the trajectory of earnings when that's strong, you have some accruals associated with share-based compensation. So those are things that kind of come year in, year out. So there's no particular large expenditures that we are planning or that we have on the horizon, which would impact the broad trajectory of expenses.

The next question comes from Riley Sandom with RBC.

I'm on for Roland Mayer this evening. Can you walk through how you're thinking about traditional versus nontraditional reinsurance? And are you seeing any appetite change from reinsurers as P&C markets have softened?

I'll just make one comment and then Aurora will share more. The idea of traditional versus nontraditional. So for us, it's all traditional because the ultimate structure that we face off against, it's excess of loss or it's quota share. We may source that capacity from a traditional slate of reinsurers or we may source it from the capital markets in the form of ILN. But the transactions that we have are all quota share or excess of loss, but I'll let Aurora speak to how we think about the balance between those 2 sources.

We like diversity in our sources of reinsurance. Recently, we've been more focused on traditional forms of reinsurance to use your vocabulary. And honestly, that's on a couple of different vectors. One is we've been getting excellent execution, and I can go through reinsurer appetite and sort of what's driving that. We're able to get a little bit more flexible terms. So in the capital markets, you need to warehouse risk either on your own balance sheet or a warehouse facility in order to get the volume you need to do a securitization and place that into the capital markets. So that's an extra complexity. Whereas in the reinsurance market, we have forward flow coverage, so we can lock in at a price certain today, coverage going out as far as 3 years in the future.

So that's pretty terrific in terms of the capital runway that it gives us and the certainty of execution for a complete planning horizon. And just the overall speed of execution in the reinsurance market, it tends to be very quick, and we can do it in smaller size. Debt capital markets transactions or securitization transactions, you need a minimum bulk in order to cover the fixed costs associated with those transactions. And so they tend to be a little bit less flexible, and we can't be quite as nimble in that market. Now that said, we like the ILN market. We would like to be back to the ILN market. And I'll pivot back to what I said at the beginning, which is we like having a diversity of different outlets for our risk transfer.

So you'll expect to see us at certain points in the cycle come back to that market. And then I said I'd come back to why are reinsurers providing capital on such attractive terms. I think it's a couple of things. One, we've had a number of new reinsurers start writing mortgage reinsurance risk. I think they've seen the success of the early participants in that market. And so there is additional capacity as additional reinsurers join the market, hire teams, build analytics. And then there's a competitive dynamic. The GSEs have been laying off less risk into the reinsurance market over the past several years. And so that has left the private mortgage insurers as the primary source of that risk. And that's certainly been an important supply-demand dynamic in terms of the pricing.

So I'd point to those things. And then as you said, there's a broader softness in certain other lines of business. But broadly, this has been a line of business that's been very profitable for the reinsurers and is diversifying and noncorrelated with some of their other businesses. So I think that remains true today.

Very helpful. And if I could squeeze one more in here. The 21st Century Road to Housing Act went into effect earlier this month. And I was wondering if you believe any of those provisions or any other legislative proposals are able to help unfreeze this market?

I'd say, overall, we've been encouraged by what I would term a renewed focus that we've seen from the administration, from Congress and others in D.C. on the housing market and housing finance issues. As for the 21st Century Road to Housing Act, I think it is great to see a coordinated bipartisan effort aimed at increasing housing supply, by streamlining the development process and ultimately improving affordability. We have a supply shortage of single-family homes in the United States.

And so a broad coordinated bipartisan effort that brings focus and hopefully solutions to that issue is terrific. So we're hugely supportive. What I would say, though, I'll focus more on us, right, in our market. I think while it's important overall, and it's also noteworthy because it's really the first major piece of housing legislation that we've had in the U.S. since the 1990s. While we expect that it will be valuable for housing supply for affordability over the long term, it's not going to happen immediately. And because it's a supply-focused initiative, we don't expect that it's going to have a significant impact on the private MI market for our business, certainly not in the near term.

This concludes our question-and-answer session. I would like to turn the conference back over to Adam Pollitzer for any closing remarks. Please go ahead.

Thank you all again for joining us. We'll be participating in the Barclays Financial Services Conference in New York on September 15. We look forward to speaking with you again soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the NMI Holdings Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I'd now like to turn the conference over to John Swenson of management. Please go ahead.

Thank you, operator. Good afternoon, and welcome to the 2026 First 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, our Chief Financial Officer. Financial results for the quarter were released after the close today. The press release may be accessed on Minimize 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 first quarter, National MI again delivered standout operating performance, continued growth in our insured portfolio and strong financial results. Our lenders and their borrowers continue to turn to us for critical down payment support. And in the first quarter, we generated $12.3 billion of NIW volume. Ending the period with a record $222.3 billion of high-quality, high-performing primary insurance in-force.

In Washington, our conversations remain active and constructive. We have long noted that there is bipartisan recognition of the unique and valuable role that the private mortgage insurance industry plays. We are in the market every day with a clear mandate and purpose, offering a low-cost, high-value solution that helps borrowers bridge the down payment gap and meaningfully reduces the cash required at the closing table. In the process, we help to make homeownership more affordable and achievable for millions of Americans in communities across the country. With coverage that works to insulate the GSEs and taxpayers from risk and loss in a downturn.

National MI and the broader private MI industry have never been stronger or better positioned to provide support than we are today, and we're looking forward to continuing to work with the administration to advance their important housing goals.

With that, let me turn it over to Adam.

Thank you, Brad, and good afternoon, everyone. National MI continued to outperform in the first quarter, delivering significant new business production, consistent growth in our insured portfolio and strong financial results. We generated $12.3 billion of NIW volume and ended the period with a record $222.3 billion of high-quality, high-performing primary insurance in-force. Total revenue in the first quarter was a record $183.5 million, and we delivered adjusted net income of $99.4 million or $1.28 per diluted share and a 15.2% adjusted 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 through an extended period of headline volatility. 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 PAUSE 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. Underwriting standards remain rigorous, and the pricing environment remains balanced and constructive. Overall, we had a terrific quarter, delivering strong operating performance, consistent growth in our insured portfolio and strong financial results.

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 and short 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 again delivered strong financial results in the first quarter. Total revenue was a record $183.5 million. Adjusted net income was $99.4 million or $1.28 per diluted share, and adjusted return on equity was 15.2%. We generated $12.3 billion of NIW and our primary insurance in-force grew to $222.3 billion. 12-month persistency was 82.2% in the first quarter compared to 83.4% in the fourth quarter. Net premiums earned in the first quarter were a record $154.8 million compared to $152.5 million in the fourth quarter and $149.4 million in the first quarter of 2025.

Net yield for the quarter was 28 basis points, consistent with the fourth 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 fourth quarter. Investment income was $28.6 million in the first quarter compared to $27.5 million in the fourth quarter and $23.7 million in the first quarter of 2025. Total revenue was a record $183.5 million in the first quarter, up 2% compared to the fourth quarter and 6% compared to the first quarter of 2025.

Underwriting and operating expenses were $30.6 million in the first quarter compared to $31.1 million in the fourth quarter. Our expense ratio was 19.8% in the quarter compared to 20.4% in the fourth quarter. We have a uniquely high-quality insured portfolio and our credit performance continues to stand out. We had 8,044 defaults at March 31, and compared to 7,661 at December 31, and our default rate was 1.17% at quarter end. Claims expense in the first quarter were $20.7 million compared to $21.2 million in the fourth quarter and $4.5 million in the first quarter of 2025. GAAP net income for the first quarter was $99.3 million and diluted earnings per share was $1.28. Adjusted net income was $99.4 million and adjusted diluted EPS was also $1.28.

