Prepared remarks
Good day. Welcome to the NMI Holdings Inc. 2026 second quarter earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. 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. 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, 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. 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. 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. I'll turn the call over to Brad.
Thank you, John. 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 continued to turn to us for critical down payment support. 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.
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 opened 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. 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. 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.
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. Our credit performance continues to stand ahead. We're delivering consistent growth and embedded value gains in our insured book. 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. 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 30th, compared to 8,044 at March 31st, 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 30th 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.
Questions and answers
We will now begin the question-and-answer session. To ask a question, you may press star one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star two. The first question comes from Bose George with KBW. Please go ahead.
Hey, everyone. Good afternoon. Starting with credit, can you discuss home price trends in your various markets? Are there areas where you're seeing things better or worse than your expectations coming into the year?
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; that's supportive for us in terms of the need for our product. As house prices move higher, the need for affordability support increases. It bolsters credit performance and is 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 Sun Belt, Mountain West, and a little bit on the West Coast. From an encouraging standpoint, what we're seeing in some of those markets—those markets are the same where we've seen inventories building a little bit of pressure on house prices for a while now—the most recent readings are showing that some of the MSAs within that broad regional footprint are bottoming and beginning to move off their lows. Overall, nothing surprising or dramatic. Generally consistent with what we've been seeing for a while now.
Okay, great. Thanks. Actually from a capital return standpoint, in, 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?
Thus far, we're really delighted with the consistency and success that we've achieved with our repurchase program. As Aurora mentioned, we've retired $408 million of stock, and that represents 16% of our total outstanding. As we roll forward the pace of NIW and the organic opportunity, that will certainly factor into how we size our excess capital position. That pull to par we've talked about is the fact that our share of new business production is still meaningfully higher than our share of industry insurance in force. We've got an embedded growth engine. Over the last four 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. 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. We still see a lot of tailwind from that embedded growth engine as we look forward.
Okay, great. Thanks.
The next question comes from Rich Shane with JPMorgan. Please go ahead.
Thanks, guys. I probably need to get in the queue just a little bit faster. I thought Bose asked the right questions. I will follow up just briefly. When you think about we're now halfway through 2026, 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. I'm also curious to benchmark how you feel about the 2026 vintage from a credit perspective versus the 2025 vintage which actually is showing hallmarks of performing pretty well.
I'll break that into three pieces: what we're seeing broadly in the market in terms of competitive dynamics; how competitive we want to be and what we observe about our success with customers; and the credit environment. Broadly, from a competitive standpoint, our view is the industry is at a point of balance in a very constructive way. We continue to be highly encouraged by the unit economics that we are achieving on new business. By saying we're where we should be, we mean the industry overall, and certainly our approach, is to fully and fairly support our customers and their borrowers, while using pricing and other tools to appropriately protect our balance sheet, our returns, and our ability to deliver long-term value for shareholders. That's always our focus: making sure we're at a point of balance. In terms of relative growth in NIW this quarter, we're the third of six to report, so it's difficult to draw too many definitive conclusions.
We did have a little more growth in our NIW volume than some others who've reported; we're delighted with writing $16 billion of high-return new business. We're working hard to support everybody turning to us in the market. As for a specific market share read-through, fluctuations are normal. Volume can move from one originator to another where we happen to have greater wallet share. MI relationships aren't uniform across the board. There's nothing of particular note I would point to; we don't manage market share directly. We focus on how we engage and show up for our customers every day.
No, that's very helpful. I realized my question was pretty long, go ahead please. Sorry.
In terms of 2026 credit, the underlying characteristics of the production we're bringing onto the portfolio are still incredibly high quality. We're using all the tools we've invested in—individual risk underwriting, Rate GPS, and broad use of reinsurance on the back end—to shape the profile of our portfolio. We're encouraged by the resiliency 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 through the year. It's early, but we're not seeing anything in our portfolio experience on early payment defaults or other markers of underwriting strain. We think it's another high-quality, productive year.
Okay. Appreciate that. Thank you.
The next question comes from Mihir Bhatia with Bank of America. Please go ahead.
Hi. Good afternoon. Thanks for taking my question. Adam, I was wondering if we could just follow up on the last point on credit and in terms of the production you're seeing. You talked about your portfolio and not seeing any signs, but maybe just talk a little bit about competition and pricing activity in the market. Are there any markets or pockets where you feel things have gotten a little irrational, or you've had to move away from or pull back in?
It's a good question. Broadly, we think the industry is at a point of constructive balance right now. We haven't seen any notable moves that would cause significant concern. When we're bringing volume onto our books, we want to provide balanced support for customers and borrowers and ensure we're building a high-quality portfolio that generates adequate returns and meets our thresholds. Areas where we see a little more pressure are nothing new; it's in some of the larger transactionally oriented business, which has been the case for many years.
All right. Great. Then maybe just on the default inventory: the loans in default this quarter ticked a little lower, marginally. Was that just seasonality and tax refunds, or should we read more into it? Anything to call out in terms of cures that have changed in the last few months that we should keep an eye on? If you could comment on where you think default rates head from here. Thanks.
