Good morning. We're ready to get started. Great to see everyone here this morning. Great to be back in New York again for our annual Investor Day. This is the 10th year we've done this event, our ninth year here at the St. Regis, and I recognize a lot of you and know you, obviously, virtually as well. Always great to be here in person and have a chance to see everyone. We've got a great day scheduled. I'm going to go through a little bit of housekeeping before we get started. Today's presentation is being delivered in person in New York and simulcast on the web at nmih oldingsi nvestorday2024.com. For those joining remotely, presentation materials have been made available online alongside the webcast and on our website at ir.nationalmi.com/eventsandpresentations.
We'll host a Q&A session following today's formal presentations, and our webcast audience will have an opportunity to submit questions through the Q&A window on the webcast page, and there'll also be a replay of today's meeting available on our website and at ir.nationalmi.com/investorsandpresentations. I have a brief disclaimer for you. During the course of this Investor Day discussion, 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 today can be found on page 77 of this presentation and on our website, or through our filings with the SEC, which are also on our website.
If and to the extent we make 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, we will refer to certain non-GAAP measures and provide a reconciliation to the most comparable measures under GAAP on pages 75 and 76 of this presentation and on the Investor Relations section of our website. With that, I'll invite Brad to come to the stage.
Thank you very much, John, and good morning, everyone. I'd like to thank you for joining us this morning. A welcome to those of you who are in the room with us and those joining by video conference. Also, to those who may be viewing this on replay. We appreciate your interest in the company, and we think we have a great story to tell, and we hope you enjoy going through it with us. We have a really packed agenda for today, and we have a lot of things we're excited to talk to you about. We're going to spend a fair amount of time reflecting on the success we've achieved to date. But beyond that, we're going to talk a lot about how we're positioned to take the company forward, both in the short term and in the long term.
And that's what we all are so excited about because we see a substantial opportunity ahead. So with that, let's get started. So one of the best things about today, one of the things we enjoy most, is the ability to showcase our executive team. This is a great team. It's never been stronger and keeps getting better. So you will hear from key members of our team. You'll hear from Adam, our President and CEO. You'll hear from Norm Fitzgerald, our Chief Sales Officer. And you'll hear from Rob Smith, our Chief Risk Officer. You'll also have the opportunity to meet our newest member of the executive team, Aurora Swithenbank. Excuse me, Aurora. Our Chief Financial Officer, Aurora, joined us in May, so still new to the team, but really, really great addition. Aurora comes to us with a very substantive background.
She spent over 20 years at Goldman Sachs, including as a partner and in charge of all the firm's financing activities for insurance clients in the Americas. And so she brings a tremendous background, and it's been great having her with us, and I'm sure you'll enjoy hearing from her later in the morning. Also with us today, a couple of other key members of our team, Bill Leatherberry, our Chief Administrative Officer and General Counsel. Bill, wave your hand if you would. Bill is responsible for all of our activities in Washington, D.C., and keeping up with the various regulatory and governmental entities that surround our business. And he's extremely plugged into all those issues. Also with us today this morning, Mohammad Yousaf. Mohammad, raise your hand.
Mohammad is our EVP of Operations and Technology, and you're going to hear us talk a lot about our modern IT system and how that is a huge advantage for our company in serving our clients and maintaining our efficiency, and I'm sure you've seen our numbers in terms of our expense levels, and a lot of that is due to what Mohammad and his team have put together, and we're delighted to have him here today. We're going to take several breaks over the course of the day, so if you haven't met the team, please introduce yourselves. Let us know what your questions are. We want to answer them. We will also have a Q&A period at the completion of the presentation, and that's probably the part we all enjoy most because we want to know what's on your mind, and we want to answer your questions.
So please get them ready. So I just firmly believe that this is the strongest management team in our industry, and I couldn't be prouder to have the opportunity to work side by side with them. And this team, along with our full employee complement, is really why we've been able to achieve what we've been able to achieve. So please get to know us and let us know what's on your mind. Okay, let's review our themes for today. And you're going to hear these more than once, and that's by design. It's because they're important. We're going to talk about the track record that we've established since our inception and why that establishes a really strong foundation for the company going forward. We're going to share a perspective on our strategy and how that positions us to take advantage of what's available in the marketplace.
And then we're going to talk a lot about the opportunity we see ahead, both from a short-term standpoint and a long-term standpoint, and share with you why we're so excited about the future that we think lies ahead for our company. And of course, we're going to talk a lot about how we built the company to perform across all market cycles. So we've always thought that that was a very important aspect in this business in order to be successful long-term. So we'll also review our founding principles, which you've seen before. Nothing's changed there. We're going to drill down on four elements of success that we think we've achieved very demonstrably to date. And we'll try and pull it all together at the end and really tell you why we're so excited about the future. And then at that point, I will introduce Adam, so.
I mentioned the founding principles, and these remain central to everything we do. We're all about helping qualified borrowers achieve the dream of homeownership. And that's something that everybody in this company believes in, everybody feels good about. It's easy to get behind that. And when we think that since our inception, we've helped nearly 2 million families achieve the dream of homeownership, it absolutely drives us in everything we do every day. We feel great about that. That's in our DNA. And so it's very much a touchstone for this company. How do we do that? In order to be successful in helping people achieve the dream, we've got to be a credible and durable counterparty. We've got to build a company that can perform well and thrive and last through all market cycles. And we'll talk a lot about that.
Since the beginning, we've sought to have a great experience with our customers. And a lot of that is our people. A lot of that is our technology. And having the only modern IT system in the industry is a real advantage there. We manage risk very carefully. I'm sure we'll get into this in some detail today. But we have the best constructed insurance portfolio of anybody in the industry. And we have the numbers we can share with you, which prove that out. Culture has always been really important to this company. We'll talk more about that in a minute. But we see that as a real competitive advantage. And then finally, we understand we have to be financially successful in order to achieve all these goals. And we have, in fact, delivered very strong returns since our inception.
And we see the opportunity ahead to continue to do that. So that's exciting because it just kind of feeds back to the top. We can still continue to create homeownership opportunities for qualified borrowers if we achieve all these various principles. Okay, let's drill down a little bit on our track record for success. And first and foremost is our culture. We set out to build a great culture day one to make it a great place to work, to make it somewhere where everybody pulls together and actually has fun. So all our success to date traces to our people. We consider this culture and the impact on our people to be a competitive advantage. And if you look at what our employees say when we survey them every year, I think it's obvious that they agree with us.
For nine years in a row, we've been recognized as a great place to work by Fortune Magazine. And you might ask, well, if after nine years, aren't you getting a little complacent or you feel like you deserve it? And I would say, no, quite the opposite is true. I'd say Adam and I spend more time talking about this now than ever because it's so important to us. And we want to make sure that we're connecting with our people in a way that continues to move this forward because it's very important to us. And I'd like to think we're the best, but we're getting better. And we're going to try very hard to continue to get better.
So this all combines to make what I think is a great time for us and our people at NMI, a great time for you to be hearing our story. Let's talk a moment about winning with customers. We've had a dramatic expansion of our customer base and our market presence, which continues to this day. Norman Fitzgerald, our Chief Sales Officer, is going to talk a lot more about that, and he's going to talk about the multiple ways we connect with our customer base, all the way from our executive team relationships, our sales force, which does a great job connecting with the customers and building relationships. Our operations people, working with our counterparties at the customer level, have great relationships, and we also connect digitally in a variety of ways so that we can connect with the customer when and where they would like to.
I mentioned the IT platform already. I'll mention it again. The IT platform is a huge advantage in terms of serving customers in flexible ways so that we can meet their needs depending on what it is they're looking for, and as a result, customers increasingly have been choosing NMI. And we've had significant growth or significant success both in growing our business but in maintaining our quality, so we've been able to do both, and that's what we intend to do going forward. So let's talk a little bit about the quality of our portfolio. We do have the highest quality portfolio in the industry. That's easy for us to demonstrate. Rob's going to take you through that in some detail, but we've been able to do this even while growing substantially. Our insurance in force, as you know, now exceeds $200 billion.
We've been able to do that without sacrificing quality. You can see that in our numbers and our risk metrics, which, as I said, Rob will share. There's also been a huge driver of demand for our product, which we've taken advantage of and has allowed us to do that. That was an investment thesis when we initially capitalized the company back in 2012, was that there were record numbers of people hitting the age in which they would typically want to buy their first home. If you look at the average price of a home relative to the savings in that group, it was clear to us that they were going to need help in the form of private mortgage insurance. That's been a big driver and continues to be a driver, and we think it will be going forward.
