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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2021-11-03 · 249 added, 421 removed, 548 unchanged (55% of the section changed)

3 unchanged sentences

Our results of operations for interim periods are not necessarily indicative of results to be expected for a full fiscal year or for any other period.

We provide private MI through our wholly-owned insurance subsidiaries NMIC and Re One.

NMIC and Re One are domiciled in Wisconsin and principally regulated by the Wisconsin OCI.

NMIC is our primary insurance subsidiary and is approved as an MI provider by the GSEs and is licensed to write coverage in all 50 states and D.C.

Re One provides reinsurance to NMIC on insured loans after giving effect to third-party reinsurance.

Our subsidiary, NMIS, provides outsourced loan review services to mortgage loan originators.

We provide private MI through our primary insurance subsidiary, NMIC.

NMIC is a wholly-owned, domiciled in Wisconsin and principally regulated by the Wisconsin OCI.

NMIC is approved as an MI provider by the GSEs and is licensed to write coverage in all 50 states and D.C.

Our subsidiary, NMIS, provides outsourced loan review services to mortgage loan originators and our subsidiary, Re One, historically provided reinsurance coverage to NMIC in accordance with certain statutory risk retention requirements.

Such requirements have been repealed and the reinsurance coverage provided by Re One to NMIC has been commuted.

Re One remains a wholly-owned, licensed insurance subsidiary;

however, it does not currently have active insurance exposures.

MI protects lenders and investors from default-related losses on a portion of the unpaid principal balance of a covered mortgage.

MI plays a critical role in the U.S.

housing market by mitigating mortgage credit risk and facilitating the secondary market sale of high-LTV ( i.e., above 80%) residential loans to the GSEs, who are otherwise restricted by their charters from purchasing or guaranteeing high-LTV mortgages that are not covered by certain credit protections.

housing market by mitigating mortgage credit risk and facilitating the secondary market sale of high-loan-to-value (LTV) ( i.e., above 80%) residential loans to the GSEs, who are otherwise restricted by their charters from purchasing or guaranteeing high-LTV mortgages that are not covered by certain credit protections.

Such credit protection and secondary market sales allow lenders to increase their capacity for mortgage commitments and expand financing access to existing and prospective homeowners.

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Since formation, we have sought to establish customer relationships with a broad group of mortgage lenders and build a diversified, high-quality insured portfolio.

As of September 30, 2021, we had master policies with 1,699 customers, including national and regional mortgage banks, money center banks, credit unions, community banks, builder-owned mortgage lenders, internet-sourced lenders and other non-bank lenders.

As of September 30, 2021, we had $143.6 billion of primary insurance-in-force (IIF) and $36.3 billion of primary RIF.

We believe that our success in acquiring a large and diverse group of lender customers and growing a portfolio of high-quality IIF traces to our founding principles, whereby we aim to help qualified individuals achieve their homeownership goals, ensure that we remain a strong and credible counter-party, deliver a unique customer service experience, establish a differentiated risk management approach that emphasizes the individual underwriting review or validation of the vast majority of the loans we insure, utilizing our proprietary Rate GPS ® pricing platform to dynamically evaluate risk and price our policies, and foster a culture of collaboration and excellence that helps us attract and retain experienced industry leaders.

As of March 31, 2022, we had issued master policies with 1,776 customers, including national and regional mortgage banks, money center banks, credit unions, community banks, builder-owned mortgage lenders, internet-sourced lenders and other non-bank lenders.

As of March 31, 2022, we had $158.9 billion of primary insurance-in-force (IIF) and $40.5 billion of primary risk-in-force (RIF).

ensure that we remain a strong and credible counter-party, deliver a high-quality customer service experience, establish a differentiated risk management approach that emphasizes the individual underwriting review or validation of the vast majority of the loans we insure, utilizing our proprietary Rate GPS ® pricing platform to dynamically evaluate risk and price our policies, and foster a culture of collaboration and excellence that helps us attract and retain experienced industry leaders.

Our strategy is to continue to build on our position in the private MI market, expand our customer base and grow our insured portfolio of high-quality residential loans by focusing on long-term customer relationships, disciplined and proactive risk selection and pricing, fair and transparent claim payment practices, responsive customer service, and financial strength and profitability.

Our common stock trades on the Nasdaq under the symbol "NMIH." Our headquarters is located in Emeryville, California.

As of September 30, 2021, we had 241 employees.

As of March 31, 2022, we had 246 employees.

Our corporate website is located at www.nationalmi.com .

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COVID-19 Developments

On January 30, 2020, the WHO declared the outbreak of COVID-19 a global health emergency and subsequently characterized the outbreak as a global pandemic on March 11, 2020.

In an effort to stem contagion and control the COVID-19 pandemic, the population at large severely curtailed day-to-day activity and local, state and federal regulators imposed a broad set of restrictions on personal and business conduct nationwide.

On January 30, 2020, the World Health Organization (WHO) declared the outbreak of COVID-19 a global health emergency and subsequently characterized the outbreak as a global pandemic on March 11, 2020.

In an effort to stem contagion and control the spread of the virus, the population at large severely curtailed day-to-day activity and local, state and federal regulators imposed a broad set of restrictions on personal and business conduct nationwide.

The COVID-19 pandemic, along with the widespread public and regulatory response, caused a dramatic slowdown in U.S.

and global economic activity and a record number of Americans were furloughed or laid-off in the ensuing downturn.

The global dislocation caused by COVID-19 was unprecedented.

In response to the COVID-19 outbreak and uncertainty that it introduced, we activated our disaster continuity program to ensure our employees were safe and able to manage our business without interruption.

We pursued a broad series of capital and reinsurance transactions to bolster our balance sheet and expand our ability to serve our customers and their borrowers, and we updated our underwriting guidelines and policy pricing in consideration of the increased level of macroeconomic volatility.

housing market demonstrated notable resiliency in the face of COVID stress, with significant purchase demand, record levels of mortgage origination activity and nationwide house price appreciation emerging shortly after the onset of the

More recently, the broad resumption of personal and business activity nationwide has prompted a sharp economic rebound and provided hope for a sustainable economic recovery.

While there is increased optimism that the acute economic impact of COVID-19 has begun to recede, the pandemic continues to affect communities across the U.S.

and poses significant risk globally.

The path and pace of global economic recovery will depend, in large part, on the course of the virus, which itself remains unknown and subject to risk.

Given this uncertainty, we are not able to fully assess or estimate the ultimate impact COVID-19 will have on the mortgage insurance market, our business performance or our financial position including our new business production, default and claims experience, and investment portfolio results at this time.

Potential Impact on the U.S.

Housing Market and Mortgage Insurance Industry

housing market demonstrated significant resiliency amidst the broader economic dislocation caused by the outbreak of COVID-19.

Low interest rates helped to support housing affordability, medical concerns and lifestyle preferences drove people to move from densely populated urban areas to suburban communities where social distancing was more easily achieved, and shelter-in-place directives reinforced the value of homeownership – all of which contributed to an influx of new home buyers, record levels of purchase demand, and nationwide house price appreciation.

While the possibility remains that the housing market will soften, we believe the general strength of the market coming into the COVID-19 crisis and demonstrated resiliency thus far through the pandemic will help to mitigate the risk of a severe pullback.

We observe several favorable differences in the current environment compared to the period leading up to and through the 2008 Financial Crisis – the last period of significant economic volatility in the U.S.

and one noted for its significant housing market dislocation.

Such differences include:

(i) the generally higher quality borrower base (as measured by weighted average FICO scores and LTV ratios) and tighter underwriting standards (with, among other items, full-documentation required to verify borrower income and asset positions) that prevail in the current market;

(ii) the lower concentration of higher risk loan structures, such as negative amortizing, interest-only or short-termed option adjustable-rate mortgages being originated and outstanding in the current market;

(iii) the meaningfully higher proportion of loans used for lower risk purposes, such as the purchase of a primary residence or rate-term refinancing in the current market, as opposed to cash-out refinancings, investment properties or second home purchases, which prevailed to a far greater degree in the lead up to the 2008 Financial Crisis;

(iv) the availability and immediate application by the government, regulators, lenders, loan servicers and others of a broad toolkit of resources designed to aid distressed borrowers, including forbearance, foreclosure moratoriums and other assistance programs codified under the CARES Act enacted on March 27, 2020;

(v) the broader and equally immediate application of significant fiscal and monetary stimulus by the federal government under the CARES Act, and subsequently under the Consolidated Appropriations Act enacted on December 27, 2020 (the CAA) and the American Rescue Plan Act enacted on March 11, 2021 (the American Rescue Plan), as well as across a range of other programs designed to assist unemployed individuals and distressed businesses, and support the smooth functioning of various capital and risk markets.

We also perceive the house price environment in the period leading up to the COVID crisis to be anchored by more balanced market fundamentals than that in the period leading up to the 2008 Financial Crisis.

We believe the 2008 Financial Crisis was directly precipitated by irresponsible behavior in the housing market that drove home prices to unsustainable heights (a so-called "bubble").

We see a causal link between the housing market and the 2008 Financial Crisis that we do not see in the COVID-19 outbreak, and we believe this will further contribute to housing market stability in the current period.

Purchase mortgage origination volume increased significantly as factors related to the COVID-19 crisis have spurred significant incremental demand for homeownership.

Refinancing origination volume also grew dramatically as historically low mortgage rates created refinancing opportunities for a large number of existing borrowers.

Growth in total mortgage origination volume increases the addressable market for the U.S.

mortgage insurance industry, while accelerated refinancing activity increases prepayment speed on outstanding insured mortgages.

In this context, total U.S.

mortgage insurance industry new insurance written (NIW) volume increased to record levels following the onset of the COVID pandemic and the persistency of existing in-force insured risk across the industry declined meaningfully.

While we currently observe broad resiliency in the housing and high-LTV mortgage markets and, for the reasons discussed above, expect this trend to continue in the near term, the ultimate impact of COVID-19 remains highly uncertain.

See Item 1A of our 2020 10K , "Risk Factors - The COVID-19 outbreak may continue to materially adversely affect our business, results of operations and financial condition ."

Potential Impact on NMI's Business Performance and Financial Position

We had 241 e mployees at September 30, 2021, including 81 who typically work at our corporate headquarters in Emeryville, CA and 160 who typically work from home in locations across the country.

In response to the COVID-19 outbreak, we activated our business continuity program and instituted additional work-from-home practices for our Emeryville-based staff.

We transitioned our operations seamlessly and have continued to positively engage with customers on a remote basis.

Our IT environment, underwriting capabilities, policy servicing platform and risk architecture have continued without interruption, and our internal control environment is unchanged.

We achieved this transition without incurring additional capital expenditures or operating expenses, and we believe our current operating platform can continue to support our newly distributed needs for an extended period without further investment beyond that planned in the ordinary course.

While the broad COVID vaccination effort and relaxation of local restrictions on indoor business operation may allow for a general resumption of in-office activity for our headquarters-based employees, the success of our remote work experience through the pandemic has caused us to offer increased flexibility for employees who prefer a full-time or part-time distributed engagement.

If we continue to offer such flexibility and a large enough number of employees elect such an approach, our office and real estate needs could evolve.

New Business Production

Our NIW volume increased significantly following the onset of the COVID-19 pandemic driven by the broad resiliency of the housing market, growth in total mortgage origination volume and increasing size of the U.S.

mortgage insurance market, as well as the continued expansion of our customer franchise.

We wrote $67.2 billion of NIW during the nine months ended September 30, 2021, up 57% compared to the nine months ended September 30, 2020, which itself was up 29% compared to the nine months ended September 30, 2019.

While we currently expect our new business production will remain elevated, the potential onset of a new viral wave could prompt a reintroduction of broad-based shelter in place directives, increased unemployment or other potentially negative economic and societal outcomes that could cause a moderation or decline in our volume going forward.

Further, increasing interest rates and rising house prices, which each trace (in part) to the pandemic, may cause certain prospective homebuyers to defer their purchases and impact mortgage origination activity, total private mortgage insurance industry production and our NIW volume in future periods.

We have broadly defined underwriting standards and loan-level eligibility criteria that are designed to limit our exposure to higher risk loans, and have used Rate GPS to actively shape the mix of our new business production and insured portfolio by, among other risk factors, borrower FICO score, debt-to-income (DTI) ratio and LTV ratio.

In the weeks following the outbreak of COVID-19, we adopted changes to our underwriting guidelines, including changes to our loan documentation requirements, asset reserve requirements, employment verification process and income continuance determinations, that further strengthened the credit risk profile of our NIW volume and IIF.

At September 30, 2021, the weighted average FICO score of our RIF was 754 and we had a 3% mix of below 680 FICO score risk.

Similarly, at September 30, 2021, the weighted average LTV ratio (at origination) of our insured portfolio was 92.4% and we had a 11% mix of 97% LTV risk.

