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Item 7. Management’s Discussion and Analysis

2023-02-28 compared with 2022-02-28 · 363 added, 340 removed, 727 unchanged (49% of the section changed)

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The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes for the years ended December 31, 2022, 2021 and 2020 included in Item 8 of this Annual Report.

This discussion includes forward-looking statements and involves numerous risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations, all of which may be exacerbated by COVID-19 and related developments.

This discussion includes forward-looking statements and involves numerous risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations.

For factors that could cause such differences refer to the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A.

Risk Factors.” We are not undertaking any obligation to update any forward-looking statements or other statements we may make in the following discussion or elsewhere in this document even though these statements may be affected by events or circumstances occurring after the forward-looking statements or other statements were made.

occurring after the forward-looking statements or other statements were made.

Future results could differ significantly from the historical results presented in this section.

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Our premium rate is applied predominantly to the original loan balance to determine either a monthly payment that the lender adds to the borrower’s monthly loan payment or a single upfront payment made by either the borrower or lender at loan closing.

The amount of premiums earned from our insurance portfolio and the timing of premium recognition are also affected by persistency, which we measure as the percentage of loans that remain on our books based on the annualized cancellations for the period.

We also employ a CRT program to transfer a portion of our risk through both traditional XOL reinsurance arrangements and the issuance of MILNs.

In exchange, we cede a negotiated amount of our premiums to the reinsurers and MILN investors that participate in our CRT transactions.

The amount of premiums earned from our insurance portfolio and the timing of premium recognition are also affected by persistency rate, which we measure as the percentage of loans that remain on our books based on the annualized cancellations for the period.

We also employ a CRT program to transfer a portion of our risk through both traditional XOL reinsurance arrangements and the issuance of ILNs.

In exchange, we cede a negotiated amount of our premiums to the reinsurers and ILN investors that participate in our CRT transactions.

Our net premiums earned (i.e., materially, the gross premiums charged less premiums ceded as part of our CRT program) represent the largest source of our revenues.

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The investment income generated through our investment portfolio is another significant source of our revenues.

We generate profits through collection of premiums less losses, operating expenses, interest expense and taxes.

We generate profits through collection of premiums and investment income less losses, operating expenses, interest expense and taxes.

Our mortgage insurance coverage protects lenders against loss in the event of a borrower default by covering a portion of the outstanding principal balance of a loan.

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Incurred losses are our estimate of future claims on these new delinquencies as well as any change in the prior estimates for previously existing delinquencies.

In addition, incurred losses include estimates of future claims on incurred-but-not-reported (“IBNR”) delinquencies.

In addition, incurred losses include estimates of future claims on IBNR delinquencies.

Our incurred losses are based on estimates of both the rate at which delinquencies will go to claim (i.e., claim rate) and the ultimate claim amount (i.e., claim severity).

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Our estimates of ultimate claim amounts for each delinquency include loss adjustment expense (“LAE”) that are costs incurred in the settlement of the claim process such as legal fees and costs to record, process and adjust claims.

Incurred losses are generally affected by macroeconomic conditions, borrower credit quality, certain loan attributes, underwriting quality and our loss mitigation efforts among other factors detailed below.

Incurred losses are generally affected by macroeconomic conditions, borrower credit

quality, certain loan attributes, underwriting quality and our loss mitigation efforts among other factors detailed below.

Key Factors Affecting Our Results

Our financial position and results of operations depend to a significant extent on the following factors, each of which may be affected by COVID-19 as noted below in “—Trends and Conditions.”

Our financial position and results of operations depend to a significant extent on the following factors, as noted below in “—Trends and Conditions.”

Mortgage Origination Volume

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The level of private mortgage insurance market penetration (“market penetration”) and eventual market size is affected in part by actions taken by the GSEs and the United States government, including the FHA, the FHFA and Congress, that impact housing or housing finance policy.

In the past, these

actions have included announced changes, or potential changes, to underwriting standards, FHA pricing, GSE guaranty fees and loan limits, as well as low-down payment programs available through the FHA or GSEs.

In the past, these actions have included announced changes, or potential changes, to underwriting standards, FHA pricing, GSE guaranty fees and loan limits, as well as low down payment programs available through the FHA or GSEs.

Competition and Market Share

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Our proprietary risk-based pricing engine evaluates returns and volatility under both the PMIERs capital framework and our internal economic capital framework, which is sensitive to economic cycles and current housing market conditions.

The model assesses the performance of new business under expected and stress scenarios on an individualized loan basis, which is used to determine pricing and inform our risk selection strategy that optimizes economic value by balancing return and volatility.

The model assesses the performance of new

business under expected and stress scenarios on an individualized loan basis, which is used to determine pricing and inform our risk selection strategy that optimizes economic value by balancing return and volatility.

Consistent with the seasonality of home sales, purchase mortgage origination volumes typically increase in late spring and peak during summer months, leading to a rise in NIW volume during the second and third quarters of a given year.

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Therefore, we typically experience lower levels of losses resulting from favorable delinquency activity in the first and second quarters, as typically compared to the third and fourth quarters.

As the COVID-19 pandemic and United States housing market continue to evolve, we may see varying levels of delinquencies and cures from period to period.

As a result of delinquencies from COVID-19 and subsequent cure activity, trends from the last two years may not follow traditional seasonality.

The following table presents our NIW, number of cures and new delinquencies for primary policies, excluding our run-off insurance block with reference properties in Mexico, for the periods indicated:

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(Dollar amounts in millions) Mar 31,

2021 Sep.30, 2021 Dec.

NIW $24,934 $26,657 $23,972 $21,441 $18,823 $17,448 $15,069 $15,145

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Persistency Rate and Business Mix

The percentage of IIF that remains insured by us after taking into account annualized cancellations for the period presented is defined as our persistency rate.

The percentage of our IIF that remains insured after taking into account annualized cancellations for the period presented is defined as our persistency rate.

Because our insurance premiums are earned over the life of a policy, higher or lower persistency rates can have a significant impact on our profitability.

The rise of interest rates throughout 2022 has significantly increased persistency in the portfolio, but this impact is partially offset by lower NIW.

Loan prepayment speeds and the relative mix of business between single premium policies and monthly premium policies also impact our profitability.

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2009 to 2014 4.45 %

2009 to 2013 4.32 %

Total portfolio

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Credit Quality

Improved analytics, stronger loan manufacturing quality controls and the regulatory implementation of the QM Rule have resulted in a significant improvement in the credit quality for loans originated in the private mortgage insurance market over time.

Improved analytics, stronger loan origination quality controls and the regulatory implementation of the QM Rule have resulted in a significant improvement in the credit quality for loans originated in the private mortgage insurance market over time.

Additionally, private mortgage insurers and the GSEs have maintained strong credit standards over the past decade, with average FICO scores for NIW persisting at levels significantly above historical averages.

As a result, the industry is insuring loans from borrowers who should be better positioned to meet their mortgage obligations.

More recently, in response to FTHB demand, there has been modest credit expansion that accommodates LTV over 95% and higher DTI ratios.

More recently, in response to FTHB

demand, there has been modest credit expansion that accommodates LTV over 95% and higher DTI ratios.

Even after this expansion, private mortgage insurers and the GSEs have maintained strong credit standards well above historical norms.

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Losses incurred represent current payments and changes in the estimated future payments on claims that result from delinquent loans.

We estimate an expense only for delinquent loans as explained in Note

2 to our consolidated financial statements.

Incurred losses depend to a significant extent on the following factors, each of which in turn may be affected by COVID-19 as noted below in “—Trends and Conditions.”

We estimate an expense only for delinquent loans as explained in Note 2 to our consolidated financial statements.

Incurred losses depend to a significant extent on the following factors:

• deterioration of regional or national economic conditions leading to a reduction in borrowers’ income and thus their ability to make mortgage payments;

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Credit Risk Transfer

We use CRT transactions to transfer a portion of our risk to third parties, through both traditional XOL reinsurance and the issuance of MILNs.

We use CRT transactions to transfer a portion of our risk to third parties, through both traditional XOL reinsurance and the issuance of ILNs.

Our CRT program reduces the volatility of our in-force portfolio and provides capital relief under PMIERs.

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(b) losses related to insured events that have occurred but that have not been reported to the insurer as of the date the liability is estimated;

and (c) loss adjustment expenses (“LAE”).

Loss adjustment expenses include costs incurred in the claim settlement process such as legal fees and costs to record, process and adjust claims.

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Significant external influences include changes in home prices, unemployment, government housing policies, state foreclosure timeline, general economic conditions, interest rates, tax policy, credit availability and mortgage products.

Small changes in assumptions or small deviations of actual experience from assumptions can have, and in the past have had, material impacts on our reserves, results of operations and financial condition.

Small changes in assumptions or small deviations of actual experience from

assumptions can have, and in the past have had, material impacts on our reserves, results of operations and financial condition.

We establish reserves to recognize the estimated liability for losses and LAE related to defaults on insured mortgage loans.

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Our liability for loss reserves is reviewed regularly, with changes in our estimates of future claims recorded through net income.

Estimation of losses are based on historical claim and cure experience and covered exposures and is inherently judgmental.

Estimation of losses is based on historical claim and cure experience and covered exposures and is inherently judgmental.

Future developments may result in losses greater or less than the liability for loss reserves provided.

Loss reserves as of December 31, 2021, were $641 million, an increase of $86 million since December 31, 2020.

Loss reserves as of December 31, 2022, were $519 million, a decrease of $122 million since December 31, 2021.

In considering the potential sensitivity of the factors underlying management’s best estimate of our loss reserve, it is possible that even a relatively small change in the estimated claim and severity rates could have a significant impact on loss reserves and, correspondingly, on results of operations.

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Valuation of Fixed Maturity Securities

Our portfolio of fixed maturity securities was valued at $5,266 million as of December 31, 2021, an increase of $220 million from December 31, 2020.

Our portfolio of fixed maturity securities was valued at $4,885 million as of December 31, 2022, a decrease of $382 million from December 31, 2021.

The methodologies, estimates and assumptions used in valuing our fixed maturity securities evolve over time and are subject to different interpretations, all of which can lead to materially different estimates of fair value.

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See Note 2 and 3 to our consolidated financial statements for additional information related to the allowance for credit losses on fixed maturity securities.

Investment in Unconsolidated Affiliate

Prior to December 12, 2019, we held 14.1 million, or approximately 16.4%, of the outstanding common shares of Genworth MI Canada Inc.

(“Genworth Canada”), a publicly traded company on the

Toronto Stock Exchange.

We concluded that we had significant influence over Genworth Canada primarily due to board representation, and therefore, classified our investment in Genworth Canada as an equity method investment.

We elected to account for the investment in Genworth Canada under the fair value option because the investment had a readily determinable fair value.

Accordingly, the investment was recorded at fair value, and changes in the fair value of the investment for each reporting period were recorded in the consolidated statements of income.

The change in fair value of the investment in Genworth Canada, including dividends and the sale of common shares, was $127.4 million in 2019 and was included within change in fair value of unconsolidated affiliate in the consolidated statements of income, net of provision for income taxes of $12.1 million in 2019.

On December 12, 2019, we completed the sale of our investment in Genworth Canada to an affiliate of Brookfield Business Partners L.P.

and received approximately $501.8 million in net cash proceeds.

Revenue Recognition

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These reviews include the consideration of recent and projected loss and policy cancellation experience, and adjustments to the estimated earnings patterns are made, if warranted.

In 2019, the review resulted in an increase in earned premiums of $13.7 million.

Unearned premium was $203 million as of December 31, 2022, a decrease of $44 million compared to December 31, 2021.

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Trends and Conditions

The United States economy and consumer confidence continued to improve during 2021.

The unemployment rate has continued to decrease since the beginning of the pandemic and was 3.9% in December 2021.

While this is elevated compared to the pre-pandemic level of 3.5% in February 2020, it has steadily decreased from a peak of 14.8% in April 2020.

Even after the continued recovery in 2021, the number of unemployed Americans stands at approximately 6.3 million, which is 0.6 million higher than in February 2020.

Among the unemployed, those on temporary layoff continued to decrease to 0.8 million from a peak of 18 million in April 2020, and the number of permanent job losses decreased to approximately 1.7 million.