It's allowed us to have the kind of growth we've had without sacrificing quality. We're really well positioned for long-term sustainable results. The final element of our track record for success is our strong financial results. Aurora is going to drill down on this in some detail a little bit later in the morning. I'm really proud of these results because this is what we set out to do. We've actually, I think, overachieved anything we might have said we would see as achievable at the outset. I think we're extremely well positioned to continue that kind of performance. Why is that important? Because, again, if our first founding principle is to help qualified borrowers become homeowners, we think by being financially successful allows us to continue to be able to do that and to achieve that goal.
So with that, let me try and pull it together. This slide has a lot of information on it. But to me, it really talks about a robust market opportunity we see in front of us, the housing market resiliency and strong buyer demand, along with the growing need for MI support that I mentioned a moment ago. So we see a sustained new business opportunity in front of us. And when you combine that with where we are as a company and everything we've achieved since our inception, our culture, which I've already mentioned, and our people, but our growth in our portfolio while maintaining our credit discipline has led to great profitability and shareholder value and the ability to do this, to continue to do this. So the bottom line, we see long-term opportunity ahead to drive growth and value for our people and our shareholders.
So we are going to hit on those topics over the course of the morning and appreciate your being here to hear it. And one thing I want you to walk out of the room today with is that we think we're very well positioned for continued success. You saw our third quarter numbers. We're having a very strong 2024. We expect to finish the year strong. We're very excited about 2025, as well as 2026 and beyond, because we think we've built a very durable and valuable company that will perform for the long haul. So with that, let's get into it. It's my great pleasure to introduce our President and Chief Executive Officer, Adam Pollitzer.
Thanks, Bradley. Good morning, everyone. I'm delighted to be here with you today and appreciate your continued interest in National MI. I'll begin on slide 14.
Over the next several pages, we'll share a perspective about our strategic outlook, where we see a tremendous opportunity to leverage our core strength and the success we've achieved to date to continue investing in our people, supporting our customers and their borrowers, and delivering differentiated growth, returns, and value for our shareholders over the long term. I'll get into the detail on slide 15, where we lead the MI market from a position of strength and success. We've always operated 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 borrowers, our lender customers, our employees, our shareholders, and other important stakeholders. We've had tremendous success in this regard.
We've helped nearly 2 million borrowers gain access to mortgage credit and open the door to affordable and sustainable homeownership in communities across the country. We've established a national customer franchise on a foundation of partnership, trust, and innovation. We've built a talented and dedicated team who drive our success every day. We've developed a comprehensive credit risk management framework, have built a large, high-quality, and high-performing insured portfolio with significant embedded value, and we've generated consistently strong and differentiated financial results. Taken together, we are leading the private MI market and outperforming in a dramatic way, excelling with our culture, our customers, our portfolio, our platform innovation and efficiency, and in the growth, returns, and value that we're delivering for shareholders. Turning forward, we'll have a look at each of these areas of outperformance, starting with our people.
We believe that the quality of our team and the culture that we've established are key competitive advantages. We've built a talented, dedicated group and have established a culture of collaboration, integrity, and performance where our employees feel energized and valued, and our continued success traces directly to their hard work and dedication. We have 229 employees, by far the smallest headcount in the mortgage insurance industry, and while we're small in footprint, our team is big in impact. We lead with a clear organizational mission, values, and purpose. Our mission is to help people gain access to housing and support them as they build value and community for themselves and their family. Our values are anchored around partnership, service, integrity, and excellence.
And our purpose is to serve our customers with distinction, security, and success, and to optimize the long-term benefit that we provide to our shareholders and other stakeholders. Winning in the market and building a large, diversified national customer franchise. We have active relationships with nearly 1,600 lenders. We've earned their trust and partnership because of our terrific team and our consistent focus on service, value-added engagement, and technology leadership. The mortgage market broadly is evolving, connected, and competitive. And we have the best sales team top to bottom to lead and outperform in a changing environment. This is also a time when lenders need our support more than ever before. Their businesses have been strained by elevated rates, and it's critically important that we show up for them with confidence and consistency as they continue to navigate through a challenging period.
And we're doing just that, staying close, staying connected, activating new accounts, and capturing increasing flow from our existing partners. Shifting to slide 18, when I talk about our book, I often use superlatives because it's appropriate and well-deserved. Our insured portfolio is the fastest growing, highest quality, and best performing in the private MI industry by a wide margin.
And these attributes are not typically paired together. Usually, growth comes at the expense of discipline, or risk management comes at the expense of growth. We have achieved all of them together: 18% compound annual growth in our insurance in force over the last five years, credit quality that stands ahead by every objective measure, and the lowest default experience in the sector by a wide margin. We have an insured portfolio advantage, and I'll build on this detail over the next several slides. Our insured portfolio advantage is not happenstance.
It's deliberate and traces directly to our risk management approach. We have built National MI to perform through all market cycles, and the discipline with which we've managed our business across the board stands ahead. Our philosophy all along has been that in order to get full benefit from risk management strategies when times are tough, you need to have implemented them when times were good. And this can be seen most specifically and most importantly in our comprehensive credit risk management strategy. There is no bigger long-term driver of our success than credit performance and how well we manage risk in our insured portfolio. And how we manage credit risk stands out. Our approach spans three foundational pillars. One, individual risk underwriting. Losses happen at an individual policy level. And the more information we have about each of the loans we insure, the better off we are.
Two, the use of Rate GPS, which allows us to fully price for the risks we're taking on a granular basis and also to price away the risks we don't want in our portfolio, and three, an expansive reinsurance program, which covers nearly all of the risks we've ever written as a company and helps to backstop our credit performance in periods of broader uncertainty or volatility. Turning forward, we have a goal to deliver differentiated performance in terms of our discipline, risk selection, and credit experience, and Rate GPS is a critical tool that has helped us achieve standout results. Rate GPS, where GPS stands for granular pricing system, is our proprietary multivariate pricing engine.
It allows us to factor for a wide array of foundational borrower and loan-level risk attributes and to further consider how regional trends and product design will drive loan performance and our credit experience at an individual policy level. Price is an important part of our voice in the market, and we use Rate GPS to directly express our risk appetite, drive our mix, and shape our insured portfolio to great effect, and in a world like today's, where the risk environment can evolve rapidly, Rate GPS is highly flexible and immediately responsive. Changes that we make to our risk decisioning and pricing framework one afternoon are effective in the market the very next morning. Rate GPS is a powerful tool and a key source of differentiation for us. Turning forward, our portfolio strength in stark relief. We have an exceptionally high-quality insured portfolio by design.
As an insurance company, we take risk. That is our purpose. Taking this risk responsibly, reviewing it and understanding it in detail, being selective as to what we ultimately put on our books, and establishing appropriate concentration guidelines is critical. And here you can see we have done just that. Now, there's a natural cause and effect. Our focus on and prioritization of credit discipline and the high quality of our insured portfolio drives our loss experience. And here we highlight the strength of our performance in a period of stress on the left at the onset of the COVID pandemic and in a constructive credit environment on the right as of the most recent reporting on September 30th.
We're deliberate in our strategy with a focus on building a high-quality insured portfolio, consistent in our execution using Rate GPS to actively shape our mix of business, and proud of our outperformance, delivering consistent industry-leading results. We have the fastest growing, highest quality, and best-performing insured portfolio in the private MI industry, again, by a wide margin. We've built it that way on the front end through the success we've achieved with customers, the business they entrust us with, and the disciplined approach we take to managing the mix of risk that we allow onto our balance sheet. We do even more on the back end, where we've led with innovation in the risk transfer markets and have secured comprehensive reinsurance coverage on nearly all of the policies we've ever originated.
Our program provides protection against adverse credit losses in periods of stress, and in doing so, serves to insulate our business, our book, and our financials from potential points of volatility. Of equal importance, reinsurance also provides us with an efficient and elastic source of regulatory capital funding. At September 30th, risk transfer in all forms provided us with over $1.8 billion of aggregate PMIERs funding at an estimated 5% pre-tax cost of capital. Turning to slide 24, I'll shift from our credit profile and performance as a source of differentiation to our platform innovation and operating efficiency. We've always been focused on managing our business with discipline and efficiency, and we have a distinct advantage with the smallest expense base in the MI sector by a wide margin and the lowest expense ratio across the industry. In terms of the benefits that this provides, the financial impact is obvious.