In terms of activity in the quarter, there is a seasonal component. With tax refunds, year-end bonuses, and getting through the holidays in the first half of the year, we tend to see more positive credit experience. Then the tide tends to turn in the back half of the year. Some of that effect falls in the first quarter, some in the second quarter. There's also the broader macroeconomic environment: employment data is very strong and housing price appreciation continues to perform, which supports default performance. In terms of outlook, we do not provide specific guidance. What I will point out is that some of those seasonal tailwinds in the first part of the year become seasonal headwinds as we head into the latter part of the year. We are keenly watching the macroeconomic environment, as that will be a key determinant of outcomes.
We would expect our default population to trend a bit higher from here. For a while, we were seeing a natural normalization of our credit experience given the growth and seasoning of the portfolio. As Aurora pointed out, seasonal dynamics mean we often see a trend higher in the third quarter and again in the fourth quarter.
Got it. Thank you. Thanks for taking my question.
The next question comes from Mark Hughes with Truist. Please go ahead.
Yeah, thank you. Good afternoon. 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 forward-looking guidance. The yield will be supported by the persistency of the in-force book; that tends to be pretty stable. It is influenced by the persistency of the in-force and the premium we're bringing on in new business. I'd expect it to be reasonably stable plus or minus, but it can be influenced by rate movements, which might cause a greater cohort of refinancing activity. Refinancing activity tends to be a little higher quality and therefore lower premium because borrowers often have higher FICO scores, have been making payments on their mortgage, and may have embedded equity. There are a number of things that can influence yield, but given the large and stable in-force and strong persistency, we would expect it to be broadly stable.
Very good. 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 influenced by underlying credit trends, but anything else structurally or timing-wise we ought to think about?
We always probe on this with our internal analysis, but there really isn't anything structural tied to a specific vintage. We're in a constructive environment in terms of macro and housing market dynamics, and our existing borrowers remain well-situated—even those falling behind—because of strength in the labor market and embedded equity in their homes. Many are able to catch up and cure at a faster and more successful pace than we anticipated when we established the initial reserves, which leads to favorable development. There's nothing structural or vintage-specific; what we're seeing is constructive credit conditions.
Very good. Then maybe just one more, if I could: the net expense ratio continues to show nice improvement. Anything around timing on that that could change that trajectory?
There are always seasonal fluctuations to expenses. In the first quarter, there's the FICA reset and 401(k) contributions. Depending on the trajectory of earnings, you have accruals associated with share-based compensation. Those are recurring items. There's no particular large expenditures we are planning that would change the broad trajectory of expenses.
Perfect. Thank you.
Once again, if you have a question, please press star then one. The next question comes from Riley Sandham with RBC. Please go ahead.
Good afternoon. I'm on for Rowland Mayor this evening. Can you walk through how you're thinking about traditional versus non-traditional reinsurance, and are you seeing any appetite change from reinsurers as P&C markets have softened?
I'll make one comment and let Aurora share more. For us, the ultimate structure we face off against is excess of loss or quota share. We may source capacity from a traditional slate of reinsurers or from the capital markets in the form of an insurance-linked note, but the transactions we execute are quota share or excess of loss.
We like diversity in our sources of reinsurance. Recently, we've been more focused on traditional forms of reinsurance. One reason is we've been getting excellent execution and more flexible terms. In the capital markets, you need to warehouse risk either on your balance sheet or through a warehouse facility to get the volume needed for a securitization; that's extra complexity. In the reinsurance market, we have forward flow coverage, so we can lock in at a price certain today for coverage going out as far as three years. That gives us capital runway and certainty of execution for a complete planning horizon. The speed of execution in the reinsurance market tends to be quick, and we can do it in smaller sizes. Debt capital markets transactions or securitizations require a minimum bulk to cover fixed costs and tend to be less flexible, so we can't be as nimble there. That said, we like the ILN market and would like to be back in it; you'll see us return at points in the cycle.
As to why reinsurers are providing capital on attractive terms, a number of new reinsurers have started writing mortgage reinsurance risk. They've seen early participants' success, and additional reinsurers bring capacity, teams, and analytics, creating competitive dynamics. The GSEs have been laying off less risk into the reinsurance market over the past several years, leaving private mortgage insurers as the primary source of that risk, which is an important supply-demand dynamic for pricing. Additionally, while there's broader softness in some other lines, mortgage reinsurance has been profitable for reinsurers and is diversifying and non-correlated with some of their other businesses. We think that remains true today.
Very helpful. If I could squeeze one more in: the 21st Century ROAD to Housing Act went into effect earlier this month. Do you believe any of those provisions or other legislative proposals are able to help unfreeze this market?
Overall, we've been encouraged by a renewed focus from the administration, Congress, and others on housing market and housing finance issues. The 21st Century ROAD to Housing Act is a coordinated bipartisan effort aimed at increasing housing supply, streamlining development, and improving affordability. We are supportive of efforts to address the single-family supply shortage. It is the first major piece of housing legislation since the 1990s; while valuable for housing supply and affordability over the long term, its effects won't be immediate. Because it's supply-focused, we don't expect it to have a significant near-term impact on the private MI market or our business.
That's great. Thank you very much.
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 15th. We look forward to speaking with you again soon.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.