In addition, the number of long term unemployed over 26 weeks has continued to decrease since March 2021, falling to approximately 2.0 million in December 2021.

Mortgage origination activity remained robust, fueled by strong home sales and refinancing, and home prices continued to climb, increasing our average loan amount on new insurance written to $305 thousand for 2021 from $276 thousand for the year.

Interest rates remained low throughout 2021, but they ended the year slightly higher than 2020.

Housing affordability declined as of November 2021 compared to one year ago due to rising home prices modestly offset by the low interest rate environment and rising median family income according to the National Association of Realtors Housing Affordability Index, but it remains above a level that a family with a median income can afford a median-priced home.

FHFA and the GSEs are focused on increasing the accessibility and affordability of homeownership, in particular for low- and moderate-income borrowers and underserved minority communities.

Among other things, FHFA directed the GSEs to submit Equitable Housing Plans by the end of 2021 to identify and address barriers to sustainable housing opportunities to advance equity in housing finance.

Any new practices or programs subsequently implemented under the GSEs’ Equitable Housing Plans or other affordability initiatives may impact the fees, underwriting and servicing standards on mortgage loans purchased by the GSEs.

In January 2022, the FHFA introduced new upfront fees for some high-balance and second-home loans sold to Fannie Mae and Freddie Mac.

Upfront fees for high balance loans will increase between 0.25% and 0.75%, tiered by loan-to-value ratio.

For second home loans, the upfront fees will increase between 1.125% and 3.875%, also tiered by loan-to-value ratio.

The new pricing framework will take effect April 1, 2022.

We do not anticipate this will significantly impact the mortgage insurance market or our growth projections.

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act requires mortgage servicers to provide up to 180 days of forbearance for borrowers with a federally backed mortgage loan who assert they have experienced a financial hardship related to COVID-19.

Forbearance may be extended for an additional 180 days up to a year in total or shortened at the request of the borrower.

In addition, on February 25, 2021, the FHFA announced that borrowers with a mortgage backed by the GSEs who are in an active COVID-19 forbearance plan as of February 28, 2021, may request up to two additional forbearance extensions for a maximum of 18 months of total forbearance relief.

In addition, the CARES Act provides that furnishers of credit reporting information, including servicers, should continue to report a loan as current to credit reporting agencies if the loan is subject to a payment accommodation, such as forbearance, so long as the borrower abides by the terms of the accommodation.

Servicer reported forbearance slowed meaningfully beginning in June 2020 and ended 2021 with approximately 2.3% or 21,899 of our active primary policies reported in a forbearance plan, of which approximately 47% were reported as delinquent.

It is difficult to predict the future level of reported forbearance and how many of the policies in a forbearance plan that remain current on their monthly mortgage payment will go delinquent.

The foreclosure moratorium for mortgages that are purchased by the GSEs expired on July 31, 2021.

However, on June 28, 2021 the Consumer Financial Protection Bureau (“CFPB”) issued a final rule to amend Regulation X of the Real Estate Settlement Procedures Act effective August 31, 2021, to assist mortgage borrowers affected by the COVID-19 emergency.

The final rule establishes temporary

procedural changes that require a loss mitigation review prior to a servicer’s first notice or foreclosure filing on certain mortgages.

On June 29, 2021, the FHFA announced that servicers were immediately prohibited from making a first notice or foreclosure filing for mortgages backed by the GSEs before they were formally prohibited by the CFPB Regulation X Final Rule that took effect on August 31, 2021.

These announcements generally prohibited servicers from starting foreclosures on mortgages purchased by the GSEs until after December 31, 2021.

The pandemic continued to affect our financial results in 2021 but to a lesser extent than in 2020 as we experienced elevated, but declining, servicer reported forbearance.

New delinquencies decreased during 2021, and the annual new delinquency rate of 3.5% in 2021 was consistent with pre-pandemic levels.

Despite continued economic recovery through 2021, the full impact of COVID-19 and its ancillary economic effects on our future business results are difficult to predict.

Given the maximum length of forbearance plans, the resolution of a delinquency in a plan may not be known for several quarters.

While we continue to monitor regulatory and government actions and the resolution of forbearance delinquencies, it is possible the pandemic could have a significant adverse impact on our future results of operations and financial condition.

Private mortgage insurance market penetration (“market penetration”) and eventual market size are affected in part by actions that impact housing or housing finance policy taken by the GSEs and the U.S.

government, including but not limited to, the Federal Housing Administration (“FHA”) and the FHFA.

During 2022, the United States and global economies experienced continued volatility due to high inflation, geopolitical uncertainty and supply chain disruption.

Inflationary pressures lessened in the latter half of 2022 but remain elevated, with the Bureau of Labor Statistics reporting in December that the Consumer Price Index was 6.5% year-over-year.

As a result, the Federal Reserve has continued its aggressive approach towards addressing inflation through interest rate increases and a reduction of its balance sheet.

The Federal Reserve approved an interest rate increase of 0.25% in February 2023, following increases of 0.50% in December 2022, 0.75% in November, September, July and June 2022, 0.50% in May 2022 and 0.25% in March 2022.

Financial markets have reacted with increased volatility and rates have increased across the Treasury yield curve.

The Federal Reserve has signaled that it may make additional interest rate increases to address persistent inflationary pressure.

Mortgage origination activity declined during 2022 in response to rising mortgage rates.

If interest rates remain high, the refinance market is likely to remain depressed.

Housing affordability was challenged in 2022 compared to recent years due to sharply increasing interest rates and elevated home prices, modestly offset by rising median family income according to the National Association of Realtors Housing Affordability Index.

Year-over-year home price appreciation slowed through early 2022, and home prices declined during the second half of the year, according to the FHFA Monthly Purchase-Only House Price Index.

The unemployment rate declined to 3.5% in December 2022 compared to 3.9% in December 2021, following a decline from its peak of 14.8% in April 2020, bringing unemployment in line with the pre-COVID-19 level of 3.5% in February 2020.

As of December 31, 2022, the number of unemployed Americans stands at approximately 5.7 million and the number of long term unemployed over 26 weeks was approximately 1.1 million.

Both metrics remain relatively in line with February 2020 levels.

For mortgages insured by the federal government, including those purchased by Fannie Mae and Freddie Mac, forbearance allows borrowers impacted by COVID-19 to temporarily suspend mortgage payments up to 18 months subject to certain limits.

Currently, the GSEs do not have a deadline for requesting an initial forbearance.

Federal laws and regulations continue to require servicers to discuss loss mitigation options with borrowers before proceeding with foreclosures.

These requirements could further extend the foreclosure timeline, which could negatively impact the severity of loss on loans that go to claim.

Although it is difficult to predict the future level of reported forbearance and how many of the policies in a forbearance plan that remain current on their monthly mortgage payment will go delinquent, servicer-reported forbearances have generally declined.

As of December 31, 2022, approximately 1.5%, or 14,270, of our active primary policies were reported in a forbearance plan.

Of these policies in forbearance plans, approximately 36% were reported as delinquent at year end.

Natural disasters, such as hurricanes, often lead to temporary increases in delinquencies in forbearance.

We experienced a small increase in delinquencies in the fourth quarter of 2022 related to the recent hurricane affecting the southeastern United States, but these did not have a material impact on reserves as of December 31, 2022.

We will continue to monitor the affected areas and support the measures enacted by the GSEs allowing forbearance, restricting foreclosure actions and providing other forms of mortgage relief for those dealing with damage.

Total delinquencies decreased during 2022 as a result of cures outpacing new delinquencies.

The annual new delinquency rate for 2022 was 3.8%, up slightly from 2021 but in line with historical pre-COVID-19 levels.

The full impact of COVID-19 and its ancillary economic effects on our future business results are difficult to predict.

Given the maximum length of forbearance plans, the resolution of a delinquency in a plan still may not be known for several quarters or longer.

We continue to monitor regulatory and government actions and the resolution of forbearance delinquencies.

While the associated risks have

moderated and delinquencies have declined, it is possible that COVID-19 could have an adverse impact on our future results of operations and financial condition.

The FHFA and the GSEs are focused on increasing the accessibility and affordability of homeownership, in particular for low- and moderate-income borrowers and underserved minority communities.

In June 2022, the FHFA announced the release of Fannie Mae’s and Freddie Mac’s respective Equitable Housing Finance Plans.

The plans included many initiatives, including language discussing potential changes that could impact the mortgage insurance industry.

The plans are in their early stages, and we will continue to work with the FHFA, the GSEs, and the broader housing finance industry as these proposals develop and to the extent they are implemented.

We cannot predict whether or when any new practices or programs will be implemented under the GSEs’ Equitable Housing Finance Plans or other affordability initiatives, and if so in what form, nor can we predict what effect, if any, such practices or programs may have on our business, results of operations or financial condition.

Private mortgage insurance market penetration and eventual market size are affected in part by actions that impact housing or housing finance policy taken by the GSEs and the U.S.

government, including but not limited to, the FHA and the FHFA.

In the past, these actions have included announced changes, or potential changes, to underwriting standards, including changes to the GSEs’ automated underwriting systems, FHA pricing, GSE guaranty fees, loan limits and alternative products.

On December 17, 2020, the FHFA published the Enterprise Capital Framework, which includes significantly higher regulatory capital requirements for the GSEs over current requirements.

However, on September 15, 2021, the FHFA announced a Notice of Proposed Rulemaking to amend the Enterprise Capital Framework, including technical corrections to provisions that were published on December 17, 2020.

Higher GSE capital requirements could ultimately lead to increased costs to borrowers of GSE loans, which in turn could shift the market away from the GSEs to the FHA or lender portfolios.

Such a shift could result in a smaller market for private mortgage insurance.

In conjunction with preparing to release the GSEs from conservatorship, on January 14, 2021, the FHFA and the Treasury Department agreed to amend the Preferred Stock Purchase Agreements (“PSPAs”) between the Treasury Department and each of the GSEs to increase the amount of capital each GSE may retain.

Among other things, the amendments to the PSPAs limit the number of certain mortgages the GSEs may acquire with two or more prescribed risk factors, including certain mortgages with combined loan-to-value (“LTV”) ratios above 90%.

However, on September 14, 2021, the FHFA and Treasury Department suspended certain provisions of the amendments to the PSPAs, including the limit on the number of mortgages with two or more risk factors that the GSEs may acquire.

Such suspensions terminate on the later of one year after September 14, 2021, or six months after the Treasury Department notifies the GSEs of termination.

The limit on the number of mortgages with two or more risk factors was based on the market size at the time, and we do not expect any material impact to the private mortgage market in the near term.

The CFPB’s Qualified Mortgage (“QM”) regulations also include a temporary category (the “QM Patch”) for mortgages that comply with certain prohibitions and limitations and meet the GSE underwriting and product guidelines.

Mortgages that meet certain requirements are deemed to be QMs until the earlier of the time in which the GSEs exit the FHFA conservatorship or the mandatory compliance date of the final amendments to the CFPB rule defining what constitutes a QM (the “QM Rule”).

On April 27, 2021, the CFPB promulgated a final rule delaying the mandatory compliance date of the amended QM Rule until October 1, 2022.

As provided under the final rule, the prior 43% debt-to-income-based QM Rule definition, the new price-based average prime offer rate (“APOR”) definition and the QM Patch will all remain available to lenders for loan applications received prior to October 1, 2022.

However, on April 8, 2021, the GSEs issued notices stating that due to the requirements of the PSPAs they would only acquire loans that meet the new price-based APOR definition set forth under the amended QM Rule for

applications received on or after July 1, 2021.

We believe that loans which previously qualified under the 43% Debt-to-Income (“DTI”) based QM Rule definition and the QM Patch will continue to qualify under the new price-based APOR definition, and therefore, we expect little impact from this change.

For more information about the potential future impact, see “Item 1A.

Risk Factors—Risks Relating to Our Business—Changes to the charters or practices of the GSEs, including actions or decisions to decrease or discontinue the use of mortgage insurance, could adversely affect our business, results of operations and financial condition” and “Item 1A.

Risk Factors—Risks Relating to Our Business—The amount of mortgage insurance we write could decline significantly if alternatives to private mortgage insurance are used or lower coverage levels of mortgage insurance are selected”.

New insurance written of $97.0 billion in 2021 decreased 3% compared to 2020 primarily due to lower estimated private mortgage insurance market in the current year.