Lower expenses translate directly to bottom-line profitability and returns, and Aurora will share these details in her discussion, but I highlight our efficiency in my discussion today because there's also real strategic value here that I think is often overlooked, and it feeds directly into our risk management approach and the flexibility we have to more actively shape the profile of our high-quality insured portfolio. As a financial matter, we write business and price our policies to generate an adequate return on capital. We need premium revenue coming in to absorb our operating expenses, loss costs, funding needs, and taxes, and with our operating expense advantage, we simply don't need larger concentrations of higher risk, higher-yielding business to cover our expense base.
We can and have, in fact, been achieving best-in-class returns while also taking the most proactive and disciplined approach to managing our mix of business and the high-quality profile of our insured portfolio. From our perspective, the fact that we have a sustained expense advantage is a key part of why we have a sustained portfolio and credit advantage. Turning forward, our balance sheet and the strength of our funding position serves as the foundation for the broad success that we're achieving in the market. We have a robust liquidity profile, a sizable regulatory capital buffer, significant embedded earnings power in our platform, and a focus on funding efficiency and optimization. Our balance sheet strength provides us with the wherewithal to confidently continue to invest in our employees, support our customers and their borrowers, and deliver for our shareholders. This is what I think is a particularly powerful view.
Everything that I've highlighted thus far, our focus on team and culture, our commitment to our customers and their borrowers, our uniquely disciplined approach to credit risk management, the growth, scale, and performance of our high-quality insured portfolio, and our operating efficiency and funding strategy are key to what I call the National MI way. These principles are intentional. They trace back to our earliest days and the work we've done from day one to establish National MI as a sustainable market leader positioned to deliver strong mid-teen returns with lower volatility through the cycle. Over the past five years, we've delivered the highest and most consistent returns in the sector by a wide margin. Broadly speaking, we've built our business to deliver a very high floor in stress and operate with very high upside when market conditions are favorable. And our pronounced return advantage translates directly to value.
We set a course, we deliver differentiated performance, and we do so with less volatility and greater certainty of outcome. Taken together, we've built a premium franchise that has consistently outperformed across all key metrics for our shareholders. We're proud of what we've achieved and the success we've delivered to date, primarily because of the confidence it provides us as we look forward. Looking forward, we see a clear long-term opportunity to deliver continued growth, returns, and value. Turning to slide 28, that opportunity that lies ahead for us is framed by continued resiliency in the macro environment and housing market. Even though interest rates remain elevated, the labor market has held strong, house prices continue to trend higher, and existing borrowers are performing exceptionally well.
While real risks do in fact remain with volatility in the rate markets, signs of strain in the card and auto sectors, and broad post-election policy uncertainty, the economy continues to set a constructive backdrop, and we're encouraged as we look forward. Now, one of the reasons we value Investor Day is because it provides us with the ability to share a longer-term view with more depth and detail than we can on our quarterly earnings calls. And one important point I want to highlight as we look ahead is the sustained new business opportunity that we see in the market, which admittedly sits in contrast to the prevailing headlines about rates, affordability, and origination activity in the mortgage market. And to explain this contrast, I'll share a piece of data first to frame things and then talk through the key underlying drivers.
For that data point, 2023 and 2024 have seen the slowest pace of mortgage origination activity by loan count in the last 25 to 30 years. Our ratable exposure, however, what we charge premium rate against is not the number of loans we insure. Rather, it's the size of the loan balance. The dollar volume of transactions is what matters. So even though 2023 and 2024 have been a low point for origination activity by loan count, they've actually seen near all-time highs for private MI industry new business production if you scope out the anomaly of the pandemic peaks. This sets a very high floor from which secular trends are expected to drive sustained growth, long-term strength, and value. Now, these secular trends, one, demographics. Demographics drive demand, and current population vectors, particularly the aging of the millennial generation, provide a long-term tailwind in the housing market.
Two, the long-standing practical and emotional pull towards homeownership in the U.S., which was dramatically reinforced by the experience of the pandemic, and three, house prices, which are expected to appreciate long-term given the severe supply-demand imbalance in the housing market, matter because as house prices move higher, loan sizes increase. Add to this dynamic the current reality that borrowers today need more support than ever before, and the long-term private mortgage insurance NIW opportunity will be large, very large, and the opportunity that we have at National MI to build long-term value is clear. Now, there are two complementary forces propelling long-term embedded value across the MI sector and for National MI in particular. The secular themes driving the sustained new business opportunity are paired with increased persistency in an elevated rate environment, and both together are driving long-term growth in MI industry insurance in force.
And I want to pause for a moment on this chart because it's an overwhelmingly positive view and one that I think is often overlooked. The private mortgage insurance market is a $1.6 trillion industry that has grown at a 6% compound annual rate over the last five years. It is a large, growing, and dynamic market. And while year-to-year trends may fluctuate based on the economy, on interest rates, and on origination volumes, long-term, there is tremendous opportunity for the sector overall and National MI in particular to continue delivering outsized growth, returns, and value. Turning forward, and what I said was a unique opportunity that we have to deliver long-term growth in an attractive market. We often talk about our embedded portfolio advantage as a credit matter, and this makes sense because we have objectively the highest quality, best-performing insured book in the industry.
But it's only part of the story. We also have an embedded growth advantage that we call the pull-to-par. Before I explain, I do want to level set. I'm about to mention market share, and I want to remind everyone that we have never before, and I commit to you, never will manage to a market share goal. However, for this discussion, share is relevant. The pull-to-par is simply the difference between our share of industry insurance in force, 13.1% at September 30th, and our share of NIW, which has averaged 15.5% through the first three quarters of the year. Over time, our share of industry in force will grow and align with our run rate share of new business production, and this provides us with a unique embedded growth engine.
Over the last five years, we've grown our insured portfolio at an 18% compound annual rate compared to 5% for the rest of the sector. While our relative outperformance will naturally slow given the size of our book today at over $200 billion, we have a track record of differentiated performance and the benefit of this pull-to-par tailwind driving us as we look forward. Ultimately, growth in our high-quality insured portfolio is a key driver of our revenue growth and embedded value gains for shareholders. Now, shifting forward to a chart that we like a lot, and I'll admit we use it frequently. You'll see it a few times today, and we've shared versions of it in many of our past Investor Day discussions.
We call it the Blue Mountain of Value, and I see it as a visual representation of the exceptional opportunity we have to deliver long-term growth, returns, and value for our shareholders. Over the past five years, we've compounded book value per share at nearly 20% annually, a terrific achievement that highlights the consistency and significance of our success to date. And looking forward, we are levered to the upside in an attractive market with a uniquely valuable strategy, and we are well-positioned to continue delivering for our shareholders over the long term. To wrap up, I stand in front of you today with confidence in the National MI way, in the differentiated performance we've so consistently delivered, in the long-term opportunity that we see across the private MI market, and in our ability to continue to execute and drive growth, profitability, and returns for our shareholders.
I'm now delighted to introduce our Chief Sales Officer, Norm Fitzgerald. Norm.
All right. Good morning, everybody. Thank you, Adam, and thank you all for joining today in person and for those of you online. We're really glad that you're here and grateful for the opportunity to tell our story. As Chief Sales Officer, I'm very proud of what we've accomplished as a sales team and as a company since our founding more than a decade ago. I'm especially gratified to see what my team has accomplished over the past year as we made ourselves even more valuable for our customers and for the company in the face of elevated interest rates and a continued slow origination market. I'm excited to take you through the results we've achieved, how we add value to our customers, and how we're thinking about growth and sustained excellence.
So you've heard it already, but we have a great team and a strong customer platform. We can access every lender in the country, both in person and virtually, effectively engaging with our customers wherever they are. And I'm proud to say that our sales team and our national platform are stronger than ever. Our account coverage and access to the market has never been better than it is today. We can sustain our high-level performance because we have a competitive team armed with powerful digital tools that have allowed us to amplify the voices of our team more proficiently every day. And I'm proud to say that I really know every individual on this list of 39 because I've had the honor to recruit, to train, and to lead this group for more than 10 years.