Shareholders' equity as of March 31 was $2.6 billion and book value per share was $34.57. Book value per share, excluding the impact of net unrealized gains and losses in the investment portfolio was $35.46, up 3% compared to the fourth quarter and 15% compared to the first quarter of last year. In the first quarter, we repurchased $27.7 million of common stock, retiring 716,000 shares at an average price of $38.65. Since starting our buyback program in 2022, we've repurchased a total of $377 million of common stock, retiring 12.8 million shares at an average price of $29.43 a. We have $198 million of repurchase capacity remaining under our existing program.

At quarter end, we reported $3.6 billion of total available assets under PMIERs and $2.2 billion of risk-based required assets. Excess available assets were $1.5 billion. Overall, we achieved robust financial results during the quarter, delivering consistent growth in our high-quality portfolio, record top line performance, continued expense efficiency and strong bottom line profitability and returns.

With that, let me turn it back to Adam.

Thank you, Aurora. We had a terrific quarter, once again delivering significant new business production consistent growth in our high-quality insured portfolio and strong 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 are 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 today comes from Bose George with KBW.

Just first, I wanted to ask what was the default per new notice this quarter versus last quarter that's a little hard to calculate sometimes is with the intra-quarter cures.

Bose is the question specifically around the reserve from new notice?

Yes, the reserve for new notice for this quarter versus last?

It's 14,200, which is broadly consistent with the 14,500 that we established last quarter.

Okay. Great. And in terms of the delinquency rate in the first quarter over the fourth quarter, was that in line with expectations given the seasonality increase, but obviously, it was a very modest increase.

Yes. Bose, I think that's right. Look, broadly speaking, I'd say we're really encouraged by the credit performance of our portfolio, including the trends in our default population. We've talked about it. We're continuing to see a natural normalization in our experience tied to just the growth and seasoning of our book. That's nothing new.

And then seasonality, you noted there's always going to be a plus/minus around that seasonality. Just one, depending on how things trended in the preceding quarter because it's a period-to-period view what's happening in the macro. And there's other factors also that can play into it, particularly in the first quarter, the timing of when borrowers received their tax refunds, for example.

But as you noted, when we look at it, we have an incredibly high-quality portfolio. Our existing borrowers are broadly well situated and the resiliency that we continue to see in the macro environment and housing market continues to set a favorable backdrop. And when all of that comes through performance, we were really encouraged by the performance. Nothing stood out to us that we highlight as a point of concern.

Okay. Great. Actually, just one more on credit. The loss severity number trended up a little bit as well. Anything to call out there? Or is it just a small cohort of loans there?

Yes. I think it is that. It's a law of small numbers. And also, it reflects what Adam was just talking about of the growth of the seasoning of our book. More and more of our ultimate claims, both our NODs and those progressing through to claims are from those post-covid vintages, the 22s and later, which inherently have less embedded equity in them.

Yes, we only paid 170 claims in Q1. So it's still a very small pool to draw from.

The next question comes from Terry Ma with Barclays.

Any just a follow-up on credit. anything kind of notable to kind of call out either within the vintages or regionally that you're kind of seeing. And then just overall, how are you thinking about the macro environment on just the consumer with higher energy prices?

Yes. Maybe I'll take them in reverse order because I think probably useful to talk about the big picture and then to talk about anything that stood out in the quarter. I think we've been -- we used the springs encouraged right across the board, but we've really been encouraged by the broad resiliency that that we've seen in the housing market and the economy for a while now. I think headline unemployment is still low.

Consumers are still spending. -- businesses are continuing to make significant investments. Equity market continues to set new highs. And I think we've got a little bit of stimulus coming in just in the form of larger tax refunds under the one Big Beautiful Bill Act. But real risks do remain, right? The labor market continues to show some signs of strain with the slowdown in hiring activity. Confidence is certainly down on the consumer side. And sort of getting to what you've touched on, I think the conflict in the Middle East has certainly added a new dimension to things.

But I think the approach that we've generally been taken all along is to plan for the possibility that stress could emerge. And if it doesn't, we'll be happy to have planned and protected nonetheless. And I think we're in the point now of being happy, right, being happy to have built our business with an eye towards disciplined and long-term risk responsibility to make sure that we can continue to perform through all cycles.

But right now, when we look at the backdrop, it's still a broadly encouraging one. And in terms of the impact specifically from higher gas prices I mentioned that the conflict in Iran has added a new dimension. But in terms of gas prices themselves, we really don't expect to see a notable impact. If you parse through all of the data although oil prices are up dramatically and there is real impact for certain households, they're still below actually where they were in 2022 at the onset of the war in Ukraine. And on an inflation-adjusted basis, they're still below where they were in the late 2000s, early 2010s. Gas today accounts for roughly 3% of household expenditures.

And so when you put all of that together, while there will certainly be pockets of the market that are impacted and it will have a impact perhaps on broad consumer behavior, we don't really expect to see anything of consequence comes through in our default activity or claims experience, again, in isolation related to gas prices.

As to the second question, as to whether or not there's anything that we would call out in the default population. Nothing new at all, I would say, in terms of borrower risk or geographic concentrations that emerged in Q1 compared to where they've been, all the same trends that we've seen for a while, which is a little more strain in higher risk cohorts, right? More default concentration in the geographies that we've had in focus for a while now like Florida and Texas. And just this natural movement that Aurora mentioned in terms of the vintage composition, right, with an incremental portion of our defaults now tracing to '22, '23, '24. But none of this is new. It's just a continuation of the themes that we've been talking about and seeing for a while now.

Got it. That's super helpful. I guess maybe taking a step back, big picture, I think it's well-known and also well messaged that the MI industry is experiencing measured credit normalization. Is there anything in this quarter that may suggest that, that rate of normalization may be accelerating? Because at least from the outside looking in, from what we could see, it looks like new notices are accelerating on a year-over-year basis. The cure rate is lower also relative to last year. So like anything that may suggest that the rate of credit normalization may be accelerating? Or should it just kind of stay stable? Like, any color would be helpful.

Yes, obviously, so much depends on what happens in the world around us, but there's nothing that stood out this quarter that makes us think we will get to normal quicker than where we were otherwise facing. I do think the quarter-on-quarter trend is obviously instructive and it's valuable to look at. If you broaden the aperture a bit, though and look at, say, how NOD count has trended over the last 6 months, just not the last quarter and you compare the experience that we've had, say, from the end of Q3 '25 to Q1 '26. It actually comps favorably to the experience that we had at the end of the third quarter of '24 to the first quarter of '25.

So again, I think it's -- there's nothing that really stands out. Borrowers are broadly well situated. The environment around us is still quite a favorable one. And movements quarter-to-quarter, nothing stood out in a way that we call attention to.

And just on the cure rate, it was down at 28%, but it was 31% in the first quarter of last year. So it was only very nominally down year-over-year.

The next question comes from Rick Shane with JPMorgan.

I apologize, I've got a few things going on here. But look, we -- first quarter, and we talked about this a lot with the consumer finance names. First quarter was sort of a tale of 2 quarters. And I would describe, we had January and February pre Iran, we're now March and April, we have 2 months post. I am curious how that sort of impacted the contours of your quarter in terms of volume? And also curious if you saw anything else that we should be aware of?

