NMI Holdings, Inc. (NMIH) stock intrinsic value fair value estimate & owner earnings analysis

NMI Holdings sells private mortgage insurance through its subsidiary National Mortgage Insurance Corporation. When a home buyer puts down less than 20%, the lender requires this insurance, and NMI collects a premium (mostly monthly, about 93% of insurance in force) in exchange for covering part of the loss if the borrower defaults. It is approved to insure loans bought by Fannie Mae and Freddie Mac. At the end of 2025 it had $221.4 billion of insurance in force, wrote $48.9 billion of new insurance during the year, and earned $602 million of net premiums. The 2025 loss ratio was 9.6% (5.6% in 2024), so claims are still very light. How we measured earnings. We used cash from operations, then removed swings in working capital (premiums receivable, unearned premiums, claim reserves and similar items), subtracted stock compensation (about $20 million in 2025) as a real cost, and subtracted only the portion of software and equipment spending needed to maintain the business (about $5 million). Deferred income taxes and prepaid income taxes are left in, because they largely offset each other. On this basis owner earnings per share were $3.01 (2021), $3.72, $4.03, $4.54 and $4.89 (2025); in total dollars, $369 million in 2024 and $386 million in 2025. We started the valuation from $369 million, the middle of the last three years, rather than the highest year. We value total earnings spread over today's 79 million diluted shares, so share buybacks (about $105 million in 2025) are not counted as growth; they are simply a use of the earnings. Growth in total owner earnings in 2025 was about 4.8%, and the base case starts at that same rate. Base case: $68 per share. Earnings grow 4.8% in year one and taper to 2% by year ten, reaching about $511 million. The growth rests on the insurance book already written and on the steady flow of new business the company has produced every year: $40.5 billion in 2023, $46.0 billion in 2024 and $48.9 billion in 2025, which has kept insurance in force growing (up 7% in 2024, 5% in 2025) even as policies run off. We taper because the share of policies that stay on the books fell from 86.1% to 83.4% over two years, which slows growth. After year ten we assume earnings hold flat for ten more years, then stop; the company has replaced its run-off with new business for over a decade, but we credit nothing beyond that. We left out any gain in market share, higher premium rates, or a larger mortgage market, because none is locked in. Bear case: $36 per share. Claims have already begun to rise: loans in default went from 0.81% to 1.12% of the portfolio over two years, and the loss ratio nearly doubled. In 2020, when the pandemic hit, owner earnings fell about 21% in dollar terms (from $230 million to $182 million). The bear case assumes a stronger version of that, with earnings of about $250 million for three years, then about $290 million with no growth, and after year ten a 10% annual decline for fifteen years as the book runs off with no credit for new business. The company also has $425 million of senior notes due August 2029, which it would need to repay or refinance; the interest is already in our earnings figures, so no separate deduction is made. Bull case: $90 per share. Earnings start from the 2025 level ($386 million) and grow at the pace insurance in force grew in 2024 (about 7%), tapering to 3% by year ten (about $617 million), then hold flat for fifteen years. This requires claims to stay light and new business to keep growing, as they have. What could make this wrong. Mortgage insurers are exposed to a housing and unemployment downturn, and this company began writing business in 2013, so its book has seen only the pandemic and the 2022 rate shock, not a full housing bust. Its ability to write business also depends on staying in compliance with Fannie Mae and Freddie Mac's eligibility rules; at year-end 2025 its available assets exceeded requirements by 70%, and the GSEs can change those rules at any time. About 10% of risk in force is in California. The margin-of-safety price of $38 is set near the bear case because the main risk is a credit downturn that no company data yet covers.