I've had the unique opportunity and responsibility to build our sales team from the ground up, so I built it around seasoned people who have proven to be effective in an ever-changing environment, always keeping in mind that personal relationships and wide-ranging experience matter a lot. We have intentionally built our team with strong and resilient people who represent the core culture we were founded on, people who are willing to roll up their sleeves and get the job done. I believe that we have the best sales force in the industry, and their success is evident in the record growth of our account base and our NIW production year after year after year, and I'll echo something that Brad said earlier in the opening. Our team loves what we do, and we are still having fun. Now, we've been incredibly successful activating new accounts and building our base.
Our account expansion has been fundamental to helping us grow, helping us grow our high-quality insurance in force in a sustainable and balanced way. With our customer base, we now have account access and a customer footprint that is second to none. I'm proud to say that with our commitment to activations, we now have access to nearly the entire market. This growth and diversification of the account base is a huge advantage in an environment that continues to be dynamic. As volumes ebb and flow between different customers and different pockets of the market, and as customers merge, restructure, or disappear, we have the access we need to pivot where the opportunity is. You'll see here that over the past five years, we've continued to increase our active customers, reaching a new record of 1,588 active customers as of the end of third quarter.
I can tell you that all of our active accounts were earned. Most conversations started with the word no, or at best, maybe. However, our talented team has been able to persevere. With our boundless professionalism and enthusiasm, we've been able to change that narrative to yes nearly 1,600 times, and there's more that we can do, and there's more that we will do to maintain our positive momentum. Our ultimate objective is to ensure that our large base of active accounts remain active and growing accounts. We talk a lot about what active accounts . What does that mean? It means we have a master policy in place. We are integrated with the customer as both an operating and technology matter and have generated NIW. That's it. Simple, but far from easy.
Now, of course, step one is getting our master policy approved, and this is a big undertaking, but we have a lot of experience, as you can see, and we are very proficient at it. Now, step two is getting complete connectivity with the customer, and that means people, process, and systems. And the system connection is absolutely crucial because this is how they see us, and we aren't ready to receive a customer's business until we're fully connected. In today's world, being fully integrated in the systems and knowing our customer's entire process, front end to back end, is essential to sustained success. Keeping all lines of communication open is paramount. I'm proud to say that we have activated more than 500 new accounts over the past five years.
My team's highest priority is providing NMI equal access to the high-quality NIW opportunity that we target as a risk management matter, helping to achieve our NIW and credit quality goals. And even though we've been incredibly successful adding new accounts, we still have an opportunity to grow. Alongside our focus on account growth, we are working continuously to increase our capture of each customer's high-quality NIW opportunity. Now, with all the accounts that we've activated over the past 10 plus years, we still celebrate every new activation like it's our first. We are always grateful and never entitled. We have worked ceaselessly to get here, and we will work just as vigorously to make sure that we hold the line because we've earned it. So I get this question a lot. Why do we win? How are we succeeding year after year?
I believe it's because every individual on our team has built their own base of customers organically. In the NMI market, in the NMI industry, that is different, and it matters. Our team did this one at a time using the strength of both their personal and our company brand in every sale. Our team's experienced. Our NMI sales team carries an average of 26 years of broad expertise spanning the entirety of the mortgage industry. We all work together, including not only sales, but our entire NMI organization to provide the most comprehensive consultative sales approach in the business. Now, we've got a united team, and we lead it with transparency and a spirit of ownership that has earned us the recognition as the best place to work nine years in a row. Nine years in a row. That is special. That is sustained excellence.
We simply care more about our customers and about each other. We are also good students. We do our homework. Our experienced team of professionals are well-known and respected in their markets. We really know all of our customers and all of our accounts and all the decision-makers and all the systems that they use. And we know that every customer situation is different, so we customize our approach for every single person. But one thing that is consistent is that account success always starts with effectively building trust and always delivering value. For one customer, it may be about our post-close underwriting validation program and accelerated rescission relief. For another, it might be about our ability to seamlessly integrate into their loan origination system. For many or most, it does come at the end of a long process of due diligence, counterparty review, and executive-level engagement.
I can say as a general matter that more and more of our conversations with customers are about their digital strategy, and we are a thought leader on this subject and have technical credibility because of our modern IT platform, our transformational IT and operations leadership, and our Rate GPS system. This leadership has become a big differentiator for us, and we're leveraging it to broaden our footprint and our penetration in the market. We have offered an outstanding customer training program for years, consisting of original customized training offered both virtually and in person, and part of our continued success there has been quickly shifting and refreshing what we offer to address an evolving set of customer needs. Our customer base now counts on us to help them navigate the changing landscape.
Now, I want to emphasize that building trust and adding value begins and continues with people who care and who know their market and their customers in this industry. We strive to efficiently get our best people in front of more customers every day. And it's our ability to capture these moments and drive our value adds, our service, our experience, our culture, our training, and of course, our people. Our team's excitement and level of commitment to our customers absolutely remains the most critical component of why we win. And the best part is, even with all this success and after more than 10 years, our team cares even more, and we aren't done yet. So in summary, we have been incredibly successful, driven by a great team with a differentiated message and value proposition.
Now, I joined this company 11 years ago because I love a challenge, and I love to build things. And this has been an incredibly rewarding time for me, and I am as excited today about our opportunity and potential as I was on my day one. I'm grateful for the relationships and partnerships that we've built internally and externally because for me, it's always been about the people. It's all about our customers, our employees, and our culture. And these are not just words on a slide. This is what drives me every day. Our team will continue to focus on high-value new account activations because that's where we win. We will use our entire organization and strategic engagement to continue our success in penetrating these accounts. We have an advantage through our digital literacy when it comes to efficiently connecting with customers and winning their business.
We are dedicated to driving all of this with sales efficiency and excellence. With this combination, the best people, the best platform, and the best customers, we are excited about what we have been able to accomplish in this market and all the exciting opportunity that lies ahead for us. So with that, I thank you for your time. I think we're going to take a 10-minute break, and when we return, you'll get to hear from our Chief Risk Officer, Rob Smith. Thank you. Governor Mayor Sharon, in white? Rob?
All right. All righty. Thank you all. I want to thank you all again for either attending here in person or attending online somewhere up there. In case you haven't figured it out yet, we do prioritize risk management in our company, and that's my job. So I'll go through some of that today.
I'm going to start with a discussion of our overall risk management framework, describe how we approach risk selection and risk distribution. I'm going to flip to my open slide here, and I'm then going to discuss our long-term commitment to managing risk, how we maintain our risk discipline and responsibility in building our insured portfolio, and how that applies to the current economic environment. One thing to understand about the MI industry is that stress events in the housing market, they generally develop over time, and when they hit, they persist over multiple years. Given this long-duration nature of a stress environment, it makes strong risk management particularly important in the MI industry. Since our inception, we've established a comprehensive risk management framework. It's really designed to reduce the volatility of our results by mitigating losses that we might experience during adverse economic events.
Our approach to risk management exists within a tight regulatory framework that really was instituted in the aftermath of the Great Recession and still remains in place to this day. Our approach is multifaceted, and it does involve a continuous commitment to managing risk, as Brad introduced in his remarks. I'm going to switch to talk about some of the specifics of our approach towards managing the risk of our insured portfolio. You've seen this slide already. There are a lot of details to how we manage risk. But we generally think of our approach as having three main pillars. The first pillar is we emphasize individual risk underwriting. This helps us understand the loan manufacturing quality of our customers. And it does help us to correct defects in the underwriting processes as they occur.
The next important pillar is our risk-based pricing engine, which we call Rate GPS, which allows us to price appropriately for the risk of each individual loan scenario. We look at factors beyond the interplay of credit score and loan-to-value ratio. That's the hallmark of a rate card-based approach, and then finally, as we aggregate risk, or in some cases before we aggregate risk, we purchase reinsurance in a variety of forms in order to cap our losses in adverse economic scenarios, so as Brad mentioned, we've been doing this for 10 years. It's been over six years since we released Rate GPS. The introduction of these systems and the widespread adoption of risk-based pricing in the MI industry is a significant advancement in our ability to actively manage our risk.