Yes. Rick, it's a good question. I think confidence obviously plays an important role in the consumer decision to purchase a home, right? For most borrowers, it's the single largest item that lever assets that they ever own. And not only do you need to have -- be at a point in life where it makes sense in terms of family dynamics and want to put down roots to the community and to were considered to the school and all these life events and not only just the math have to pencil out from an affordability and a value standpoint, but you have to feel confident to make such a significant leap. So that does play a role in it. But even more important is the art of interest rates.

And so it happens to be that the period you talked about January and February, we saw a continued rally in rates, and we touched towards the end of February a multiyear low with a 5.99% rate. And even though it's just a touch below 6%, I think the psychological value of seeing a rate with a 5 handle on it is really powerful. And since then, rates have sold off and I think today, we closed something close to 6.5%. And on the 30-year fixed rate mortgage. And so we're seeing some of that come through where that hits most specifically is on the pace of refinancing activity. So the first quarter was a strong quarter for purchase volume, it was an even stronger quarter from a refinancing volume standpoint, and we've seen some of that begin to slow just as rates have moved somewhat higher, right, 50 basis points is a pretty significant move. I think that's going to be a much more significant driver than the psychology and confidence that comes around what's happening in the Middle East.

The next question comes from Mark Hughes with Truist.

I wonder if you could talk about the competition, the competitive dynamic in the quarter. Your NIW was quite strong year-over-year. I think you just touched on the cancellations, which I assume was a little more refi activity in the quarter. But anything you would say about competition, what that implies for the balance of the year?

Yes. I guess what I mentioned that we see a broadly balanced and constructive market environment around us both in terms of how lenders are engaging, where credit standards are set, but also just the the general tone of the competitive environment. And in terms of our performance, we're delighted with our results for the quarter from an NIW volume standpoint, right, up 33% year-on-year is a terrific result. And I point to 2 drivers.

One is just, I'd call it, sort of foundational on-the-ground execution, right? Doing what we do every day, adding more customers, providing value-added input to existing accounts so we can win more of their business, doing all the things we've always done around proactively managing our mix of business and flow by borrower, geography, product risk attributes just the day-to-day that we've always done.

But the second is the market, right? I think we've been saying for some time now that despite elevated rates, the MI market presents us with a compelling and durable opportunity. And in Q1, the sort of first 2/3, right, January and February, declining rates really added to that and helped to spur some incremental activity both on the production side -- sorry, on the purchase side, but also on the refi side. So all in, I think because of what we're achieving with our customer franchising in the market and then strengthen the market around us, it was a really constructive market. As we look out across the year, we don't provide guidance, but I'll trace back to some comments that I made on our Q4 call -- coming into the year, we generally expected that 2026 volume would look similar to how 2025 volume trended from an overall market standpoint, right? A strong year where long-term secular drivers of demand and activity continue to come through, where resiliency in house prices continue to support larger loan sizes and where affordability challenges continue to drive a real need for private MI coverage and the down payment support that we provide.

And that's absolutely been the case PAUSE through the first quarter. Obviously, first quarter was stronger than Q1 last year because we had the tailwind of rates PAUSE -- now that they've sold off as we look ahead through the remainder of the year, I think we're still calibrating off of 2025 performance, which, again, was a highly constructive environment, and we'd be delighted to see that type of experience this year.

Understood. And then on the expenses, just in absolute terms, you've been last 3 quarters kind of down a little bit, up a little bit. Year-over-year on expenses and that's contributed to nice leverage. Does that pattern continue in subsequent quarters on an absolute basis, maybe just a modest progression?

I think in terms of absolute dollars of expenditure, we've said this before, we will expect increases over time, but we try to be very disciplined about minimizing those increases. So each individual quarter has its own corks and certain things that manifest in those quarters. So I think the best comparison is year-over-year. And in the first quarter of last year, we had $30.2 million of expense. This year, it's $30.6 million of expense. So again, as you indicated, a modest increase. But I think we need to balance against that. We have the smallest expense base in absolute dollar terms in the industry, and we want to make sure we're continuing to invest in our people, our systems, our data and analytics and risk management and making sure that we're making those investments for future value.

So I think we're going to continue to remain disciplined PAUSE but you should expect, over time, increases to that absolute dollar expenditure.

[Operator Instructions]

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

Adam I wanted to go back to the credit discussion a little bit. Maybe just on credit losses, in-period losses in particular, I think they were up pretty materially like $13 million year-over-year versus new notices up being $300 million. It sounded like you didn't change any assumption. Maybe just talk a little bit about that. Is that just like the extra $13 million is just from the $300 million new notice?

It's going to be a combination of things. So the environment is never static. And so when we're going through -- we're not applying a blanket homogeneous assumption around frequency or severity. We're actually going out and modeling each individual default and where those defaults at the time that we're closing the book.

So an estimation of the mark-to-market LTV, for example, of that loan. So we've got just -- there's a different set of actual experiences that go into how we're marking each of those defaults at a given point in time. the Default composition themselves. We've talked about this idea of normalizing. So if you rewind a year, there would have been fewer defaults in the overall population a year ago that traces to the post-covid population, the '23, '24, ]25 for example, nothing in the -- of the 2025 year.

And now that more of those are coming through they're broadly similar to the loans that have experienced default in prior periods with the 1 big differential being the mark-to-market LTV position is higher because. Those are loans that while they were originated in a constructive environment didn't get the benefit of the record rolling of house price appreciation through the pandemic. And that has a big impact on our expectation for ultimate claim outcomes from initial default. So that will factor through.

And the other one is that over time, as we're seeing house prices continue to move higher, loan sizes themselves move higher, that the average risk exposure, the average risk in force for each defaulted loan can grow a bit, and that will contribute to a different reserve per NOD that we're establishing. So it's kind of all of those together will drive the differences. Plus, as you noted, there's a larger number of notices that we reserve for.

Okay. And then is that the same -- like I guess, is this the mix and the mark-to-market of the loss. Is that what's also driving the reserve per default assumption hire? Like I'm just trying to understand because obviously, you released $26 million of prior period reserves but the reserve per default is moving higher. Is that just the same thing that's driving the...

Yes. I'm sorry. It is moving nominally higher. So if you look at our entire -- I referenced the new NODs earlier. -- if you look at our entire population of NODs, it's 26,000 around about 300 is the average reserve, which is up approximately 2% quarter-over-quarter. And if you look at what's driving that change, it really is the larger loan size of the loans that are in default.

Got it. Maybe just turning to NIW for a second, I think it's down a little bit quarter-over-quarter. So I know everyone hasn't reported yet, so we don't have like market share. But I'm sure you do some ongoing monitoring. Maybe just decompose some of that for us? Like what are some of the key factors driving it? I imagine a little bit smaller market, but do you see any shift in market share? Is there any mix shift going on, whether from the bulk market or what have you, that's driving that would make you think your results will be different than some of your peers..

No. When we look at it, we -- again, we don't -- because we're not in share, I feel the need to give the caveat. We don't manage to market share at all, right? We never have, and that certainly remains the case today. But in terms of our performance in the quarter, we didn't see any significant moves. There obviously was a bulk transaction that one of our competitors announced over the last few days. So that will just skew the headline number, and you need to normalize for that because that's not slow business that really traces to share. But there were no significant moves.

Our our NIW was up year-on-year. rough estimate, we think market is probably up about 35% year-on-year, so right in line with market growth, which is where we want to be, right? We're in a terrific position with our customer franchise as we continue to perform from a new business flow standpoint at that level, we'll just naturally, we've got this embedded growth engine in terms of our share of industry insurance in force continuing to accrete higher.

Got it. And then just end with a reinsurance question, the profit commission has been trending a little bit lower. Is that just a function of normalizing credit default, something else going on there?