The year-over-year decrease in estimated private mortgage insurance available market was primarily driven by lower refinance originations.

Our primary persistency increased to 62% during 2021 compared to 59% during 2020 but remained below historic levels of approximately 80%.

The increase in persistency was primarily driven by a decline in the percentage of our in-force policies with mortgage rates above current mortgage rates.

Low persistency has impacted business performance trends in several ways including, but not limited to, offsetting insurance in-force growth from new insurance written, accelerating the recognition of earned premiums due to single premium policy cancellations, accelerating the amortization of our existing reinsurance transactions reducing their associated Private Mortgage Insurer Eligibility Requirements (“PMIERs”) capital credit and shifting the concentration of our primary IIF to more recent years of policy origination.

As of December 31, 2021, our primary insurance in-force has approximately 5% concentration in 2014 and prior book years.

More specifically, our 2005 through 2008 book year concentration is approximately 3%.

In contrast, our 2020 book year represents 31% of our primary insurance in-force concentration while our 2021 book year is 40% as of December 31, 2021.

On February 25, 2022, the FHFA finalized the rule for the Enterprise Capital Framework, which included technical corrections to its December 17, 2020 rule.

Higher GSE capital requirements could lead to increased costs to borrowers of GSE loans, which in turn could shift the market away from the GSEs to the FHA or lender portfolios.

Such a shift could potentially result in a smaller market for private mortgage insurance.

In January 2022, the FHFA introduced new upfront fees for some high-balance and second-home loans sold to Fannie Mae and Freddie Mac.

Upfront fees for high balance loans increased between 0.25% and 0.75%, tiered by loan-to-value ratio.

For second home loans, the upfront fees increased between 1.125% and 3.875%, also tiered by loan-to-value ratio.

The new pricing framework became effective April 1, 2022.

To date, we have not experienced a significant impact to the mortgage insurance market or our projections based on this initiative.

On October 24, 2022, the FHFA announced two initiatives :

1) t argeted changes to the GSEs’ guarantee fee pricing by eliminating upfront fees for certain borrowers and affordable mortgage products, while implementing targeted increases to the upfront fees for most cash-out refinance loans;

and 2) the validation and approval of both the FICO 10T credit score model and the VantageScore 4.0 credit score model for use by the GSEs as well as changing the requirement that lenders provide credit reports from all three nationwide consumer reporting agencies and instead only require credit reports from two of the three nationwide credit reporting agencies.

The upfront fees are eliminated for certain first-time home buyers with income at or below area median income and certain other GSE affordable housing product s.

The fee reductions went into effect in the fourth quarter of 2022 while the new fees on cash-out refinance loans began February 1, 2023.

We expect these price changes to be a net positive to the mortgage insurance market.

The validation of the new credit scores requires lenders to deliver both credit scores for each loan sold to the GSEs.

There is currently no implementation deadline, but this is expected to be a multiple year process that will require system and process updates along with coordination across stakeholders of the industry.

In January 2023, the FHFA announced additional updates to its up-front fee structure and a recalibration and reformatting of their entire pricing matrix.

The changes marked the third iteration of FHFA’s ongoing pricing review since early last year and impact purchase and rate-term refinance loans.

Pricing grids are now broken out by loan purpose and are recalibrated to new credit score and loan-to-value ratio categories along with associated loan attributes.

The new pricing matrix also includes new up-front fees for loans with DTI ratios greater than 40%.

The changes are effective May 1, 2023.

The effects of these changes will ultimately be dependent on any changes made by the FHA, but we do not expect a significant impact to the private mortgage insurance market.

On February 22, 2023, the Department of Housing and Urban Development announced a 30-basis point reduction of the annual insurance premium charged to borrowers with FHA-insured mortgages.

This action is designed to reduce the cost of borrowing for lower- and middle-class homebuyers who are eligible for the federal program The price reduction is expected to have a negative impact on the private mortgage insurance market, but will be partially offset by the effects of the recent FHFA pricing changes referenced above.

We do not believe this net impact will be material.

private mortgage insurance industry is highly competitive.

Our market share is influenced by the execution of our go to market strategy, including but not limited to, pricing competitiveness relative to our peers and our selective participation in forward commitment transactions.

Since our IPO, we have held discussions with customers that in recent years, have not sent us new business.

During the fourth quarter of 2021, we reactivated our relationship with a key customer, and we continued to deepen existing relationships and develop new ones.

We continue to manage the quality of new business through pricing and our underwriting guidelines, which are modified from time to time when circumstances warrant.

We see the market and underwriting conditions, including the pricing environment, as being well within our risk adjusted return appetite enabling us to write new business at attractive returns.

We see the market and underwriting conditions, including the pricing environment, as being within our risk-adjusted return appetite enabling us to write new business at attractive returns.

Ultimately, we expect our new insurance written with its strong credit profile and attractive pricing to positively contribute to our future profitability and return on equity.

Net earned premiums increased in 2021 compared to 2020 primarily from insurance in force growth, partially offset by the continued lapse of older, higher priced policies, a decrease in single premium cancellations and higher ceded premiums as the use of credit risk transfer increased in 2021.

The total number of delinquent loans has declined from the COVID-19 peak in the second quarter of 2020 but remains elevated compared to pre-COVID-19 levels.

During this time and consistent with prior years, servicers continued the practice of remitting premiums during the early stages of default.

Additionally, we have a business practice of refunding the post-delinquent premiums to the insured party if the delinquent loan goes to claim.

New insurance written of $66.5 billion in 2022 decreased 31% compared to 2021 primarily due to a smaller estimated private mortgage insurance market in the current year as refinance and purchase originations were impacted by rising interest rates.

Our largest customer accounted for 18% and 14% of our total NIW during the years ended December 31, 2022 and 2021, respectively.

No customer had earned premiums that accounted for more than 10% of our total revenues for the years ended December 31, 2022 or 2021.

Our primary persistency rate increased to 80% during 2022 compared to 62% during 2021.

The persistency rate increased throughout 2022, with a rate in the fourth quarter of 86%.

The increase in persistency was primarily driven by a decline in the percentage of our in-force policies with mortgage rates above current mortgage rates as a result of the rising rate environment during 2022.

Higher persistency impacted business performance trends in several ways including, but not limited to, slowing the recognition of earned premiums due to single premium policy cancellations, slowing the amortization of our existing reinsurance transactions and reduction of their associated PMIERs capital credit and shifting the concentration of our primary IIF by policy year.

As of December 31, 2022, primary IIF had approximately 58% concentration in 2022 and 2021 compared to 71% concentration in 2021 and 2020 as of December 31, 2021.

Despite slower NIW production, our IIF grew $21.6 billion, or 10% in 2022, compared to $18.3 billion or 9% in 2021, driven by increased persistency.

Net earned premiums declined in 2022 compared to 2021 primarily as a result of the lapse of older, higher priced policies and a decrease in single premium cancellations.

This was partially offset by IIF growth.

The total number of delinquent loans has declined from the COVID-19 peak in the second quarter of 2020 as forbearance exits continue and new forbearances declined.

During this time and consistent with prior years, servicers continued the practice of remitting premiums during the early stages of default, and we refund the post-delinquent premiums to the insured party if the delinquent loan goes to claim.

We record a liability and a reduction to net earned premiums for the post-delinquent premiums we expect to refund.

The post-delinquent premium liability recorded since the beginning of COVID-19 in the second quarter of 2020 through 2021 was not significant to the change in earned premiums for those periods as a result of the high concentration of new delinquencies being subject to a servicer reported forbearance plan and the lower estimated rate at which delinquencies go to claim (“claim rate”) for these loans.

As a result of COVID-19, certain state insurance regulators required or requested the provision of grace periods of varying lengths to insureds in the event of non-payment of premium.

Regulators differed greatly in their approaches but generally focused on the avoidance of

cancellation of coverage for non-payment.

While most of these requirements and requests have lapsed, it is possible that some or all of them could be re-issued in the event of declarations of new states of emergency that might result from worsening pandemic conditions.

We currently comply with all state regulatory requirements.

If timely payment is not made, future premiums could decrease and the certificate of insurance could be subject to cancellation after 60 days, or such longer time as required under applicable law.

Our loss reserves continue to be impacted by COVID-19.

Borrowers who have experienced a financial hardship including, but not limited to, the loss of income due to the closing of a business or the loss of a job, have taken advantage of available forbearance programs and payment deferral options.

During the peak of the pandemic, we experienced elevated new delinquencies subject to forbearance plans which may ultimately cure at a higher rate than traditional delinquencies.

Unlike a hurricane where the natural disaster occurs at a point in time and the rebuild starts soon after, COVID-19 brought ongoing displacement to the mortgage insurance market, making it more difficult to determine the effectiveness of forbearance and the resulting claim rates for new delinquencies in forbearance plans.

Given this difference, we initially leveraged our prior hurricane experience and have recently layered in cure activity from COVID-19 related delinquencies as considerations in the establishment of an appropriate claim rate estimate for new delinquencies in forbearance plans that have emerged as a result of COVID-19.

Approximately 42% of our primary new delinquencies in 2021 were subject to a forbearance plan as compared to 66% in 2020 and less than 5% in recent quarters prior to COVID-19.

The severity of loss on loans that do go to claim may be negatively impacted by the extended forbearance timeline, the associated elevated expenses and the higher loan amount of the recent new delinquencies.

These negative influences on loss severity could be mitigated, in part, by further home price appreciation.

For loans insured on or after October 1, 2014, our mortgage insurance policies limit the number of months of unpaid interest and associated expenses that are included in the mortgage insurance claim amount to a maximum of 36 months.

The post-delinquent premium liability recorded since the beginning of COVID-19 in the second quarter of 2020 through the fourth quarter of 2022 was not significant to the change in earned premiums for those periods as a result of the high concentration of new delinquencies being subject to a servicer reported forbearance plan and the lower estimated rate at which delinquencies go to claim for these loans.

Our loss ratio for the year ended December 31, 2022, was (10%) as compared to 13% for the year ended December 31, 2021.

The decrease was largely from lower new delinquencies from the improving economy and net favorable reserve adjustments related to pre-COVID-19 delinquencies in 2021 compared to reserve strengthening in 2020.

New primary delinquencies were 32,624 in 2021 compared 85,074 in 2020.

We recorded $65 million of reserve strengthening in 2020 primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a modest increase in claim severity while releasing reserves of $22 million in 2021.

In determining the loss expense estimate during 2021, considerations were given to forbearance and non-forbearance delinquencies, recent cure and claim experience and the ongoing economic impact due to the pandemic.

GMICO’s risk-to-capital ratio under the current regulatory framework as established under North Carolina law and enforced by the NCDOI, GMICO’s domestic insurance regulator, was approximately 12.3 as of December 31, 2021 and 2020.

GMICO’s risk-to-capital ratio remains below the NCDOI’s maximum risk-to-capital ratio of 25:1.

The decrease was largely from favorable reserve adjustments in 2022.

We released $314 million of reserves on delinquencies from prior years, primarily related to favorable cure performance on COVID-19 delinquencies from 2020 and 2021.

During the peak of COVID-19, we experienced elevated new delinquencies subject to forbearance plans.

Those delinquencies have continued to cure at levels above our reserve expectations, which led to the release of reserves in 2022.

Due to uncertainty in the current economic environment, we increased the expected claim rate on new delinquencies throughout 2022.

This contributed to reserve strengthening of $46 million on previous quarter delinquencies in 2022 and increased the amount of reserves on new delinquencies in the fourth quarter of 2022.

These 2022 reserve adjustments compare to reserve releases of $22 million in 2021 related primarily to pre-COVID-19 delinquencies.

Our loss reserves continue to be impacted by COVID-19 and remain subject to uncertainty.

Borrowers who have experienced a financial hardship including, but not limited to, the loss of income due to the closing of a business or the loss of a job, continue to take advantage of available loss mitigation options including forbearance programs, payment deferral options and other modifications.

Loss reserves recorded on these delinquencies have a high degree of estimation due to the level of uncertainty regarding whether delinquencies in forbearance will ultimately cure or result in claim payments as well as the timing and severity of those payments.

The severity of loss on loans that do go to claim may be negatively impacted by the extended forbearance and foreclosure timelines, the associated elevated expenses and the higher loan amount of the recent new delinquencies.