Giving industry participants, such as ourselves, the ability to independently determine the appropriate premium rate to charge given the borrower product and geographic risk of each loan scenario, risk-based pricing allows each participant to shape their portfolio the way they see fit. While the use of risk-based pricing is firmly embedded in the industry today and by our estimate comprises the overwhelming majority of industry volume, we put particular emphasis on acquiring business through our engine. And we actively adjust our pricing as the environment develops. As Adam mentioned earlier, we have the ability to change price overnight as we see fit. Now, our view is that accepting more volatile risk requires higher premium rates to compensate for that volatility. And as a result, we tend to over- or under-index the industry on some key risk markers, as these graphs on this slide demonstrate.
To get into some more details on this slide, we put a particular focus on managing what we consider layered risk, which is some combination of low credit scores, high loan-to-value ratios, and high debt-to-income ratios. While any one of these risk factors in isolation may be offset by compensating factors, combinations of these risk factors can lead to increased borrower defaults. Another risk factor in strong focus these days for us is geographic risk. While in aggregate, the U.S. housing market is really strong, it's characterized by supply, which is well below the pre-COVID levels, not all areas are showing equal strength, and that necessitates differentiated pricing.
While we support all geographic areas of the country, because we direct most of our NIW through risk-based pricing, which gives us the ability to differentiate pricing across all roughly 950 separate MSAs, and because we price for what we perceive as the house price risk in each market, our exposure to some geographies have trended below the competitors, as you can see on the lower right-hand side. You've seen this slide as well. You can see the result of our emphasis on risk-based pricing is an insured portfolio that is tremendously high quality on both an absolute basis and a relative basis. Our portfolio has practically no product risk. Nearly all of our insured loans are fixed-rate and fixed-payment mortgages. The borrowers taking out these mortgages are fully documented for income assets and employment.
We do operate across the country, as I mentioned, which results in a well-diversified geographic mix, and as we've seen in the previous slide in reviewing NIW trends, and it's reflected again here on our portfolio view, we are very selective insuring loans with low-risk attributes, and therefore, tend to under-index the market on some of these key risk factors. As you'd expect, the result of constructing a relatively high credit quality portfolio is relative outperformance. The overall results for the entire industry have been good, and they continue to be strong, but our higher quality portfolio generates fewer losses, as one would expect. If we look closer at the vintage breakout, outperformance exists across all book years.
From an absolute perspective, while some vintages, such as the 2022 book year, are seasoning into their peak default years, default rates on all books remain historically low, while the 2020 and 2021 book years benefited from unusually high house price appreciation and will likely generate very few losses over their life. The 2022 and onward book years are also of exceptionally high quality by any historical measure and are performing well within our expectations at the time they were insured. Despite our efforts to control for known risks, macroeconomic risk in the form of declining house prices or rising unemployment is outside our control. For those macroeconomic events that may generate more severe losses, we purchase comprehensive reinsurance. The coverage on this reinsurance attaches anywhere from first loss in the case of quota share to a low working layer for our insurance-linked notes and traditional excess of loss agreements.
Because it provides meaningful risk transfer, reinsurance also provides reasonably priced loss-absorbing capital relief. So this is another significant advancement for the mortgage insurance industry, with reinsurance now available in many forms from many different market participants in both the traditional reinsurance and capital markets, and covering risk that's already in our portfolio and risk we have yet to write. We've been active in the markets, traditional reinsurance markets since 2016, and the securitized markets since 2017. And we intend to stay active in all these markets. We recently renewed our traditional reinsurance agreements. These renewals were really our best ever. Pricing was near the lowest level we've ever achieved. And the terms were excellent, with forward coverage extending through the end of 2027.
So now, I'll spend a few slides discussing our view in the macro and housing market through which we're managing and how we intend to maintain our approach to managing risk. So as we can see here, the economy has proven incredibly resilient so far, avoiding the recession that many thought was inevitable. GDP continues to grow at a steady pace. And the housing market has held up well in the face of decreased affordability. While overall housing sales activity is down, house prices have proven resilient in most markets and are reaching new highs on a national basis. Although there are pockets of increased inventory, for most of the country, active inventory remains well below pre-pandemic levels. So we remain optimistic about the short and long-term health of the U.S. economy and by extension, the U.S. housing market. We do recognize that challenges remain.
Housing affordability remains a challenge for many U.S. households, and so far, the expected relief from low mortgage rates was fleeting. We had a few weeks in September. Wages are still struggling to compensate for the compounded effect of inflation on many of life's necessities, and of course, forecasting the future is always fraught with danger, so we remain diligent in executing our risk management strategies, so underpinning the tailwind behind U.S. house prices is a persistent supply-demand imbalance. It's really built up in the aftermath of the Great Recession. It was intensified by continued demographic trends that generate a large house-buying cohort, and it's exacerbated by the lock-in effect, keeping many existing homeowners from adding their homes to the market. This imbalance serves to provide a tailwind to house prices, notwithstanding any short-term economic disruptions.
As we look forward, we expect this favorable dynamic will help generate upward house price momentum that will continue despite any temporary disturbances that might arise. For our existing book of business, we have insured loans of extremely high quality. You can see some of the statistics here. We're confident in the ability of these borrowers to perform well through economic stress, given their risk profile, the underwriting through which they're vetted, the stable payment profile of the mortgage products which they have selected, and the equity they've generated. On that note, a little information on our estimate of the equity in our portfolio. The average LTV at origination in the MI industry tends to trend around 92%, a mix of 85s, 90s, 95s, and 97s. We estimate, however, the average LTV on our portfolio is about 75% on a mark-to-market basis.
Even moderate house price declines would leave most borrowers with sufficient equity to provide an incentive and an ability to avoid ultimate default. We do observe this loss avoidance behavior regularly in our default inventory. Delinquent borrowers with large equity cushions will voluntarily list their properties for sale in order to pay off their mortgage balances and extract their equity rather than fall into foreclosure. With house prices continuing to increase and fully amortizing mortgage products, insured borrowers will continue to build up equity. So there's been some recent studies of mortgage defaults that have found that roughly 95% of defaults are caused, at least in part, by life events that negatively impact borrowers' cash flows. Generally, as long as borrowers have the ability to pay, they will. The most common life event leading to a negative impact on cash flow is a loss or reduction of income.
The state of the labor market is a key underlying factor driving mortgage default trends. Fortunately, the labor market in the United States is strong. The unemployment rate is up slightly from its lows, but at 4.1%, it remains low from a long-run historical perspective, and it's not far from the levels the economy experienced immediately prior to the pandemic. When we drill down further, U.S. Census Bureau data indicates the unemployment rate for homeowners is not only lower than that for renters, but also the recent increase of the overall unemployment rate from its lows is largely driven by an increase in renter unemployment, so this indicates homeowners' cash flows have remained strong, which again helps them avoid mortgage default, and there's no indication of a recent change in their overall cash flow position.
The difference in homeowner unemployment rates and renter unemployment rates can help explain some of the difference between mortgage and other consumer credit trends recently. There have been some increase in defaults that we've observed in other consumer products like auto and credit cards. But by definition, renters don't have a mortgage, so increased unemployment can't translate through to increased mortgage defaults, so when we tally up the totality of the steps we are taking and have taken to manage and mitigate our risks and the strength of the environment under which our industry operates, we feel confident in our ability to deliver exceptional results. Risk management is the core of what our company does. It's validated by the credit performance of our insured portfolio, and it informs our actions in the current economic environment.
It's a key focus of ours to maintain a proactive stance in risk management through policy pricing to ensure we adequately balance our risks and returns, through risk selection to ensure we continue to construct a high-quality portfolio, and through reinsurance to ensure we maintain comprehensive coverage for unseen events. I want to thank you again for attending today. I'll now turn you over to Aurora Swithenbank, our CFO.
There we go. Thank you, Rob, and good morning. It's great to be back in New York. It's been a long time since I've been here. I'm excited to meet all of you here in the room in person, and thank you for braving the rain to come out and see us this morning, and very much looking forward to meeting all of you who are joining us on the web.
In case there was any doubt, we are live here in New York City. You can hear some horns and all sorts of great sounds of the city out the window there. So you heard earlier from Brad and Adam about our strong track record of success. And I've heard from Rob about the disciplined approach we take to portfolio construction and risk management. I'm going to get into a little bit more detail from a financial perspective about how we manage both our capital and our expenses with the same discipline and how this positions National MI to deliver growth, returns, and value. On this page, we've got a lot of numbers that highlight our customer franchise, our high-quality portfolio, our disciplined credit risk management framework, and our capital and expense focus, and how these factors drive our financial performance.