Yes, that's you put your finger on it.

This concludes our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

Thank you again for joining us. We'll be participating in the BTIG Housing and Real Estate Conference in New York on May 6, the KBW Virtual Real Estate Finance Conference on May 19 and the Truist Securities Financial Services Conference in New York on May 20.

We look forward to speaking with you again soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the NMI Holdings, Inc. Fourth Quarter 2025 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, sir.

Thank you. Good afternoon, and welcome to the 2025 Fourth 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, our 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 fourth quarter, National MI again delivered standout operating performance, continued growth in our insured portfolio and strong financial results capping another year of success.

We closed 2025 with $49 billion of total NIW volume and a record $221.4 billion of high-quality, high-performing primary insurance-in-force. We delivered broad success in customer development, continue to innovate in the capital and reinsurance markets, and once again achieved industry-leading credit performance.

In 2025, we generated record net income of $388.9 million up 8% compared to 2024, record diluted EPS of $4.92, up 11% compared to 2024 and delivered a 16.2% return on equity. Looking ahead, I'm excited at the opportunity we have to continue to build on our success.

As we move forward in 2026, we'll continue to focus on our people. They are talented, innovative and dedicated and we'll continue to invest in our culture with a focus on collaboration, performance and impact. We'll continue to differentiate with our customers. The mortgage market is connected and evolving, and we'll work to continue to stand out with our focus on customer service, value-added engagement and technology leadership. We'll continue to prioritize discipline and risk responsibility as we grow our insured portfolio, working to write a large volume of high-quality, high-return business under the protective umbrella of our comprehensive credit risk management framework. And we'll continue to focus on building value for our shareholders, growing earnings, compounding book value, delivering strong mid-teens returns and prudently distributing excess capital.

Before turning it over to Adam, I'd also like to comment on the current policy environment. Our conversations in Washington remain active and constructive. We have long noted that there is bipartisan recognition of the unique and valuable role that the private mortgage insurance industry plays. We are in the market every day with a clear mandate and purpose, offering a low-cost, high-value solution that helps borrowers bridge the down payment gap and meaningfully reduces the cash required at the closing table.

In the process, we help to make homeownership more affordable and achievable for millions of Americans in communities across the country with covers that works to insulate the GSEs and taxpayers from risk and lost in a downturn. National MI and the broader private MI industry have never been stronger or better positioned to provide support than we are today. And we're looking forward to continuing to work with the administration to advance their important housing goals.

With that, let me turn it over to Adam.

Thank you, Brad, and good afternoon, everyone. National MI continued to perform in the fourth quarter, delivering significant new business production, consistent growth in our insured portfolio and strong financial results. We generated $14.2 billion of NIW volume and ended the period with a record $221.4 billion of high-quality, high-performing primary insurance-in-force. Total revenue in the fourth quarter was a record $180.7 million, and we delivered GAAP net income of $94.2 million or $1.20 per diluted share and a 14.8% return on equity.

Overall, we had a terrific quarter and closed 2025 in a position of real strength. We generated $49 billion of NIW volume during the year and exited with $221.4 billion of primary insurance-in-force. Our portfolio is the fastest-growing highest quality and best performing in the MI industry and has enormous embedded value. We now have over 680,000 policies outstanding and has helped a record number of borrowers gain access to housing at a time when they needed us most.

We enjoyed continued momentum and growth in our customer franchise, activating 90 new lenders in 2025 and ending the year with over 1,700 active accounts. We were once again recognized as a Great Place to Work, our tenth consecutive award, which we view as a reflection of our unique corporate culture and a testament to the hard work and dedication of our talented team.

We continue to innovate and found broad success and support in the reinsurance market. securing a series of new quota share and excess of loss treaties in the fourth quarter that further extend our comprehensive credit risk management framework and are amongst the best we've ever achieved in terms of their cost, capacity, duration and structure. And we achieved record full year financial results, generating $706.4 million of total revenue, up 9% compared to 2024. $388.9 million of GAAP net income, up 8% compared to 2024, $4.92 of diluted EPS, up 11% compared to 2024 and a 16.2% return on equity.

As we begin 2026, we're encouraged by both the broad resiliency that we've seen in the macro environment and housing market, and by the continued opportunity that we see across the private MI industry. Total MI industry NIW volume was over $300 billion in 2025, with the market demonstrating real strength despite the headwind of elevated rates for much of the year. Our lender customers and their borrowers continue to rely on us in size for critical down payment support. And we expect that the private MI market will remain just as strong in 2026, with long-term secular trends continuing to drive an attractive new business opportunity.

More broadly, we remain encouraged by the continued discipline that we see across the industry and are confident as we look ahead. The private MI market opportunity is compelling and we're well positioned to continue to deliver value for our people, our customers and their borrowers and our shareholders. 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.

With that, I'll turn it over to Aurora.

Thank you, Adam. We again delivered strong financial results in the fourth quarter. Total revenue was a record $180.7 million. GAAP net income was $94.2 million or $1.20 per diluted share and return on equity was 14.8%. We generated $14.2 billion of NIW and our primary insurance-in-force grew to $221.4 billion, up 1.4% from the end of the third quarter and 5.4% compared to the fourth quarter of 2024.

12-month persistency was 83.4% in the fourth quarter compared to 83.9% in the third quarter. Net premiums earned in the fourth quarter were a record $152.5 million compared to $151.3 million in the third quarter and $143.5 million in the fourth quarter of 2024. Net yield for the quarter was 28 basis points, consistent with the third 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 third quarter.

Investment income was $27.5 million in the fourth quarter compared to $26.8 million in the third quarter and $22.7 million in the fourth quarter of 2024. Total revenue was a record $180.7 million in the fourth quarter compared to $178.7 million in the third quarter and $166.5 million in the fourth quarter of 2024.

Underwriting and operating expenses were $31.1 million in the fourth quarter compared to $29.2 million in the third quarter and $31.1 million in the fourth quarter of 2024. Our expense ratio was 20.4%. We have a uniquely high-quality insured portfolio and our credit performance continues to stand out. We have 7,661 defaults at December 31, and compared to 7,093 at September 30, and our default rate was 1.12% at year-end. Claims expense for the fourth quarter was $21.2 million compared to $18.6 million in the third quarter, reflecting normal seasonal activity and the continued growth and seasoning of our portfolio.

GAAP net income for the quarter was $94.2 million, and diluted earnings per share was $1.20. Adjusted net income was $93.8 million and adjusted diluted EPS was also $1.20. Shareholders' equity at December 31 was $2.6 billion and book value per share was $33.98. Book value per share, excluding the impact of net unrealized gains and losses in the investment portfolio was $34.58, up 4% compared to the third quarter and 16% compared to the fourth quarter of last year.

In the fourth quarter, we repurchased $31 million of common stock, retiring 811,000 shares at an average price of $37.72. Since starting our buyback program in 2022, we've repurchased a total of $349 million of common stock, retiring 12.1 million shares at an average price of $28.89. We have $226 million of repurchase capacity remaining under our existing authorization.

In the fourth quarter, we entered into a series of new quota share in excess of loss reinsurance treaties, which together further extend our comprehensive credit risk management program and provide us with forward flow coverage for all new business produced through 2028 at an estimated 4% pretax cost of capital. Reinsurance has long been a core pillar of our risk management strategy, working to mitigate the potential impact of credit volatility in our insured portfolio and has consistently provided us with a deep, secure and efficient source of PMIER's growth capital.