These negative influences on loss severity could be mitigated, in part, by embedded home price appreciation.

New delinquencies in 2022 increased compared to 2021.

Current period primary delinquencies of 35,996 contributed $171 million of loss expense in 2022.

We incurred $144 million of losses from 32,624 current period delinquencies in 2021.

In determining the loss expense estimate, considerations were given to forbearance and non-forbearance delinquencies, recent cure and claim experience, and the prevailing and prospective economic conditions.

Approximately 21% of our primary new delinquencies in 2022 were subject to a forbearance plan as compared to 42% in 2021.

EMICO’s risk-to-capital ratio under the current regulatory framework as established under North Carolina law and enforced by the NCDOI, EMICO’s domestic insurance regulator, was approximately 12.9:1 as of December 31, 2022 and 12.3:1 as of December 31, 2021.

EMICO’s risk-to-capital ratio remains below the NCDOI’s maximum risk-to-capital ratio of 25:1.

North Carolina’s calculation of risk-to-capital excludes the risk-in-force for delinquent loans given the established loss reserves against all delinquencies.

GMICO’s ongoing risk-to-capital ratio will depend principally on the magnitude of future losses incurred by GMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business or capital support provided.

EMICO’s ongoing risk-to-capital ratio will depend principally on the magnitude of future losses incurred by EMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business.

Under PMIERs, we are subject to operational and financial requirements that private mortgage insurers must meet in order to remain eligible to insure loans that are purchased by the GSEs.

During 2020, the GSEs issued several amendments to PMIERs.

The December 4, 2020, version extended the application of reduced PMIERs capital factors to each non-performing loan that had an initial missed monthly payment occurring on or after March 1, 2020 and prior to April 1, 2021, and extended the capital preservation period from March 31, 2021, to June 30, 2021.

On June 30, 2021, the GSEs issued a revised and restated version of the PMIERs Amendment that replaced the version issued on December 4,

The June 30, 2021, version allows loans that enter a forbearance plan due to a COVID-19 hardship on or after April 1, 2021, to remain eligible for extended application of the reduced PMIERs capital factor for as long as the loan remained in forbearance.

The June 30, 2021, version also extended the capital preservation period through December 31, 2021, with certain exceptions, as described below.

The PMIERs Amendment implemented both permanent and temporary revisions to PMIERs.

Since 2020, the GSEs have issued several amendments to PMIERs, which implemented both permanent and temporary revisions.

For loans that became non-performing due to a COVID-19 hardship, PMIERs was temporarily amended with respect to each non-performing loan that (i) had an initial missed monthly payment occurring on or after March 1, 2020, and prior to April 1, 2021, or (ii) is subject to a forbearance plan granted in response to a financial hardship related to COVID-19, the terms of which are materially consistent with terms of forbearance plans offered by the GSEs.

The risk-based required asset amount factor for the non-performing loan will be the greater of (a) the applicable risk-based required asset amount factor for a performing loan were it not delinquent, and (b) the product of a 0.30 multiplier and the applicable risk-based required asset amount factor for a non-performing loan.

In the case of (i) above, absent the loan being subject to a forbearance plan described in (ii) above, the 0.30 multiplier will be applicable for no longer than three calendar months beginning with the month in which the loan became a non-performing loan due to having missed two monthly payments.

Loans subject to a forbearance plan described in (ii) above include those that are either in a repayment plan or loan modification trial period following the forbearance plan unless reported to the approved insurer that the loan is no longer in such forbearance plan, repayment plan, or loan modification trial period.

The PMIERs Amendment also imposed temporary capital preservation provisions through December 31, 2021, that require an approved insurer to meet certain PMIERs minimum required assets buffers (150% in the third quarter of 2021 and 115% in the fourth quarter of 2021) or otherwise obtain prior written GSE approval before paying any dividends, pledging or transferring assets to an affiliate or entering into any new, or altering any existing, arrangements under tax sharing and intercompany expense-sharing agreements, even if such insurer had a surplus of available assets.

In addition, the PMIERs Amendment imposes permanent revisions to the risk-based required asset amount factor for non-performing loans for properties located in future Federal Emergency Management Agency Declared Major Disaster Areas eligible for individual assistance.

In September 2020, subsequent to the issuance of Enact Holdings’ senior notes due in 2025, the GSEs imposed certain restrictions (the “GSE Restrictions”) with respect to capital on our business.

In May 2021, in connection with their conditional approval of the then potential partial sale of Enact Holdings, the GSEs confirmed the GSE Restrictions will remain in effect until the following collective conditions (“GSE Conditions”) are met:

(a) GMICO obtains “BBB+”/“Baa1” (or higher) rating from S&P, Moody’s or Fitch Ratings, Inc.

for two consecutive quarters and (b) Genworth achieves certain financial metrics.

The risk-based required asset amount factor for the non-performing loan is the greater of (a) the applicable risk-based required asset amount factor for a performing loan were it not delinquent, and (b) the product of a 0.30 multiplier and the applicable risk-based required asset amount factor for a non-performing loan.

In the case of (i) above, absent the loan being subject to a forbearance plan described in (ii) above, the 0.30 multiplier was applicable for no longer than three calendar months beginning with the month in which the loan became a non-performing loan due to having missed two monthly payments.

Loans subject to a forbearance plan described in (ii) above include those that are either in a repayment plan or loan modification trial period

following the forbearance plan unless reported to the approved insurer that the loan is no longer in such forbearance plan, repayment plan, or loan modification trial period.

The PMIERs amendment dated June 30, 2021, further allows loans that enter a forbearance plan due to a COVID-19 hardship on or after April 1, 2021, to remain eligible for extended application of the reduced PMIERs capital factor for as long as the loan remains in forbearance.

In addition, the PMIERs amendment made permanent revisions to the risk-based required asset amount factor for non-performing loans for properties located in future Federal Emergency Management Agency Declared Major Disaster Areas eligible for individual assistance.

In September 2020, subsequent to the issuance of our senior notes due in 2025, the GSEs imposed certain restrictions (the “GSE Restrictions”) with respect to capital on our business.

In May 2021, in connection with their conditional approval of the then potential partial sale of EHI, the GSEs confirmed the GSE Restrictions will remain in effect until the following collective conditions (“GSE Conditions”) are met for two consecutive quarters:

(a) EMICO obtains “BBB+”/“Baa1” (or higher) rating from S&P, Moody’s or Fitch Ratings, Inc.

and (b) Genworth achieves certain financial metrics.

EHI maintained the requisite ratings for two consecutive quarters prior to the end of 2022.

As of December 31, 2022, Genworth believes that they achieved their financial metrics for the quarters ended September 30, 2022 and December 31, 2022.

Once confirmed by the GSEs, EHI will no longer be subject to GSE Restrictions and Conditions.

Prior to the satisfaction of the GSE Conditions, the GSE Restrictions require:

• GMICO to maintain 115% of PMIERs minimum required assets through 2021, 120% during 2022 and 125% thereafter;

• Enact Holdings to retain $300 million of net proceeds from the 2025 Senior Notes offering that can be drawn down exclusively for debt service of those notes or to contribute to GMICO to meet its regulatory capital needs including PMIERs;

• written approval must be received from the GSEs prior to any additional debt issuance by either GMICO or Enact Holdings.

Until the GSE Conditions imposed in connection with the GSE Restrictions are met, Enact Holdings’ liquidity must not fall below 13.5% of its outstanding debt.

In addition, Fannie Mae agreed to reconsider the GSE Restrictions if Genworth were to own 50% or less of Enact Holdings at any point prior to their expiration.

We understand that Genworth’s current plans do not include a potential sale in which Genworth owns less than 80% of Enact Holdings.

The current balance of the 2025 Senior Notes proceeds required to be held by our holding company is approximately $252 million.

• EMICO to maintain 120% of PMIERs minimum required assets through 2022 and 125% thereafter;

• EHI to retain $300 million of net proceeds from the 2025 Senior Notes offering that can be drawn down exclusively for debt service of those notes or to contribute to EMICO to meet its regulatory capital needs including PMIERs;

• written approval must be received from the GSEs prior to any additional debt issuance by either EMICO or EHI.

Until the GSE Conditions imposed in connection with the GSE Restrictions are met, our liquidity must not fall below 13.5% of its outstanding debt.

In addition, Fannie Mae agreed to reconsider the GSE Restrictions if Genworth were to own 50% or less of EHI at any point prior to their expiration.

We understand that Genworth’s current plans do not include a potential sale in which Genworth owns less than 80% of EHI.

As of December 31, 2022, the balance of the 2025 Senior Notes proceeds required to be held by our holding company was approximately $203 million compared to $453 million of cash and invested assets held at EHI.

As of December 31, 2022, we had estimated available assets of $5,206 million against $3,156 million net required assets under PMIERs compared to available assets of $5,077 million against $3,074 million net required assets as of December 31, 2021.

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PMIERs sufficiency is based on the published requirements applicable to private mortgage insurers and does not give effect to the GSE Restrictions imposed on our business.

The increase in the PMIERs sufficiency was driven by CRT transactions.

During 2021, we executed a series of credit risk transfer transactions including a series of MILNs and an XOL treaty.

Credit risk transfer transactions provided an aggregate of approximately $1,578 million of PMIERs capital credit as of December 31, 2022, compared to $1,404 million as of December 31, 2021.

This was coupled with elevated lapse driven by prevailing low interest rates, business cash flows and lower delinquencies, partially offset by elevated new insurance written.

Our PMIERs required assets as of December 31, 2022, benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans.

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This amount is gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier.

On January 27, 2022, we executed an excess of loss reinsurance transaction with a panel of reinsurers, which will provide up to $294 million of reinsurance coverage on a portion of current and expected new insurance written for the 2022 book year, effective January 1, 2022.

EHI announced and paid a dividend of $200 million during the fourth quarter of 2021.

We believe this was an important milestone as we work to restart the return of capital to stockholders.

We are in the process of evaluating our capital return objectives for 2022 which includes an assessment of holding company liquidity and financial flexibility.

We expect a component of our capital return plan to include the initiation of a regular, common dividend to Company stockholders around mid-year 2022.

In addition to this dividend, we will continue to evaluate the potential for an incremental return of capital based on our ongoing business performance and a review of the macroeconomic conditions and regulatory landscape.

On July 21, 2022, Moody’s Investors Service upgraded the insurance financial strength rating of EMICO to Baa1 from Baa2.

The increase was driven by improvement in our overall credit profile, including market position, profitability, capital adequacy and financial flexibility.

Our continued

performance also led S&P Global Ratings to upgrade the financial rating of EMICO from BBB to BBB+ as of February 16, 2023.

On January 27, 2022, we executed an excess of loss reinsurance transaction with a panel of reinsurers, on a portion of current and expected new insurance written for the 2022 book year, effective January 1, 2022.

Based on actual 2022 NIW, this agreement provided up to $221 million of reinsurance coverage.

On March 24, 2022, we executed an excess of loss reinsurance transaction with a panel of reinsurers, which provides up to $325 million of reinsurance coverage on a portfolio of existing mortgage insurance policies written from July 1, 2021, through December 31, 2021, effective March 1, 2022.

On September 15, 2022, we executed an excess of loss reinsurance transaction with a panel of reinsurers, which provides up to $201 million of reinsurance coverage on a portfolio of existing mortgage insurance policies written from January 1, 2022, through June 30, 2022, effective September 1, 2022.

On June 30, 2022, we entered into a five-year, unsecured revolving credit facility (the “Facility”) with a syndicate of lenders in the initial aggregate principal amount of $200 million.

The Facility may be used for working capital needs and general corporate purposes, including the execution of dividends to our shareholders and capital contributions to our insurance subsidiaries.

The Facility remains undrawn as of December 31, 2022.

On April 26, 2022, our Board of Directors approved the initiation of a dividend program under which the Company intends to pay a quarterly cash dividend.

We paid quarterly dividends of $0.14 per share in May, September and December of 2022.

Future dividend payments are subject to quarterly review and approval by our Board of Directors and Genworth and will be targeted to be paid in the third month of each subsequent quarter.

In April and October of 2022, our primary mortgage insurance operating company, EMICO, completed distributions to EHI supporting our ability to pay cash dividends.

