NMI Holdings, Inc.NMIH
NMI Holdings, Inc. Fair Value Disclosure
Fair Value of Financial Instruments
The following describes the valuation techniques used by us to determine the fair value of our financial instruments:
We established a fair value hierarchy by prioritizing the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under this standard are described below:
Level 1 – Fair value measurements based on quoted prices in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments.
Level 2 – Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 – Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions, which require significant management judgment or estimation about the inputs a hypothetical market participant would use to value that asset or liability.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Assets Classified as Level 1 and Level 2
To determine the fair value of securities available-for-sale in Level 1 and Level 2 of the fair value hierarchy, independent pricing sources have been utilized. One price is provided per security based on observable market data. To ensure securities are appropriately classified in the fair value hierarchy, we review the pricing techniques and methodologies of the independent pricing sources and believe that their policies adequately consider market activity, either based on specific transactions for the issue valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded. A variety of inputs are utilized by the independent pricing sources including benchmark yields, reported trades, non-binding broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including data published in market research publications. Inputs may be weighted differently for any security, and not all inputs are used for each security evaluation. Market indicators, industry and economic events are also considered. This information is evaluated using a multidimensional pricing model. Quality controls are performed by the independent pricing sources throughout this process, which include reviewing tolerance reports, trading information and data changes, and directional moves compared to market moves. This model combines all inputs to arrive at a value assigned to each security. We have not made any adjustments to the prices obtained from the independent pricing sources.
The following tables present our financial instruments that are measured at fair value on a recurring basis by hierarchy level:
| Fair Value Measurements Using | |||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Fair Value | ||||||||||||||||||||
| As of December 31, 2025 | (In Thousands) | ||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government agencies | $ | 307,028 | $ | — | $ | — | $ | 307,028 | |||||||||||||||
| Municipal debt securities | — | 611,569 | — | 611,569 | |||||||||||||||||||
| Corporate debt securities | — | 2,019,611 | — | 2,019,611 | |||||||||||||||||||
| Asset-backed securities | — | 70,125 | — | 70,125 | |||||||||||||||||||
| U.S. agency mortgage-backed securities | — | 42,071 | — | 42,071 | |||||||||||||||||||
| Cash, cash equivalents and short-term investments | 130,556 | — | — | 130,556 | |||||||||||||||||||
| Total assets | $ | 437,584 | $ | 2,743,376 | $ | — | $ | 3,180,960 | |||||||||||||||
| Fair Value Measurements Using | |||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Fair Value | ||||||||||||||||||||
| As of December 31, 2024 | (In Thousands) | ||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. government agencies | $ | 116,060 | $ | — | $ | — | $ | 116,060 | |||||||||||||||
| Municipal debt securities | — | 635,245 | — | 635,245 | |||||||||||||||||||
| Corporate debt securities | — | 1,847,640 | — | 1,847,640 | |||||||||||||||||||
| Asset-backed securities | — | 41,980 | — | 41,980 | |||||||||||||||||||
| Cash, cash equivalents and short-term investments | 136,924 | — | — | 136,924 | |||||||||||||||||||
| Total assets | $ | 252,984 | $ | 2,524,865 | $ | — | $ | 2,777,849 | |||||||||||||||
There were no transfers between Level 2 and Level 3 of the fair value hierarchy during the years ended December 31, 2025 or 2024.
Financial Instruments Not Measured at Fair Value
On May 21, 2024, we issued $425 million aggregate principal amount of senior unsecured notes that mature on August 15, 2029 (the 2024 Notes). Proceeds from the 2024 Notes offering were primarily used to repay our then-outstanding $400 million senior secured notes (the 2020 Notes). At December 31, 2025, the 2024 Notes were carried at an amortized cost of $417.0 million, net of unamortized debt issuance costs and an original issue discount totaling $8.0 million, and had a fair value of $441.3 million as assessed under our Level 2 hierarchy. At December 31, 2024 the 2024 Notes were carried at an amortized cost of $415.1 million, net of unamortized debt issuance costs and an original issue discount totaling $9.9 million, and had a fair value of $429.6 millionHistorical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 15, 2023 | |
| 2021 | Feb 16, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 14, 2020 | |
| 2018 | Feb 14, 2019 | |
| 2017 | Feb 16, 2018 | |
| 2016 | Feb 17, 2017 | |
| 2015 | Feb 19, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.