We have significant experience, strong secondary market relationships and a track record of leading with innovation across the risk transfer spectrum. The deals we have just secured are among the best we've ever achieved in terms of their cost capacity, duration and structure, and serve to highlight the quality of our insured portfolio and the differentiation we have achieved through our comprehensive credit risk management framework.

At year-end, we reported $3.5 billion of total available assets under PMIERs and $2.1 billion of risk-based required assets. Excess available assets were $1.4 billion. Overall, we achieved robust financial results during the quarter, delivering consistent growth in our high-quality insured portfolio, record top line performance, continued expense efficiency bottom line profitability and returns.

With that, let me turn it back to Adam.

Thank you, Aurora. Overall, we had a terrific quarter, capping a record year in which we delivered broad success in customer development, continue to innovate in the capital and reinsurance markets. Once again, achieved industry-leading credit performance and generated exceptionally strong financial results with record profitability, significant growth in book value per share and a 16.2% return on equity.

Looking ahead, we're confident. 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] And the first question will come from Bose George with KBW.

Actually, first, have you seen any changes in the competitive landscape in the industry? And should we expect the core premium yield to remain pretty steady in 2026?

Yes. I'll talk about the industry and then turn it to Aurora to talk about the premium yields. I'd say, broadly speaking, we see a really balanced in and constructive environment. And we're -- we continue to be encouraged by volume pricing rate, underlying unit economics that we're able to achieve on new business.

We think today, certainly, we had National MI where we should be, which is at a point of balance where we're fully and fairly supporting our customers and their borrowers, and at the same time, we're able to use rates that we're achieving in the market to appropriately protect our balance sheet, our returns and our ability to deliver value for shareholders. So a really constructive environment as we look out across the landscape. And Aurora will pick up on yields.

In terms of outlook, we don't provide guidance on that, but we do expect our core yields, which obviously strips away the impact of movements in reinsurance costs and cancellation earnings. We expect that to remain generally stable going forward. Obviously, the potential for a little bit of plus/minus, but generally stable. And the net yield will benefit from that core stability but will also be impacted by our loss experiences since our profit commissions fluctuate with changes in our ceded claims expense.

Okay. Great. And then just one on the regulatory front. One concern in the market seems to be what a potential reduction of premiums at the FHA, just from your interaction with regulators, how do you think that potentially plays out?

Yes. Look, I think it's a fair question, certainly, given the focus on affordability and the fact that the FHA reported at least as a headline matter, what appears to be a healthy capital position. But I guess I'd note a few points. First, certainly, the private MI industry is already providing a seamless low-cost, high-value solution to the vast majority of borrowers who need support.

And we're encouraged, as Brad mentioned, that there's really broad bipartisan recognition of the unique and valuable role that our industry plays. I think when you look at it, I don't want to speak for anybody in D.C. Obviously, it's not our decision. But when we look at it, there are some real challenges that we would note at the FHA as a credit of capital, a regulatory and a budget matter that we certainly are focused on when we think about the potential for an FHA rate cut.

We don't, at this point, given all of those constraints, I think that there should be any additional FHA rate adjustment. We don't think it serves the interest of the American taxpayer to ask them to take on even more risk and provide an even larger subsidy to the housing market, particularly when the MI industry is ready, willing and able to provide all the support necessary.

The next question will come from Terry Ma with Barclays.

Maybe just to start off with, can you talk about what you're seeing in terms of the health of the consumer as we look out into 2026. And to the extent possible, any color you can give us on credit trends by state or region and if there any states that are more stressed than others?

Yes, why don't we take them in turn. We'll talk just generally, perhaps not just consumer, but about the macro environment. I talked in my comments -- in the prepared remarks about the continued resiliency that we've seen in the macro environment and housing market. And I'd say we're really encouraged by that broad resiliency. Headline unemployment remains low. I think consumers outside of today's print are still spending. Businesses are continuing to make significant investments the equity market, notwithstanding some recent volatility continues to set new highs.

And also, I think the larger tax refunds that are expected this year following the One Big Beautiful Bill Act, should serve as a bit of added stimulus. On balance, though, when we look out across the macro landscape, it's still an environment where we say there's a lot to be really optimistic about all of those reasons, but there's also items to focus on, and risks that do remain, right? We've got a labor market that is showing some stream with a slowdown in hiring activity.

Consumer debt balances are at all-time highs, confidence Consumer confidence is down, particularly among certain cohorts. And there's been a lot of talk about a K-shaped economy taking hold. And so we see all of that -- and we think looking forward, again, there's reasons to be optimistic. There's reasons though still to focus and protect against the downside. And in many respects, that's the approach that we've been taking for a while now that has served us best, which is to plan for the potential that stress might emerge in the near term. And if it doesn't, to obviously be happy that we planned and protected nonetheless.

And I think, Terry, you also asked questions about what we're seeing in terms of credit trends in different regions or different cohorts. And to be frank, aside from things that we've talked about extensively in previous quarters in terms of keeping an eye on those states where there is a downward trend in terms of home price appreciation. There's nothing that's emerging in terms of the default experience or the claims experience that is notable in that regard with regard to any particular geography or particular cohort.

And Terry, one of the things we have the benefit of is Rate GPS gives us the ability to manage our mix of business at a very granular level across 950 different MSAs. And we've been using that tool actively for the last several years to shape the mix of our portfolio, not just by underlying borrower loan level or product risk attributes but also by geographic mix of business.

And so we look at the headlines in areas like Florida, Texas, the Southeast, the Mountain West. But when we look at our default population in part because of how we have shaped our mix, not only are we managing our exposure in many of those markets that are now experiencing house price pressure but we're also managing the mix within those geographies. And so for us, we don't see concentrations developing in our default population.

Got it. That's helpful. And then just a follow-up, like quarterly runoff accelerated in the fourth quarter. Are you seeing that trend kind of continue early this year? And then what's the outlook for persistency?

Yes. We obviously saw a decline of 50 basis points in our persistency in the fourth quarter. And that was to be expected, just given what we saw with rates rallying in the fourth quarter, and that's spurring 2 things, really a bit of refi activity as well as some stimulation of the purchase market. And so we don't give guidance or we don't speak about current quarter trends that we're seeing.

But I would say that in terms of persistency going forward, we do expect the persistency is well above historical trends and continues, notwithstanding the 50 basis point decrease last quarter to be well above trend. So we do expect, as we go through time that, that will down more in line with historical norms. And we've talked about that quite extensively. But in terms of potential movements within the quarter, a lot of that will be rate driven, just thinking about what that refi activity is going to look like.

We were already seeing this independent of any notable movement in rates. It's just the natural trend in the portfolio when we're coming off of the pandemic years with record low note rates, naturally, our persistency has been trending a little bit of additional movement because of the refinancing opportunity.

But Aurora alluded to, there's also an opportunity there for us, right, which is in an environment where rate has moved to the point that we're seeing an uptick in refinancing activity and the pace of turnover those lower rates can unlock both the purchase market and obviously, refi origination volume, which can drive incremental NIW, and we saw that in the strength of our results in the fourth quarter.

Next question will come from Rick Shane with JPMorgan.

It's sort of been asked and answered, but maybe a nuance here. When we really disaggregate the persistency what you start to see sort of the tale of 2 portfolios persistency on the '23 and '24 cohorts our vintages fell fairly sharply, the '22s, '21s and '20s, not nearly as much, and that makes sense in the context of rate distributions. I am curious as you think about that tail of 2 portfolios, how should we start to think about credit and the implications of one part of the portfolio paying off fairly quickly and the other being pretty sticky?