Future EMICO distributions will be used to fund the quarterly dividend as well as to bolster our financial flexibility and potentially return additional capital to shareholders.

Returning capital to shareholders, balanced with our growth and risk management priorities, remains a key commitment as we look to drive shareholder value through time.

We believe the initiation of a quarterly dividend in 2022 reflects meaningful progress towards that goal.

Further, we announced a special cash dividend of $183 million, or $1.12 per share, that was paid during the fourth quarter of 2022.

We also announced the initiation of a share repurchase program which authorized the repurchase of up to $75 million of the Company’s common stock.

Under the program, share repurchases may be made at the Company’s discretion from time to time in open market transactions, privately negotiated transactions, or by other means, including through Rule 10b5-1 trading plans.

In support, we have entered into an agreement with Genworth Holdings, Inc.

to repurchase its EHI shares on a pro rata basis as part of the program.

The share repurchase program is not expected to change Genworth’s ownership interest in EHI post-completion.

We began repurchases in the fourth quarter of 2022 which were immaterial.

We expect the timing and amount of any future share repurchases will be opportunistic and will depend on a variety of factors, including EHI’s share price, capital availability, business and market conditions, regulatory requirements, and debt covenant restrictions.

The program does not obligate EHI to acquire any amount of common stock, it may be suspended or terminated at any time at the Company’s discretion without prior notice, and it does not have a specified expiration date.

Future return of capital will be shaped by our capital prioritization framework:

supporting our existing policyholders, growing our mortgage insurance business, funding attractive new business opportunities and returning capital to shareholders.

Our total return of capital will also be based on our view of the prevailing and prospective macroeconomic conditions, regulatory landscape and business performance.

Results of Operations and Key Metrics

Results of Operations

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

The following table sets forth our consolidated results for the periods indicated:

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and percentage

Increase (decrease)

and percentage

(Amounts in thousands)

2022 2021 2020 2022 vs.

Premiums $ 939,462 $ 974,949 $ 971,365 $ (35,487) (4) % $ 3,584 — %

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Income before income taxes 898,222 695,216 472,418 203,006 29 % 222,798 47 %

695,216 472,418 222,798 47 %

Provision for income taxes 194,065 148,531 101,997 45,534 31 % 46,534 46 %

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Loss ratio (1)

(10) % 13 % 39 %

Expense ratio (2)

25 % 25 % 24 %

_______________

(1) Loss ratio is calculated by dividing losses incurred by net earned premiums.

(2) Expense ratio is calculated by dividing acquisition and operating expenses, net of deferrals, plus amortization of DAC and intangibles by net earned premiums.

Premiums increased mainly attributable to higher IIF partially offset by continued lapse of our in-force portfolio as older, higher priced policies continued to lapse in the current low interest rate environment, lower single premium cancellations and higher ceded premiums from reinsurance transactions executed in 2021.

Net investment income increased primarily from higher average invested assets in the current year and higher income from bond calls, partially offset by lower investment yields in 2021.

Net investment losses in the current year were primarily driven by credit losses related to corporate available-for-sale fixed maturity securities and realized losses from the sale of fixed maturity securities.

Net investment losses in the prior year were largely from impairments and net losses from the sale of fixed maturity securities.

Other income primarily includes underwriting fee revenue charged on a per-unit or per-diem basis, as defined in the underwriting agreement.

Detailed discussions of our consolidated results of operations for the year ended December 31, 2020, including the year-over-year comparisons between 2021 and 2020, that are not included in this Annual Report on Form 10-K can be found in Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Premiums decreased mainly attributable to lapse of our in-force portfolio as older, higher priced policies lapsed combined with lower single premium cancellations and partially offset by higher IIF.

Net investment income increased primarily due to higher investment yields due to interest rate increases during 2022 coupled with higher average invested assets.

This was partially offset by lower income from bond calls.

Net investment losses in the current year were primarily driven by realized losses from the sale of fixed maturity securities.

Net investment losses in the prior year were largely from impairments and net realized losses from the sale of fixed maturity securities.

Other income decreased primarily due to lower contract underwriting revenue.

Other income includes underwriting fee revenue charged on a per-unit or per-diem basis, as defined in the underwriting agreement.

Underwriting volume was down due to a smaller mortgage insurance market.

Losses and expenses

Losses incurred decreased largely from lower new delinquencies from the improving economy and favorable development related to pre-COVID-19 claim years, compared to unfavorable reserve adjustments in the prior year as a result of COVID-19 .

New primary delinquencies were 32,624 in 2021 compared to 85,074 in 2020.

During 2021, we recorded a $22 million reserve release related to pre-COVID-19 claim years.

In 2020 we strengthened existing reserves by $65 million primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a modest increase in claim severity.

The following table shows incurred losses related to current and prior accident years for the year ended December 31:

Losses incurred decreased largely from favorable development related to cures exceeding expectations predominantly related to COVID-19 related delinquencies from 2020 and 2021.

New primary delinquencies were 35,996 in 2022 compared to 32,624 in 2021, resulting in $171 million and $144 million of losses, respectively.

During 2022, we recorded a $314 million reserve release primarily related to COVID-19 delinquencies from 2020 and 2021.

Due to uncertainty in the current economic environment, we increased the expected claim rate on new delinquencies throughout 2022.

This contributed to reserve strengthening of $46 million on previous quarter delinquencies in 2022 and increased the amount of reserves on new delinquencies in the fourth quarter of 2022.

In 2021 we recorded a $22 million reserve release related to pre-COVID-19 claim years.

The following table shows incurred losses related to current and prior accident years for the years ended December 31:

(Amounts in thousands)

2022 2021 2020

Losses and LAE incurred related to current accident year

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(1) Excludes run-off business.

Acquisition and operating expenses, net of deferrals, increased primarily attributable to strategic transaction preparation costs, higher corporate overhead and a one-time restructuring charge partially offset by lower volume-related operating costs.

Amortization of DAC and intangibles decreased primarily due to accelerated DAC amortization of $6 million in the prior year driven by elevated lapses.

The expense ratio increased mainly driven by $7 million of strategic transaction preparation costs and a one-time restructuring charge of $3 million, coupled with higher compensation and operating costs.

The strategic transaction preparation costs and restructuring costs increased the expense ratio by approximately 1 point.

Interest expense increased in the current year related to our 2025 Senior Notes issued in August 2020.

Acquisition and operating expenses, net of deferrals, decreased primarily attributable to lower corporate overhead.

Amortization of DAC and intangibles declined due to lower DAC amortization as a result of higher persistency, driven by rising mortgage rates.

The expense ratio remained flat due to similar percentage declines in premiums and expenses.

Interest expense was relatively flat in the current year and related primarily to our 2025 Senior Notes issued in August 2020.

For additional details see Note 7 to our consolidated financial statements.

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The effective tax rate was 21.6% and 21.4% for the years ended December 31, 2022 and 2021, respectively, consistent with the United States corporate federal income tax rate.

Results of Operations

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

The following table presents our consolidated results for the periods indicated:

Increase (decrease)

and percentage

(Amounts in thousands)

Premiums $ 971,365 $ 856,976 $ 114,389 13 %

Net investment income 132,843 116,927 15,916 14 %

Net investment gains (losses) (3,324) 718 (4,042) (563) %

Other income 5,575 4,232 1,343 32 %

Total revenues 1,106,459 978,853 127,606 13 %

Losses and expenses:

Losses incurred 379,834 49,850 329,984 662 %

Acquisition and operating expenses, net of deferrals 215,024 195,768 19,256 10 %

Amortization of deferred acquisition costs and intangibles 20,939 15,065 5,874 39 %

Interest expense 18,244 — 18,244 NM (1)

Total losses and expenses 634,041 260,683 373,358 143 %

Income before income taxes and change in fair value of unconsolidated affiliate 472,418 718,170 (245,752) (34) %

Provision for income taxes 101,997 155,832 (53,835) (35) %

Income before change in fair value of unconsolidated affiliate 370,421 562,338 (191,917) (34) %

Change in fair value of unconsolidated affiliate, net of taxes — 115,290 (115,290) (100) %

Net income $ 370,421 $ 677,628 $ (307,207) (45) %

Loss ratio (2)

Expense ratio (3)

_______________

(1) Not measurable.

(2) Loss ratio is calculated by dividing losses incurred by net earned premiums.

(3) Expense ratio is calculated by dividing acquisition and operating expenses, net of deferrals, plus amortization of DAC and intangibles by net earned premiums.

Premiums increased mainly attributable to higher IIF and higher policy cancellations in our single premium mortgage insurance product driven largely by higher mortgage refinancing, partially offset by lower average premium rates in 2020.

The year ended December 31, 2019 also included a favorable adjustment of $14 million related to our single premium earnings pattern review driven by our revised assessment of recent claim and cancellation experience and the refinement of loan attributes.

Net investment income increased primarily due to higher average invested assets partially offset by lower investment yields in 2020.

Net investment losses in 2020 were primarily driven by impairments and net losses from the sale of fixed maturity securities.

Net investment gains in 2019 were largely from net gains from the sale of fixed maturity securities.

Other income primarily includes underwriting fee revenue charged on a per-unit or per-diem basis, as defined in the underwriting agreement.

Other income increased primarily due to higher contract underwriting revenue from a larger mortgage insurance market.

Losses and expenses

Losses incurred increased largely from new delinquencies driven primarily by a significant increase in borrower forbearance as a result of COVID-19 and strengthening of existing reserves of $65 million in 2020 primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a modest increase in claim severity.

We also experienced lower net benefits from cures and aging of existing delinquencies in 2020.

Included in 2019 were favorable reserve adjustments of $23 million mostly associated with lower expected claim rates.

Our loss ratio increased primarily from higher losses, partially offset by higher net earned premiums in 2020.

The following table shows incurred losses related to current and prior accident years for the years ended December 31:

(Amounts in thousands)

Losses and LAE incurred related to current accident year $ 364,548 $ 105,734

Losses and LAE incurred related to prior accident years 16,202 (55,917)

Total incurred (1)

$ 380,750 $ 49,817

_______________

(1) Excludes run-off business.

Acquisition and operating expenses, net of deferrals, increased primarily driven by higher acquisition costs mainly driven by increased NIW in 2020 and higher information technology and other expenses due to continued investment in modernization of the business.

Amortization of DAC and intangibles consists primarily of the amortization of acquisition costs that are capitalized and capitalized software.

Amortization of DAC and intangibles increased primarily due to accelerated DAC amortization of $6 million driven by elevated lapses in 2020.

Our expense ratio decreased slightly primarily from higher earned premiums, mostly offset by higher acquisition and operating expenses and higher DAC amortization in 2020.

Interest expense in 2020 relates to our 2025 Senior Notes issued in August 2020.

Provision for income taxes

The effective tax rate was 21.6% and 21.7% for the years ended December 31, 2020 and 2019, respectively, consistent with the United States corporate federal income tax rate.

Change in fair value of unconsolidated affiliate, net of taxes

Change in fair value of unconsolidated affiliate consists of the change in the fair value of our previously held investment in Genworth Canada, which also includes dividends and the sale of common shares, net of taxes.

The decrease was driven by the sale of our investment in Genworth Canada, which closed on December 12, 2019.

See Note 3 to our consolidated financial statements for additional information.

Use of Non-GAAP Measures

Use of Non-GAAP Financial Measures

We use a non-U.S.

GAAP (“non-GAAP”) financial measure entitled “adjusted operating income.” This non-GAAP financial measure aligns with the way our business performance is evaluated by both management and by our board of directors.

This measure has been established in order to increase transparency for the purposes of evaluating our core operating trends and enabling more meaningful comparisons with our peers.

Although “adjusted operating income” is a non-GAAP financial measure, for the reasons discussed above we believe this measure aids in understanding the underlying performance of our operations.

Our senior management, including our chief operating decision maker, uses “adjusted operating income” as the primary measure to evaluate the fundamental financial performance of our business and to allocate resources.

Our senior management, including our chief operating decision maker (who is our Chief Executive Officer), use “adjusted operating income” as the primary measure to evaluate the fundamental financial performance of our business and to allocate resources.

“Adjusted operating income” is defined as U.S.

GAAP net income excluding the effects of (i) net investment gains (losses), (ii) change in fair value of unconsolidated affiliate and (iii) Restructuring costs and infrequent or unusual non-operating items.