I won't tick through each metric, but we've delivered significant success across every key measure of financial performance, so on the top line, we've compounded at over 10% compound annual growth rate over the past three years. Expenses, we've maintained a low 20% expense ratio consistently. Bottom line profitability, we've compounded over 17% annually over the past three years in adjusted net income, and in book value per share, 18% compound growth over that same three-year period. On the previous slide, you saw the high average returns that we are producing, but in this view, you'll see the consistency in our growth and our high returns quarter over quarter over a very extended period. I'd also bring your attention to the left-hand side of the chart, where we achieved a nearly 10% ROE even at the height of the COVID-related default wave.
It's a testament to the high quality of our portfolio and the strength of the credit experience during that time of stress. You saw the consistently high returns we had delivered presented visually in the histogram that Adam presented earlier. I'm going to revisit it for emphasis. This chart plots our return on equity in each of the past 20 quarters and plots the same using an average of our monoline peers. What you'll see is a higher peak of ROE for NMI relative to our peers, a higher floor, and a much tighter distribution of results. The greatest source of ROE volatility in the mortgage insurance industry is credit losses. With our disciplined focus on risk management and shaping our portfolio, we have minimized our concentrations of the risk cohorts that drive negative credit outcomes and earnings volatility.
It's an approach that has served us well and one that we continue to actively pursue. Looking at the right-hand side of this page, this has resulted in an outsized growth in our book value per share, driving long-term shareholder value. Now I'm going to turn to a discussion on how we construct our balance sheet and how this supports our long-term business opportunity. As a balance sheet-intensive financial services company, balance sheet strength is key. We need a strong capital base and liquidity to support our state and federal capital requirements, our strong ratings, and our commitment to policyholders. You can see on this slide the growth in our PMIERs funding base as we organically generate capital to sustainably finance our new business opportunity. We have $2.7 billion in total capital, up 42% over the past three years.
We have low-GAAP leverage of 15%, now at a lower cost of capital following our May debt refinancing, and a $1.3 billion PMIERs funding buffer, which is up from $627 million three years ago. A key part of our PMIERs funding and balance sheet strength is our comprehensive reinsurance program. National MI has been an innovator in the reinsurance market, and 97% of our risk in force is covered by these risk transfer solutions. The markets have proven to be a deep and consistent source of cost-efficient capital funding since our first placement back in 2016. In the most recent quarter, you heard Rob make reference to this, we placed three years of forward flow quota share protection covering production for 2025, 2026, and 2027. We also placed two excess of loss reinsurance treaties covering 2025 and 2026.
These transactions are the longest-duration contracts we've ever achieved, giving us significant capital and risk protection runway as we execute our business plan going forward. In addition, they all represent either the lowest cost of reinsurance funding or tied for the lowest cost of reinsurance funding we've ever achieved. Here on slide 64, we provide further detail on how we are funding our PMIERs requirements with a focus on diversity, efficiency, and sustainable funding sources. Quota share reinsurance is a core foundational part of our PMIERs funding structure. On top of that, we've layered excess of loss reinsurance in both capital markets and traditional forms, as well as our $425 million senior unsecured note offering. We like reinsurance for its efficient funding profile.
If you look across all of the treaties that we've got on our books, it's roughly a 5% cost of capital across all of those treaties and for its ability to absorb losses under stress. Reinsurance gives us better than a debt cost of capital with equity-like loss absorption characteristics. Now I'm going to speak as to how we're delivering growth, return, and value, and why we believe that we are poised to continue to do so. Earlier this year, our insurance in force crossed the $200 billion threshold. With the constructive new business environment we see, coupled with our strong persistency in our book, we believe that there is continued opportunity to grow our insured portfolio. This is notwithstanding the current high level of interest rates and low mortgage origination activity.
We continue to deliver industry-best growth in our insured portfolio with a five-year growth rate of 18%. The high persistency, which was 85.5% in the third quarter of this year, means that we're seeing an extension in the expected life of our in force portfolio and an increase in the expected lifetime premium revenue that it will throw off, which will enhance the value of our in force policies. You heard from Rob about our careful and deliberate portfolio management approach, and Adam touched on this earlier, but I'm going to reemphasize this. In today's strong macroeconomic backdrop, you can see on the right-hand side of the page that we produce a default rate of 87 basis points, or less than half of the average of our peers, but you can also see the outperformance in a time of stress.
And on the left-hand side of the chart, you can see that our peak pandemic default levels were substantially below peers. Turning to page 68, our high-grade fixed income portfolio is also providing an earnings tailwind, with new money yields continuing to meaningfully exceed the current book yield. We're putting new money to work in at around 5%, which compares to the book yield on our portfolio as of September 30th of 3.15%. As cash flows are put to work at these new money rates, we'll continue to pull that book yield higher. Every 100 basis point rise in book yield translates through to roughly 100 basis points of increase in the ROE. You've seen this slide from Adam as well. We have the lowest operating expenses among the monoline insurance peers. And I want to briefly describe how we do this and why it's important.
In mortgage insurance and broadly across the financial services sector, the two biggest components of expenses are people and systems. We have a modern IT platform. In fact, we have the only de novo built system in the sector that has been built since the financial crisis. This means we can take advantage of the latest technologies, have a larger base of developers and partners, faster and more efficient implementation of new features and requirements, and streamlined connectivity to our clients. We believe we have the best people in the industry, and I'm not going to do our people justice the way Norm and Brad and Adam have already spoken about our people, but I fundamentally believe that we have the best people in the industry, but I would say that our systems advantage supports the efficiency of our people and their productivity.
As we look forward, we remain equally focused on expense discipline and efficiency. As every dollar of expense we don't spend goes straight to the bottom line. Adam shared this slide earlier. It's a chart of the growth in our book value per share we've achieved to date, which is the net result of this focus on portfolio construction, expenses, and investments. As we continue to pursue this substantial new business opportunity available to us in the housing market and manage with discipline and efficiency consistent with our track record and our brand, we see the continued opportunity to deliver strong mid-teens ROEs and compound book value per share as we go forward. Our significant success to date has driven a substantial opportunity for shareholders to directly benefit from the value that we're creating.
We returned over $200 million of capital to shareholders since initiating our share repurchase program back in 2022. As of September 30th, we have $108 million remaining on our existing repurchase authorization, which runs through December of next year. Capital distribution is both a near-term focus for us and a longer-term opportunity as we continue to grow and build value. In conclusion, as we look forward, we've delivered significant financial success, continued to build an efficient, durable, and risk-responsible balance sheet, and are well-positioned to capture the opportunity ahead, and with that, I'm going to turn it back to Adam for some concluding remarks.
Great. Well, thank you, Aurora.
You've heard a terrific set of presentations today from our senior team outlining our track record of success, highlighting the National MI way and our differentiated strategy, and detailing the clear opportunity that we see over the long term to drive continued growth, returns, and value for our shareholders. We thank you for your time today and continued interest in National MI. We'll take a five-minute break to set up for Q&A. Thank you.
Are we ready, John? Okay. Welcome back. This brings us to our favorite part of the program today, where we get to hear what's on your mind and answer your questions. So with that, please raise your hand. Wait for the microphone so we can make sure everybody attending virtually can hear you and state your question.
This is Doug Harter from UBS.
I was hoping you could talk about your outlook for persistency, specifically as the 2020 and 2021 large vintages kind of hit their four-to-five-year age, where they are approaching the 78%, and just how that's going to impact overall persistency.
All right. We're live and ready to go. Thanks, Doug. So in terms of persistency, on our earnings call, we shared a perspective as well that I'll just reiterate. We're obviously today at 85.5% persistency. We're above long-term historical averages, which tend to run closer to 80% in the sector. If you look at the underlying note rates, so the weighted average note rate in our portfolio is 4.8%. And not everybody has a 4.8% note rate. There's heavier skew with a lot of borrowers still with sub 3% or sub 4% note rates.
And then those from more recent vintages that have 6% and higher note rates. And so, but with an overall weighted average of 4.8%, we do expect that persistency will continue to trend above long-term historical averages for some time. We're probably not going higher from where we are now, right? There's always some level of activity and turnover that we see. As to the performance and sort of outlook for the 2020 and 2021 vintages, you referenced, call it four years or so. In fact, the lower the note rate, right, the quicker that the underlying amortization of the principal balance, because more of your monthly payment goes towards principal repayment than interest. But it's still, even down to call it a 3% note rate, it's still roughly, for us, a 92 weighted average LTV at origination that Rob referenced.