Yes, Rick, it's a good question. And it's something we look at because obviously, there's the opportunity that comes in a -- when rates drive an uptick in activity, both in purchase and refinancing isn't just volume related but there's also a derivative impact or potential for a derivative impact on credit to the positive, right? So as you noted, the pandemic years, the insurance-in-force that traces to sort of the prepandemic and pandemic years for us, some of the incredibly low underlying note rates.

And while that business is going to naturally run off because of life events and hope of cancellations and all of these things, really, we don't see that those vintages are going to have run off or refinancing opportunity. And instead, it's going to be the late '22, really the '23, '24 and even parts of the 2025 vintages. Those are the book years that when we talk about a normalization and credit experience, right, these are book years that: one, they're large; two, even though they've been underwritten in a rigorous environment and the underlying credit profile for those borrowers is incredibly strong, they simply don't have the same level of embedded equity because of house price appreciation of some of the pandemic years do.

And so as those -- those vintages age and they get to a point of natural loss incurrence right, that sort of 3- to 4-year period, we would expect to see our credit experience overall continue to normalize. If there's an uptick in refinancing activity in a consequential way and you see a more accelerated turnover of those post coke vintages it could also refresh the sorting point for that normalization of the credit experience and in fact, push off some of that some that would otherwise have come through.

We're not seeing the level of turnover yet that we would say, boy, this is something noteworthy that really is going to meaningfully impact and interrupt that normalization of the credit cycle. But it's a positive -- potential positive that we're looking at.

Got it. Okay. And just a follow-up. If we look at your NIW for the fourth quarter, and again, there are many companies still to report, but indications are you guys are getting very, very close to parity market share. When -- and I know you don't target market share, but when you think about 2026, do you think that 2026 is the year where you essentially achieve parity share in NIW?

Well, Rick, maybe I'll give you a perspective on the fourth quarter, and I'll also talk about our broad outlook for the market. In 2026, I'd say, overall, we're delighted with our performance in our results during the quarter. We note the strong performance that we've had and really the success that we've had traces to on-the-ground execution, right? We're adding more customers. We're providing value-added input to our existing accounts so that we can win increasing share. We're managing our mix in our NIW flows by borrower, by geography, all these things that we want to do. And we're generally just showing up in the market every day with consistency for lenders and their borrowers.

In the fourth quarter, in terms of overall trend, right, we've talked about it now, but declining rates certainly spurred some incremental activity, both on the purchase side and on the refinancing side. And for us, that can be an added plus because refinancing volume tend to have stronger credit characteristics, right? These are borrowers who typically have higher FICO scores and lower LTVs given the payment experience that they have on their existing loans. And we generally outperform in higher-quality risk cohorts. And so it's an attractive opportunity for us.

I mean, first and foremost, it's an attractive opportunity for borrowers and then it can help in or to our benefit. As we look out into next year, the 2025 industry NIW volume, we pay get roughly $310 billion. And I'd say we expect a similarly attractive environment in 2026 with the big caveat that's all premised on rates holding roughly where they are now. If rates hold where they are now, we could actually see perhaps a little bit of upside as affordability improves for some prospective buyers, and the refinancing opportunity continues to come through.

But all in, we're delighted with our performance and the growth that we were able to achieve in our volume in our portfolio, and we really do see a compelling opportunity in the industry as we look ahead.

[Operator Instructions] The next question will come from Mark Hughes with Truist.

The quota share and XOL, I think you talked about the forward flow through 2028. Is that going to have a little further in the future than usual? And is there something you saw in the market or anticipate about coming in the market that influences that?

When you look back to what we did in 2024, we were able to secure forward flow quota share coverage for all of 2025, 2026 and into 2027. So we've previously gone out 3 years, and that's consistent with what we did this year. What I would say that is a little bit different or incremental is the size that we were able to achieve in terms of the quota share coverage that we secured for that third year in this instance, the 2028 year was greater and the economics of that transaction were incrementally better versus what we were able to achieve last year. So I don't think anything here is transformational or hugely different to what we've previously done, but it is incrementally better and shows the strength of the reinsurance market at this time.

And how about the share buybacks or capital management in 2026 continue with this recent pace or accelerate a bit?

Yes. Look, I think we're delighted with the execution that we've achieved on our program thus far. We bought back roughly $31 million of stock in the fourth quarter. And I'd say, as we look ahead, well, we don't have a set schedule, $25 million per quarter is still a good assumption for where we'll be. But we'll take advantage if there's opportunities from a value standpoint, our shares traded off early in the fourth quarter that provided us with an attractive point to retire a little bit more during the period than we'd otherwise been pacing. And so still plus/minus $25 million is a good assumption.

Yes. And how about from an expense standpoint, any particular initiatives one way or the other as we think about 2026. And then anything on the AI front that jumped out as that could contribute to some efficiencies?

Sure. I'll just comment on our expenses, and I'll let Adam tackle the AI question. So expenses in the quarter were $31.1 million, which was identical to the $31.1 million we spent in the fourth quarter of 2024. And obviously, given the higher earned premiums in the quarter, a slightly lower expense ratio. So again, we don't give guidance on expenses. We do have a broad target of 20% to 25%, low to mid-20s, and we're thrilled that we achieved that expense ratio within the quarter.

So in terms of quarter-over-quarter changes, obviously, up a little bit versus the third quarter. I think you've seen that historically where sequentially, the fourth quarter is a little bit heavier than third quarter and also the first quarter tends to be a heavier quarter for different reasons, the fourth quarter because of some of the vesting around incentive compensation and in the first quarter due to 401(k) contributions, FICO reset and other matters.

So no particular initiatives in terms of spend that we have in 2026 that would, in any way, change the expense discipline that we've demonstrated.

Yes. And then I'll pick up on that and talk specifically about AI. And I'll start with just a broader sense as to where we are and where we're using tools because at NMI, we've already begun, and really, for some time now, have been deploying AI in virtually every department. We're using advanced tools in our indexing and imaging, functions to increase the speed and accuracy of the data that we capture from loan files at the time of underwriting.

We're using these tools in our IT and modeling development efforts to streamline our coding process. Our finance team is using tools to help with this very call here, right? We're able to streamline our close process to assist with the development of our SEC filings. Our legal team is using these tools. We've got them embedded in our cybersecurity process now. And so they're really valuable solutions.

And as we look even more expansively, we're excited as to the additional use cases that we're focused on and there'll be additional areas that we look to deploy in 2026 and beyond. As an expense matter, though, the short answer is no, we don't expect that there's going to be either significant incremental investment that we need to make to continue to deploy these valuable solutions.

And then on the in terms of the potential for savings, look, I think anything we do, we want to make sure that we're helping to drive increased productivity, efficiency and scalability. But we also, today, have by far the smallest head count in the MI sector by a meaningful margin. We've got the most modern IT and operating platform the most scalable stack and the most efficient expense profile in our sector by a wide margin.

And so we really see AI as a way to make our team even more efficient and productive and not necessarily as a way to specifically strip out expenses because we've already been so disciplined.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Well, thank you again for joining us. We'll be participating in the RBC Financial Services Conference in New York on March 11. We look forward to speaking with you again soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good afternoon, and welcome to the NMI Holdings, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

Please note, this event is being recorded. I would now like to turn the conference over to John Swenson of management. Please go ahead.

Thank you, Gary. Good afternoon, and welcome to the 2025 Third 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, our 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 1 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 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 third quarter, National MI again delivered standout operating performance, continued growth in our insured portfolio and strong financial results. Our lenders and their borrowers continued to turn to us for critical down payment support. And in the third quarter, we generated $13 billion of [ NIW ] volume, ending the period with a record $218.4 billion of high-quality, high-performing primary insurance in-force.