GAAP net income excluding the effects of (i) net investment gains (losses) and (ii) restructuring costs and infrequent or unusual non-operating items.

(i) Net investment gains (losses)—The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities or exposure management.

Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these realized gains and losses.

the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these realized gains and losses.

We do not view them to be indicative of our fundamental operating activities.

Therefore, these items are excluded from our calculation of adjusted operating income.

(ii) Change in fair value of unconsolidated affiliate—The change in fair value of our previously held investment in Genworth Canada could vary significantly across periods and was highly dependent on the performance of the Canadian housing market and Genworth Canada’s operating results.

We managed the investment in Genworth Canada separately from our remaining investments portfolio through and up until the sale of our ownership interest in Genworth Canada in December 2019.

Prior to the sale, we did not view the results of our investment in Genworth Canada as part of our fundamental operating activities.

Therefore, this item is excluded from our calculation of adjusted operating income.

Additionally, given the divestiture of Genworth Canada on December 12, 2019, we will no longer have any impact from Genworth Canada in our financial statements going forward.

(iii) Restructuring costs and infrequent or unusual non-operating items are also excluded from adjusted operating income if, in our opinion, they are not indicative of overall operating trends.

(ii) Restructuring costs and infrequent or unusual non-operating items are also excluded from adjusted operating income if, in our opinion, they are not indicative of overall operating trends.

In reporting non-GAAP measures in the future, we may make other adjustments for expenses and gains we do not consider reflective of core operating performance in a particular period.

We may disclose other non-GAAP operating measures if we believe that such a presentation would be helpful for investors to evaluate our operating condition by including additional information.

Total adjusted operating income is not a measure of total profitability, and therefore should not be considered in isolation or viewed as a substitute for U.S.

Adjusted operating income is not a measure of total profitability, and therefore should not be considered in isolation or viewed as a substitute for U.S.

GAAP net income.

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(Amounts in thousands)

2022 2021 2020

Net income $ 704,157 $ 546,685 $ 370,421

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Costs associated with reorganization 3,461 2,744 —

Change in fair value of unconsolidated affiliate — — (127,397)

Taxes on adjustments (1,155) (1,022) (698)

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We recorded a pre-tax expense of $3.5 million for the year ended December 31, 2022, related to restructuring costs as we evaluate and appropriately size our organizational needs and expenses.

Adjusted operating income increased in 2021 compared to 2020 primarily attributable to lower losses mainly from lower new delinquencies from the improving economy and net favorable reserve adjustments in 2021 compared to unfavorable reserve adjustments in 2020, partially offset by interest expense associated with senior notes issued in August 2020 and higher operating costs in the current year.

Adjusted operating income decreased in 2020 compared to 2019 primarily attributable to higher losses largely from new delinquencies driven in large part by a significant increase in borrower forbearance as a result of COVID-19, reserve strengthening of $51 million on existing delinquencies and from lower net benefits from cures and aging of existing delinquencies in 2020.

These decreases were partially offset by higher premiums largely driven by higher IIF and an increase in policy cancellations in our single premium mortgage insurance product primarily due to higher mortgage refinancing in 2020.

The year ended December 31, 2019 included favorable reserve adjustments of $18 million mostly associated with lower expected claim rates and a favorable adjustment of $11 million related to our single premium earnings pattern review.

The change in fair value of the investment in Genworth Canada was $127.4 million for the year ended December 31, 2019, and is included within change in fair value of unconsolidated affiliate in the consolidated statements of income, net of provision (benefit) for income taxes of $12.1 million.

There were no infrequent or unusual items excluded from adjusted operating income during the periods presented.

Adjusted operating income increased in 2022 compared to 2021 due to larger favorable reserve adjustments in 2022 related to cure activity exceeding expectations predominantly from COVID-19 related delinquencies from 2020 and 2021.

This was partially offset by lower premiums in 2022.

Management reviews the key metrics included within this section when analyzing the performance of our business.

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(Dollar amounts in millions)

2022 2021 2020

New insurance written $ 66,485 $ 97,004 $ 99,871

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(1) Represents the aggregate unpaid principal balance for loans we insure.

Original loan balances are primarily used to determine premiums.

New insurance written

NIW for the year ended December 31, 2021 decreased 3% compared to 2020 primarily due to a smaller estimated private mortgage insurance market resulting in lower refinancing originations, partially offset by higher mortgage purchase originations.

NIW for the year ended December 31, 2022 decreased 31% compared to 2021 primarily due to a smaller estimated private mortgage insurance market as both refinancing and purchase originations were impacted by increasing mortgage rates.

We manage the quality of new business through pricing and our underwriting guidelines, which we modify from time to time as circumstances warrant.

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Total $ 66,485 100 % $ 97,004 100 % $ 99,871 100 %

We have seen a higher concentration of loans with a DTI ratio of greater than 45% during 2022.

This is in line with market trends as rising mortgage rates and recent home price appreciation have put pressure on affordability.

We believe the levels are in line with our current risk appetite as we consider layered risk across multiple risk attributes, pricing and our portfolio credit mix.

Insurance in-force and Risk in-force

IIF increased largely from NIW, partially offset by lapses and cancellations as we experienced lower persistency during the current year.

Primary persistency was 62% and 59% for the years ended December 31, 2021 and 2020, respectively.

IIF increased largely from NIW and increased persistency in the current year, partially offset by lapses and cancellations.

Primary persistency rate was 80% and 62% for the years ended December 31, 2022 and 2021, respectively.

RIF increased primarily as a result of higher IIF.

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(Amounts in millions)

December 31, 2022 December 31, 2021 December 31, 2020

Primary IIF $ 248,262 100 % $ 226,514 100 % $ 207,947 100 %

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Total RIF $ 62,870 100 % $ 56,986 100 % $ 52,621 100 %

The following table sets forth primary IIF and primary RIF by origination as of the dates indicated:

(Amounts in millions)

December 31, 2022 December 31, 2021 December 31, 2020

Purchases IIF $ 207,827 84 % $ 176,550 78 % $ 157,805 76 %

Refinances IIF 40,435 16 49,964 22 50,142 24

Total IIF $ 248,262 100 % $ 226,514 100 % $ 207,947 100 %

Purchases RIF $ 54,165 86 % $ 46,470 82 % $ 41,710 79 %

Refinances RIF 8,626 14 10,411 18 10,765 21

Total RIF $ 62,791 100 % $ 56,881 100 % $ 52,475 100 %

The following table sets forth primary IIF and primary RIF by product as of the dates indicated:

(Amounts in millions)

December 31, 2022 December 31, 2021 December 31, 2020

Monthly IIF $ 216,831 87 % $ 194,826 86 % $ 172,558 83 %

Single IIF 29,275 12 29,205 13 31,628 15

Other IIF 2,156 1 2,483 1 3,761 2

Total IIF $ 248,262 100 % $ 226,514 100 % $ 207,947 100 %

Monthly RIF $ 55,879 89 % $ 49,614 87 % $ 44,005 84 %

Single RIF 6,370 10 6,658 12 7,576 14

Other RIF 542 1 609 1 894 2

Total RIF $ 62,791 100 % $ 56,881 100 % $ 52,475 100 %

The following table sets forth primary IIF by policy year as of the dates indicated:

(Amounts in millions)

December 31, 2022 December 31, 2021 December 31, 2020

2008 and prior $ 6,596 3 % $ 8,196 3 % $ 11,322 5 %

2009 to 2014 2,113 1 3,369 2 6,729 4

2009 to 2013 1,404 1 3,030 2 5,656 3

2015 2,912 1 4,488 2 7,887 4

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(Amounts in millions)

December 31, 2022 December 31, 2021 December 31, 2020

2008 and prior $ 1,699 3 % $ 2,112 3 % $ 2,918 5 %

2009 to 2014 560 1 904 2 1,831 4

2009 to 2013 370 1 832 2 1,572 3

2015 781 1 1,197 2 2,104 4

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(Amounts in millions)

2022 2021 2020

Beginning balance $ 226,514 $ 207,947 $ 181,785

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(Amounts in millions)

December 31, 2022 December 31, 2021 December 31, 2020

95.01% and above $ 39,509 16 % $ 35,455 16 % $ 34,520 17 %

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(Amounts in millions)

December 31, 2022 December 31, 2021 December 31, 2020

95.01% and above $ 11,136 18 % $ 9,907 17 % $ 9,279 18 %

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(Amounts in millions)

December 31, 2022 December 31, 2021 December 31, 2020

Over 760 $ 102,467 41 % $ 89,982 40 % $ 78,488 38 %

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(Amounts in millions)

December 31, 2022 December 31, 2021 December 31, 2020

Over 760 $ 25,807 41 % $ 22,489 40 % $ 19,691 37 %

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(1) Loans with unknown FICO scores are included in the 660-679 category.

The following table sets forth primary IIF by DTI score at origination as of the dates indicated:

(Amounts in millions)

December 31, 2022 December 31, 2021 December 31, 2020

45.01% and above $ 43,831 18 % $ 34,076 15 % $ 31,047 15 %

38.01% to 45.00% 87,816 35 79,147 35 73,555 35

38.00% and below 116,615 47 113,291 50 103,345 50

Total $ 248,262 100 % $ 226,514 100 % $ 207,947 100 %

The following table sets forth primary RIF by DTI score at origination as of the dates indicated:

(Amounts in millions)

December 31, 2022 December 31, 2021 December 31, 2020

45.01% and above $ 11,176 18 % $ 8,631 15 % $ 7,855 15 %

38.01% to 45.00% 22,268 35 19,974 35 18,647 36

38.00% and below 29,347 47 28,276 50 25,973 49

Total $ 62,791 100 % $ 56,881 100 % $ 52,475 100 %

Delinquent loans and claims

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Total 24,820 $ 606 $ 1,409 43 %

______________

(1) Direct primary case reserves exclude LAE, pool, IBNR and reinsurance reserves.

December 31, 2020

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(1) Direct primary case reserves exclude LAE, pool, IBNR and reinsurance reserves.

The total increase in reserves as a percentage of RIF as of December 31, 2021 compared to December 31, 2020 was primarily driven by higher reserves in relation to a decrease in delinquent RIF.

Delinquent RIF decreased mainly from lower total delinquencies as cures outpaced new delinquencies in 2021, while reserves increased in the current year primarily from new delinquencies, partially offset by net favorable reserve adjustments related to pre-COVID-19 delinquencies.

As of December 31, 2021, we have experienced an increase in loans that are delinquent for 12 months or more due in large part to borrowers entering a forbearance plan over a year ago driven by COVID-19.

Our current reserve estimate assumes that remaining delinquencies will have a higher likelihood of going to claim given foreclosure moratoriums and the uncertainty around the lack of progression through the foreclosure process.

Forbearance plans may be extended up to 18 months, therefore, we could experience elevated delinquencies in this aged category during 2022.

The total reserves as a percentage of RIF as of December 31, 2022, compared to December 31, 2021, remained relatively flat in 2022.

Delinquent RIF decreased mainly from lower total delinquencies as cures outpaced new delinquencies in 2022, while reserves decreased in the current year primarily from favorable reserve adjustments related to COVID-19 delinquencies from 2021 and 2020.

As of December 31, 2022, we have experienced a decrease in loans that are delinquent for 12 months or more.

This number was elevated in 2021 in large part to borrowers entering a forbearance plan driven by COVID-19 and we saw cure activity within these delinquencies during 2022.

Our current reserve estimate assumes that remaining COVID-19 delinquencies will have a higher likelihood of going to claim given the uncertainty around the lack of progression through the foreclosure process.

While we have seen significant cure activity in aged delinquencies, continued forbearance options exist, so we could continue to experience elevated delinquencies in this aged category.

Resolution of a delinquency in a forbearance plan, whether it ultimately results in a cure or a claim, is difficult to estimate and may not be known for several quarters, if not longer.

The ratio of the claim paid to the current risk in-force for a loan is referred to as “claim severity.” The current risk in-force is equal to the unpaid principal amount multiplied by the coverage percentage.

main determinants of claim severity are the age of the mortgage loan, the value of the underlying property, accrued interest on the loan, expenses advanced by the insured and foreclosure expenses.