Delinquency Trends and Claims Expense

At September 30, 2021 we had 7,670 defaulted loans in our primary insured portfolio, which represented a 1.56% default rate against our 490,714 total policies in-force, and identified 9,342 loans that were enrolled in a forbearance program, including 6,566 of those in default status.

Our default population increased significantly following the outbreak of the pandemic as borrowers faced increased challenges related to COVID-19 and chose to access the forbearance program for federally backed loans codified under the CARES Act or other similar assistance programs made available by private lenders.

After this significant initial spike our default experience has steadily improved as an increasing number of impacted borrowers have cured their delinquencies, and fewer new defaults have emerged.

Our total population of defaulted loans peaked in August 2020 and has declined every month since with consistency.

As of October 31, 2021, our default population was 6,988, representing a 1.40% default rate.

The table below highlights default and forbearance activity in our primary portfolio as of the dates indicated

Default and Forbearance Activity as of

9/30/2020 12/31/2020 3/31/21 6/30/21 9/30/21

Number of loans in default 13,765 12,209 11,090 8,764 7,670

Default rate (1)

3.60% 3.06% 2.54% 1.86% 1.56%

Number of loans in forbearance 24,809 19,464 14,805 11,889 9,342

Forbearance rate (2)

6.50% 4.87% 3.39% 2.52% 1.90%

(1) Default rate is calculated as the number of loans in default divided by total polices in force.

(2) Forbearance rate is calculated as the number of loans in forbearance divided by total polices in force.

While we are encouraged by the decline in our forbearance and default populations and optimistic that we will see continued improvement as the economic stress of the COVID crisis recedes, future viral waves could cause further social and economic dislocation and contribute to an increase in our forbearance and default counts in future periods.

We establish reserves for claims and allocated claim expenses when we are notified that a borrower is in default.

The size of the reserve we establish for each defaulted loan (and by extension our aggregate reserve and claims expense) reflects our best estimate of the future claim payment to be made under each individual policy.

Our future claims exposure is a function of the number of delinquent loans that progress to claim payment (which we refer to as frequency) and the amount to be paid to settle such claims (which we refer to as severity).

Our estimates of claims frequency and severity are not formulaic, rather they are broadly synthesized based on historical observed experience for similarly situated loans and assumptions about future macroeconomic fact ors.

We generally observe that forbearance programs are an effective tool to bridge dislocated borrowers from a time of acute stress to a future date when they can resume timely payment of their mortgage obligations.

The effectiveness of forbearance programs is enhanced by the availability of various repayment and loan modification options, which allow borrowers to amortize, or in certain instances fully defer the payments otherwise due during the forbearance period, over an extended length of time.

In response to the onset of the COVID-19 outbreak, the GSEs introduced new repayment and loan modification options to further assist borrowers with their transition out of forbearance and back into performing status.

Our reserve setting process considers the beneficial impact of forbearance, foreclosure moratorium and other assistance programs available to defaulted borrowers.

At September 30, 2021, we generally established lower reserves for defaults that we consider to be connected to the COVID-19 outbreak, given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs.

Our Master Policies require insureds to file a claim no later than 60-days after completion of a foreclosure, and in connection with the claim, the insured is generally entitled to include in the claim amount (i) up to three years of missed interest payments and (ii) certain advances, each as incurred through the date the claim is filed.

Under our Master Policies, a national foreclosure moratorium of the type enacted following the onset of the COVID-19 pandemic will not limit the amount of accrued interest (subject to the three-year limit) or advances that may be included in the claim amoun t.

Given the duration of the foreclosure moratorium mandated by the GSEs, certain loans in our default inventory, including those with defaults unrelated to the COVID-19 crisis that had not gone through foreclosure at the onset of the pandemic, have remained in pre-foreclosure default status for a prolonged period of time.

For those loans that do not ultimately cure, the delayed foreclosure cycle and resulting delay in claims submission may increase the severity of claims we ultimately pay.

Regulatory Capital Position

As an approved mortgage insurer and Wisconsin-domiciled carrier, we are required to satisfy financial and/or capitalization requirements stipulated by each of the GSEs and the Wisconsin OCI.

The financial requirements stipulated by the GSEs are outlined in the PMIERs.

Under the PMIERs, we must maintain available assets that are equal to or exceed a minimum risk-based required asset amount, subject to a minimum floor of $400

At September 30, 2021, we reported $1,993 million available assets against $1,366 million risk-based required assets.

Our “excess” funding position was $627 million.

The risk-based required asset amount under PMIERs is determined at an individual policy-level based on the risk characteristics of each insured loan.

Loans with higher risk factors, such as higher LTVs or lower borrower FICO scores, are assessed a higher charge.

Non-performing loans that have missed two or more payments are generally assessed a significantly higher charge than performing loans, regardless of the underlying borrower or loan risk profile;

however, special consideration is given under PMIERs to loans that are delinquent on homes located in an area declared by the Federal Emergency Management Agency (FEMA) to be a Major Disaster zone eligible for Individual Assistance.

In June 2020, the GSEs issued guidance (subsequently amended and restated in each of September 2020, December 2020 and June 2021) on the risk-based treatment of loans affected by the COVID-19 crisis and the reporting of non-performing loans by aging category.

Under the guidance, non-performing loans that are subject to a forbearance program granted in response to a financial hardship related to COVID-19 will benefit from a permanent 70% risk-based required asset haircut for the duration of the forbearance period and subsequent repayment plan or trial modification period.

Our PMIERs minimum risk-based required asset amount is also adjusted for our reinsurance transactions (as approved by the GSEs).

Under our quota share reinsurance treaties, we receive credit for the PMIERs risk-based required asset amount on ceded RIF.

As our gross PMIERs risk-based required asset amount on ceded RIF increases, our PMIERS credit for ceded RIF automatically increases as well (in an unlimited amount).

Under our ILN transactions, we generally receive credit for the PMIERs risk-based required asset amount on ceded RIF to the extent such requirement is within the subordinated coverage (excess of loss detachment threshold) afforded by the transaction.

We have structured our ILN transactions to be overcollateralized, such that there are more ILN notes outstanding and cash held in trust than we currently receive credit for under the PMIERs.

To the extent our PMIERs risk-based required asset amount on RIF ceded under the ILN transactions grows, we receive increased PMIERs credit under the treaties.

The increasing PMIERs credit we receive under the ILN treaties is further enhanced by their lockout triggers.

In the event of certain credit enhancement or delinquency events, the ILN notes stop amortizing and the cash held in trust is secured for our benefit (a Lock-Out Event).

As the underlying RIF continues to run-off, this has the effect of increasing the overcollateralization within, and excess PMIERs capacity provided by, each ILN structure.

A Lock-Out Event was deemed to have occurred, effective June 25, 2020 for each of the 2017, 2018 and 2019 ILN Transactions (related to the default experience of the underlying reference pools for each respective transaction) and at inception for the 2021-1 ILN Transaction (related to the initial build of its target credit enhancement), and the amortization of reinsurance coverage, and distribution of collateral assets and amortization of insurance-linked notes was suspended for each such ILN Transaction.

The amortization of reinsurance coverage, distribution of collateral assets and amortization of insurance-linked notes will remain suspended for the duration of the Lock-Out Event for each such ILN Transaction, and during such period the overcollateralization within and potential PMIERs capacity provided by each such ILN Transaction will grow as assets are preserved in the applicable reinsurance trust account.

At September 30, 2021, we had an aggregate $537 million of overcollateralization available across our ILN Transactions to absorb an increase in the PMIERs risk-based required asset amount on ceded RIF.

The following table provides detail on the level of overcollateralization of each of our ILN Transactions at September 30, 2021:

($ values in thousands) 2017 ILN Transaction 2018 ILN Transaction 2019 ILN Transaction 2020-1 ILN Transaction 2020-2 ILN Transaction 2021-1 ILN Transaction

Ceded RIF $ 1,227,763 $ 1,333,991 $ 1,533,960 $ 3,128,472 $ 4,689,578 $ 8,334,990

First Layer Retained Loss 121,196 122,750 122,697 169,488 121,177 163,708

Reinsurance Coverage 40,226 158,489 231,877 84,470 177,566 367,238

Eligible Coverage $ 161,422 $ 281,239 $ 354,574 $ 253,958 $ 298,743 $ 530,946

Subordinated Coverage (1)

13.15% 21.08% 23.11% 8.00% 6.25% 6.37%

PMIERs Charge on Ceded RIF 6.47% 8.41% 8.25% 6.50% 5.63% 6.07%

Overcollateralization (2) (4)

$ 40,226 $ 158,489 $ 227,965 $ 50,704 $ 34,887 $ 25,038

Delinquency Trigger (3)

4.0% 4.0% 4.0% 6.0% 4.7% 4.8%

(1) Absent a delinquency trigger, the subordinated coverage is capped at 8.00%, 6.25% and 6.75% for the 2020-1, 2020-2 and 2021-1 ILN Transactions,

respectively.

(2) Overcollateralization for each of the 2017 and 2018 ILN Transactions is equal to their current reinsurance coverage as the PMIERs required asset amount on RIF ceded under each transaction is currently below its remaining first layer retained loss.

(3) Delinquency triggers for 2017, 2018, and 2019 ILN Transactions are set at a fixed 4.0% and assessed on a discrete monthly basis;

delinquency triggers for the 2020-1, 2020-2 and 2021-1 ILN Transactions are equal to seventy-five percent of the subordinated coverage level and assessed on the basis of a three-month rolling average.

(4) May not be replicated based on the rounded figures presented in the table.

Our PMIERs funding requirement will go up in future periods based on the volume and risk profile of our new business production, and performance of our in-force insurance portfolio.

We estimate, however, that we will remain in compliance with our PMIERs asset requirements even if the forbearance-driven default rate on our in-force portfolio materially exceeds its current level, given our $627 million excess available asset position at September 30, 2021, the nationwide applicability of the 70% haircut on delinquent policies subject to a forbearance program accessed in response to a financial hardship related to the COVID-19 crisis, and the increasing PMIERs relief automatically provided under each of our quota share treaties and ILN Transactions.

NMIC is also subject to state regulatory minimum capital requirements based on its RIF.

Formulations of this minimum capital vary by state, however, the most common measure allows for a maximum ratio of RIF to statutory capital (commonly referred to as RTC) of 25:1.

The RTC calculation does not assess a different charge or impose a different threshold RTC limit based on the underlying risk characteristics of the insured portfolio.

Non-performing loans are generally treated the same as performing loans under the RTC framework.

As such, the PMIERs generally imposes a stricter financial requirement than the state RTC standard, and we expect this to remain the case through the duration of and following the COVID-19 pandemic.

We evaluate our liquidity position at both a holding company (NMIH) and primary operating subsidiary (NMIC) level.

As of September 30, 2021, we had $2.2 billion of consolidated cash and investments, including $79 million of cash and investments at NMIH.

On June 8, 2020, NMIH completed the sale of 15.9 million shares of common stock, including the exercise of a 15% overallotment option, and raised proceeds of approximately $220 million, net of underwriting discounts, commissions and other direct offering expenses.

On June 19, 2020, NMIH also completed the sale of its $400 million aggregate principal amount of senior secured notes, raising net proceeds of $244 million after giving effect to offering expenses and the repayment of the $150 million principal amount outstanding under our 2018 Term Loan.

NMIH contributed approximately $445 million of capital to NMIC following completion of its respective Notes and common stock offerings.

NMIH also has access to $110 million of undrawn revolving credit capacity (through the 2020 Revolving Credit Facility) and $1.6 million of ordinary course dividend capacity available from Re One without the prior approval of the Wisconsin OCI.

Amounts drawn under the 2020 Revolving Credit Facility are available as directed for NMIH needs or may be down-streamed to support the requirements of our operating subsidiaries if we so decide.

Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4, Debt.

NMIH's principal liquidity demands include funds for the payment of (i) certain corporate expenses, (ii) certain reimbursable expenses of our insurance subsidiaries, including NMIC, and (iii) principal and interest as due on our outstanding debt.

NMIH generates cash interest income on its investment portfolio, receives cash proceeds upon the exercise of outstanding stock options, and benefits from tax, expense-sharing and debt service agreements with its subsidiaries.

Such agreements have been approved by the Wisconsin OCI and provide for the reimbursement of substantially all of NMIH's annual cash expenditures.

While such agreements are subject to revocation by the Wisconsin OCI, we do not expect such action to be taken at this time.

The Wisconsin OCI refreshed its approval of the debt service agreement and provided for the additional reimbursement by NMIC of interest expense due on our Notes and 2020 Revolving Credit Facility at the time each transaction was completed.

NMIC's principal sources of liquidity include (i) premium receipts on its insured portfolio and new business production, (ii) interest income on its investment portfolio and principal repayments on maturities therein, and (iii) existing cash and cash equivalent holdings.

At September 30, 2021, NMIC had $2.0 billion of cash and investments, including $81 million of cash and equivalents.

NMIC's principal liquidity demands include funds for the payment of (i) reimbursable holding company expenses, (ii) premiums ceded under our reinsurance transactions (iii) claims payments, and (iv) taxes as due or otherwise deferred through the purchase of tax and loss bonds.

NMIC's cash inflow is generally significantly in excess of its cash outflow in any given period.

During the twelve-month period ended September 30, 2021, NMIC generated $316 million of cash flow from operations and received an additional $140 million of cash flow from the maturity, sale and redemption of securities held in its investment portfolio.

NMIC is not a party to any contracts (derivative or otherwise) that require it to post an increasing amount of collateral to any counterparty and NMIC's principal liquidity demands (other than claims payments) generally develop along a scheduled path ( i.e.

, are of a contractually predetermined amount and due at a contractually predetermined date).

NMIC's only use of cash that

develops along an unscheduled path is claims payments.

Given the breadth and duration of forbearance programs available to borrowers, separate foreclosure moratoriums that have been enacted at a local, state and federal level, and the general duration of the default to foreclosure to claim cycle, we do not expect NMIC to use a meaningful amount of cash to settle claims in the near-term.

Premiums paid to NMIC on monthly policies are generally collected and remitted by loan servicers.

There was broad discussion at the onset of the COVID pandemic and concerns about potential liquidity challenges that servicers might face in the event of widespread borrower utilization of forbearance programs.

These concerns have not materialized thus far and we do not believe that loan servicer liquidity constraints, should they arise in the future, would have a material impact on NMIC's premium receipts or liquidity profile.

Loan servicers are contractually obligated to advance mortgage insurance premiums in a timely manner, even if the underlying borrowers fail to remit their monthly mortgage payments.

In June 2020, the GSEs issued guidance to the PMIERs (subsequently amended and restated in each of September 2020, December 2020 and June 2021) that, among other items, requires us to notify them of our intent to cancel coverage on policies for which servicers have failed to make timely premium payments so that the GSEs can pay the premiums directly to us and preserve the mortgage insurance coverage.

Through September 30, 2021, we did not see any notable changes in servicer payment practices, with servicers generally continuing to remit monthly premium payments as scheduled, including those for policies covering loans that are in a forbearance program.

Investment portfolio

At September 30, 2021, we had $2.2 billion of cash and invested assets.

Our investment strategy equally prioritizes capital preservation alongside income generation, and we have a long-established investment policy that sets conservative limits for asset types, industry sectors, single issuers and instrument credit ratings.

At September 30, 2021, our investment portfolio was comprised of 100% fixed income assets with 100% of our holdings rated investment grade and our portfolio having an average rating of "A+." At September 30, 2021, our portfolio was in a $30 million aggregate unrealized gain position;

it was highly liquid and highly diversified with no Level 3 asset positions and no single issuer concentration greater than 1.4%.

We did not record any allowance for credit losses in the portfolio during the three months ended September 30, 2021, as we expect to recover the amortized cost basis of all securities held.

The pre-tax book yield on our investment portfolio was 2.0% for the three months ended September 30, 2021.

At the onset of the COVID-19 crisis, we decided to prioritize liquidity and increased our cash and equivalent holdings as a percentage of our total portfolio.

We believe such action was prudent in light of the heightened market volatility and general uncertainty developing in the early stages of the COVID-19 pandemic.

We have since redeployed much of our excess liquidity position.

The CARES Act, CAA and American Rescue Plan include, among other items, provisions relating to refundable payroll tax credits, deferment of social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, technical corrections to tax depreciation methods for qualified improvement property, and temporary 100% deduction for business meals.

We continue to monitor the impact that the CARES Act, CAA and American Rescue Plan may have on our business, financial condition and results of operations.

and global economic activity.

The global dislocation caused by COVID-19 was unprecedented and the pandemic had a direct impact on the U.S.

housing market, private mortgage insurance industry, and our business and operating performance for an extended period.

More recently, however, the acute economic impact of COVID-19 has begun to recede.

While the pandemic continues to pose a global risk and affect communities across the U.S., it is no longer the single dominant driver of our performance that it had been in earlier periods.

COVID-19 is now one of several mosaic factors, including a range of macroeconomic forces and public policy initiatives that are influencing our market and business.

Although we are optimistic that the nationwide COVID-19 vaccination effort and other medical advances will continue to support a normalization of personal and business activity, the path of the virus remains unknown and subject to risk.

Given this uncertainty, we are not able to fully assess or estimate the impact the pandemic may have on the mortgage insurance market, our business performance or our financial position at this time, and it remains possible COVID-19 could again trigger more severe and adverse outcomes in future periods.

New Insurance Written, Insurance-In-Force and Risk-In-Force

10 unchanged sentences

Net Premiums Written and Net Premiums Earned

We set our premium rates on individual policies based on the risk characteristics of the underlying mortgage loans and

borrowers, and in accordance with our filed rates and applicable rating rules.

We set our premium rates on individual policies based on the risk characteristics of the underlying mortgage loans and borrowers, and in accordance with our filed rates and applicable rating rules.

On June 4, 2018, we introduced a proprietary risk-based pricing platform, which we refer to as Rate GPS.

Rate GPS considers a broad range of individual variables, including property type, type of loan product, borrower credit characteristics, and lender and market factors, and provides us with the ability to set and charge premium rates commensurate with the underlying risk of each loan that we insure.

to set and charge premium rates commensurate with the underlying risk of each loan that we insure.

We introduced Rate GPS in June 2018 to replace our previous rate card pricing system.

10 unchanged sentences

For single premiums, we receive a single premium payment at origination, which is earned over the estimated life of the policy.

Substantially all of our single premium policies in force as of September 30, 2021 were non-refundable under most cancellation scenarios.

Substantially all of our single premium policies in force as of March 31, 2022 were non-refundable under most cancellation scenarios.

If non-refundable single premium policies are canceled, we immediately recognize the remaining unearned premium balances as earned premium revenue.

19 unchanged sentences

Quota share reinsurance

NMIC is a party to quota share reinsurance treaties – the 2016 QSR Transaction, effective September 1, 2016, the 2018 QSR Transaction, effective January 1, 2018, the 2020 QSR Transaction, effective April 1, 2020, the 2021 QSR Transaction, effective January 1, 2021, the 2022 QSR Transaction, effective October 1, 2021, and the 2023 QSR Transaction, effective January 1, 2023.

NMIC is a party to five active quota share reinsurance treaties – the 2016 QSR Transaction, effective September 1, 2016, the 2018 QSR Transaction, effective January 1, 2018, the 2020 QSR Transaction, effective April 1, 2020, the 2021 QSR Transaction, effective January 1, 2021, and the 2022 QSR Transaction, effective October 1, 2021 – which we refer to collectively as the QSR Transactions.

Under each of the QSR Transactions, NMIC cedes a proportional share of its risk on eligible policies written during a discrete period to panels of third-party reinsurance providers.

Each of the third-party reinsurance providers has an insurer financial strength rating of A- or better by S&P, A.M.

Each of the third-party reinsurance providers has an insurer financial strength rating of A- or better by Standard & Poor's Rating Service (S&P), A.M.

Best Company, Inc.

Best) or both.

2 unchanged sentences

Under the terms of the 2020 QSR Transaction, NMIC cedes premiums earned related to 21% of the risk on eligible policies written from April 1, 2020 through December 31, 2020, in exchange for reimbursement of ceded claims and claim expenses on covered po licies, a 20% ceding commission, and a profit commission of up to 50% that varies directly and inversely with ceded claims.

Under the terms of the 2021 QSR Transaction, NMIC cedes premiums earned related to 22.5% of the risk on eligible policies written in 2021 (subject to an aggregate risk written limit), in exchange for reimbursement of ceded claims and claim expenses on covered po licies, a 20% ceding commission, and a profit commission of up to 57.5% that varies directly and inversely with ceded claims.

Under the terms of the 2022 and 2023 QSR Transactions, NMIC will cede premiums earned related to 20% of the risk on eligible policies written between January 1, 2022 and December 31, 2023, in exchange for reimbursement of ceded claims and claims expenses on covered policies, a 20% ceding commission, and a profit commission of up to 62% that varies directly and inversely with ceded claims.

If NMIC exhausts the aggregate risk written limit of the 2021 QSR Transaction prior to December 31, 2021, the 2022 QSR Transaction will automatically incept and NMIC will begin to cede risk on eligible policies under the treaty prior to January 1, 2022.

Under the terms of the 2021 QSR Transaction, NMIC cedes premiums earned related to 22.5% of the risk on eligible policies written in 2021 (subject to an aggregate risk written limit which was exhausted on October 30, 2021), in exchange for reimbursement of ceded claims and claim expenses on covered policies, a 20% ceding commission, and a profit commission of up to 57.5% that varies directly and inversely with ceded claims.

Under the terms of the 2022 QSR Transaction, NMIC cedes premiums earned related to 20% of the risk on eligible policies written between October 30, 2021 and December 31, 2022, in exchange for reimbursement of ceded claims and claims expenses on covered policies, a 20% ceding commission, and a profit commission of up to 62% that varies directly and inversely with ceded claims.

In connection with the 2022 QSR Transaction, NMIC entered into an additional back-to-back quota share agreement that is scheduled to incept on January 1, 2023 (the 2023 QSR Transaction).

Under the terms of the 2023 QSR Transactions, NMIC will cede premiums earned related to 20% of the risk on eligible policies written in 2023, in exchange for reimbursement of ceded claims and claim expenses on covered policies, a 20% ceding commission, and a profit commission of up to 62% that varies directly and inversely with ceded claims.

NMIC may elect to terminate its engagement with individual reinsurers on a run-off basis ( i.e., reinsurers continue providing coverage on all risk ceded prior to the termination date, with no new cessions going forward) or cut-off basis ( i.e., the reinsurance arrangement is completely terminated with NMIC recapturing all previously ceded risk) under certain circumstances.

8 unchanged sentences

NMIC then retains losses in excess of the respective reinsurance coverage amounts.

The respective reinsurance coverage amounts provided by the Oaktown Re Vehicles decrease from the inception of each agreement over a ten-year period as the underlying insured mortgages are amortized or repaid, and/or the mortgage insurance coverage is canceled.

As the reinsurance coverage decreases, a prescribed amount of collateral held in trust by the Oaktown Re Vehicles is distributed to ILN Transaction note-holders as amortization of the outstanding insurance-linked note principal

balances occurs.

The respective reinsurance coverage amounts provided by the Oaktown Re Vehicles decrease over a ten-year period as the underlying insured mortgages are amortized or repaid, and/or the mortgage insurance coverage is canceled (except the coverage provided by Oaktown Re VI Ltd.

and Oaktown Re VII Ltd., which decreases over a 12.5-year period).

The outstanding reinsurance coverage amounts stop amortizing, and the collateral distribution to ILN Transaction note-holders and amortization of insurance-linked note principal is suspended if certain credit enhancement or delinquency thresholds, as defined in each agreement, are triggered (each, a Lock-Out Event).

A Lock-Out Event was deemed to have occurred, effective June 25, 2020 for each of the 2017, 2018 and 2019 ILN Transactions (related to the default experience of the underlying reference pools for each respective transaction) and at inception of the 2021-1 ILN Transaction (related to the initial build of its target credit enhancement), and the amortization of reinsurance coverage, and distribution of collateral assets and amortization of insurance-linked notes was suspended for each ILN Transaction.

The amortization of reinsurance coverage, distribution of collateral assets and amortization of insurance-linked notes will remain suspended for the duration of the Lock-Out Event for each ILN Transaction, and during such period assets will be preserved in the applicable reinsurance trust account to collateralize the excess-of-loss reinsurance coverage provided to NMIC.

The following table presents the inception date, covered production p eriod, initial and current reinsurance coverage amount, and initial and current first layer retained aggregate loss under each of the ILN Transactions.

Current amounts are presented as of September 30, 2021.

( $ values in thousands)

Inception Date Covered Production Initial Reinsurance Coverage Current Reinsurance Coverage Initial First Layer Retained Loss Current First Layer Retained Loss (1)

2017 ILN Transaction May 2, 2017 1/1/2013 - 12/31/2016 $211,320 $40,226 $126,793 $121,196

2018 ILN Transaction July 25, 2018 1/1/2017 - 5/31/2018 264,545 158,489 125,312 122,750

2019 ILN Transaction July 30, 2019 6/1/2018 - 6/30/2019 326,905 231,877 123,424 122,697

2020-1 ILN Transaction July 30, 2020 7/1/2019 - 3/31/2020 322,076 84,470 169,514 169,488

2020-2 ILN Transaction October 29, 2020 4/1/2020 - 9/30/2020 (2)

As of March 31, 2022, the 2018 and 2019 ILN Transactions were deemed to be in Lock Out due to the default experience of the underlying reference pools for each respective transaction and the 2021-2 ILN Transaction was deemed to be in Lock Out in connection with the initial build of its target credit enhancement level.

As such, the amortization of reinsurance coverage, and distribution of collateral assets and amortization of insurance-linked notes was suspended for each ILN Transaction.

The amortization of reinsurance coverage, distribution of collateral assets and amortization of insurance-linked notes issued in connection with the 2018, 2019 and 2021-2 ILN Transactions will remain suspended for the duration of the Lock-Out Event for each respective ILN Transaction, and during such period assets will be preserved in the applicable reinsurance trust account to collateralize the excess-of-loss reinsurance coverage provided to NMIC.

NMIC holds optional termination rights under each ILN Transaction, including, among others, an optional call feature which provides NMIC the discretion to terminate the transaction on or after a prescribed date, and a clean-up call if the outstanding reinsurance coverage amount amortizes to 10% or less of the reinsurance coverage amount at inception or if NMIC reasonably determines that changes to GSE or rating agency asset requirements would cause a material and adverse effect on the capital treatment afforded to NMIC under a given agreement.

In addition, there are certain events that trigger mandatory termination of an agreement, including NMIC's failure to pay premiums or consent to reductions in a trust account to make principal payments to note-holders, among others.

Effective March 25, 2022, NMIC exercised its optional clean-up call to terminate the 2017 ILN Transaction.

In connection with the termination of the transaction, NMIC’s excess of loss reinsurance agreement with Oaktown Re Ltd.

was commuted and the insurance-linked notes issued by Oaktown Re Ltd.

were redeemed in full with a distribution of remaining collateral assets.

The following table presents the inception date, covered production p eriod, current reinsurance coverage amount, current first layer retained aggregate loss and detail on the level of overcollateralization under each outstanding ILN Transaction.

Current amounts are presented as of March 31, 2022.

($ values in thousands) 2018 ILN Transaction 2019 ILN Transaction 2020-1 ILN Transaction (4)

2020-2 ILN Transaction 2021-1 ILN Transaction 2021-2 ILN Transaction

Inception date July 25, 2018 July 30, 2019 July 30, 2020 October 29, 2020 April 27, 2021 October 26, 2021

Covered production 1/1/2017 - 5/31/2018 6/1/2018 - 6/30/2019 7/1/2019 - 3/31/2020 4/1/2020 - 9/30/2020 (1)

10/1/2020 - 3/31/2021 (2)

2021-1 ILN Transaction (4)

April 27, 2021 10/1/2020 - 3/31/2021 (3)

4/1/2021 - 9/30/2021 (3)

(1) NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure, and cedes reserves for incurred claims and claims

expenses to each applicable ILN Transaction and recognizes a reinsurance recoverable if such incurred claims and claims expenses exceed its current

first layer retained loss.

Current ceded RIF $ 1,049,140 $ 1,171,775 $ 2,437,684 $ 4,100,877 $ 7,731,544 $ 7,504,161

Current first layer retained loss 122,403 122,524 169,463 121,177 163,708 146,229

Current reinsurance coverage 158,489 231,877 35,409 140,063 359,787 363,596

Eligible coverage $ 280,892 $ 354,401 $ 204,872 $ 261,240 $ 523,495 $ 509,825

Subordinated coverage (5)

26.77 % 30.24 % 8.00 % 6.25 % 6.75 % 6.79 %

PMIERs charge on ceded RIF 8.22 % 7.99 % 5.95 % 5.54 % 6.06 % 6.53 %

Overcollateralization (6) (7)

$ 158,489 $ 231,877 $ 35,409 $ 33,855 $ 54,997 $ 20,148

Delinquency Trigger (8)

4.0% 4.0% 6.0 % 4.7 % 5.1 % 5.1 %

(1) Approximately 1% of the production covered by the 2020-2 ILN Transaction has coverage reporting dates between July 1, 2019 and March 31, 2020.

(2) Approximately 1% of the production covered by the 2021-1 ILN Transaction has coverage reporting dates between July 1, 2019 and September 30, 2020.

(4) As of September 30, 2021, the current reinsurance coverage amount on the 2021-1 ILN transaction is equal to the initial reinsurance coverage, as the

reinsurance coverage provided by Oaktown Re will not decrease until its target credit enhancement is met.

(3) Approximately 2% of the production covered by the 2021-2 ILN Transaction has coverage reporting dates between July 1, 2019 and March 31, 2021.

(4) Effective April 25, 2022, NMIC exercised its optional clean-up call to terminate the 2020-1 ILN Transaction.

In connection with the termination of the transaction, NMIC's excess of loss reinsurance agreement with Oaktown Re IV Ltd.

was commuted and the insurance-linked notes issued by Oaktown Re IV Ltd.

were redeemed in full with a distribution of remaining collateral assets.

(5) Absent a delinquency trigger, the subordinated coverage is capped at 8.00%, 6.25%, 6.75% and 7.45% for the 2020-1, 2020-2, 2021-1 and 2021-2 ILN Transactions, respectively.

(6) Overcollateralization for each of the 2018, 2019 and 2020-1 ILN Transactions is equal to their current reinsurance coverage as the PMIERs required asset amount on RIF ceded under each transaction is currently below its remaining first layer retained loss.

(7) May not be replicated based on the rounded figures presented in the table.

(8) Delinquency triggers for the 2018 and 2019 ILN Transactions are set at a fixed 4.0% and assessed on a discrete monthly basis;

delinquency triggers for the 2020-1, 2020-2, 2021-1 and 2021-2 ILN Transactions are equal to seventy-five percent of the subordinated coverage level and assessed on the basis of a three-month rolling average.

See Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 5, Reinsurance " for further discussion of these third-party reinsurance arrangements.

On October 26, 2021, NMIC secured $363.6 million of aggregate excess-of-loss reinsurance coverage at inception for an existing portfolio of policies primarily written from April 1, 2021 to September 30, 2021, through a mortgage insurance-linked notes offering by Oaktown Re VII.

The reinsurance coverage amount under the terms of the 2021-2 ILN Transaction decreases from $363.6 million at inception over a 12.5 year period as the underlying covered mortgages are amortized or repaid, and/or the mortgage insurance coverage is canceled.

The outstanding reinsurance coverage amount will begin amortizing after an initial period in which a target level of credit enhancement is obtained.

For the reinsurance coverage period, NMIC retains the first layer of $146.2 million of aggregate losses and Oaktown Re VII then provides second layer coverage up to the outstanding reinsurance coverage amount.

NMIC then retains losses in excess of the outstanding reinsurance coverage amount.

Portfolio Data

1 unchanged sentence

Unless otherwise noted, the tables below do not include the effects of our third-party reinsurance arrangements described above.

Primary and pool IIF and NIW As of and for the three months ended For the nine months ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

IIF NIW IIF NIW NIW

Primary and pool IIF and NIW As of and for the three months ended

March 31, 2022 March 31, 2021

IIF NIW IIF NIW

(In Millions)

4 unchanged sentences

Total $ 160,039 $ 14,165 $ 125,419 $ 26,397

For the three months ended September 30, 2021, NIW decreased 2%, compared to the three months ended September 30, 2020, due to a decline in the size of the total mortgage insurance market.

Total private mortgage insurance industry NIW volume was $181 billion in the third quarter of 2020 – the largest quarterly result ever recorded for the industry.

The impact of the year-on-year decline in total private mortgage insurance industry volume was partially offset by growth in our customer franchise and market presence tied to the increased penetration of existing customer accounts and new customer account activations.

For the nine months ended September 30, 2021, NIW increased 57%, compared to the nine months ended September 30, 2020, driven by growth in our monthly and single premium policy production tied to the growth in our customer franchise and market presence.

Total IIF increased 36% at September 30, 2021 compared to September 30, 2020, primarily due to the NIW generated between such measurement dates, partially offset by the run-off of in-force policies.

Our persistency rate decreased to 58% at September 30, 2021 from 60% at September 30, 2020, reflecting the impact of increased refinancing activity during the intervening twelve-month period.

NIW for the three months ended March 31, 2022 was $14.2 billion compared to $26.4 billion for the three months ended March 31, 2021.

NIW decreased year-on-year primarily due to a decline in the size of the total mortgage insurance market.

Total IIF increased 28% at March 31, 2022 compared to March 31, 2021, primarily due to the NIW generated between such measurement dates, partially offset by the run-off of in-force policies.

Our persistency rate improved to 71.5% at March 31, 2022 from 51.9% at March 31, 2021, reflecting a slowdown in the pace of refinancing activity during the intervening twelve month period tied to an increase in interest and mortgage note rates.

The following table presents net premiums written and earned for the periods indicated:

Primary and pool premiums written and earned For the three months ended For the nine months ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Primary and pool premiums written and earned For the three months ended

March 31, 2022 March 31, 2021

(In Thousands)

1 unchanged sentence

Net premiums earned 116,495 105,879

For the three and nine months ended September 30, 2021, net premiums written increased 10% and 25%, respectively, and net premiums earned increased 15% and 11%, respectively, compared to the three and nine months ended September 30, 2020.

The growth in net premiums written and earned were primarily due to the growth of our IIF and increased monthly policy production, partially offset by increased cessions under the QSR and ILN Transactions.

Pool premiums written and earned for the three and nine months ended September 30, 2021 and 2020, were $0.4 million and $1.3 million, and $0.6 million and $2.0 million, respectively, before giving effect to the 2016 QSR Transaction, under which all of our written and earned pool premiums are ceded.

Net premiums earned increased 10% during the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily due to the growth of our IIF, partially offset by a decrease in the contribution from single premium policy cancellations and an increase in cessions under the ILN Transactions.

The accelerated rate of growth in net premiums earned compared to net premiums written is due to a decrease in the volume and mix of our single premium policy production from period to period.

Pool premiums written and earned for the three months ended March 31, 2022 and 2021, were $0.3 million and $0.5 million, respectively, before giving effect to the 2016 QSR Transaction, under which all of our written and earned pool premiums are ceded.

A portion of our ceded pool premiums written and earned are recouped through profit commission.

3 unchanged sentences

Primary portfolio trends As of and for the three months ended

September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020

March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021

($ Values In Millions, except as noted below)

34 unchanged sentences

The table below presents a summary of the change in total primary IIF for the dates and periods indicated.

Primary IIF For the three months ended For the nine months ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Primary IIF As of and for the three months ended

March 31, 2022 March 31, 2021

(In Millions)

7 unchanged sentences

The table below presents a summary of our primary IIF and RIF by book year as of the dates indicated.

Primary IIF and RIF As of September 30, 2021 As of September 30, 2020

Primary IIF and RIF As of March 31, 2022 As of March 31, 2021

IIF RIF IIF RIF

(In Millions)

September 30, 2021 $ 64,885 $ 16,274 $ — $ —

March 31, 2022 $ 14,076 $ 3,699 $ — $ —

2021 78,955 20,058 26,296 6,508

12 unchanged sentences

We calculate the LTV of a loan as the percentage of the original loan amount to the original purchase value of the property securing the loan.

Primary NIW by FICO For the three months ended For the nine months ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Primary NIW by FICO For the three months ended

March 31, 2022 March 31, 2021

(In Millions)

7 unchanged sentences

Weighted average FICO 748 755

Primary NIW by LTV For the three months ended For the nine months ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Primary NIW by LTV For the three months ended

March 31, 2022 March 31, 2021

(In Millions)

5 unchanged sentences

Weighted average LTV 92.1 % 91.0 %

Primary NIW by purchase/refinance mix For the three months ended For the nine months ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Primary NIW by purchase/refinance mix For the three months ended

March 31, 2022 March 31, 2021

(In Millions)

Purchase $ 13,398 $ 17,909

1,684 5,735 14,012 14,389

Total $ 14,165 $ 26,397

1 unchanged sentence

Primary IIF by FICO As of

September 30, 2021 September 30, 2020

March 31, 2022 March 31, 2021

($ Values In Millions)

7 unchanged sentences

Primary RIF by FICO As of

September 30, 2021 September 30, 2020

March 31, 2022 March 31, 2021

($ Values In Millions)

7 unchanged sentences

Primary IIF by LTV As of

September 30, 2021 September 30, 2020

March 31, 2022 March 31, 2021

($ Values In Millions)

5 unchanged sentences

Primary RIF by LTV As of

September 30, 2021 September 30, 2020

March 31, 2022 March 31, 2021

($ Values In Millions)

5 unchanged sentences

Primary RIF by Loan Type As of

September 30, 2021 September 30, 2020

March 31, 2022 March 31, 2021

Fixed 99 % 99 %

3 unchanged sentences

Total 100 % 100 %

The table below presents selected primary portfolio statistics, by book year, as of September 30, 2021.

As of September 30, 2021

The table below presents selected primary portfolio statistics, by book year, as of March 31, 2022.

As of March 31, 2022

Book Year Original Insurance Written Remaining Insurance in Force % Remaining of Original Insurance Policies Ever in Force Number of Policies in Force Number of Loans in Default # of Claims Paid Incurred Loss Ratio (Inception to Date) (1)

11 unchanged sentences

2021 85,574 78,955 92 % 257,972 242,014 658 — 2.8 % 0.3 % 0.3 %

2022 14,165 14,076 99 % 38,974 38,771 — — — % — % — %

Total $ 293,681 $ 158,877 973,098 526,976 5,238 526

3 unchanged sentences

Geographic Dispersion

The following table shows the distribution by state of our primary RIF as of the periods indicated.

The distribution of our primary RIF as of September 30, 2021 is not necessarily representative of the geographic distribution we expect in the future.

The following table shows the distribution by state of our primary RIF as of the dates indicated.

The distribution of our primary RIF as of March 31, 2022 is not necessarily representative of the geographic distribution we expect in the future.

Top 10 primary RIF by state As of

September 30, 2021 September 30, 2020

March 31, 2022 March 31, 2021

California 10.8 % 10.8 %

2 unchanged sentences

Virginia 4.5 5.0

Colorado 4.0 4.0

Maryland 3.8 3.6

Illinois 3.7 4.0

Georgia 3.9 3.3

Illinois 3.8 3.7

Colorado 3.7 4.1

Washington 3.7 3.5

Maryland 3.6 3.8

Pennsylvania 3.3 3.3

13 unchanged sentences

Reserves are also ceded to reinsurers under the QSR Transactions and ILN Transactions, as applicable under each treaty.

We have not yet ceded any reserves under the ILN Transactions as incurred claims and claims expenses on each respective reference pool remain within our retained coverage layer of each transaction.

We have not yet ceded any reserves under the ILN Transactions as incurred claims and claim expenses on each respective reference pool remain within our retained coverage layer of each transaction.

Our pool insurance agreement with Fannie Mae contains a claim deductible through which Fannie Mae absorbs specified losses before we are obligated to pay any claims.

5 unchanged sentences

The effectiveness of forbearance programs is enhanced by the availability of various repayment and loan modification options which allow borrowers to amortize or, in certain instances, outright defer payments otherwise due during the forbearance period over an extended length of time.

In response to the COVID-19 outbreak, politicians, regulators, lenders, loan servicers and others have offered extraordinary assistance to dislocated borrowers through, among other programs, the forbearance, foreclosure moratorium and other assistance programs codified under the CARES Act.

In response to the COVID-19 pandemic, politicians, regulators, lenders, loan servicers and others have offered extraordinary assistance to dislocated borrowers through, among other programs, the forbearance, foreclosure moratorium and other assistance programs codified under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

The FHFA and GSEs have offered further assistance by introducing new repayment and loan modification options to assist borrowers with their transition out of forbearance programs and default status.

At September 30, 2020 and 2021, we generally established lower reserves for defaults that we consider to be connected to the COVID-19 outbreak, given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs.

The following table provides a reconciliation of the beginning and ending gross reserve balances for primary insurance claims and claim expenses.

For the three months ended For the nine months ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

At March 31, 2022 and 2021, we generally established lower reserves for defaults that we consider to be connected to the COVID-19 pandemic, given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs.

The following table provides a reconciliation of the beginning and ending gross reserve balances for primary insurance claims and claim (benefits) expenses:

For the three months ended

March 31, 2022 March 31, 2021

(In Thousands)

4 unchanged sentences

Add claims incurred:

Claims and claim expenses incurred:

Claims and claim (benefits) expenses incurred:

Current year (2)

2 unchanged sentences

(10,699) (5,595)

Total claims and claim expenses incurred 3,204 15,667 12,806 55,698

Total claims and claim (benefits) expenses incurred (619) 4,962

Less claims paid:

2 unchanged sentences

Prior years (3)

526 1,100 1,566 4,309

Total claims and claim expenses paid 320 504

7 unchanged sentences

For example, if a loan had defaulted in a prior year and subsequently cured and later re-defaulted in the current year, that default would be included in the current year.

Amounts are presented net of reinsurance and included $14.0 million attributed to net case reserves and $4.8 million attributed to net IBNR reserves for the nine months ended September 30, 2021 and $55.4 million attributed to net case reserves and $4.8 million attributed to net IBNR reserves for the nine months ended September 30, 2020.

Amounts are presented net of reinsurance and included $5.2 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the three months ended March 31, 2022 and $5.3 million attributed to net case reserves and $5.3 million attributed to net IBNR reserves for the three months ended March 31, 2021.

(3) Related to insured loans with defaults occurring in prior years, which have been continuously in default before the start of the current year.

Amounts are presented net of reinsurance and included $1.8 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the nine months ended September 30, 2021 and $4.0 million attributed to net case reserves and $1.3 million attributed to net IBNR reserves for the nine months ended September 30, 2020.

The "claims incurred" section of the table above shows claims and claim expenses incurred on defaults occurring in current and prior years, including IBNR reserves and is presented net of reinsurance.

Amounts are presented net of reinsurance and included $5.8 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the three months ended March 31, 2022 and $0.6 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the three months ended March 31, 2021.

The "claims incurred" section of the table above shows claims and claim (benefits) expenses incurred on defaults occurring in current and prior years, including IBNR reserves and is presented net of reinsurance.

We may increase or decrease our claim estimates and reserves as we learn additional information about individual defaulted loans, and continue to observe and analyze loss development trends in our portfolio.

Gross reserves of $80.6 million related to prior year defaults remained as of September 30, 2021.

Gross reserves of $89.7 million related to prior year defaults remained as of March 31, 2022.

The following table provides a reconciliation of the beginning and ending count of loans in default:

For the three months ended For the nine months ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

For the three months ended

March 31, 2022 March 31, 2021

Beginning default inventory 6,227 12,209

2 unchanged sentences

claims paid (19) (16)

claims denied — (1) (2) (4)

rescission and claims denied (1) (2)

Ending default inventory 5,238 11,090

Ending default inventory declined from September 30, 2020 to September 30, 2021 as an increased number of borrowers impacted by the COVID-19 pandemic cured their delinquencies, and fewer new defaults emerged as the acute economic stress of the pandemic crisis began to recede.

While our default population declined from September 30, 2020 to September 30, 2021, our default inventory remains elevated compared to historical experience due to the continued challenges certain borrowers are facing related to the COVID-19 outbreak and their decision to access the forbearance program for federally backed loans codified under the CARES Act or similar programs made available by private lenders.

As of September 30, 2021, 6,566 of our 7,670 defaulted loans were in a COVID-19 related forbearance program.

Ending default inventory declined from March 31, 2021 to March 31, 2022 as an increased number of borrowers initially impacted by the COVID-19 pandemic cured their delinquencies, and fewer new defaults emerged as the acute economic stress of the pandemic crisis began to recede.

While our default population declined from March 31, 2021 to March 31, 2022, our default inventory remains elevated compared to historical experience due to the continued challenges certain borrowers are facing related to the COVID-19 pandemic and their decision to access the forbearance program for federally backed loans codified under the CARES Act or similar programs made available by private lenders.

As of March 31, 2022, 3,463 of our 5,238 defaulted loans were in a COVID-19 related forbearance program.

The following table provides details of our claims paid, before giving effect to claims ceded under the QSR Transactions and ILN Transactions, for the periods indicated:

For the three months ended For the nine months ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

For the three months ended

March 31, 2022 March 31, 2021

($ In Thousands)

2 unchanged sentences

Average amount paid per claim

$ 28 $ 39 $ 34 $ 46

55 % 67 % 60 % 80 %

(1) Count include s six and ten claims settled without payment during the three and nine months ended September 30, 2021, respectively, and six and eight claims settled without payment during the three and nine months ended September 30, 2020, respectively.

(1) Count include s six and one claims settled without payment during the three months ended March 31, 2022 and 2021, respectively.

(2) Severity represents the total amount of claims paid including claim expenses divided by the related RIF on the loan at the time the claim is perfected, and is calculated including claims settled without payment.

The Company paid 24 and 59 claims during the three and nine months ended September 30, 2021, respectively, and 40 and 123 claims during three and nine months ended September 30, 2020, respectively.

The number of claims paid in each period was low relative to the size of our insured portfolio and the number of defaulted loans we reported, primarily due to the forbearance program and foreclosure moratorium implemented by the GSEs in response to the COVID outbreak and codified under the CARES Act.

The Company paid 19 and 16 claims during the three months ended March 31, 2022 and 2021, respectively.

The number of claims paid was modest relative to the size of our insured portfolio and number of defaulted loans we reported in each period, primarily due to the forbearance program and foreclosure moratorium implemented by the GSEs in response to the COVID-19 pandemic and codified under the CARES Act.

Such forbearance and foreclosure programs have extended, and may ultimately interrupt, the timeline over which loans would otherwise progress through the default cycle to a paid claim.

Our claims paid experience for the three and nine months ended September 30, 2021, further benefited from the resiliency of the housing market and broad national house price appreciation.

Our claims paid experience for the three months ended March 31, 2022 and 2021, further benefited from the resiliency of the housing market and broad national house price appreciation.

An increase in the value of the homes collateralizing the mortgages we insure provides defaulted borrowers with alternative paths and incentives to cure their loan prior to the development of a claim.

Our claims severity for the three and nine months ended September 30, 2021 was 55% and 60%, respectively, compared to 67% and 80% for the three and nine months ended September 30, 2020, respectively.

Claims severity for the three and nine months ended September 30, 2021 benefited from the same resiliency of the housing market and broad national house price appreciation as our claims paid.

Our claims severity for the three months ended March 31, 2022 was 39% compared to 61% for three months ended March 31, 2021.

Claims severity for the three months ended March 31, 2022 and 2021 benefited from the same resiliency of the housing market and broad national house price appreciation as our claims paid.

An increase in the value of the homes collateralizing the mortgages we insure provides additional equity support to our risk exposure and raises the prospect of a third-party sale of a foreclosed property, which can mitigate the severity of our settled claims.

1 unchanged sentence

Average reserve per default:

As of September 30, 2021 As of September 30, 2020

As of March 31, 2022 As of March 31, 2021

(In Thousands)

2 unchanged sentences

(2) Amount includes claims adjustment expenses.

Average reserve per default increased from September 30, 2020 to September 30, 2021, primarily due to the “aging” of early COVID-related defaults.

While we have generally established lower reserves for defaults that we consider to be connected to the COVID-19 outbreak given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs, we have increased such reserves over time as individual defaults remain outstanding or “age.” The growth in our average reserve per default from September 30, 2020 to September 30, 2021 far exceeded the growth in our aggregate gross reserve position in the intervening period as the impact of the increase in our average reserve per default was largely offset by the decline in our total default inventory.

Average reserve per default increased from March 31, 2021 to March 31, 2022 primarily due to the “aging” of early COVID-related defaults.

While we have generally established lower reserves for defaults that we consider to be connected to the COVID-19 pandemic given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs, we have increased such reserves over time as individual defaults remain outstanding or “age.” The growth in our average reserve per default from March 31, 2021 to March 31, 2022, far exceeded the growth in our aggregate gross reserve position in the intervening period as the impact of the increase in our average reserve per default was largely offset by the decline in our total default inventory.

GSE Oversight

13 unchanged sentences

The following table provides a comparison of the PMIERs available assets and risk-based required asset amount as reported by NMIC as of the dates indicated:

September 30, 2021 September 30, 2020

March 31, 2022 March 31, 2021

(In Thousands)

1 unchanged sentence

Risk-based required assets 1,341,217 1,261,015

Available assets were $2.0 billion at September 30, 2021, compared to $1.7 billion at September 30, 2020.

Available assets were $2.1 billion at March 31, 2022, compared to $1.8 billion at March 31, 2021.

The $317 million increase in available assets between the dates presented was primarily driven by NMIC's positive cash flow from operations during the intervening period.

The increase in the risk-based required asset amount between the dates presented was primarily due to the growth of our gross RIF, p artially offset by an increase in the risk ceded under our third-party reinsurance agreements.

The increase in the risk-based required asset amount between the dates presented was primarily due to the growth of our gross RIF, partially offset by an increase in the risk ceded under our third-party reinsurance agreements.

The MI industry is highly competitive and currently consists of six private mortgage insurers, including NMIC, as well as government MIs such as the FHA, USDA or VA.

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On March 5, 2021, ICE Benchmark Administration Limited (“IBA”), the administrator for LIBOR, confirmed it would permanently cease the publication of overnight, one-month, three-month, six-month and twelve-month USD LIBOR settings in their current form after June 30, 2023.

Financial Conduct Authority ("FCA"), the regulator of IBA, announced on the same day that it intends to stop requiring panel banks to continue to submit to LIBOR and all USD LIBOR settings in their current form will either cease to be provided by any administrator or no longer be representative after June 30, 2023.

We have exposure to USD LIBOR-based financial instruments, such as LIBOR-based securities held in our investment portfolio, and our 2020 Revolving Credit Facility and certain ILN Transactions that require LIBOR-based payments.

Financial Conduct Authority, the regulator of IBA, announced on the same day that it intends to stop requiring panel banks to continue to submit to LIBOR and all USD LIBOR settings in their current form will either cease to be provided by any administrator or no longer be representative after June 30, 2023.

We have exposure to USD LIBOR-based financial instruments, such as LIBOR-based securities held in our investment portfolio and certain ILN Transactions that require LIBOR-based payments.

We are in the process of reviewing our LIBOR-based contracts and transitioning, as necessary and applicable, to a set of alternative reference rates.

We will continue to monitor, assess and plan for the phase out of LIBOR;

however, we cannot currently estimate the impact such transition will have on our operations or financial results.

CEO Transition

On September 9, 2021, we announced that Adam Pollitzer, currently the company’s Executive Vice President and Chief Financial Officer, was appointed as the company's President and Chief Executive Officer, effective January 1, 2022.

Pollitzer will also join the company’s Board of Directors upon assuming his new role.

He succeeds Claudia Merkle, who will step down as Chief Executive Officer and as a member of the Board, effective December 31, 2021.

During the three months ended September 30, 2021, the Company recorded $1.3 million of severance, restricted stock modification and other expenses related to this transition.

however, we do not expect the impact of such transition to be material to our operations or financial results.

Consolidated Results of Operations

Consolidated statements of operations Three months ended Nine months ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Consolidated statements of operations Three months ended

March 31, 2022 March 31, 2021

Revenues ($ in thousands, except for per share data)

1 unchanged sentence

Net investment income 10,199 8,814

Net realized investment gains (losses) 3 (4) 15 635

Net realized investment gains 408 —

Other revenues 339 501

Total revenues 127,441 115,194

Insurance claims and claim expenses 3,204 15,667 12,806 55,698

Insurance claims and claim (benefits) expenses (619) 4,962

Underwriting and operating expenses 32,935 34,065

14 unchanged sentences

27.7 % 36.9 %

Three months ended Nine months ended

Three months ended

Non-GAAP financial measures (4)

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

March 31, 2022 March 31, 2021

($ in thousands, except for per share data)

6 unchanged sentences

(4) See " Explanation and Reconciliation of Our Use of Non-GAAP Financial Measures, " below.

Net premiums earned were $113.6 million and $330.4 million for the three and nine months ended September 30, 2021, respectively, compared to $98.8 million and $296.5 million for the three and nine months ended September 30, 2020, respectively.

The year-on-year increase in net premiums earned in each respective period was primarily driven by the growth of our IIF, partially offset by an increase in cessions made under our QSR and ILN Transactions, and a decline in the contribution from single premium policy cancellations.

Net investment income was $9.8 million and $28.0 million for the three and nine months ended September 30, 2021,

respectively, compared to $8.3 million and $23.5 million for the three and nine months ended September 30, 2020, respectively.

The year-on-year increase in net investment income in each respective period was primarily driven by growth in the size of our total investment portfolio, partially offset by a decline in book yield tied to the prevailing interest rate and credit spread environment.

Other revenues were $613 thousand and $1.6 million for the three and nine months ended September 30, 2021, respectively, compared to $648 thousand and $2.8 million for the three and nine months ended September 30, 2020, respectively.

Net premiums earned were $116.5 million for the three months ended March 31, 2022 compared to $105.9 million for the three months ended March 31, 2021.

The increase in net premiums earned was primarily driven by the growth of our IIF, partially offset by a decline in the contribution from single premium policy cancellations and an increase in cessions under the ILN Transactions.

Net investment income was $10.2 million for the three months ended March 31, 2022 compared to $8.8 million for the three months ended March 31, 2021.

The increase in net investment income in each respective period was primarily driven by growth in the size of our total investment portfolio.

Other revenues were $339 thousand for the three months ended March 31, 2022 compared to $501 thousand for the three months ended March 31, 2021.

Other revenues represent underwriting fee revenue generated by our subsidiary, NMIS, which provides outsourced loan review services to mortgage loan originators.

The year-on-year decline in other revenues in each respective period relates to a decrease in NMIS' outsourced loan review volume.

The decline in other revenues relates to a decrease in NMIS' outsourced loan review volume.

Amounts recognized in other revenues generally correspond with amounts incurred as service expenses for outsourced loan review activities in the same periods.

1 unchanged sentence

We also incur service expenses in connection with NMIS' outsourced loan review activities.

Insurance claims and claim expenses were $3.2 million and $12.8 million for the three and nine months ended September 30, 2021, respectively, compared to $15.7 million and $55.7 million for the three and nine months ended September 30, 2020, respectively.

The year-on-year decline in insurance claims and claim expenses in each respective period primarily reflects a significant decrease in the number of new defaults emerging on loans impacted by the COVID-19 outbreak.

Insurance claims and claim expenses during the three and nine months ended September 30, 2021 also benefited from cure activity and a release of reserves previously held against certain loans that defaulted prior to the onset of the COVID pandemic.

Underwriting and operating expenses were $34.7 million and $103.5 million for the three and nine months ended September 30, 2021, respectively, compared to $34.0 million and $96.6 million for the three and nine months ended September 30, 2020.

The year-on-year increase in underwriting and operating expenses for the three months ended September 30, 2021 primarily reflects severance, restricted stock modification and other expenses incurred in connection with the CEO transition we announced on September 9, 2021, as well as an increase in travel and entertainment expenses tied to the easing of COVID-19 related restrictions, incremental depreciation and amortization incurred in connection with the completion and on-lining of certain development initiatives, and other (non-CEO transition) payroll and related amounts.

Such increases were largely offset by a decline in administrative costs due to the timing of ILN issuance and a reduction in technology service expenses tied to our long-term IT services agreement with Tata Consultancy Services.

See Item 1 of our 2020 10K, "Business - Information Technology Systems and Intellectual Property" and Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Information Technology" for more details about IT services agreement entered into with Tata Consultancy Services.

The year-on-year increase in underwriting and operating expenses for the nine months ended September 30, 2021, further reflects an increase in the recognition of previously deferred policy acquisition costs taken in connection with in-force portfolio run-off.

Underwriting and operating expenses included capital market reinsurance transaction costs of $0.5 million and $2.5 million, respectively, for the three months and nine months ended September 30, 2021, and $2.3 million and $2.9 million, respectively, for the three and nine months ended September 30, 2020, as well as $1.3 million of CEO-transition related expenses for the three and nine months ended September 30, 2021.

Service expenses were $787 thousand and $1.9 million for the three and nine months ended September 30, 2021, respectively, compared to $557 thousand and $2.4 million for the three and nine months ended September 30, 2020, respectively.

Insurance claims and claim expenses were a benefit of $0.6 million for the three months ended March 31, 2022 compared to insurance claims and claim expenses of $5.0 million for the three months ended March 31, 2021.

Insurance claims and claim expenses during the three months ended March 31, 2022 benefited from cure activity and release of a portion of the reserves we established for anticipated claims payments in prior period, and a decrease in the number of new defaults emerging on loans impacted by the COVID-19 pandemic.

Underwriting and operating expenses were $32.9 million for the three months ended March 31, 2022 compared to $34.1 million for the three months ended March 31, 2021.

The decrease in underwriting and operating expenses for the three months ended March 31, 2022 was primarily due to a decrease in the amortization of deferred policy acquisition costs (DAC) offset by an increase in depreciation and amortization incurred in connection with the completion and implementation of certain software and equipment initiatives, as well as an increase in travel and entertainment expenses tied to the easing of COVID-19 related restrictions.

Underwriting and operating expenses included capital market reinsurance transaction costs of $0.3 million and $0.4 million for the three months ended March 31, 2022 and 2021, respectively.

Service expenses were $430 thousand for the three months ended March 31, 2022 compared to $591 thousand for the three months ended March 31, 2021.

Service expenses represent third-party costs incurred by NMIS in connection with the services it provides.

The year-on-year decline in service expenses in each respective period was driven by a decrease in NMIS' outsourced loan review volume.

The year-on-year decline in service expenses was driven by a decrease in NMIS' outsourced loan review volume.

Amounts incurred as service expenses generally correspond with amounts recognized in other revenues in the same periods.

Interest expense was $7.9 million and $23.8 million for the three and nine months ended September 30, 2021, respectively, compared to $7.8 million and $16.5 million for the three and nine months ended September 30, 2020, respectively.

Interest expense for the three and nine months ended September 30, 2021 and three months ended September 30, 2020 includes the carrying costs of our $400 million Notes for each period in full, while interest expense for the nine months ended September 30, 2020 includes partial period carry costs for the Notes (which were issued on June 19, 2020) and partial period carrying costs for the $150 million 2018 Term Loan (which was retired with a portion of net proceeds from the Notes offering).

Interest expense for the nine months ended September 30, 2020, also includes $2.6 million of costs related to the extinguishment of the 2018 Term Loan.

Interest expense was $8.0 million for the three months ended March 31, 2022 compared to $7.9 million for the three months ended March 31, 2021.

Interest expense primarily reflects the carrying costs on the $400 million Notes offering completed in June 2020.

The increase in interest expense period-to-period was due to an increase in commitment fees associated with the 2021 Revolving Credit Facility which had extended its borrowing capacity from $110 million to $250 million in November 2021.

See Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4, Debt.

Income tax expense was $17.3 million and $48.0 million for the three and nine months ended September 30, 2021, respectively, compared to $11.2 million and $33.2 million for the three and nine months ended September 30, 2020, respectively.

The year-on-year increase in income tax expense in each respective period was primarily driven by growth in our pre-tax income.

Our effective tax rate on pre-tax income was 22.3% and 21.9% for the three and nine months ended September 30, 2021, respectively, compared to 22.6% and 21.2% for the three and nine months ended September 30, 2020, respectively.

Income tax expense was $19.1 million for the three months ended March 31, 2022 compared to $14.6 million for the three months ended March 31, 2021.

The year-on-year increase in income tax expense was primarily driven by growth in our pre-tax income.

Our effective tax rate on pre-tax income was 22.0% for the three months ended March 31, 2022, compared to 21.6% for the three ended March 31, 2021.

taxpayer, we are subject to a statutory U.S.

1 unchanged sentence

Our provision for income taxes for interim periods is established based on our estimated annual effective tax rate for a given year and reflects the impact of discrete tax effects in the period in which they occur.

Our effective tax rates for the three and nine months ended September 30, 2021 and 2020 reflect the discrete tax effects of the vesting of RSUs and exercise of options, and the change in fair value of our warrant liability in each period.

Our effective tax rates for the three months ended March 31, 2022 and 2021 reflect the discrete tax effects of the vesting of RSUs and exercise of options, and the change in fair value of our warrant liability in each period.

See Item 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 9, Income Taxes.

Net income was $60.2 million and $170.6 million for the three and nine months ended September 30, 2021, respectively, compared to $38.2 million and $123.3 million for the three and nine months ended September 30, 2020, respectively.

Adjusted net income was $61.8 million and $173.3 million for the three and nine months ended September 30, 2021, respectively, compared to $40.4 million and $122.9 million for the three and nine months ended September 30, 2020, respectively.

The year-on-year increases in net income and adjusted net income in each respective period were primarily driven by growth in our total revenues and decrease in insurance claims and claim expenses, partially offset by an increase in our interest expenses, underwriting and operating expenses, and income tax expense.

Diluted EPS was $0.69 and $1.96 for the three and nine months ended September 30, 2021, respectively, compared to $0.45 and $1.55 for the three and nine months ended September 30, 2020, respectively.

Adjusted diluted EPS was $0.71 and $2.00 for the three and nine months ended September 30, 2021, respectively, compared to $0.47 and $1.60 for the three and nine months ended September 30, 2020, respectively.

Diluted and adjusted diluted EPS increased due to growth in net income and adjusted net income, respectively, partially offset for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, by an increase in weighted average diluted shares outstanding in connection with the issuance of 15.9 million shares of common stock we completed in June 2020, and, to a lesser extent for all comparative periods, by stock awards made under our share-based compensation plans.

Net income was $67.7 million for the three months ended March 31, 2022 compared to $52.9 million for the three months ended March 31, 2021.

Adjusted net income was $67.5 million for the three months ended March 31, 2022 compared to $53.4 million for the three months ended March 31, 2021.

The increases in net income and adjusted net income were primarily driven by growth in our total revenues and decrease in insurance claims and claim expenses, partially offset by an increase in our income tax expense.

Diluted EPS was $0.77 for the three months ended March 31, 2022 compared to $0.61 for the three months ended March 31, 2021.

Adjusted diluted EPS was $0.77 for the three months ended March 31, 2022 compared to $0.62 for the three

months ended March 31, 2021.

Diluted and adjusted diluted EPS increased due to growth in net income and adjusted net income, partially offset by an increase in weighted average diluted shares outstanding.

The non-GAAP financial measures adjusted income before tax, adjusted net income and adjusted diluted EPS are presented to enhance the comparability of financial results between periods.

Non-GAAP Financial Measure Reconciliations For the three months ended September 30, For the nine months ended September 30,

2021 2020 2021 2020

Non-GAAP Financial Measure Reconciliations For the three months ended March 31,

As reported ($ in thousands, except for per share data)

2 unchanged sentences

Net income $ 67,680 $ 52,891

Net realized investment (gains) loss (3) 4 (15) (635)

Net realized investment gains (408) —

(Gain) loss from change in fair value warrant liability (93) 205

1 unchanged sentence

Other infrequent, unusual or non-operating items

1,289 — 1,289 —

Adjusted income before tax 86,506 68,039

Income tax expense on adjustments (2)

139 474 555 1,025

Income tax (benefit) expense on adjustments (31) 79

Adjusted net income $ 67,470 $ 53,395

1 unchanged sentence

Adjusted diluted EPS $ 0.77 $ 0.62

(1) Represents severance, restricted stock modification and other expenses incurred in connection with the CEO transition announced on September 9,

See " CEO Transition" above.

(2) Marginal tax impact of non-GAAP adjustments is calculated based on our statutory U.S.

federal corporate income tax rate of 21%, except for those

items that are not eligible for an income tax deduction.

Such non-deductible items include gains or losses from the change in the fair value of our warrant liability and certain costs incurred in connection with the CEO transition, which are limited under Section 162(m) of the Internal Revenue Code.

Explanation and Reconciliation of Our Use of Non-GAAP Financial Measures

26 unchanged sentences

Identification and exclusion of these items provides clarity about the impact special or rare occurrences may have on our current financial performance.

Infrequent, unusual or non-operating adjustments for the three and nine months ended September 30, 2021, include severance, restricted stock modification and other expenses incurred in connection with the CEO transition we announced on September 9, 2021.

Past adjustments under this category include the effects of the release of the valuation allowance recorded against our net federal and certain state net deferred tax assets in 2016 and the re-measurement of our net deferred tax assets in connection with tax reform in 2017.

Past adjustments under this category include infrequent, unusual or non-operating adjustments related to severance, restricted stock modification and other expenses incurred in connection with the CEO transition announced in September 2021 and the effects of the release of the valuation allowance recorded against our net federal and certain state net deferred tax assets in 2016 and the re-measurement of our net deferred tax assets in connection with tax reform in 2017.

We believe such items are infrequent or non-recurring in nature, and are not indicative of the performance of, or ongoing trends in, our primary operating activities or business.

Consolidated balance sheets September 30, 2021 December 31, 2020

Consolidated balance sheets March 31, 2022 December 31, 2021

(In Thousands)

19 unchanged sentences

Total liabilities and shareholders' equity $ 2,423,944 $ 2,450,581

Total cash and investments were $2.2 billion as of September 30, 2021, compared to $1.9 billion as of December 31, 2020.

Cash and investments at September 30, 2021 included $79.3 million held by NMIH.

The increase in total cash and investments between the respective measurement dates reflects cash generated from operations, partially offset by a decrease in the unrealized gain position of our fixed income portfolio tied to the prevailing interest rate and credit spread environment.

Premiums receivable was $58.5 million as of September 30, 2021, compared to $49.8 million as December 31, 2020.

Total cash and investments were $2.1 billion as of March 31, 2022, compared to $2.2 billion as of December 31, 2021.

Cash and investments at March 31, 2022 included $106.2 million held by NMIH.

The decrease in total cash and investments reflects an increase in the unrealized loss positions of our fixed income portfolio tied to the prevailing interest rate and credit spread environment and share repurchases during the three months ended March 31, 2022, partially offset by an increase in cash generated from operations.

Premiums receivable was $60.5 million as of March 31, 2022, compared to $60.4 million as December 31, 2021.

The increase was primarily driven by growth in our monthly premium policies in force, where premiums are generally paid one month in arrears.

Net deferred policy acquisition costs were $61.4 million as of September 30, 2021, compared to $62.2 million as of December 31, 2020.

The decrease was primarily driven by the recognition of previously deferred policy acquisition costs taken in connection with in-force portfolio run-off, and was largely offset by the deferral of certain costs associated with the origination of new policies between the respective balance sheet dates.

Prepaid reinsurance premiums were $3.0 million as of September 30, 2021, compared to $6.2 million as of December 31, 2020.

Net deferred policy acquisition costs were $59.7 million as of March 31, 2022, compared to $59.6 million as of December 31, 2021.

The increase was primarily driven by the deferral of certain costs associated with the origination of new policies between the respective balance sheet dates, largely offset by the recognition of previously deferred policy acquisition costs.

Prepaid reinsurance premiums were $2.0 million as of March 31, 2022, compared to $2.4 million as of December 31, 2021.

Prepaid reinsurance premiums, which represent the unearned premiums on single premium policies ceded under the 2016 QSR Transaction, decreased due to the continued amortization of previously ceded unearned premiums.

Reinsurance recoverable was $20.4 million as of September 30, 2021, compared to $17.6 million as of December 31, 2020.

The increase was driven by an increase in ceded losses recoverable associated with our QSR Transactions.

Other assets increased to $71.3 million as of September 30, 2021, compared to $70.0 million as of December 31, 2020.

Other assets included $46.4 million of tax and loss bonds held by the Company at both September 30, 2021 and December 31, 2020.

Reinsurance recoverable was $20.1 million as of March 31, 2022, compared to $20.3 million as of December 31, 2021.

The decrease was driven by a decrease in ceded losses recoverable associated with our QSR Transactions.

Other assets increased to $124.3 million as of March 31, 2022, compared to $113.3 million as of December 31, 2021.

The increase was primarily driven by the recognition of incremental ROU assets in connection with the modification of the operating lease for our corporate headquarters in January 2022.

Other assets included $89.2 million of tax and loss bonds held by the Company at both March 31, 2022 and December 31, 2021.

See Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 9, Income Taxes.

Unearned premiums were $139.6 million as of September 30, 2021, compared to $118.8 million as of December 31, 2020.

The increase was driven by single premium policy originations during the nine months ended September 30, 2021, partially offset by the cancellation of other single premium policies and the amortization of existing unearned premiums through earnings in accordance with the expiration of risk on related single premium policies.

Accounts payable and accrued expenses were $78.7 million as of September 30, 2021, compared to $61.7 million as of December 31, 2020.

The increase was primarily driven by accrued and unpaid interest on the Notes which is payable semi-annually in June and December, reinsurance premiums payable, accrued payroll, and timing of other contractual payments due, partially offset by payment of unsettled trade payable.

Reserve for insurance claims and claim expenses was $104.6 million as of September 30, 2021, compared to $90.6 million as of December 31, 2020.

Reserve for insurance claims and claim expenses increased at September 30, 2021, despite a decline in the total size of our default population because of an increase in the average case reserve held against previously defaulted loans and the establishment of initial reserves on newly defaulted loans during the period.

Unearned premiums were $138.4 million as of March 31, 2022, compared to $139.2 million as of December 31, 2021.

The decrease was driven by the amortization of existing unearned premiums through earnings in accordance with the expiration of risk on related single premium policies and the cancellations of other single premium policies, partially offset by single premium policy originations during the three months ended March 31, 2022.

Accounts payable and accrued expenses were $76.9 million as of March 31, 2022, compared to $72.0 million as of December 31, 2021.

The increase was primarily driven by accrued and unpaid interest on the Notes which is payable semi-annually in June and December and unsettled trades payable, partially offset by payments of payroll and bonuses, premium taxes and other contractual payables.

Reserve for insurance claims and claim expenses was $102.4 million as of March 31, 2022, compared to $103.6 million as of December 31, 2021.

The decrease was primarily driven by a release of a portion of the reserves we established for anticipated claims payments in prior periods, cure activity, and a decline in the total size of our default population.

The decrease was partially offset by the increase in the average reserve per default.

While we have generally established lower reserves per default for loans that we consider to be impaired in connection with the COVID-19 pandemic, we have increased the initial reserves held for such loans as they have aged in default status.

The increase in the reserves for insurance claims and claim expenses at September 30, 2021 was partially offset by the release of prior year reserves tied to the curing of certain loans that had defaulted prior to the onset of the COVID pandemic.

See " - Insurance Claims and Claim Expenses ," above for further details.

Reinsurance funds withheld, which represents our ceded reinsurance premiums written, less our profit and ceding commission receivables related to the 2016 QSR Transaction was $6.3 million as of September 30, 2021, compared to $8.7 million as of December 31, 2020.

Reinsurance funds withheld, which represents our ceded reinsurance premiums written, less our profit and ceding commission receivables related to the 2016 QSR Transaction was $5.3 million as of March 31, 2022, compared to $5.6 million as of December 31, 2021.

The decrease relates to the continued decline in ceded premiums written on single premium policies, due to the end of the reinsurance coverage period for new business under the 2016 QSR Transaction at December 31, 2017.

See Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 5, Reinsurance ."

Warrant liability was $3.0 million at September 30, 2021, compared to $4.4 million at December 31, 2020.

Warrant liability was $1.4 million at March 31, 2022, compared to $2.4 million at December 31, 2021.

The decrease was driven by the exercise of outstanding warrants, and changes in the price of our common stock and other Black-Scholes model inputs between the respective measurement dates.

For further information regarding the valuation of our warrant liability and its impact on our results of operations and financial position, see Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 3, Fair Value of Financial Instruments.

Net deferred tax liability was $151.4 million at September 30, 2021 compared to $112.6 million at December 31, 2020.

The increase was primarily due to an increase in the claimed deductibility of our statutory contingency reserve, partially offset by the change in unrealized gains recorded in other comprehensive income.

Net deferred tax liability was $157.0 million at March 31, 2022, compared to $164.2 million at December 31, 2021.

The decrease was primarily due to the increase in unrealized losses recorded in other comprehensive income, partially offset by an increase in the claimed deductibility of our statutory contingency reserve.

For further information regarding income taxes and their impact on our results of operations and financial position, see Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 9, Income Taxes ."

Other liabilities increased to $12.5 million as of March 31, 2022, compared to $3.2 million as of December 31, 2021.

The increase was primarily driven by the recognition of an incremental lease liability in connection with the modification of the operating lease for our corporate headquarters in January 2022.

The following table summarizes our consolidated cash flows from operating, investing and financing activities:

Consolidated cash flows For the nine months ended September 30,

Consolidated cash flows For the three months ended March 31,

Net cash provided by (used in):

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Financing activities (4,680) (437)

Net (decrease) increase in cash and cash equivalents $ (29,677) $ 153,110

Net cash provided by operating activities was $281.4 million for the nine months ended September 30, 2021, compared to $215.0 million for the nine months ended September 30, 2020.

The increase in cash generated from operating activities year-on-year was primarily driven by growth in premiums written, with further increase tied to a decline in claims paid, partially offset by an increase in cash interest expense from period-to-period.

Cash used in investing activities for the nine months ended September 30, 2021 and 2020 reflects the purchase of fixed and short-term maturities with cash provided by operating and, as available, financing activities, and the reinvestment of coupon payments, maturities and sale proceeds within our investment portfolio.

Cash used in financing activities was $0.5 million for the nine months ended September 30, 2021, compared to cash provided by financing activities of $459.0 million for the nine months ended September 30, 2020.

Cash used in financing activities during the nine months ended September 30, 2021 primarily relates to taxes paid on the net share settlement of equity awards for certain employees.

Cash provided by financing activities for the nine months ended September 30, 2020 primarily reflects $220.3 million net cash proceeds raised in connection with our 2020 equity offering and $245.9 million net cash proceeds raised in connection with our 2020 Notes offering.

Net increase (decrease) in cash and cash equivalents $ 54,260 $ (11,420)

Net cash provided by operating activities was $80.3 million for the three months ended March 31, 2022, compared to $85.5 million for the three months ended March 31, 2021.

The decrease in cash provided by operating activities year-on-year was primarily driven by the payment of certain employee compensation costs, partially offset by growth in premiums written and a decline in claims paid during the three months ended March 31, 2022.

Cash used in investing activities for the three months ended March 31, 2022 and 2021 reflects the purchase of fixed and short-term maturities with cash provided by operating activities, and the reinvestment of coupon payments, maturities and sale proceeds within our investment portfolio.

Cash used in financing activities was $4.7 million for the three months ended March 31, 2022, compared to $0.4 million for the three months ended March 31, 2021.

Cash used in financing activities during the three months ended March 31, 2022 primarily relates to the repurchase of common stock.

Liquidity and Capital Resources

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(v) capital support for its subsidiaries;

and (vi) payment of dividends, if any, on its common stock.

(vi) repurchase of its common stock;

and (vii) payment of dividends, if any, on its common stock.

NMIH is not subject to any limitations on its ability to pay dividends except those generally applicable to corporations that are incorporated in Delaware.

Delaware law provides that dividends are only payable out of a corporation's surplus or recent net profits (subject to certain limitations).

As of September 30, 2021, NMIH had $79.3 million of cash and investments.

NMIH's principal source of net cash is investment income.

As of March 31, 2022, NMIH had $106.2 million of cash and investments.

NMIH's principal sources of net cash are dividends from its subsidiaries and investment income.

NMIC has the capacity, under Wisconsin law, to pay $34.9 million of aggregate ordinary course dividends to NMIH during the twelve-month period ending December 31, 2022.

NMIH also has access to $250 million of undrawn revolving credit capacity under the 2021 Revolving Credit Facility.

See Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4, Debt.

Re One also has the capacity, under Wisconsin law, to pay $1.6 million of aggregate ordinary dividends to NMIH during the twelve-month period ending December 31, 2021.

In the future, NMIH may also benefit from ordinary course dividend capacity available from NMIC.

On February 10, 2022, our Board of Directors approved a $125 million share repurchase program through December 31, 2023, that enables the company to repurchase its common stock.

The authorization provides NMIH the flexibility to repurchase stock from time to time in the open market or in privately negotiated transactions, based on market and business conditions, stock price and other factors.

During the three months ended March 31, 2022, NMIH repurchased 235,344 shares of common stock pursuant to a trading plan under Rule 10b-18 of the Exchange Act, at a total cost of $5.0 million, including associated costs.

NMIH has entered into tax and expense-sharing agreements with its subsidiaries which have been approved by the Wisconsin OCI, with such approvals subject to change or revocation at any time.

Among such agreements, the Wisconsin OCI has approved the allocation of interest expense on the Notes and the 2021 Revolving Credit Facility to NMIC to the extent proceeds from such offering and facility are distributed to NMIC or used to repay, redeem or otherwise defease amounts raised by NMIC under prior credit arrangements that have previously been distributed to NMIC.

The Notes mature on Ju ne 19, 202 5 and bear interest at a rate of 7.375%, payable semi-annually on June 1 and December 1.

The 2020 Revolving Credit Facility matures on February 22, 2023 and accrues interest at a variable rate equal to, at our discretion, (i) a base rate (as defined in the Credit Agreement, subject to a floor of 1.00% per annum) plus a margin of 0.375% to 1.875% per annum or (ii) the Eurodollar Rate (subject to a floor of 0.00% per annum) plus a margin of 1.375% to 2.875% per annum, in each case based on the applicable corporate credit rating at the time.

The Notes mature on June 1, 2025 and bear interest at a rate of 7.375%, payable semi-annually on June 1 and December 1.

The 2021 Revolving Credit Facility matures on the earlier of (x) November 29, 2025 or (y) if any existing senior secured notes remain outstanding on such date, February 28, 2025, and accrues interest at a variable rate equal to, at our discretion, (i) a Base Rate (as defined in the 2021 Revolving Credit Facility, subject to a floor of 1.00% per annum) plus a margin of 0.375% to 1.875% per annum or (ii) the Adjusted Term SOFR Rate (as defined in the 2021 Revolving Credit Facility) plus a margin of 1.375% to 2.875% per annum, with the margin in each of (i) or (ii) based on our applicable corporate credit rating at the time.

Borrowings under the 2021 Revolving Credit Facility may be used for general corporate purposes, including to support the growth of our new business production and operations.

Under the 2021 Revolving Credit Facility, NMIH is required to pay a quarterly commitment fee on the average daily undrawn amount of 0.175% to 0.525%, based on the applicable corporate credit rating at the time.

As of September 30, 2021, the applicable commitment fee was 0.35%.

We are subject to certain covenants under the 2020 Revolving Credit Facility (as defined in the Credit Agreement), including a maximum debt-to-total capitalization ratio of 35%, a minimum liquidity requirement, a requirement to maintain compliance with the PMIERs financial requirements (subject to any GSE-approved waivers), and minimum consolidated net worth and statutory capital requirements (respectively, as defined therein).

We were in compliance with all covenants as of September 30, 2021.

As of March 31, 2022, the applicable commitment fee was 0.35%.

We are subject to certain covenants under the 2021 Revolving Credit Facility, including:

a maximum debt-to-total capitalization ratio of 35%, a requirement to maintain compliance with the private mortgage insurer eligibility requirements (PMIERs) financial requirements (subject to any GSE approved waivers), and minimum consolidated net worth and statutory capital requirements (respectively, as defined therein).

We were in compliance with all covenants at March 31, 2022.

NMIC and Re One are subject to certain capital and dividend rules and regulations prescribed by jurisdictions in which they are authorized to operate and the GSEs.

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Under Wisconsin insurance laws, an extraordinary dividend is defined as any payment or distribution that, together with other dividends and distributions made within the preceding twelve months, exceeds the lesser of (i) 10% of the insurer's statutory policyholders' surplus as of the preceding December 31 or (ii) adjusted statutory net income for the twelve-month period ending the preceding December 31 .

Re One has the capacity to pay $1.6 million of aggregate ordinary dividends to NMIH during the twelve-month period ending December 31, 2021.

NMIC reported a statutory net loss for the year ended December 31, 2020 and does not have the capacity to pay dividends to NMIH during the twelve-m onth period ended December 31, 2021 without prior approval from the Wisconsin OCI.

Since inception, neither NMIC nor Re One have paid any dividends to NMIH.

As an approved insurer under PMIERs, NMIC would generally be subject to prior GSE approval of its ability to pay dividends to NMIH if it failed to meet the financial requirements prescribed by PMIERs.

In response to the COVID-19 pandemic, the GSEs issued temporary PMIERs guidance, effective for the period from June 30, 2020 to June 30, 2021, that requires approved insurers to secure approval from the GSEs, even if the approved insurer otherwise satisfies the financial requirements prescribed by PMIERs, prior to taking any of the following actions:

(i) pay dividends, make payments of principal or increase payments of interest beyond those commitments made prior to the guidance effective date associated with surplus notes issued by

the approved insurer , make any other payments, unless related to expenses incurred in the normal course of business or to commitments made prior to the guidance effective date, or pledge or transfer asset(s) to any affiliate or investor, or (ii) enter into any new arrangements or alter any existing arrangements under tax sharing and intercompany expense-sharing agreements other than renewals and extensions of agreements in effect prior to the guidance effective date.

On June 30, 2021, the GSEs updated the temporary PMIERs guidance to permit approved insurers to pay dividends or undertake other actions described in (i) and (ii) above without securing prior approval if certain prescribed financial requirements are met during the period from July 1, 2021 to December 31, 2021.

On April 1, 2022, NMIC paid a $34.9 million ordinary course dividend to NMIH.

NMIH may require liquidity to fund the capital needs of its insurance subsidiaries.

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Under the PMIERs, NMIC must maintain available assets that are equal to or exceed a minimum risk-based required asset amount, subject to a minimum floor of $400 million.

At September 30, 2021, we reported $1,993 million available assets against $1,366 million risk-based required assets, for a $627 million "excess" funding position.

At March 31, 2022, NMIC reported $2,127 million available assets against $1,341 million risk-based required assets, for a $786 million "excess" funding position.

The risk-based required asset amount under PMIERs is determined at an individual policy-level based on the risk characteristics of each insured loan.

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however, special consideration is given under PMIERs to loans that are delinquent on homes located in an area declared by FEMA to be a Major Disaster zone eligible for Individual Assistance.

In June 2020, the GSEs issued guidance (amended and restated in each of September 2020, December 2020 and June 2021) on the risk-based treatment of loans affected by the COVID-19 crisis.

In June 2020, the GSEs issued guidance (which was subsequently amended and restated) on the risk-based treatment of loans affected by the COVID-19 pandemic.

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As such, the PMIERs generally imposes a stricter financial requirement than the state RTC standard.

As of September 30, 2021, NMIC's performing primary RIF, net of reinsurance, was approximately $23.4 billion.

As of March 31, 2022, NMIC's performing primary RIF, net of reinsurance, was approximately $24.5 billion.

NMIC ceded 100% of its pool RIF pursuant to the 2016 QSR Transaction.

Based on NMIC's total statutory capital of $1.8 billion (including contingency reserves) as of September 30, 2021, NMIC's RTC ratio was 12.7:1 Re One had total statutory capital of $38.0 million as of September 30, 2021 and a RTC ratio of 2.2:1 .

Based on NMIC's total statutory capital of $2.0 billion (including contingency reserves) as of March 31, 2022, NMIC's RTC ratio was 12.4:1.

Re One has no risk in force remaining and no longer reports a RTC ratio.

At September 30, 2021, NMIC had $2.0 billion of cash and investments, including $81 million of cash and equivalents.

At March 31, 2022, NMIC had $2.0 billion of cash and investments, including $92 million of cash and equivalents.

NMIC's cash inflow is generally significantly in excess of its cash outflow in any given period.

During the twelve-month period ended September 30, 2021, NMIC generated $316 million of cash flow from operations and received an additional $140 million of cash flow on the maturity, sale and redemption of securities held in its investment portfolio.

During the twelve-month period ended March 31, 2022, NMIC generated $302 million of cash flow from operations and received an additional $137 million of cash flow on the maturity, sale and redemption of securities held in its investment portfolio.

, are of a contractually predetermined amount and due at a contractually predetermined date).

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Our investment portfolio is comprised entirely of fixed maturity instruments.

As of September 30, 2021, the fair value of our investment portfolio was $2.1 billion and we held an additional $97.3 million of cash and equivalents.

Pre-tax book yield on the investment portfolio for the nine months ended September 30, 2021 was 2.0%.

As of March 31, 2022, the fair value of our investment portfolio was $2.0 billion and we held an additional $130.9 million of cash and equivalents.

Pre-tax book yield on the investment portfolio for the three months ended March 31, 2022 was 1.9%.

Book yield is calculated as period-to-date net investment income divided by the average amortized cost of the investment portfolio.

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The following tables present a breakdown of our investment portfolio and cash and cash equivalents by investment type and credit rating:

Percentage of portfolio's fair value September 30, 2021 December 31, 2020

Percentage of portfolio's fair value March 31, 2022 December 31, 2021

Corporate debt securities 63 % 64 %

Municipal debt securities 26 26

Asset-backed securities 5 7

Cash, cash equivalents, and short-term investments 6 4

Asset-backed securities 4 5

treasury securities and obligations of U.S.

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Investment portfolio ratings at fair value (1)

September 30, 2021 December 31, 2020

AAA 10 % 12 %

March 31, 2022 December 31, 2021

Total 100 % 100 %

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Investment Securities - Allowance for credit losses

We did not recognize an allowance for credit loss for any security in the investment portfolio as of September 30, 2021 or December 31, 2020, and we did not record any provision for credit loss for investment securities during the three or nine month periods ended September 30, 2021 or September 30, 2020.

As of September 30, 2021, the investment portfolio had gross unrealized losses of $13.3 million, of which $1.3 million had been in an unrealized loss position for a period of twelve months or longer.

As of December 31, 2020, the investment portfolio had gross unrealized losses of $512 thousand, of which $8 thousand had been in an unrealized loss position for a period of twelve months or longer.

The increase in the number of securities in and the aggregate size of the unrealized loss position as of September 30, 2021, was primarily driven by interest rate movements following the purchase date of certain securities.

Based on current facts and circumstances, we believe the unrealized losses as of September 30, 2021 are not indicative of the ultimate collectability of the current amortized cost of the securities.

We did not recognize an allowance for credit loss for any security in the investment portfolio as of March 31, 2022 or December 31, 2021, and we did not record any provision for credit loss for investment securities during the three months ended March 31, 2022 or 2021.

As of March 31, 2022, the investment portfolio had gross unrealized losses of $122.9 million, of which $29.0 million had been in an unrealized loss position for a period of twelve-months or longer.

As of December 31, 2021, the investment portfolio had gross unrealized losses of $23.2 million, of which $6.5 million had been in an unrealized loss position for a period of twelve months or longer.

The increase in the aggregate size of the unrealized loss position as of March 31, 2022, was primarily driven by interest rate movements following the purchase date of certain securities.

We evaluated the securities in an unrealized loss position as of March 31, 2022, assessing their credit ratings as well as any adverse conditions specifically related to the security.

Based upon our estimate of the amount and timing of cash flows to be collected over the remaining life of each instrument, we believe the unrealized losses as of March 31, 2022 are not indicative of the ultimate collectability of the current amortized cost of the securities.

Critical Accounting Estimates

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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-Q

Item 2. Management’s Discussion and Analysis