Mortgage Insurance

# Executive Summary * The mortgage insurance industry is navigating a challenging macroeconomic environment where high interest rates are suppressing new business volumes but boosting profitability from the highly persistent in-force portfolio. * A shifting regulatory landscape, headlined by updated Private Mortgage Insurer Eligibility Requirements (PMIERs) capital standards, is forcing companies to prioritize capital efficiency, influencing reinsurance strategies and shareholder returns. * While credit quality remains strong, early signs of normalization are emerging as delinquency rates and loss ratios begin to tick up from historically low levels. * In a largely homogeneous market, competitive advantage is increasingly being defined by proprietary technology and advanced data analytics that enable superior risk selection and pricing. * Faced with a mature core market, some players are pursuing strategic diversification into adjacent insurance lines, while others are doubling down on the core MI business and maximizing shareholder returns through aggressive buybacks and dividends. * Financially, the industry remains robust, with all major players holding significant capital buffers above regulatory requirements, providing resilience against economic headwinds. ## Key Trends & Outlook The primary force shaping the mortgage insurance industry in late 2025 is the volatile macroeconomic and interest rate environment. Elevated mortgage rates have sharply curtailed mortgage originations and refinance activity, contracting the market for New Insurance Written (NIW). However, this has a significant silver lining: policy persistency has surged from pre-pandemic levels of around 60% to approximately 85% in 2024, extending the revenue stream from the existing in-force portfolio. The Federal Reserve's recent 50-basis-point rate cut on September 18, 2025, may provide modest relief for originations, but insurers remain wary of persistent inflation and recession risks which could elevate future credit losses. MGIC's (MTG) new originations are tempered by high mortgage interest rates, while NMI Holdings' (NMIH) CEO expects a similarly attractive environment in 2025 as 2024, driven by long-term secular demand and resilient house prices supporting larger loan sizes. Against this backdrop, the industry is preparing for updated Private Mortgage Insurer Eligibility Requirements (PMIERs) set to be fully effective on September 30, 2026. Insurers are financially well-positioned to meet these new standards, holding significant capital buffers above current requirements. This capital strength allows for strategic flexibility, with capital efficiency becoming a key competitive differentiator. For example, Essent (ESNT) maintains a PMIERs efficiency ratio of 176%, representing $1.6 billion in excess available assets. The primary opportunity lies in leveraging proprietary technology to achieve superior risk-adjusted pricing and gain profitable share in a tight market. The most significant risk is a sharper-than-expected economic downturn that could accelerate credit deterioration, leading to a rapid increase in claims and pressuring loss ratios, as seen in the modest uptick at Enact (ACT). ## Competitive Landscape The U.S. private mortgage insurance market is a highly concentrated oligopoly of six active, GSE-approved insurers, which creates high barriers to entry. The product offering is largely homogeneous, forcing competition to center on service, technology, and risk management rather than product differentiation. Some players, like Essent (ESNT), focus intensely on the core MI business but seek to win through technological superiority in risk selection. Essent's core strategy is to compete primarily on the basis of superior risk selection, underwriting precision, and dynamic pricing enabled by its proprietary EssentEDGE credit engine, which analyzes raw credit bureau data from multiple sources. This approach offers the potential for higher underwriting margins and better long-term profitability by writing a more resilient book of business, though it requires continuous investment in technology to maintain an edge and retains concentrated exposure to the cyclicality of the U.S. housing market. In contrast, others, like Radian (RDN), are using their MI business as a foundation to diversify into other insurance markets to reduce cyclicality. Radian's core strategy is to use the stable cash flows from its foundational mortgage insurance business to fund expansion into other, less correlated lines of insurance or real estate services. This is exemplified by its planned $1.7 billion acquisition of specialty insurer Inigo and divestiture of non-core mortgage services businesses, aiming to create a smoother, more resilient earnings stream less dependent on the U.S. mortgage cycle. This strategy, however, carries execution risk in entering new markets and potential for management distraction. Established incumbents like MGIC (MTG) leverage their massive scale to generate cash and return it to shareholders. MGIC's core strategy is to leverage its large, established market position, deep lender relationships, and operational scale to efficiently manage a massive in-force portfolio while maximizing capital returns to shareholders. With an industry-first $300 billion insurance-in-force portfolio, its focus is on disciplined risk management and substantial shareholder returns, exemplified by its $980 million in capital return over the last year. While this provides significant and stable cash flow, growth is largely tied to the overall market, making market share gains difficult without price competition. The key competitive battleground remains the race to develop and deploy the most effective risk-based pricing engines to protect margins as credit trends normalize. ## Financial Performance Revenue trends for the core mortgage insurance business are a tale of two opposing forces: weak new business creation due to high interest rates, and strong revenue from the existing book due to high persistency and growing net investment income. Revenue growth for MI-focused firms ranged from -1.2% to +8% year-over-year in recent quarters. MGIC's (MTG) 1.2% year-over-year decline in Net Premiums Earned in Q3 2025 exemplifies the pressure on new business volumes. Conversely, NMI Holdings' (NMIH) 8% growth in total revenue in Q3 2025 highlights the positive contribution from higher investment income, which is benefiting from elevated yields on investment portfolios. {{chart_0}} Profitability remains robust across the industry, but early signs of margin pressure are emerging as loss ratios normalize from historically low levels. Loss ratios are climbing into the low-to-mid double digits, ranging from 12% to 15% for some firms. The key driver is the normalization of credit quality; after years of unusually low defaults, the natural aging of portfolios and economic pressures are causing delinquencies to rise. While still low by historical standards, this trend is pushing loss ratios up and compressing underwriting margins. Enact's (ACT) loss ratio climbing to 15% in Q3 2025 is a clear proof point of this margin pressure. This contrasts with the industry's strong underlying profitability, evidenced by NMI Holdings' (NMIH) 15.6% return on equity in Q3 2025. {{chart_1}} The dominant theme in capital allocation across the industry is returning significant capital to shareholders, primarily via share buybacks. With strong balance sheets, significant excess capital above regulatory minimums, and limited organic growth opportunities in a slow market, companies are prioritizing shareholder returns. This reflects a mature industry generating more cash than it can reinvest at high rates of return in its core business. This trend is best exemplified by MGIC (MTG), which returned $980 million to shareholders over the past year, and Radian (RDN), which has an active $863 million share repurchase authorization alongside its strategic M&A. {{chart_2}} The industry's balance sheet position is universally strong and resilient. Years of strong earnings, disciplined underwriting, and the use of reinsurance to manage risk have resulted in fortress-like balance sheets across the industry. All companies report significant liquidity and excess capital above PMIERs requirements, ranging from $1.4 billion to $2.5 billion. Radian's (RDN) $2.1 billion cushion above its PMIERs requirement, representing a 53% surplus as of March 31, 2025, is a representative proof point of the industry's overall financial resilience. {{chart_3}}