The main determinants of claim severity are the age of the mortgage loan, the value of the underlying property, accrued interest on the loan, expenses advanced by the insured and foreclosure expenses.

These amounts depend partly upon the time required to complete foreclosure, which varies depending upon state laws.

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Our average primary mortgage insurance claim severity was 94%, 103% and 106% for the years ended December 31, 2022, 2021 and 2020, respectively.

The average claim severities do not include the effects of agreements on non-performing loans.

The 2022 average claim severity was impacted by low claim volumes and lifetime home price appreciation.

These figures do not include the effects of agreements on non-performing loans.

Primary insurance delinquency rates differ from region to region in the United States at any one time depending upon economic conditions and cyclical growth patterns.

Delinquency rates are shown by region based upon the location of the underlying property, rather than the location of the lender.

The table below sets forth our primary delinquency rates for the ten largest states by our primary RIF as of December 31, 2021:

below sets forth our primary delinquency rates for the ten largest states by our primary RIF as of December 31, 2022:

Percent of RIF

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Texas 8 7 2.12 %

Michigan 4 2 1.87 %

Arizona 4 2 1.78 %

Michigan 4 3 1.79 %

North Carolina 3 3 1.59 %

Pennsylvania (1)

Georgia 3 3 2.23 %

Washington 3 3 1.92 %

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Percent of RIF

Percent of total

Percent of direct

California 11 % 12 % 3.17 %

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Michigan 4 2 1.87 %

Washington 4 3 5.37 %

Pennsylvania (1)

Arizona 4 2 2.31 %

North Carolina 3 2 2.18 %

Pennsylvania (1)

Washington 3 3 2.98 %

All other states (2)

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Percent of RIF

Percent of total

Percent of direct

California 11 % 11 % 6.20 %

Texas 8 8 5.82 %

Washington 4 2 1.10 %

Michigan 4 2 2.93 %

Washington 4 3 5.37 %

Pennsylvania (1)

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Dallas, TX MD 2 1 1.86 %

Nassau County, NY MD 2 4 5.55 %

Denver-Aurora-Lakewood, CO MSA 2 1 1.12 %

All other MSAs/MDs 77 71 2.00 %

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Percent of RIF

Percent of total

Percent of direct primary case reserves

By MSA or MD:

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Dallas, TX MD 2 2 2.31 %

Seattle-Bellevue, WA MD 2 2 6.33 %

Nassau County, NY MD 2 4 5.55 %

All other MSAs/MDs 77 67 2.44 %

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Percent of RIF

Percent of total

Percent of direct primary case reserves

By MSA or MD:

Chicago-Naperville, IL MD 3 % 4 % 6.36 %

New York, NY MD 3 10 3.68 %

Phoenix, AZ MSA 3 2 4.63 %

New York, NY MD 3 8 10.25 %

Atlanta, GA MSA 2 3 6.68 %

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Houston, TX MSA 2 3 7.59 %

Riverside-San Bernardino, CA MSA 2 2 7.08 %

Los Angeles-Long Beach, CA MD 2 2 7.57 %

Dallas, TX MD 2 2 5.10 %

Seattle-Bellevue, WA MD 2 2 6.33 %

Riverside-San Bernardino, CA MSA 2 2 2.08 %

Nassau County-Suffolk County, NY Metro Division 2 5 3.47 %

All other MSAs/MDs 77 70 4.43 %

Total 100 % 100 % 4.86 %

The frequency of delinquencies often does not correlate directly with the number of claims received because delinquencies may cure.

The number of delinquencies often does not correlate directly with the number of claims received because delinquencies may cure.

The rate at which delinquencies cure is influenced by borrowers’ financial resources and circumstances and regional economic differences.

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2009 to 2014 1 4 5.01 % 0.69 %

2009 to 2013 1 2 5.54 % 0.74 %

2015 1 3 3.61 % 0.71 %

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The following table sets forth the dispersion of primary RIF and loss reserves by policy year and delinquency rates as of December 31, 2021:

Percent of total

Percent of direct

2008 and prior 3 % 24 % 10.54 % 5.59 %

2009 to 2013 1 2 5.54 % 0.74 %

2009 to 2013 2 2 5.44 0.91 %

2014 1 3 5.51 % 0.99 %

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2020 31 14 1.50 % 1.14 %

2021 40 2 0.37 % 0.36 %

Total portfolio 100 % 100 % 2.65 % 4.42 %

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The following table sets forth the dispersion of primary RIF and loss reserves by policy year and delinquency rates as of December 31, 2020:

Percent of total

Percent of direct

2008 and prior 5 % 28 % 13.68 % 5.66 %

2009 to 2013 2 2 5.44 % 0.91 %

2009 to 2012 1 2 2.42 % 0.87 %

2014 2 3 6.06 % 1.57 %

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(1) Calculated as the sum of the number of policies where claims were ever paid to date and number of policies for loans currently in default divided by policies ever in-force.

Loss reserves in policy years 2005 through 2008 are outsized compared to their representation of RIF.

The size of these policy years at origination combined with the significant decline in home prices led to significant losses in policy years prior to 2009.

Loss reserves in policy years 2008 and prior are outsized compared to their representation of RIF.

The size of these policy years at origination, particularly 2005 through 2008, combined with the significant decline in home prices led to significant losses in policy years prior to 2009.

Although uncertainty remains with respect to the ultimate losses we will experience on these policy years, they have become a smaller percentage of our total mortgage insurance portfolio.

The largest portion of loss reserves has shifted to newer book years as a result of the COVID-19 pandemic given their significant representation of RIF.

The largest portion of loss reserves has shifted to newer book years in line with changes in RIF.

As of December 31, 2022, our 2015 and newer policy years represented approximately 96% of our primary RIF and 70% of our total direct primary case reserves.

Investment Portfolio

Our investment portfolio is affected by factors described below, each of which in turn may be affected by COVID-19 as noted above in “—Trends and Conditions.” Management of our investment portfolio has been delegated by our board of directors to our Parent’s investment committee and chief investment officer.

Our Parent’s investment team, with oversight from our board of directors and our senior management team, is responsible for the execution of our investment strategy.

Our investment portfolio is affected by factors described below, each of which in turn may be affected by current macroeconomic conditions as noted above in “—Trends and Conditions.” The investment portfolios of our insurance subsidiaries are directed by the Enact Investment Committee, a management-level committee, with Genworth serving as the investment manager.

The investment portfolio of EHI is directed by a separate management-level EHI Investment Committee with a third-party investment manager.

These parties, with oversight from our Board of Directors and our senior management team, are responsible for the execution of our investment strategy.

Our investment portfolio is an important component of our consolidated financial results and represents our primary source of claims paying resources.

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The following table presents the fair value of our fixed maturity securities available-for-sale as of the dates indicated:

December 31, 2021

December 31, 2020

December 31, 2019

December 31, 2022 December 31, 2021 December 31, 2020

(Amounts in thousands)

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corporate 652,844 13.4 666,594 12.7 607,669 12.0

Residential mortgage-backed 11,043 0.2 — — — —

Other asset-backed 1,100,036 22.5 1,035,165 19.7 1,193,670 23.7

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We have no derivative financial instruments in our investment portfolio.

As of December 31, 2021, December 31, 2020 and December 31, 2019, 97%, 98%, 99% of our investment portfolio was rated investment grade, respectively.

As of December 31, 2022, December 31, 2021 and December 31, 2020, 98%, 97% and 98% of our investment portfolio was rated investment grade, respectively.

The following table presents the security ratings of our fixed maturity securities as of the dates indicated:

December 31, 2022 December 31, 2021 December 31, 2020

AAA 10 % 9 % 11 %

AA 17 % 13 % 12 %

A 34 % 36 % 36 %

BBB 37 % 38 % 39 %

BB & below 2 3 2

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The table below presents the effective duration and investment yield on our investments available-for-sale, excluding cash and cash equivalents:

December 31, 2022 December 31, 2021 December 31, 2020

Duration (in years) 3.6 3.9 3.4

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(Amounts in thousands)

2022 2021 2020

Net cash provided by (used in):

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Our most significant source of operating cash flows is from premiums received from our insurance policies, while our most significant uses of operating cash flows are generally for claims paid on our insured policies and our operating expenses.

Net cash from operating activities decreased principally due to increased taxes and interest payments during 2021, partially offset by premiums received from a larger IIF balance and lower claims paid in the current year.

Net cash from operating activities decreased largely due to lower premiums.

Cash flows from operations were also impacted by changes in reserves, changes in unearned premium, stock-based compensation expense and amortization of discounts and premiums on fixed maturity securities.

Investing activities are primarily related to purchases, sales and maturities of our investment portfolio.

We had cash outflows from investing activities in 2021 as a result of continued fixed maturity security purchases driven by premium growth and lower losses paid.

We had cash outflows from investing activities in 2022 and 2021 as a result of continued fixed maturity security purchases driven by premium growth and lower losses paid.

Outflows of cash in 2020 were primarily as a result of purchases of fixed maturity securities using the net proceeds from the December 2019 sale of our investment in Genworth Canada and our operating cash flows, partially offset by higher maturities and sales of our fixed maturity securities.

We had cash inflows from investing activities in 2019 primarily from the sale of our investment in Genworth Canada, partially offset by net purchases of fixed maturity securities.

Financing activities in 2021 reflect a $200 million dividend paid in the fourth quarter while financing activities in 2020 reflect $738 million net proceeds from the issuance of our 2025 Senior Notes, discussed below, partially offset by a $437 million dividend paid to our Parent from the net proceeds of the offering.

We paid dividends of $250 million in 2019.

The amount and timing of future dividends will depend on the economic recovery from COVID-19, among other factors as described below.

Financing activities in 2022 reflect dividends paid for the year including a regular quarterly dividend initiated in the second quarter of 2022 along with an additional special dividend paid in the fourth quarter of 2022.

We also began our share repurchase program in the fourth quarter of 2022.

Financing activities in 2021 included a $200 million dividend paid in the fourth quarter while 2020 includes $738 million net proceeds from the issuance of our 2025 Senior Notes, discussed below, partially offset by a $437 million dividend paid to our Parent from the net proceeds of the offering.

The amount and timing of future dividends will depend on the prevailing economic and business conditions, among other factors as described below.

Capital Resources and Financing Activities

We issued our 2025 Senior Notes in 2020 with interest payable semi-annually in arrears on February 15 and August 15 of each year.

During 2021 we made our first two interest payments of $23.6 million, each.

The 2025 Senior Notes mature on August 15, 2025.

We may redeem the 2025 Senior

Notes, in whole or in part, at any time prior to February 15, 2025 at our option, by paying a make-whole premium, plus accrued and unpaid interest, if any.

We may redeem the 2025 Senior Notes, in whole or in part, at any time prior to February 15, 2025 at our option, by paying a make-whole premium, plus accrued and unpaid interest, if any.

At any time on or after February 15, 2025, we may redeem the 2025 Senior Notes, in whole or in part, at our option, at 100% of the principal amount, plus accrued and unpaid interest.

The 2025 Senior Notes contain customary events of default, which subject to certain notice and cure conditions, can result in the acceleration of the principal and accrued interest on the outstanding 2025 Senior Notes if we breach the terms of the indenture.

Pursuant to the GSE Restrictions, we are required to retain $300 million of our holding company cash that can be drawn down exclusively for our debt service or to contribute to GMICO to meet its regulatory capital needs including PMIERs.

The current balance of the 2025 Senior Notes proceeds required to be held by our holding company is approximately $252 million.

Pursuant to the GSE Restrictions, we are required to retain $300 million of our holding company cash that can be drawn down exclusively for our debt service or to contribute to EMICO to meet its regulatory capital needs including PMIERs.

As of December 31, 2022, the balance of the 2025 Senior Notes proceeds required to be held by our holding company was approximately $203 million.

See “—Trends and Conditions” for additional information regarding the GSE Restrictions.

On June 30, 2022, we entered into a credit agreement with a syndicate of lenders that provides for a five-year, unsecured revolving credit facility (the “Facility”) in the initial aggregate principal amount of $200 million.

We may use borrowings under the Facility for working capital needs and general corporate purposes, including the execution of dividends to our shareholders and capital contributions to our insurance subsidiaries.

The Facility contains several covenants, including financial covenants relating to minimum net worth, capital and liquidity levels, maximum debt to capitalization level and PMIERS compliance.