In Washington, our conversations remain active and constructive, and there continues to be broad recognition in D.C. of the unique and valuable role that the private mortgage insurance industry plays, offering borrowers low-cost down payment support and access to mortgage credit while also placing private capital in front of the taxpayer to absorb risk and loss in a downturn and ultimately ensure the safety and soundness of the conventional mortgage market.

National MI and the broader private mortgage insurance industry have never been stronger or better positioned to provide this critical down payment support than we are today. And we're excited to continue working with Director [ Pulte ], other members of the administration and the leadership teams of Fannie and Freddie to advance their important goal of helping more Americans than ever unlock the dream of homeownership. With that, let me turn it over to Adam.

Thank you, Brad, and good afternoon, everyone. National MI continued to outperform in the third quarter, delivering significant new business production, consistent growth in our insured portfolio and strong financial results. We generated $13 billion of NIW volume and ended the period with a record $218.4 billion of high-quality, high-performing primary insurance in-force. Total revenue in the third quarter was a record $178.7 million, and we delivered GAAP net income of $96 million or $1.22 per diluted share and a 15.6% 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 through an extended period of headline volatility. 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 and [ furthered ] by the recent improvement in mortgage rates. 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 in 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 remain 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 strong financial results. We're in the market every day with a clear mandate and purpose offering a low-cost, high-value solution that helps borrowers bridge the down payment gap and meaningfully reduces the cash required at the closing table.

In the process, we help to make homeownership more affordable and achievable for millions of Americans and communities across the country with coverage that works 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 again delivered standout financial results in the third quarter. Total revenue was a record $178.7 million, GAAP net income was $96 million or $1.22 per diluted share and return on equity was 15.6%. We generated $13 billion of NIW and our primary insurance in-force grew to $218.4 billion, up 2% from the end of the second quarter and 5% compared to the third quarter of 2024. 12-month persistency was 83.9% in the third quarter compared to 84.1% in the second quarter. Net premiums earned in the third quarter were a record $151.3 million, compared to $149.1 million in the second quarter and $143.3 million in the third quarter of 2024.

Net yield for the quarter was 28 basis points, consistent with the second quarter. Core yields, which excludes the cost of our reinsurance coverage and the contribution from cancellation earnings was 34.2 basis points also unchanged from the second quarter.

Investment income was $26.8 million in the third quarter compared to $24.9 million in the second quarter and $22.5 million in the third quarter of 2024. Total revenue was a record $178.7 million in the third quarter compared to $173.8 million in the second quarter and $166.1 million in the third quarter of 2024. Underwriting and operating expenses were $29.2 million in the third quarter compared to [ $29.5 million ] in the second quarter. Our expense ratio was a record low 19.3% in the quarter, highlighting the significant operating leverage embedded in our business and the success we have achieved in efficiently managing our cost base. We have a uniquely high-quality insured portfolio and our credit performance continues to stand out.

We had 7,093 defaults at September 30 compared to 6,709 at June 30, and our default rate was 1.05% at quarter end. Claims expense in the third quarter was $18.6 million compared to $13.4 million in the second quarter, reflecting normal seasonal activity and the continued growth and seasoning of our portfolio. GAAP net income for the quarter was $96 million and diluted earnings per share was $1.22. Adjusted net income was $95.7 million, and adjusted diluted EPS was $1.21.

Total cash and investments were $3.1 billion at quarter end, including $148 million of cash and investments at the holding company. Shareholders' equity at September 30 was $2.5 billion and book value per share was $32.62. Book value per share, excluding the impact of net unrealized gains and losses in the investment portfolio was $33.32, up 4% compared to the second quarter and 16% compared to the third quarter of last year.

In the third quarter, we repurchased $24.6 million of common stock, retiring 628,000 shares at an average price of $39.13, through quarter end, we've repurchased a total of $319 million of common stock, retiring 11.3 million shares at an average price of $28.25. We have [ $256 million ] of repurchase capacity remaining under our existing program.

At quarter end, we reported $3.4 billion of total available assets under PMIERs and $2 billion of risk-based required assets. Excess available assets were $1.4 billion. Overall, we achieved standout financial results during the quarter, delivering consistent growth in our high-quality insured portfolio, record top line performance and expense efficiency and strong bottom line profitability and returns. With that, let me turn it back to Adam.

Thank you, Aurora. We had a terrific quarter, once again delivering significant new business production, consistent growth in our high-quality insured portfolio and stand out 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 are 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] Our first question today is from Terry Ma with Barclays.

Just wanted to start off with credit. As I look at new defaults in the quarter, it was up only about 5% year-over-year, that's [ notice ] a little step down from the pace of year-over-year increases that you've seen in the last kind of 10 quarters. So maybe just any color on kind of what happened in the quarter? And as we kind of look forward, how should we expect kind of new defaults kind of emerge like when we factor in kind of seasoning and everything?

Yes. Terry, good question. Look, I'd say broadly speaking, we're still greatly encouraged by the performance of our portfolio overall including the trends, obviously, in the default population. The impact of seasonality coming through this year was a bit more muted, which is encouraging. I think we trace that to a few things, right?

We got broad resiliency that we've seen in the macro environment, and so that continues to set a favorable backdrop. We have an incredibly high-quality insured book and our existing borrowers, broadly speaking, remain well situated, and we're seeing that continue to translate through to our credit experience.

The increase in our default experience that you noted some amount of that traces to seasonality, right? We tend to see seasonally a seasonal uptick in default experience as we roll through the second half of the year, and some portion of it traces to what we've talked about for a while now the seasoning, just the natural growth and seasoning of our book. As we look forward, we do expect that seasonality will continue to come through, and so we'll see an additional impact seasonally in Q4.

And we do also expect that as we roll forward over the longer term, we'll continue to see that normalization in our credit experience but overall, we're delighted with how our portfolio is performing. It's exceptionally high quality, and we're encouraged by the trends that we saw in the third quarter and really year-to-date.

Got it. That's helpful. And then maybe just any color on the competitive environment. There has been some rumblings about a potential new entrant, so any color on kind of how to think about how the dynamic may or may not change like if there was a new entrant into the MI market.

Yes. Yes. It's -- I'd say, look, it's not necessarily new. I think there's been periodic chatter about new market entrants over the years. and we're aware of the latest effort that's out there. But I'd say we, perhaps more than anybody else know the challenges and difficulties that that come with building a private MI business, it is not easy at all, right? It's really hard to raise the capital. It's really hard to build an MI specific operating platform. It's really hard to hire the right team to sign up customers, earn their trust and also manage through an extended J curve to get to a point of profitability. And when we look at things, say, today versus when we got our start back in 2011, the market is at a very different point today.

And so today, there is no clear need in the market, right? At this point, the 6 incumbent MI players are all serving the market incredibly well. We're showing up every day for lenders and their borrowers. We've got ample capacity to support their origination volume. We've got their trust we're offering, I think, broadly speaking, fair and valuable solutions for every borrower that comes through our market, and so it's difficult to know obviously exactly where things land. We don't know what will happen with the latest rumors. But [ to say ] it's a very high bar, right? It takes a lot of capital, a very large amount of capital to fund the PMIERs compliance business. And if we were controlling first strings and thinking about making an investment in a new entrant ourselves, I'd say we'd be highly skeptical that now is the right time to do that, given all the challenges that we would see for anybody who came into the market today.

And that's not because the market itself is challenges because the market is doing so well in the 6 companies that are there today are performing so well. So we'll see, ultimately, if somebody new came in, everybody -- the market will adapt around it. But I think going from discussions to actually having a fully funded, capitalized approved entity, that's a pretty wide [ gulf. ]

Next question is from Bose George with KBW.

Can you give us an update on what you're seeing in terms of the strength of the consumer? Also just any housing markets that you're keeping an eye on where -- in terms of home prices or other signs of potential weakness.

Sure. Yes. Good question. Look, I'd say broadly speaking, I noted in our prepared remarks, but -- we've been encouraged by the broad resiliency that we're seeing in the economy and the housing market for a while now. Headline unemployment remains low. Inflation is cooled consumers broadly speaking, are still spending businesses or continuing to make significant investments. The equity market is continuing to set new highs. And so the overall picture today is an encouraging one. But for us, obviously, it's not just about today. It's also what comes tomorrow. And so we always think about risks that might be on the horizon.

And so when we parse through the data, I think we can all see it on the macro side, there are signs in the labor market of some degree of strain emerging. We're not seeing unemployment increase, and we don't have government data for the last little while, but there are certain private data points that we can look at. So we don't see unemployment increasing, but certainly, the pace of new hiring activity has slowed. I think consumer confidence is down, particularly amongst certain borrower cohorts, and there's broad talks of -- I think we're terming it a K-shaped recovery. So we'll see what I'd say from our vantage point, it's still a really encouraging and resilient backdrop those macro and housing market, but we're always focused on what might come.

And then Bose, I think you asked a question about geos. And so yes, we've talked for a while now that there are certain geographies, Florida, Texas, the Sunbelt, Mountain West where we're seeing some -- either a declining pace of house price appreciation or a turn in prices with inventory building. And that's still the case. [ Those ] same markets, there's nothing new. The pressure isn't new, but we're still seeing, when we look at the world, those markets that have been soft for a little while now continue to show signs that they're soft, and we see continued strength, though, in the Northeast and the Midwest.

Okay. Great. That's helpful. And then actually just in terms of the reinsurance markets, can you just talk about what you're seeing there? Also, just I guess you guys are more active on the XOL side, just in terms of execution, like why there versus more on the [ ILN ] side?

Sure. In terms of what we're seeing in the reinsurance market, reinsurance markets remain very robust, and we look at the pricing achieved by some of our competitors in the marketplace year-to-date, it's the best pricing that's ever been achieved. If we wind the clock back to 2024, we placed full XOL and quota share coverage for 2025, 2026 and a portion of the 2027 year with respect to the quota share. So we have a really nice runway in terms of our locked-in capacity in the traditional reinsurance market.

So you may recall that in the third and fourth quarter of the year, the back part of the year, we typically engage with our reinsurance partners and talk about the opportunity to lock in further coverage for forward years or to optimize the coverage that we have in place. And so you may imagine, we're engaged in those discussions currently. And -- but again, it's a very strong reinsurance market backdrop leading into those conversations.

And with regards to ILN versus XOL, we like both of those markets. Both of them have been very good sources of capital for us as a company. Recently, we have been more biased towards the traditional reinsurance market. In particular, because it offers that forward coverage, which isn't available in the debt capital markets. And so that's been our recent preference just from a cost flexibility and speed of execution perspective. But we like both of those markets. And I think you should expect us in the fullness of time to be active across all different markets.

The next question is from Mark Hughes with Truist.

Yes. the core yield, it's been holding pretty steady at 34 basis points. Is that a good run rate here? What moves that 1 way or the other in kind of the near to medium term?

Sure. I'm happy to start out here. It has been very stable, and that's that's obviously been supported by the tremendous persistency that we've had in the book and continue to have in the third quarter. So again, we would -- we don't give forward guidance, but given the strength of the in-force book, we would expect that plus/minus that kind of number for the core yield will be good. Obviously, the net yield is influenced by claims expense in the quarter and how that runs through our reinsurance contracts.

And then -- any thoughts about the impact on persistency if we do see interest rates drop, that would be great from a new business perspective, a lot of [ loved ] purchase activity would ramp up presumably, but you get a lot of refi. How would you see the puts and takes if kind of you get a refi market? And then if you can get multiple rounds of it, given the where recent borrowers have been borrowing at.

Yes. So I think as you termed, there's both puts and takes. Our persistency was [ 83.9% in ] the third quarter, and as we noted, again, helped to drive continued growth in embedded value gains in our insured portfolio. Overall, our portfolio is broadly well situated because we've got a 5.2% weighted average note rate underpinning our exposure at quarter end. But it's not even, obviously, across the entirety of our book.

There are vintages parts of our in-force that have greater degrees of refi sensitivity, and where we will likely see an uptick in some prepayment speeds given the recent moves in rates, that's going to be natural, right? So that's the put.

The take, as you noted, though, is One, some portion of the borrowers in our portfolio who will benefit from a refinancing today or very likely to still need MI coverage because while HPA has generally trended higher, it's trended higher at a normal, not record pace. And so there's an opportunity to see penetration of refinancing origination activity grow if there were -- if we saw an uptick in overall refi activity. As you noted, look, if rates lag down, to the point where we see a more pronounced pressure on persistency, we'd also expect to see a benefit in new business activity, NIW volume, bringing prospective buyers purchase demand off the sidelines.

And the 1 other 1 to note is there's a potential knock-on benefit from a credit experience standpoint, to a refinancing cycle, right? If we see refinancings accelerate, it's most likely just because of where the underlying note rates are that, that will come from our more recent vintages. And those are the vintages that we're looking at for that normalizing credit experience. If those vintages begin to turn over, it will take -- it will extend that normalization cycle from a credit performance standpoint.

Appreciate that. And then were there any onetimers in the expense ratio is obviously, as you say, a record number. Anything nonrecurring there? Or is that a good run rate?

I'd say, with regard to the expense ratio, there was nothing in particular that I'd point out in the quarter. And if you look at the raw dollars, it's within a couple of hundred thousand dollars of what we spent last quarter. And so there are a few positives and negatives, but again, nothing of note.

I would say if you're looking forward, typically, the second and third quarter are lightest in terms of expenses and the fourth, and then the first quarter tend to be heavier just in terms of both dollars of expense and also the ratio goes up during those quarters. And in the fourth quarter, that typically results from the accrual of some of our people-related expenses. So that's the only thing that I would note with regard to the fourth quarter.

The next question is from Rick Shane with JPMorgan.

This is A.J. on for Rick. So if rates fall in refis do start to tick up, is there anything kind of proactive you can do to recapture MI on more of those loans? Could you maybe just walk through your playbook sharing your early experience you've had there?

Yes. So I'd say on the margin, there are things that you might try to do. But more broadly, the most important piece of the playbook is to be everywhere in the market and be offering valuable solutions for our customers to be plugged in with as many lenders as possible and so that we could serve their borrowers.

We've noted for a while that 1 of the unique attributes that we have to our benefit is that our share of the new business environment is larger than our share of industry insurance in-force. So to the extent that there is some amount of industry insurance in-force that's in motion because it's refinancing, but still needs MI coverage. We have an opportunity, we think, to capture a little bit more of that than we will necessarily lose.

And so that's not a strategy per se, it's just where the numbers are. But the real strategy behind it is make sure that we are connected to our customers that we're offering them valuable solutions that were present for their borrowers across all markets so that, that business that is potentially in motion is a business that we can capture.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you again for joining us. We look forward to speaking with you again soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.