It's still about a six-and-a-half-year period before you actually get to that natural 78% automatic cancellation under HOPA, and so we think that persistency probably continues to trend off the absolute peaks that we hit over the last several quarters, but that will probably stay above long-term historical averages for a while going forward.
In the back, Greg.
Just a question about credit quality. Your performance has obviously been very good. Would you like it to stay kind of as good to continue to really outperform the sector, or is there maybe a little higher loss number that would be acceptable and maybe maximize returns if you're trying to maintain top-line growth, you shift that balance a little bit more? How should we think about that?
Yeah, maybe I'll start, and Rob can weigh in. It's certainly an interesting question, right?
In the same way that we think about, I'd say, optimization across any aspect of our business. Optimization in terms of the construction of our balance sheet and that efficient frontier in terms of how we layer reinsurance debt and equity, what the right mix is. Think about optimization from an expense standpoint. We also do think about optimization and sort of what's that point on the efficient frontier where we want to live from a risk-taking standpoint. While it is perhaps true that if we were to lean in more and take more risk, we might be able to deliver slightly stronger numbers than we are in good times, it would certainly expose us to incremental volatility.
And so to a certain extent, today we can live at a point where we have the most conservative posture towards risk-taking, the highest quality portfolio by a wide margin, and still deliver meaningfully outsized returns to the rest of the sector. And we think that's a comfortable position for us to be. Now, the environment around us, though, isn't static, right? I think even though we've seen really broad resiliency for quite some time now in terms of the macro environment and housing market, there are a number of cross currents out there that we touched on a bit as well, right? We're in a post-election period that just naturally brings with it some policy uncertainty. We have not just elevated rates, but we've seen a lot of volatility to rates.
We tallied it, and the number of eight-week periods over the last two years that have seen greater than 50 basis point moves in rates. It's like something like 10 or 11 times. I mean, we're at a point of real significant rate volatility, and then even though Rob touched on one of the reasons why we see better performance in mortgage than we do in other sleeves of consumer credit performance. These are all cross currents that are out there that factor into our decisioning as to where we want to sit from a risk and mix standpoint.
To the extent that the environment changes meaningfully and some of those cross currents die down and the resiliency really shines through even more than it is today, perhaps, but we're comfortable and don't expect meaningful changes in terms of our mix of business and portfolio construction from where we sit today.
I guess that was part of the other question was you've got a nice capital buffer, as you were pointing out. So couldn't you withstand a little more volatility? Is that a little bit higher returns? Your reinsurance partners are obviously doing quite well. And shouldn't you keep a little bit of that yourself? Wouldn't that be beneficial?
Yeah. Look, so in fact, the reason that we have such a significant buffer is in part because of the potential for volatility. And so that certainly helps us absorb what might be out there.
We don't want it to develop, but it's something that provides us with benefit. One of the reasons that we're also able to achieve the outcomes that we do in the reinsurance market, as Aurora mentioned, right, the longest ever forward flow contracts looking out three years for quota share and two years for excess of loss at some of our best absolute levels of cost of funding is because of the quality, because of the discipline that we bring, and the fact that that's well known by our reinsurance partners.
Oh, that's one more if I might. Adam, you've talked a lot about these kind of drivers of credit performance. Is there something that you're kind of keeping your eye on that if you think something emerges, this is going to be an early sign of it? What's the hair trigger for you?
Yeah, so I'd say there's external markers that we look at. So we look at unemployment. We look at where house prices are trending, not just where they're going, but where they've come from as external factors. But then internally, we do look for, I'll call it the canary in the coal mine type items. And so two that we look at, one is early payment defaults, right? We typically shouldn't see a significant number of early payment defaults, borrowers defaulting within the first 12 months that they've taken out their loan. That's a sign really of the underwriting environment. And if you look at our EPD rate, it's not something we report externally, but it's pretty much been constant every quarter for the last, I don't know, 12 quarters or so. It's quite low.
There's nothing that we're seeing in that spot data that's giving us cause for concern around the underwriting environment. The other one that we look at is what we call our D30 rate. It's borrowers who've missed one payment but not two payments and are essentially waiting in the waiting room, if you will, right?
Because in order for a borrower to be in default, which we define as somebody who's missed two payments for a long enough period of time that we consider them to formally be behind on their mortgage that we reserve for, that we think about adverse outcomes, you have to have missed your first payment, right? You can't miss two without missing one. The population of borrowers that are sitting in that waiting room, if you will, in the D30 group is trending consistent with how the overall default population is moving. And that's a positive sign for us as well.
Thanks. Just a quick question on NIW for the industry. It's first nine months, it's kind of been mixed by different companies, and you guys have gotten a benefit from increased activation of accounts and doing business with more customers. But can you just talk about the growth environment and the outlook for 2025? Is there any pockets or any places where you're a little more cautious on, or is it just continue to be a good growth environment, high credit quality? You expect more of that for 2025?
Perhaps the easiest is we could just say yes. That's what we expect. Look, when we look out next year, we're hopeful that the environment, I'd say in terms of origination activity, will pick up.
I think if we were to have had this conversation perhaps in early September, right after the Fed made its first rate cut and 10-year treasuries came down, rallied considerably, the 30-year mortgage rate moved in kind down to a multi-year low of about 6.11, I think we touched in the first or second week of September. There was some increased optimism as to what that might mean for origination activity. But as we look out now, current spot rates for mortgages are sitting around 7%. That happens to be the average roughly this year. The average 30-year fixed-rate mortgage this year has been 6.72. We're sitting right around 6.97%, I think most recently. And if you look at the forward curve, it causes us to think that mortgage rates will likely hold roughly where they are now through the course of next year.
It's not going to be perfectly linear, right? There'll probably be continued volatility around that. But in a market that's roughly where we see roughly the same interest rate environment with roughly the same dynamics around demand and supply emerging, we would expect that market size for NIW next year will be roughly similar to what it was this year. This year's pacing, we absolutely have the fourth quarter to go, but pacing to around a $285 billion NIW market. That's exactly where we were in 2023. And so our base case view is that we'll see a market of roughly similar size next year. Perhaps there's a little bit of, if you were to ask us, is there more bias to the upside or downside? There's probably a little more bias to the upside, depending on how rates trend.
We don't think that volume will necessarily dip meaningfully below what we've seen over the last two years, and that's part of the really constructive environment that we've talked about over the long term, though, right? If these are the low points in origination activity, truth be told, $285 billion or so of NIW activity scoping out the pandemic, this is the second largest MI market new business market ever. And so to have 30-year lows in origination activity by loan count and yet still achieve the second largest MI market ever, it gives us real confidence, whether it's 2025 that we'll see improvement, at least at some point in the reasonably near term that we'll see the new business opportunity gain strength.
Yeah, just one quick follow-up too. You had the slide on the headcount versus your peers, which is significantly lower.
And can you just talk about what some of the drivers behind that? Is it just more efficiencies between your IT platform and sales and fewer offices and not being in ancillary businesses? Or what's kind of the differentiator between NMI and your peers? And then if industry volume picks up, do you need to do much hiring as that happens?
So I touched on this in some of my comments, which is we do have this system that was built post-financial crisis. We're unique in that regard. So we do think that in terms of productivity and the lift that we get from the technological platform, that's a significant advantage. We also do have a technology outsource arrangement with a third-party vendor, which, for those who in-house their technology versus our outsourcing arrangement, that may also lead to some of the differential.
But there's a clear advantage that we have in terms of being able to do the exact same things as our peers, but with fewer individuals. And I'd say in terms of your question of would we need to add substantial headcount or the NIW to pick up meaningfully, the short answer is no.
Just to reinforce that, to give you some historical perspective, we wrote roughly $85 billion of NIW volume from, I think it was July 1st of 2020 through June 30th of 2021, right? The pandemic peaks were enormous opportunities, and we had roughly the same headcount. We weren't missing out on anything. And so I think you asked the question of how are we able to do this. I think the question perhaps to pose, not here, but for others, is why aren't they able to do what we're doing? Because we are a public company.
You've seen our management team here. We are operating in the same market, perhaps with greater success than others and doing it with far fewer people. We're proud of that.