We are in compliance with all covenants of the Facility and the Facility remained undrawn as of December 31, 2022.

Restrictions on the Payment of Dividends

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In addition to dividends and distributions, alternative mechanisms, such as share repurchases, subject to any requisite regulatory approvals, may be utilized from time to time to upstream surplus.

On June 30, 2021, the GSEs issued a revised and restated version of the PMIERs Amendment that imposed temporary capital preservation provisions through December 31, 2021 that required an approved insurer to meet certain PMIERs minimum required asset buffers (150% in the third quarter of 2021 and 115% in the fourth quarter of 2021) or otherwise obtain prior written GSE approval before paying any dividends, pledging or transferring assets to an affiliate or entering into any new, or altering any existing, arrangements under tax sharing and intercompany expense-sharing agreements, even if such insurer had a surplus of available assets.

In addition, prior to the satisfaction of the GSE Conditions, the GSE Restrictions require GMICO to maintain 115% of PMIERs Minimum Required Assets through 2021, 120% during 2022 and 125% thereafter.

Another consideration in the development of the dividend strategies for our regulated insurance operating subsidiaries is our expected level of compliance with PMIERs.

Prior to the satisfaction of the GSE Conditions, the GSE Restrictions also required EMICO to maintain 120% of PMIERs Minimum Required Assets through 2022, and 125% thereafter.

In addition, under PMIERs, EMICO is subject to other operational and financial requirements that approved insurers must meet in order to remain eligible to insure loans purchased by the GSEs.

Refer to “—Trends and Conditions” for recent updates related to these requirements.

In addition, we review multiple other considerations in parallel to determine a prospective dividend strategy for our regulated insurance operating subsidiaries.

Given the regulatory focus on the reasonableness of an insurer’s surplus in relation to its outstanding liabilities and the adequacy of its surplus relative to its financial needs for any dividend, our insurance subsidiaries consider the minimum amount of policyholder surplus after giving effect to any contemplated future dividends.

Given the regulatory focus on the

reasonableness of an insurer’s surplus in relation to its outstanding liabilities and the adequacy of its surplus relative to its financial needs for any dividend, our insurance subsidiaries consider the minimum amount of policyholder surplus after giving effect to any contemplated future dividends.

Regulatory minimum policyholder surplus is not codified in North Carolina law and limitations may vary based on prevailing business conditions including, but not limited to, the prevailing and future macroeconomic conditions.

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As mentioned above, another consideration in the development of the dividend strategies for our regulated insurance operating subsidiaries is our expected level of compliance with PMIERs.

Under PMIERs, GMICO is subject to operational and financial requirements that approved insurers must meet in order to remain eligible to insure loans purchased by the GSEs.

Refer to “—Trends and Conditions” for recent updates related to these requirements.

Under PMIERs, EMICO is subject to operational and financial requirements that approved insurers must meet in order to remain eligible to insure loans purchased by the GSEs.

Our regulated insurance operating subsidiaries are also subject to statutory RTC requirements that affect the dividend strategies of our regulated operating subsidiaries.

GMICO’s domiciliary regulator, the NCDOI, requires the maintenance of a statutory RTC ratio not to exceed 25:1.

EMICO’s domiciliary regulator, the NCDOI, requires the maintenance of a statutory RTC ratio not to exceed 25:1.

See “—Risk-to-Capital Ratio” for additional RTC trend analysis.

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In addition, the dividend strategies of our regulated operating subsidiaries are made in consultation with our Parent.

EMICO completed distributions of approximately $242 million to EHI in both April and October of 2022 that supported our ability to pay cash dividends.

We intend to use future EMICO distributions to fund the quarterly dividend as well as to bolster our financial flexibility at EHI and return additional capital to shareholders.

The credit agreement entered into in connection with the Facility contains customary restrictions on EHI’s ability to pay cash dividends.

Under the credit agreement, EHI is permitted to make cash distributions (1) so long as no Default or Event of Default (as each are defined in the credit agreement) has occurred and is continuing and EHI is in pro forma compliance with its financial covenants as described below at the time of and after giving effect to such payment, (2) within 60 days of declaration of any cash dividend so long as the payment was permitted under the credit agreement at the time of such declaration and (3) other customary exceptions as more fully set forth in the credit agreement.

The credit agreement requires EHI to maintain the following financial covenants:

a minimum consolidated net worth equal to the sum of (i) 72.5% of EHI’s consolidated net worth as of June 30, 2022 (“the Closing Date”), (ii) 50% of EHI’s positive consolidated net income for each fiscal quarter after the Closing Date and (iii) 50% of any increase in EHI’s consolidated net worth after the Closing Date resulting from equity issuances or capital contributions;

in respect of EMICO, a minimum total adjusted capital amount equal to 72.5% of EMICO’s total adjusted capital as of the Closing Date;

a maximum debt-to-total capitalization ratio of 0.35 to 1.00;

a minimum liquidity level of $25,000,000;

and compliance with all applicable financial requirements under the Private Mortgage Insurer Eligibility Requirements published by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association.

purposes of determining EHI’s compliance with the foregoing financial covenants, the consolidated net worth metric, total adjusted capital metric, debt-to-capitalization ratio and liquidity metric (including, in each case, any component thereof) are each calculated as set forth in the credit agreement.

In addition to the restrictions described above, all dividends from EHI are subject to Parent consent and EHI Board of Directors approval.

Risk-to-Capital Ratio

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(Dollar amounts in millions)

December 31, 2022 December 31, 2021 December 31, 2020

Statutory policyholders’ surplus $ 1,136 $ 1,397 $ 1,555

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In accordance with NCDOI requirements, adjusted RIF excludes delinquent policies.

The following table presents the calculation of our RTC ratio for our principal insurance company, GMICO, as of the dates indicated:

The following table presents the calculation of our RTC ratio for our principal insurance company, EMICO, as of the dates indicated:

(Dollar amounts in millions)

December 31, 2022 December 31, 2021 December 31, 2020

Statutory policyholders’ surplus $ 1,084 $ 1,346 $ 1,475

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$ 59,663 $ 54,033 $ 49,021

GMICO risk-to-capital ratio 12.3 12.3 12.5

EMICO risk-to-capital ratio 12.9 12.3 12.3

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(1) Adjusted RIF for purposes of calculating GMICO statutory RTC differs from RIF presented elsewhere herein.

(1) Adjusted RIF for purposes of calculating EMICO statutory RTC differs from RIF presented elsewhere herein.

In accordance with NCDOI requirements, adjusted RIF excludes delinquent policies.

As of December 31, 2021, we maintained liquidity in the form of cash and cash equivalents of $426 million compared to $453 million as of December 31, 2020, and we also held significant levels of investment-grade fixed maturity securities that can be monetized should our cash and cash equivalents be insufficient to meet our obligations.

As of December 31, 2022, we maintained liquidity in the form of cash and cash equivalents of $514 million compared to $426 million as of December 31, 2021, and we also held significant levels of

investment-grade fixed maturity securities that can be monetized should our cash and cash equivalents be insufficient to meet our obligations.

On August 21, 2020, we issued the 2025 Senior Notes.

The GSE Restrictions require us to retain $300 million of the net proceeds in our holding company cash that can be drawn down exclusively for our debt service or to contribute to GMICO to meet its regulatory capital needs including PMIERs, until the GSE Conditions are satisfied.

The GSE Restrictions require us to retain $300 million of the net proceeds in our holding company cash that can be drawn down exclusively for our debt service or to contribute to EMICO to meet its regulatory capital needs including PMIERs, until the GSE Conditions are satisfied.

We distributed $437 million of the net proceeds to Genworth Holdings at the closing of the offering of our 2025 Senior Notes.

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persons outside of the United States in compliance with Regulation S under the Securities Act.

The current balance of the 2025 Senior Notes proceeds required to be held by our holding company is approximately $252 million.

As of December 31, 2022, the balance of the 2025 Senior Notes proceeds required to be held by our holding company was approximately $203 million.

Additionally, on June 30, 2022, we entered into a five-year, unsecured revolving credit facility with a syndicate of lenders in the initial aggregate principal amount of $200 million.

The Facility may be used for working capital needs and general corporate purposes, including the execution of dividends to our shareholders and capital contributions to our insurance subsidiaries.

The Facility remains undrawn as of December 31, 2022.

The principal sources of liquidity in our business currently include insurance premiums, net investment income and cash flows from investment sales and maturities.

We believe that the operating cash flows generated by our mortgage insurance subsidiary will provide the funds necessary to satisfy our claim payments, operating expenses and taxes.

We believe that the operating cash flows generated by our mortgage insurance subsidiary will provide the funds necessary to satisfy our claim payments, operating expenses and taxes in both the short-term and long-term.

However, our subsidiaries are subject to regulatory and other capital restrictions with respect to the payment of dividends.

The net proceeds of the 2025 Senior Notes offering retained by EHI comprise substantially all of the cash and cash equivalents held directly by EHI and initially available to pay interest on the 2025 Senior Notes.

To the extent the net proceeds retained from the offering is used to provide capital support to GMICO, the GSEs and the NCDOI may seek to prevent GMICO from returning that capital to EHI in the form of a dividend, distribution or an intercompany loan.

We currently have no material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years, other than the 2025 Senior Notes.

To the extent the net proceeds retained from the offering is used to provide capital support to EMICO, the GSEs and the NCDOI may seek to prevent EMICO from returning that capital to EHI in the form of a dividend, distribution or an intercompany loan.

We currently have no material financing commitments, such as drawn lines of credit or guarantees, that are expected to affect our liquidity over the next five years, other than the 2025 Senior Notes.

Financial Strength Ratings

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The financial strength ratings of our operating companies are not designed to be, and do not serve as, measures of protection or valuation offered to our stockholders.

ratings of our holding company as a result of the impact of the COVID-19 pandemic or otherwise.

We cannot predict with any certainty the impact to us from any future disruptions in the credit markets or downgrades by one or more of the rating agencies of the financial strength ratings of our insurance company subsidiaries and/or the credit ratings of our holding company as a result of the impact of the COVID-19 pandemic, the ensuing economic uncertainty or otherwise.

We also cannot predict the impact on our ratings or future ratings of actions taken with respect to our Parent.

The following GMICO financial strength ratings have been independently assigned by third-party rating organizations and represent our current ratings, which are subject to change.

The following EMICO financial strength ratings have been independently assigned by third-party rating organizations and represent our current ratings, which are subject to change.

Name of Agency Rating Outlook Change Date of Rating

Moody’s Investor Service, Inc.

Baa2 Stable Upgrade September 24, 2021

Baa1 Stable Upgrade July 21, 2022

Fitch Ratings, Inc.

BBB+ Stable Upgrade September 17, 2021

Standard & Poor’s Financial Services, LLC BBB Positive Upgrade September 24, 2021

BBB+ Stable Affirmed April 27, 2022

S&P Global Ratings BBB+ Stable Upgrade February 16, 2023

Contractual Obligations and Commitments

We enter into agreements and other relationships with third parties in the ordinary course of our operations.

However, we do not believe that our cash flow requirements can be assessed based upon this analysis of these obligations, as the funding of these future cash obligations will be from future cash flows from premiums and investment income that are not reflected in the following table.

Future cash outflows, whether they are contractual obligations or not, also will vary based upon our future needs.

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Refer to Note 7 and Note 12 of our audited consolidated financial statements for discussion of borrowings and commitments in contingencies, respectively.

We experienced an increase in loss reserves during the year ended December 31, 2021, driven mostly by new delinquencies from borrower forbearance programs due to COVID-19.

We expect a large portion of these delinquencies to cure before becoming an active claim;

however, reserves recorded related to borrower forbearance have a high degree of estimation.

Therefore, it is possible we could have higher contractual obligations related to these loss reserves if they do not cure as we expect.

We continue to hold reserves as of December 31, 2022, related to delinquencies from borrower forbearance programs due to COVID-19.

We have seen COVID-19-related delinquencies cure above expectations, but reserves recorded related to borrower forbearance have a high degree of estimation.

Therefore, it is possible we could have higher contractual obligations related to these loss reserves if they do not perform as we expect.

Refer to Note 5 in our audited consolidated financial statements for discussion of our loss reserves.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis