What changed in this filing

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Item 1. Financial Statements

2022-08-03 compared with 2022-05-05 · 184 added, 137 removed, 619 unchanged (34% of the section changed)

1 unchanged sentence

INDEX TO FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021 6

Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2022 and 2021 (Unaudited) 7

Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2022 and 2021 (Unaudited) 8

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (Unaudited) 9

Condensed Consolidated Balance Sheets as of June 30, 2022 (Unaudited) and December 31, 2021 6

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2022 and 2021 (Unaudited) 7

Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended June 30, 2022 and 2021 (Unaudited) 8

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (Unaudited) 10

Notes to Condensed Consolidated Financial Statements (Unaudited) 11

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Assets (In Thousands, except for share data)

Fixed maturities, available-for-sale, at fair value (amortized cost of $ 2,111,869 and $ 2,078,773 as of March 31, 2022 and December 31, 2021, respectively)

Fixed maturities, available-for-sale, at fair value (amortized cost of $ 2,218,344 and $ 2,078,773 as of June 30, 2022 and December 31, 2021, respectively)

$ 2,019,420 $ 2,085,931

Cash and cash equivalents (including restricted cash of $ 3,057 and $ 3,165 as of March 31, 2022 and December 31, 2021, respectively)

Cash and cash equivalents (including restricted cash of $ 2,152 and $ 3,165 as of June 30, 2022 and December 31, 2021, respectively)

72,398 76,646

21 unchanged sentences

Common stock - class A shares, $ 0.01 par value;

86,274,184 shares issued and 86,038,840 shares outstanding as of March 31, 2022 and 85,792,849 shares issued and outstanding as of December 31, 2021 ( 250,000,000 shares authorized)

86,375,154 shares issued and 84,701,092 shares outstanding as of June 30, 2022 and 85,792,849 shares issued and outstanding as of December 31, 2021 ( 250,000,000 shares authorized)

Additional paid-in capital 964,654 955,302

Treasury Stock, at cost, 235,344 and 0 common shares as of March 31, 2022 and December 31, 2021, respectively

Treasury Stock, at cost:

1,674,062 and 0 common shares as of June 30, 2022 and December 31, 2021, respectively

Accumulated other comprehensive (loss) income, net of tax ( 161,320 ) 1,485

4 unchanged sentences

NMI HOLDINGS, INC.

C ONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

For the three months ended March 31,

C ONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

For the three months ended June 30, For the six months ended June 30,

2022 2021 2022 2021

Revenues (In Thousands, except for per share data)

8 unchanged sentences

Interest expense 8,051 7,922 16,092 15,837

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

Gain from change in fair value of warrant liability ( 1,020 ) ( 658 ) ( 1,113 ) ( 453 )

Total expenses 35,031 47,110 75,725 94,848

9 unchanged sentences

Net income $ 75,444 $ 57,522 $ 143,124 $ 110,414

Other comprehensive loss, net of tax:

Unrealized losses in accumulated other comprehensive income, net of tax benefit of $ 26,176 and $ 11,997 for the quarters ended March 31, 2022 and 2021, respectively

Other comprehensive (loss) income, net of tax:

Unrealized (losses) gains in accumulated other comprehensive income (loss), net of tax (benefit) expense of $( 17,004 ) and $ 4,995 for the three months ended June 30, 2022 and 2021, and $( 43,180 ) and $( 7,003 ) for the six month ended June 30, 2022 and 2021, respectively

( 63,967 ) 18,790 ( 162,438 ) ( 26,343 )

Reclassification adjustment for realized gains included in net income, net of tax expense $ 86 for the quarter ended March 31, 2022

Other comprehensive loss, net of tax ( 98,794 ) ( 45,133 )

Comprehensive (loss) income $ ( 31,114 ) $ 7,758

Reclassification adjustment for realized gains included in net income, net of tax expense of $ 11 and $ 3 for the three months ended June 30, 2022 and 2021, and $ 97 and $ 3 for the six months ended June 30, 2022 and 2021, respectively

( 44 ) ( 10 ) ( 367 ) ( 10 )

Other comprehensive (loss) income, net of tax ( 64,011 ) 18,780 ( 162,805 ) ( 26,353 )

Comprehensive income (loss) $ 11,433 $ 76,302 $ ( 19,681 ) $ 84,061

See accompanying notes to condensed consolidated financial statements (unaudited).

2 unchanged sentences

Common Stock - Class A Additional

Paid-in Capital Treasury Stock, At Cost Accumulated Other Comprehensive Income Retained Earnings Total

Paid-in Capital Treasury Stock, At Cost Accumulated Other Comprehensive Income (Loss) Retained Earnings Total

Shares Amount

11 unchanged sentences

Balances, March 31, 2022 86,039 $ 863 $ 960,667 $ ( 5,000 ) $ ( 97,309 ) $ 675,821 $ 1,535,042

Common stock:

class A shares issued related to warrant exercises 33 * 624 — — — 624

Common stock:

class A shares issued under stock plans, net of shares withheld for employee taxes 68 1 ( 504 ) — — — ( 503 )

Repurchase of common stock ( 1,439 ) — — ( 25,371 ) — — ( 25,371 )

Share-based compensation expense — — 3,867 — — — 3,867

Change in unrealized investment gains/losses, net of tax benefit of $ 17,015

— — — — ( 64,011 ) — ( 64,011 )

Net income — — — — — 75,444 75,444

Balances, June 30, 2022 84,701 $ 864 $ 964,654 $ ( 30,371 ) $ ( 161,320 ) $ 751,265 $ 1,525,092

* During the three months ended June 30, 2022, we issued 32,659 common shares with a par value of $ 0.01 in connection with the exercise of warrants, which is not identifiable in this schedule due to rounding.

NMI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

Common Stock - Class A Additional

Paid-in Capital Accumulated Other Comprehensive Income Retained Earnings Total

Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total

Shares Amount

10 unchanged sentences

Balances, March 31, 2021 85,600 $ 856 $ 940,827 $ 8,723 $ 429,902 $ 1,380,308

* During the months ended March 31, 2021, we issued 23,750 common shares with a par value of $ 0.01 in connection with the exercise of warrants, which is not identifiable in this schedule due to rounding.

Common stock:

class A shares issued related to warrant exercises 8 * 197 — — 197

Common stock:

class A shares issued under stock plans, net of shares withheld for employee taxes 95 1 ( 286 ) — — ( 285 )

Share-based compensation expense — — 3,383 — — 3,383

Change in unrealized investment gains/losses, net of tax expense of $ 4,992

— — — 18,780 — 18,780

Net income — — — — 57,522 57,522

Balances, June 30, 2021 85,703 $ 857 $ 944,121 $ 27,503 $ 487,424 $ 1,459,905

* During the months ended March 31, 2021 and June 30, 2021, we issued 23,750 and 8,096 common shares, respectively, with a par value of $ 0.01 in connection with the exercise of warrants, which is not identifiable in this schedule due to rounding.

NMI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the three months ended March 31,

For the six months ended June 30,

Cash flows from operating activities (In Thousands)

2 unchanged sentences

Net realized investment gains ( 461 ) ( 12 )

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

Gain from change in fair value of warrant liability ( 1,113 ) ( 453 )

Depreciation and amortization 6,044 5,344

28 unchanged sentences

Net cash used in financing activities ( 30,326 ) ( 722 )

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

Net decrease in cash, cash equivalents and restricted cash ( 4,248 ) ( 58,857 )

Cash, cash equivalents and restricted cash, beginning of period 76,646 126,937

1 unchanged sentence

Supplemental disclosures of cash flow information

Interest paid $ 14,750 $ 14,750

Income taxes refunded $ — $ 457

69 unchanged sentences

Cost Gross Unrealized Fair

As of March 31, 2022 (In Thousands)

As of June 30, 2022 (In Thousands)

Treasury securities and obligations of U.S.

16 unchanged sentences

Total investments $ 2,078,773 $ 30,353 $ ( 23,195 ) $ 2,085,931

We did not own any mortgage-backed securities in our asset-backed securities portfolio at March 31, 2022 or December 31, 2021.

The following table presents a breakdown of the fair value of our corporate debt securities by issuer industry group as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

We did not own any mortgage-backed securities in our asset-backed securities portfolio at June 30, 2022 or December 31, 2021.

The following table presents a breakdown of the fair value of our corporate debt securities by issuer industry group as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

Financial 37 % 38 %

5 unchanged sentences

Total 100 % 100 %

As of March 31, 2022 and December 31, 2021, approximately $ 5.5 million and $ 5.6 million, respectively, of our cash and investments were held in the form of U.S.

As of June 30, 2022 and December 31, 2021, approximately $ 5.4 million and $ 5.6 million, respectively, of our cash and investments were held in the form of U.S.

Treasury securities on deposit with various state insurance departments to satisfy regulatory requirements.

2 unchanged sentences

Scheduled Maturities

The amortized cost and fair value of available-for-sale securities as of March 31, 2022 and December 31, 2021, by contractual maturity, are shown below.

The amortized cost and fair value of available-for-sale securities as of June 30, 2022 and December 31, 2021, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Because most asset-backed securities provide for periodic payments throughout their lives, they are listed below in a separate category.

As of March 31, 2022 Amortized

As of June 30, 2022 Amortized

(In Thousands)

14 unchanged sentences

Aging of Unrealized Losses

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

As of June 30, 2022, the investment portfolio had gross unrealized losses of $ 199.4 million, of which $ 41.7 million were associated with securities that 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 were associated with securities that had been in an unrealized loss position for a period of twelve-months or longer.

2 unchanged sentences

# of Securities Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses

As of March 31, 2022 (Dollars in Thousands)

As of June 30, 2022 (Dollars in Thousands)

Treasury securities and obligations of U.S.

3 unchanged sentences

Asset-backed securities 27 75,688 ( 4,454 ) 1 1,759 ( 282 ) 28 77,447 ( 4,736 )

Short-term investments 13 39,287 ( 20 ) — — — 13 39,287 ( 20 )

Total 543 $ 1,586,699 $ ( 157,758 ) 53 $ 244,741 $ ( 41,650 ) 596 $ 1,831,440 $ ( 199,408 )

9 unchanged sentences

Allowance for credit losses

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

The increase in the number of securities in and 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.

As of June 30, 2022 and December 31, 2021, we did not recognize an allowance for credit loss for any security in the investment portfolio and we did not record any provision for credit loss for investment securities during the three or six month periods ended June 30, 2022 or June 30, 2021.

The increase in the number of securities in and the aggregate size of the unrealized loss position as of June 30, 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 June 30, 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 June 30, 2022 are not indicative of the ultimate collectability of the current amortized cost of the securities.

Net Investment Income

The following table presents the components of net investment income:

For the three months ended March 31,

For the three months ended June 30, For the six months ended June 30,

2022 2021 2022 2021

(In Thousands)

3 unchanged sentences

The following table presents the components of net realized investment gains:

For the three months ended March 31,

For the three months ended June 30, For the six months ended June 30,

2022 2021 2022 2021

(In Thousands)

34 unchanged sentences

Variables in the model include the risk-free rate of return, dividend yield, expected life and expected volatility of our stock price.

All outstanding and unexercised warrants expired in April 2022 and there was no warrant liability remaining as of June 30, 2022.

NMI HOLDINGS, INC.

9 unchanged sentences

(Level 3) Fair Value

As of March 31, 2022 (In Thousands)

As of June 30, 2022 (In Thousands)

Treasury securities and obligations of U.S.

5 unchanged sentences

Total assets $ 208,035 $ 1,883,783 $ — $ 2,091,818

Warrant liability — — 1,416 1,416

Total liabilities $ — $ — $ 1,416 $ 1,416

Fair Value Measurements Using

16 unchanged sentences

Total liabilities $ — $ — $ 2,363 $ 2,363

There were no transfers between Level 2 and Level 3 of the fair value hierarchy during the three months ended March 31, 2022, or the year ended December 31, 2021.

There were no transfers between Level 2 and Level 3 of the fair value hierarchy during the six months ended June 30, 2022, or the year ended December 31, 2021.

NMI HOLDINGS, INC.

1 unchanged sentence

The following table provides a roll-forward of Level 3 liabilities measured at fair value:

For the three months ended March 31,

For the six months ended June 30,

Warrant Liability 2022 2021

3 unchanged sentences

Issuance of common stock on warrant exercise ( 1,250 ) ( 571 )

Balance, March 31 $ 1,416 $ 4,239

The following table outlines the key inputs and assumptions used to calculate the fair value of the warrant liability in the Black-Scholes option-pricing model as of the dates indicated:

As of March 31,

Balance, June 30 $ — $ 3,385

All outstanding and unexercised warrants expired in April 2022 and there was no warrant liability remaining as of June 30, 2022.

For more information on the expiration of warrants, see Note 8, "Warrants" .

The following table outlines the key inputs and assumptions used to calculate the fair value of the warrant liability in the Black-Scholes option-pricing model as of the date indicated:

As of June 30, 2021

Common stock price $ 22.48

Risk free interest rate 0.06 %

Expected life 0.06 years 1.06 years

Expected life 0.81 years

Expected volatility 39.0 %

Dividend yield 0 %

The changes in fair value of the warrant liability for the three months ended March 31, 2022 and 2021 were driven by the exercise of outstanding warrants, as well as changes in the price of our common stock and other Black-Scholes model inputs during the respective periods.

The change in fair value of the warrant liability for the six months ended June 30, 2022 was primarily driven by the exercise of certain outstanding warrants and the unexercised expiration of all remaining warrants at their contractual maturity in April 2022.

The change in fair value of the warrant liability for the six months ended June 30, 2021 was driven by the exercise of outstanding warrants, as well as changes in the price of our common stock and other Black-Scholes model inputs during the respective periods.

Financial Instruments not Measured at Fair Value

On June 19, 2020, we issued $ 400.0 million aggregate principal amount of senior secured notes that mature on June 1, 2025 (the Notes) and used a portion of the proceeds from the Notes offering to repay the outstanding amount due under our $ 150 million term loan (2018 Term Loan).

At March 31, 2022, the Notes were carried at a cost of $ 395.0 million, net of unamortized debt issuance costs of $ 5.0 million, and had a fair value of $ 421.0 million as assessed under our Level 2 hierarchy.

At June 30, 2022, the Notes were carried at a cost of $ 395.3 million, net of unamortized debt issuance costs of $ 4.7 million, and had a fair value of $ 397.2 million as assessed under our Level 2 hierarchy.

At December 31, 2021, the Notes were carried at a cost of $ 394.6 million, net of unamortized debt issuance costs of $ 5.4 million, and had a fair value of $ 454.6 million.

Senior Secured Notes

At March 31, 2022, we had $ 400.0 million aggregate principal amount of senior secured notes outstanding.

At June 30, 2022, we had a $ 400.0 million aggregate principal amount of senior secured notes outstanding.

The Notes were issued pursuant to an indenture dated June 19, 2020 (the Indenture) and bear interest at a rate of 7.375 %, payable semi-annually on June 1 and December 1.

3 unchanged sentences

At any time on or after March 1, 2025, we may elect to redeem the Notes in whole or in part at a price equal to 100 % of the aggregate principal amount of the Notes to be redeemed plus accrued and unpaid interest thereon.

From time to time prior to June 1, 2022, we may also elect to use proceeds raised from one or more equity offerings to redeem up to 40 % of the aggregate principal amount of the Notes at a price equal to 107.375 % of the aggregate principal amount thereof plus accrued and unpaid interest thereon, subject to certain exceptions.

NMI HOLDINGS, INC.

3 unchanged sentences

Such amounts will be amortized over the contractual life of the Notes using the effective interest method.

At March 31, 2022 and December 31, 2021, approximately $ 5.0 million and $ 5.4 million, respectively, of unamortized debt issuance costs remained.

At March 31, 2022 and December 31, 2021, $ 9.8 million and $ 2.5 million, respectively, of accrued and unpaid interest on the Notes was included in "Accounts Payable and Accrued Expenses" on the consolidated balance sheet.

At June 30, 2022 and December 31, 2021, approximately $ 4.7 million and $ 5.4 million, respectively, of unamortized debt issuance costs remained.

At June 30, 2022 and December 31, 2021, $ 2.5 million of accrued and unpaid interest on the Notes was included in "Accounts Payable and Accrued Expenses" on the consolidated balance sheet.

2021 Revolving Credit Facility

On November 29, 2021, we amended our $ 110 million senior secured revolving credit facility (the 2020 Revolving Credit Facility and as amended, the 2021 Revolving Credit Facility), expanding the lender group, increasing the revolving capacity to $ 250 million, and extending the maturity from February 22, 2023 to the earlier of (x) November 29, 2025, or (y) if any existing senior secured notes remain outstanding on such date, February 28, 2025.

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, and accrue 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.

As of March 31, 2022, no amount was drawn under the 2021 Revolving Credit Facility.

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, and accrue 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 Secured Overnight Financing 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.

As of June 30, 2022 and December 31, 2021, no amount was drawn under the 2021 Revolving Credit Facility.

Under the 2021 Revolving Credit Facility, we are 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 March 31, 2022, the applicable commitment fee was 0.35 %.

For the three months ended March 31, 2022, we recorded $ 0.2 million of commitment fees in interest expense.

As of June 30, 2022, the applicable commitment fee was 0.35 %.

For the three and six months ended June 30, 2022, we recorded $ 0.2 million and $ 0.4 million of commitment fees in interest expense, respectively.

On July 21, 2022, Moody's upgraded its financial strength rating of NMIC from "Baa2" to "Baa1" and its rating of NMIH's Notes from "Ba2" to "Ba1".

As a result of the upgrade, the commitment fee due under the 2021 Revolving Credit Facility will be reduced to 0.30 %.

We incurred debt issuance costs of $ 1.1 million in connection with the 2021 Revolving Credit Facility, and had $ 0.6 million of unamortized debt issuance costs associated with the 2020 Revolving Credit Facility remaining at the time of its amendment and replacement.

Combined unamortized debt issuance will be amortized through interest expense on a straight-line basis over the contractual life of the 2021 Revolving Credit Facility.

At March 31, 2022, remaining unamortized deferred debt issuance costs were $ 1.5 million.

At June 30, 2022, remaining unamortized deferred debt issuance costs were $ 1.4 million.

We are subject to certain covenants under the 2021 Revolving Credit Facility, including, but not limited to, the following:

a maximum debt-to-total capitalization ratio of 35 %, 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.

We were in compliance with all covenants at June 30, 2022.

We enter into third-party reinsurance transactions to actively manage our risk, ensure compliance with PMIERs, state regulatory and other applicable capital requirements, (respectively, as defined therein), and support the growth of our business.

3 unchanged sentences

The effect of our reinsurance agreements on premiums written and earned is as follows:

For the three months ended

March 31, 2022 March 31, 2021

For the three months ended For the six months ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

(In Thousands)

9 unchanged sentences

Excess-of-loss reinsurance

Insurance-linked note excess-of-loss reinsurance transactions

NMIC is a party to reinsurance agreements with Oaktown Re Ltd., Oaktown Re II Ltd., Oaktown Re III Ltd., Oaktown Re IV Ltd., Oaktown Re V Ltd., Oaktown Re VI Ltd., and Oaktown Re VII Ltd.

4 unchanged sentences

NMIC makes risk premium payments to the Oaktown Re Vehicles for the applicable outstanding reinsurance coverage amount and pays an additional amount for anticipated operating expenses (capped at $ 250 thousand per year, except with respect to Oaktown Re Ltd., for which the cap is $ 300 thousand per year).

NMIC ceded aggregate premiums to the Oaktown Re Vehicles of $ 10.9 million and $ 9.4 million during the three months ended March 31, 2022 and 2021, respectively.

The increase in premiums ceded year-on-year is due to the inception of the excess-of-loss reinsurance agreements that NMIC entered in with Oaktown Re VI Ltd.

and Oaktown VII Ltd.

NMIC ceded aggregate premiums to the Oaktown Re Vehicles of $ 10.1 million and $ 21.1 million during the three and six months ended June 30, 2022, respectively, and $ 10.2 million and $ 19.6 million during the three and six months ended June 30, 2021, respectively.

NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure under each excess-of-loss agreement.

NMIC did not cede any incurred losses on covered policies to the Oaktown Re Vehicles during the three months ended March 31, 2022 and 2021, as the aggregate first layer risk retention for each applicable agreement was not exhausted during such periods.

NMIC did not cede any incurred losses on covered policies to the Oaktown Re Vehicles during the three and six months ended June 30, 2022 and 2021, as the aggregate first layer risk retention for each applicable agreement was not exhausted during such periods.

Under the terms of each excess-of-loss reinsurance agreement, the Oaktown Re Vehicles are required to fully collateralize their outstanding reinsurance coverage amount to NMIC with funds deposited into segregated reinsurance trusts.

8 unchanged sentences

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.

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).

As of March 31, 2022, the 2018 and 2019 ILN Transactions were deemed to be in Lock Out

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

triggered (each, a Lock-Out Event).

As of June 30, 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.

2 unchanged sentences

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.

Effective March 25, 2022 and April 25, 2022, NMIC exercised its optional clean-up call to terminate the 2017 and 2020-1 ILN Transactions, respectively.

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

and Oaktown Re IV Ltd.

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

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

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 outstanding ILN Transaction.

Current amounts are presented as of March 31, 2022.

The following table presents the inception date, covered production period, initial and current reinsurance coverage amount, and initial and current first layer retained aggregate loss under each outstanding ILN Transaction.

Current amounts are presented as of June 30, 2022.

( $ values in thousands)

2 unchanged sentences

2019 ILN Transaction July 30, 2019 6/1/2018 - 6/30/2019 326,905 231,877 123,424 122,489

2020-1 ILN Transaction (5)

July 30, 2020 7/1/2019 - 3/31/2020 322,076 35,409 169,514 169,463

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

9 unchanged sentences

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

(5) 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.

(6) As of March 31, 2022, the current reinsurance coverage amount on the 2021-2 ILN Transactions is equal to the initial reinsurance coverage amount, as the reinsurance coverage provided by Oaktown Re VII Ltd.

(5) As of June 30, 2022, the current reinsurance coverage amount on the 2021-2 ILN Transactions is equal to the initial reinsurance coverage amount, as the reinsurance coverage provided by Oaktown Re VII Ltd.

will not begin to amortize until a target credit enhancement level is reached.

Under the terms of our ILN Transactions, we are required to maintain a certain level of restricted funds in premium deposit accounts with Bank of New York Mellon until the respective notes have been redeemed in full.

"Cash and cash equivalents" on our consolidated balance sheet includes restricted amounts of $ 3.1 million and $ 3.2 million as of March 31, 2022 and December 31, 2021, respectively.

"Cash and cash equivalents" on our consolidated balance sheet includes restricted amounts of $ 2.2 million and $ 3.2 million as of June 30, 2022 and December 31, 2021, respectively.

The restricted balances required under these transactions will decline over time as the outstanding principal balance of the respective insurance-linked notes are amortized.

Traditional excess-of-loss reinsurance transaction

Effective April 1, 2022, NMIC entered into a reinsurance agreement with a broad panel of third-party reinsurers that provides for aggregate excess-of-loss reinsurance coverage on a defined portfolio of mortgage insurance policies primarily written between October 1, 2021, and March 31, 2022 (the 2022-1 XOL Transaction).

Under the agreement, NMIC retains $ 133.4 million first layer aggregate loss exposure on covered policies and the reinsurers then provide second layer loss protection up to a defined reinsurance coverage amount.

The reinsurance coverage amount is set to approximate the PMIERs minimum required assets of the reference pool and decreases from the inception of the agreement over a ten-year period in the event the PMIERs minimum required assets of the pool decline.

The outstanding reinsurance coverage amount under the 2022-1 XOL Transaction was $ 286.6 million as of June 30, 2022.

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

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Under the terms of the treaty, NMIC makes risk premium payments to the reinsurers for the outstanding reinsurance coverage amount, and ceded aggregate premiums of $ 2.9 million during the three and six months ended June 30, 2022.

NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure under the 2022-1 XOL Transaction.

NMIC did not cede any incurred losses on covered policies under the treaty during the three and six months ended June 30, 2022, as its aggregate first layer risk retention was not exhausted during such periods.

The 2022-1 XOL Transaction is scheduled to terminate on March 31, 2032.

NMIC holds an optional termination right which provides it the discretion to terminate the transaction on or after April 1, 2027.

NMIC may also elect to terminate the transaction at any point if the outstanding reinsurance coverage amount amortizes to 10 % or less of the reinsurance coverage amount provided at inception, or if it determines that it will no longer be able to take full PMIERs asset credit for the coverage.

Additionally, under the terms of the treaty, NMIC may selectively terminate its engagement with individual reinsurers under certain circumstances.

Such selective termination rights arise when, among other reasons, a reinsurer experiences a deterioration in its capital position below a prescribed threshold, and/or a reinsurer breaches (and fails to cure) its collateral posting obligation.

Each of the third-party reinsurance providers that is party to the 2022-1 XOL Transaction 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.

We actively monitor the counterparty credit profiles of our reinsurers and each is required to partially collateralize its obligations under the 2022-1 XOL Transaction.

Quota share reinsurance

1 unchanged sentence

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 Standard & Poor's Rating Service (S&P), A.M.

Best Company, Inc.

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

Best or both.

16 unchanged sentences

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.

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NMIC may terminate any or all of the QSR Transactions without penalty if, due to a change in PMIERs requirements, it is no longer able to take full PMIERs asset credit for the risk-in-force (RIF) ceded under the respective agreements.

7 unchanged sentences

The termination has no effect on the cession of pool risk under the 2016 QSR Transaction.

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table shows amounts related to the QSR Transactions:

For the three months ended

March 31, 2022 March 31, 2021

As of and for the three months ended As of and for the six months ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

(In Thousands)

1 unchanged sentence

Ceded premiums earned ( 30,231 ) ( 27,537 ) ( 59,236 ) ( 53,284 )

Ceded claims and claim expenses ( 159 ) 1,180

Ceded claims and claim (benefits) expenses ( 403 ) 1,194 ( 562 ) 2,374

Ceding commission earned 6,146 5,961 12,032 11,123

8 unchanged sentences

NMIC's reinsurance recoverable balance is further supported by trust accounts established and maintained by each reinsurer in accordance with the PMIERs funding requirements for risk ceded to non-affiliates.

The reinsurance recoverable on loss reserves related to the 2016 QSR Transaction was $ 4.6 million as of March 31, 2022.

The reinsurance recoverable on loss reserves related to the 2016 QSR Transaction was $ 4.1 million as of June 30, 2022.

In accordance with the terms of the 2018, 2020, 2021 and 2022 QSR Transactions, cash payments for ceded premiums earned are settled on a quarterly basis, offset by amounts due to NMIC for ceding and profit commissions.

1 unchanged sentence

NMIC's reinsurance recoverable balance is supported by trust accounts established and maintained by each reinsurer in accordance with the PMIERs funding requirements for risk ceded to non-affiliates.

The aggregate reinsurance recoverable on loss reserves related to the 2018, 2020, 2021 and 2022 QSR Transactions was $ 15.5 million as of March 31, 2022.

The aggregate reinsurance recoverable on loss reserves related to the 2018, 2020, 2021 and 2022 QSR Transactions was $ 15.5 million as of June 30, 2022.

We remain directly liable for all claim payments if we are unable to collect reinsurance recoverable due from our reinsurers and, as such, we actively monitor and manage our counterparty credit exposure to our reinsurance providers.

1 unchanged sentence

We actively monitor the counterparty credit profiles of our reinsurers and each is required to partially collateralize its obligations under the terms of our QSR Transactions.

The allowance for credit loss established on our reinsurance recoverable was deemed immaterial at March 31, 2022 and December 31, 2021.

The allowance for credit loss established on our reinsurance recoverable was deemed immaterial at June 30, 2022 and December 31, 2021.

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Reserves for Insurance Claims and Claim Expenses

3 unchanged sentences

We also establish reserves for claim expenses, which represent the estimated cost of the claim administration process, including legal and other fees, as well as other general expenses of administering the claim settlement process.

As of March 31, 2022, we had 5,238 primary loans in default and held gross reserves for insurance claims and claim expenses of $ 102.4 million.

During the three months ended March 31, 2022, we paid 19 claims totaling $ 0.4 million, all of which were covered under the QSR Transactions representing $ 0.1 million of ceded claims and claim expenses.

As of June 30, 2022, we had 4,271 primary loans in default and held gross reserves for insurance claims and claim expenses of $ 98.5 million.

During the six months ended June 30, 2022, we paid 43 claims totaling $ 0.9 million, including 41 claims covered under the QSR Transactions representing $ 0.2 million of ceded claims and claim expenses.

In 2013, we entered into a pool insurance transaction with Fannie Mae.

1 unchanged sentence

We only establish reserves for pool risk if we expect claims to exceed this deductible.

At March 31, 2022, 70 loans in the pool were in default.

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

At June 30, 2022, 57 loans in the pool were in default.

These 57 loans represented approximately $ 4.1 million of RIF.

Due to the size of the remaining deductible, our expectation that a limited number of loans in default will progress to a claim and the expected severity on such claim submissions (all loans in the pool had loan-to-value (LTV) ratios under 80 % at origination), we did not establish any case or IBNR reserves for pool risk at March 31, 2022.

In connection with the settlement of pool claims, we applied $ 1.0 million to the pool deductible through March 31, 2022.

At March 31, 2022, the remaining pool deductible was $ 9.4 million.

In connection with the settlement of pool claims, we applied $ 1.0 million to the pool deductible through June 30, 2022.

At June 30, 2022, the remaining pool deductible was $ 9.4 million.

We have not paid any pool claims to date.

100 % of our pool RIF is reinsured under the 2016 QSR Transaction.

We had 5,238 loans in default in our primary insured portfolio as of March 31, 2022, which represented a 0.99 % default rate against 526,976 to tal policies in-force.

We had 11,090 loans in default in our primary insured portfolio as of March 31, 2021, which represented a 2.54 % default rate against 436,652 total policies in-force.

Although our default count declined from March 31, 2021 to March 31, 2022, the population remains elevated compared to our 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 Coronavirus Aid, Relief and Economic Security (CARES) Act or similar programs made available by private lenders.

We had 4,271 loans in default in our primary insured portfolio as of June 30, 2022, which represented a 0.77 % default rate against 551,543 to tal policies in-force.

We had 8,764 loans in default in our primary insured portfolio as of June 30, 2021, which represented a 1.86 % default rate against 471,794 total policies in-force.

Although our default count declined from June 30, 2021 to June 30, 2022, the population remains elevated compared to our 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 Coronavirus Aid, Relief and Economic Security (CARES) Act or similar programs made available by private lenders.

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

4 unchanged sentences

In response to the COVID-19 pandemic, the FHFA and GSEs introduced new repayment and loan modification options to further assist borrowers with their transition out of forbearance programs and default status.

We generally observe that forbearance, repayment and modification, and other assistance programs aid affected borrowers and drive higher cure rates on defaults than would otherwise be expected on similarly situated loans that did not benefit from broad-based assistance programs.

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

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.

NMI HOLDINGS, INC.

1 unchanged sentence

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,

For the six months ended June 30,

(In Thousands)

23 unchanged sentences

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

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.

Amounts are presented net of reinsurance and included $ 14.0 million attributed to net case reserves and $ 4.5 million attributed to net IBNR reserves for the six months ended June 30, 2022 and $ 9.8 million attributed to net case reserves and $ 5.6 million attributed to net IBNR reserves for the six months ended June 30, 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 $ 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.

Amounts are presented net of reinsurance and included $ 17.0 million attributed to net case reserves and $ 4.7 million attributed to net IBNR reserves for the six months ended June 30, 2022 and $ 1.1 million attributed to net case reserves and $ 5.0 million attributed to net IBNR reserves for the six months ended June 30, 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 $ 89.7 million related to prior year defaults remained as of March 31, 2022.

Gross reserves of $ 74.9 million related to prior year defaults remained as of June 30, 2022.

Earnings per Share (EPS)

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

For the three months ended March 31,

For the three months ended June 30, For the six months ended June 30,

2022 2021 2022 2021

(In Thousands, except for per share data)

10 unchanged sentences

Anti-dilutive shares 141 2 52 1

We issued 992 thousand warrants in connection with a private placement of our common stock in April 2012, of which 133 thousand remained outstanding available for exercise at March 31, 2022.

Each warrant gives the holder thereof the right to purchase one share of common stock at an exercise price equal to $ 10.00 .

We issued 992 thousand warrants in connection with a private placement of our common stock in April 2012 with a ten-year contractual term that expired in April, 2022.

Each warrant provided the holder thereof the right to purchase one share of common stock at an exercise price equal to $ 10.00 .

The warrants were issued with an aggregate fair value of $ 5.1 million.

During the three months ended March 31, 2022, 66 thousand warrants were exercised resulting in the issuance of 51 thousand shares of common stock.

On April 24, 2022, 90 thousand warrants expired unexercised, resulting in a gain of approximately $ 0.9 million.

No warrants remained outstanding as of June 30, 2022.

During the three months ended June 30, 2022, 44 thousand warrants were exercised resulting in the issuance of 33 thousand shares of common stock.

Upon exercise, we reclassified approximately $ 0.4 million of warrant fair value from warrant liability to additional paid-in capital.

During the three months ended March 31, 2021, 27 thousand warrants were exercised resulting in the issuance of 24 thousand shares of common stock.

During the six months ended June 30, 2022, 110 thousand warrants were exercised resulting in the issuance of 84 thousand shares of common stock.

Upon exercise, we reclassified approximately $ 1.3 million of warrant fair value from warrant liability to additional paid-in capital.

During the three months ended June 30, 2021, 14 thousand warrants were exercised resulting in the issuance of eight thousand shares of common stock.

Upon exercise, we reclassified approximately $ 0.2 million of warrant fair value from warrant liability to additional paid-in capital.

During the six months ended June 30, 2021, 41 thousand warrants were exercised resulting in the issuance of 32 thousand shares of common stock.

Upon exercise, we reclassified approximately $ 0.6 million of warrant fair value from warrant liability to additional paid-in capital.

We are a U.S.

3 unchanged sentences

federal and various state income tax returns on behalf of itself and its subsidiaries.

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

Our effective tax rate on our pre-tax income was 22.4 % and 22.2 % for the three and six months ended June 30, 2022, respectively, compared to 21.9 % and 21.8 % for the three and six months ended June 30, 2021, respectively.

Our provision for income taxes for interim reporting periods is established based on our estimated annual effective tax rate for a given year.

2 unchanged sentences

As a mortgage guaranty insurance company, we are eligible to claim a tax deduction for our statutory contingency reserve balance, subject to certain limitations outlined under IRC Section 832(e), and only to the extent we acquire tax and loss bonds in an amount equal to the tax benefit derived from the claimed deduction, which is our intent.

As a result, our interim provision for income taxes for the three months ended March 31, 2022 represents a change in our net deferred tax liability.

As of March 31, 2022 and December 31, 2021, we held $ 89.2 million of tax and loss bonds in "Other assets" on our consolidated balance sheet.

As a result, our interim provision for income taxes for the three and six months ended June 30, 2022 represents a change in our net deferred tax liability.

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

As of June 30, 2022 and December 31, 2021, we held $ 89.2 million of tax and loss bonds in "Other assets" on our consolidated balance sheet.

Stockholders' Equity

1 unchanged sentence

The authorization provides us 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, we repurchased 235,344 shares pursuant to a trading plan under Rule 10b-18 of the Exchange Act at an average price of $ 21.23 per share, e xcluding associated costs.

We have two operating lease agreements related to our corporate headquarters and a data center facility for which we recognized operating right-of-use (ROU) assets and lease liabilities of $ 11.3 million and $ 12.2 million in "Other assets" and "Other liabilities," respectively, on our consolidated balance sheet as of March 31, 2022.

During the three and six months ended June 30, 2022, we repurchased 1.4 million and 1.7 million shares, respectively, at average prices of $ 17.61 and $ 18.12 per share (excluding associated costs) pursuant to a trading plan under Rule 10b-18 of the Exchange Act.

As of June 30, 2022, $ 94.6 million of repurchase authority remained available under the program.

We have two operating lease agreements related to our corporate headquarters and a data center facility for which we recognized operating right-of-use (ROU) assets and lease liabilities of $ 11.0 million and $ 12.4 million in "Other assets" and "Other liabilities," respectively, on our consolidated balance sheet as of June 30, 2022.

As of December 31, 2021, we recognized operating ROU assets and lease liabilities of $ 2.6 million and $ 2.9 million, respectively.

As of March 31, 2022 and December 31, 2021, we did no t have any finance leases.

As of June 30, 2022 and December 31, 2021, we did no t have any finance leases.

In January 2022, we modified the lease for our corporate headquarters, securing a reduction in pricing and incremental leasehold improvement concessions, reducing the square footage of leased space and extending the remaining term through March 2030.

In February 2022, we renewed the lease of our data center facility, extending its term through January 2024.

Upon the respective modification and extension, the ROU asset and liability associated with each lease was remeasured, using our current estimated incremental borrowing rate, resulting in an aggregate increase to ROU assets and lease liabilities of $ 9.7 million during the three months ended March 31, 2022.

The following table provides a summary of our ROU asset and lease liability assumptions as of March 31, 2022:

The following table provides a summary of our ROU asset and lease liability assumptions as of June 30, 2022:

Weighted-average remaining lease term 7.6 years

Weighted-average discount rate 6.50 %

Cash paid on our operating leases for the three months ended March 31, 2022 and 2021, was $ 29 thousand and $ 0.6 million, respectively.

Lease expenses incurred for the three months ended March 31, 2022 and 2021, were $ 0.5 million and $ 0.6 million, respectively.

Future payments due under our existing operating leases as of March 31, 2022 are as follows:

Cash paid on our operating leases for the three and six months ended June 30, 2022 was $ 44 thousand and $ 0.1 million, respectively, compared to $ 0.6 million and $ 1.3 million for the three and six months ended June 30, 2021, respectively.

Lease expenses incurred for the three and six months ended June 30, 2022 were $ 0.5 million and $ 1.0 million, respectively, compared to $ 0.6 million and $ 1.1 million for the three and six months ended June 30, 2021 .

Future payments due under our existing operating leases as of June 30, 2022 are as follows:

($ In Thousands)

6 unchanged sentences

The lease for our corporate headquarters includes an option to renew for an additional five years at prevailing market rates at the time of renewal.

This renewal option is not included in the calculation of future lease payments due under the existing lease as presented above as it is not reasonably certain to be exercised.

This renewal option is

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

not included in the calculation of future lease payments due under the existing lease as presented above as it is not reasonably certain to be exercised.

Premium Receivable

2 unchanged sentences

We recognize an allowance for credit losses for premiums receivable based on credit losses expected to arise over the life of the receivable.

Due to the nature of our insurance policies (a necessary precondition for access to mortgage credit for covered borrowers) and the short duration of the related receivables, we do not typically experience credit losses against our premium receivables and the allowance for credit loss established on premium receivable was deemed immaterial at March 31, 2022 and December 31, 2021.

Premiums receivable may be written off prior to 120 days in the ordinary course of business for non-credit events including, but not limited to, the modification or refinancing of an underlying insured loan.

We established a $ 1.8 million and $ 2.3 million reserve for premium write-offs at March 31, 2022 and December 31, 2021, respectively.

We established a $ 1.7 million and $ 2.3 million reserve for premium write-offs at June 30, 2022 and December 31, 2021, respectively.

Regulatory Information

3 unchanged sentences

The Wisconsin OCI recognizes only statutory accounting practices prescribed or permitted by the state of Wisconsin for determining and reporting the financial condition and results of operations of an insurance company and for determining its solvency under Wisconsin insurance laws.

NMIC and Re One generated combined statutory net income of $ 18.6 million and $ 6.4 million for the three months ended March 31, 2022 and 2021, respectively.

NMIC and Re One generated combined statutory net income of $ 25.6 million and $ 44.2 million for the three and six months ended June 30, 2022, respectively, compared to $ 8.8 million and $ 15.1 million for the three and six months ended June 30, 2021, respectively.

The Wisconsin OCI has imposed a prescribed accounting practice for the treatment of statutory contingency reserves that differs from the treatment promulgated by the NAIC.

3 unchanged sentences

While such treatment impacts NMIC's statutory net income, it does not have an effect on NMIC's statutory capital position.

The following table presents NMIC's statutory surplus, contingency reserve, statutory capital and risk-to-capital (RTC) ratio as of March 31, 2022 and December 31, 2021.

March 31, 2022 December 31, 2021

The following table presents NMIC's statutory surplus, contingency reserve, statutory capital and risk-to-capital (RTC) ratio as of June 30, 2022 and December 31, 2021.

June 30, 2022 December 31, 2021

(In Thousands)

5 unchanged sentences

(1) Represents the total of the statutory surplus and contingency reserve.

Re One had $ 5.6 million of statutory capital at March 31, 2022 and December 31, 2021.

Re One had $ 5.6 million of statutory capital at June 30, 2022 and December 31, 2021.

Effective October 1, 2021, the reinsurance agreement between NMIC and Re One was commuted and all ceded risk was transferred back to NMIC.

7 unchanged sentences

Subsequent Event

Excess-of-loss reinsurance (XOL) Agreement

On May 2, 2022, NMIC entered into a reinsurance agreement with a broad panel of highly rated reinsurers that provides for $ 289.7 million of aggregate excess-of-loss reinsurance coverage at inception for new delinquencies on an existing portfolio of mortgage insurance policies primarily written between October 1, 2021, and March 31, 2022 (2022-1 XOL Transaction).

For the reinsurance coverage period, NMIC will retain the first layer of $ 133.4 million of aggregate losses and reinsurers then provide second layer coverage up to $ 289.7 million, subject to retained participation limits.

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

As of March 31, 2022, we had 133 thousand unexercised warrants.

They were issued on April 24, 2012 with a contractual term of ten years expiring on April 24, 2022.

On April 24, 2022, 90 thousand warrants expired unexercised, resulting in a gain of approximately $ 0.9 million.

Effective July 1, 2022, NMIC entered into a quota share reinsurance treaty that provides coverage primarily for a seasoned pool of mortgage insurance policies that had previously been covered under the now retired 2017 and 2020-1 ILN Transactions.

Under the terms of the agreement, NMIC will cede premiums earned related to 95 % of the net risk on eligible policies after the consideration of coverage provided by existing QSR Transactions, in exchange for reimbursement of ceded claims and claims expenses on covered policies, as well as a ceding commission equal to 35 % and profit commission of up to 55 % of ceded premiums.

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 1. Financial Statements