Can you just talk about your thoughts around capital? Is PMIERs the gating factor? Are there other? Is it statutory capital? And how do you think about the pacing of capital return?
Sure. I'll start out and I'll invite Adam to jump in as well. But we look at multiple different vectors of capital. So obviously, we are a state-regulated insurance company. We have to comply with state regulations. We have our PMIERs obligations at the federal level. We have internal views on capital. We have rating agency views on capital. We are rated by three different rating agencies, each of which has their own approach to capital management. So we keep an eye on all of these.
When you boil it down on a portfolio level, PMIERs is the binding constraint. On any individual piece of business, our own internal economic capital model may be more constraining. But again, on a portfolio basis, it is clearly PMIERs that is the binding constraint. And so when you hear us speak about capital and capital management, that's why that bubbles up as something that we focus on, because I think it is the binding constraint and it would likely remain the binding constraint for the foreseeable future.
And then just on how you think about the pacing of capital return given the returns you're generating.
Yeah, I think I said it in my comments. We've got $108 million left on the existing repurchase authorization that runs through the end of next year, and you'd expect us to roughly ratably execute along that over its remaining life.
I think you've seen in recent quarters, some quarters may be slightly higher, some quarters may be slightly lower. We do operate on a grid where we buy more shares at lower prices and fewer shares at higher prices. However, we're not day trading our stock with it. But the purpose of this program is to be consistent in terms of our returns to shareholders.
Thanks. Maybe just to piggyback a little bit on the capital return question, you guys spoke to the pull-to-par dynamic a couple of times today. And just maybe to kind of go a little bit deeper there, maybe more long term, do you think capital return in the form of a dividend would maybe become more of a priority or come to the forefront when that growth somewhat normalizes with the rest of the industry?
And then maybe as a somewhat of a secondary question, if not, would you maybe look at entering maybe an ancillary business similar to how some of your peers have in the industry?
Sure. Maybe we'll take that in two parts. We'll take the capital, the form and long-term view, and then separately about where we might want to pursue other opportunities and avenues for growth, whether it's organically into other lines or inorganically. And I'll say, look, our current focus is on share repurchase. We view it as a way for shareholders to directly participate in the value that we're creating. It also allows us to maintain the right funding profile, right, and balance, obviously, between the equitization of the balance sheet and then the support that it allows us to provide for future EPS and ROE outcomes.
I'd say also we're quite pleased with the execution that we've achieved. I think if I have the number correctly, we've bought back roughly 10% of our outstanding from the, if you measure that against December 31st, 2021, we launched the program in February of 2022. So since then, we've bought back 10% of the then outstanding shares at a weighted average price of $25.28, I believe, and so we're really delighted with the execution that we've been able to achieve over the long term, and that remains our focus, right? Aurora said we have 108 million left remaining under our current authorization. We expect to continue to prosecute that opportunity as we roll forward into next year.
Over the long term, Aurora mentioned that capital distribution for us, it's not just a near-term focus, but there's a long-term opportunity for us to continue as we're delivering high teens ROEs, building book value and capital organically on an accelerated basis. There may be an opportunity for us over the long term to think about other forms of distribution. There's not that many, so dividend, right? But right now, we like the execution that we're achieving. We like the participation that it provides investors alongside value. And candidly, when we're delivering a 17.5% ROE and trading where we are, we think there's actually the highest and best use from a corporate finance standpoint is repurchase. That continues to be the case. We'll see where things develop going forward.
To your second question or the second part around, would we look to perhaps pursue other paths, ancillary businesses or something bigger? Again, right now, we're fully reinvesting excess capital that we have other than what we're distributing to shareholders back into our core business. And we're doing so in a way that allows us to generate high-teens ROEs. We think that is the highest and best use of capital as we're thinking about deploying it in support of business growth right now. Over the long term, we think about opportunities, both big and small, that are out there, whether it's business line extensions or something more significant. But we really think about what would that do and what would it mean for, would it be strategically accretive to our core MI business? And clearly, based on our performance, there's nothing that we're missing.
There's no added piece that we really need to have in order to drive continued strength in the core MI business. And so unless something was, I'd say, strategically accretive to the MI franchise, we set a pretty high bar. And then we look at it really more as a financial opportunity as opposed to a strategic opportunity.
Could you talk a little bit about the trend in cure rates? I think it was down in Q3. And you talked on the call about default rates and some of the seasonal factors there. But we didn't really discern a seasonal factor looking in the past with cures. So just wondering that metric in this last quarter and how to think about that.
Yes. I think there's two elements to it. And I don't recall the exact numbers, but you're right.
Cure activity was down in Q3 compared to where it was in Q2. Recall, though, in Q2, cure activity sat at multi-year highs for reasons that weren't immediately obvious, nor are they now. Why we actually saw this significant uptick in cure rate and cure activity in Q2. We enjoy it. We're pleased that obviously borrowers are finding their footing. But part of the decline or sort of that period-to-period trend is also explained by the increase that was somewhat anomalous that we saw in Q2. There is a seasonal dynamic, though, that comes through. In fact, more of the seasonality of default experience in the third quarter as opposed to the fourth quarter relates to the existing default population and cure activity as opposed to new defaults emerging.
So what that seasonal pattern is for the default population overall is that the first half of the year is defined by fund inflows, right? Cash inflows coming into a household. In some instances, that's bonus income that tends to be paid after the first of the year. But in more instances, and more broadly applied, it's tax refunds. And the third quarter, we begin to see a seasonal shift. And the seasonal shift by the fourth quarter is defined more specifically by cash outflows, right? And those outflows are families that are choosing, in many instances, to increase their discretionary spending around the holidays and perhaps prioritizing holiday spending above other obligations. The third quarter doesn't necessarily see that increased outflow. It's the lack of an inflow. It's the fact that there isn't tax refund or bonus income that's coming in.
That one comes through a bit in terms of default activity because borrowers who perhaps were otherwise sitting at a point of concern, if they got the benefit of a tax refund coming in, that allows them to not fall into default. But more importantly, it really does help support cure activity in the first and second quarters. That cure activity, there isn't that external additional support that comes through in the third quarter.
Brad, we have 61 people online and some questions from our webcast audience. Question: With the Fed's cut as well as the expectation of lower short-term rates, how does that impact our investment strategy and the opportunity to continue to increase investment income?
The Fed is expected to continue to cut rates. Obviously, the cuts on the front end have not translated back to the back end of the curve.
And so notwithstanding the Fed cut in September, we've seen long-end rates trend higher, or I should say back higher because they had come down and now they've come back up. So we've been investing new money all along the way through that period where they did come down a little bit after the bad unemployment number in early August. And as they've trended back up since that time, what I would say is at 3.15% as the current book yield of the investment portfolio, even if investment yields are slightly lower, there is still a lot of room to improve investment income. And so we continue to look at investments. We continue to be dynamic and thinking about the points along the curve that we want to play. Our duration is in and around four years in the portfolio.
We constantly calibrate around that and look at opportunities. But I'd say even if rates come off their current level a little bit, there's still quite a bit of room to run in terms of improvement of the book yield of the portfolio.
Thanks, Aurora. And we have another question from online. Outside of our fixed income focus, would we consider investing in equities such as what you're seeing from Berkshire Hathaway, Markel, and Fairfax, among others?
Well, I'll just say we appreciate the question because I don't think we've ever been put in the company of Berkshire Hathaway. And so that feels good. But Aurora will address the would we invest in equities?
I think just generically, the PMIERs framework is a little bit more restrictive than the NAIC framework with regards to asset haircuts. And so we have a 100% investment grade, 100% fixed income portfolio.
And instruments, even non-investment grade bonds, get quite a punitive treatment under PMIERs. And as I said in response to an earlier question, PMIERs really is our binding constraint. And so we really do think about the efficient frontier in terms of what are the yields on the investments versus what is the PMIERs capital consumption and try to think through that. So I think it's unlikely that equities would fit that vector under almost all circumstances, but I never rule anything out.
All of the other online questions have been answered. Any other questions from our audience? Okay. Terrific. I think we're done.
Okay. Great. Not seeing any additional questions. Let me just once again thank you for being here with us today, viewing us online. We really appreciate the opportunity to tell our story. We feel passionate about it. We're excited about it. And thank you again.
We look forward to ongoing dialogue over the remainder of the year and into next year. Thanks again.