What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-03 compared with 2022-05-05 · 201 added, 175 removed, 622 unchanged (38% of the section changed)

16 unchanged sentences

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 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.

As of June 30, 2022, we had issued master policies with 1,812 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 June 30, 2022, we had $168.6 billion of primary insurance-in-force (IIF) and $43.3 billion of primary risk-in-force (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 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.

profitability.

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

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

As of June 30, 2022, we had 246 emp loyees.

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

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We discuss below our results of operations for the periods presented, as well as the conditions and trends that have impacted or are expected to impact our business, including new insurance writings, the composition of our insurance portfolio and other factors that we expect to impact our results.

COVID-19 Developments

Conditions and Trends Affecting Our Business

COVID-19 and Other Developments

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.

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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

It is also possible that emerging macroeconomic factors, including persistent inflation, flagging consumer confidence and increasing jobless claims could have a pronounced impact on the housing market, the mortgage insurance industry and our business in future periods.

Key Factors Affecting Our Results

New Insurance Written (NIW), Insurance-In-Force and Risk-In-Force

NIW is the aggregate unpaid principal balance of mortgages underpinning new policies written during a given period.

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

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

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.

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

While most of our new business is priced through Rate GPS, we also continue to offer a rate card pricing option to a limited number of lender customers who require a rate card for operational reasons.

While most of our new business is priced through Rate GPS, we also

continue to offer a rate card pricing option to a limited number of lender customers who require a rate card for operational reasons.

We believe the introduction and utilization of Rate GPS provides us with a more granular and analytical approach to evaluating and pricing risk, and that this approach enhances our ability to continue building a high-quality mortgage insurance portfolio and delivering attractive risk-adjusted returns.

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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 March 31, 2022 were non-refundable under most cancellation scenarios.

Substantially all of our single premium policies in force as of June 30, 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.

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Quota share reinsurance

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.

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.

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Excess-of-loss reinsurance

Insurance-linked note excess-of-loss reinsurance transactions

NMIC is party to reinsurance agreements with the Oaktown Re Vehicles that provide it with aggregate excess-of-loss reinsurance coverage on defined portfolios of mortgage insurance policies.

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

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.

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 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 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.

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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 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, 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

Current amounts are presented as of June 30, 2022.

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

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

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

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(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.

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

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delinquency triggers for the 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.

Traditional excess-of-loss reinsurance transaction

Effective April 1, 2022, NMIC secured $289.7 million of aggregate excess-of-loss reinsurance coverage at inception on a defined portfolio of mortgage insurance policies primarily written between October 1, 2021, and March 31, 2022 from a broad panel of highly rated reinsurers (the 2022-1 XOL Transaction).

Under the agreement, NMIC retains $133.4 million of first layer aggregate loss exposure on covered policies, of which all remained as of June 30, 2022, and the reinsurers then provide second layer loss protection up to a defined reinsurance coverage amount.

The reinsurance coverage amount decreases from $289.7 million at inception over a ten-year period as the PMIERs minimum required assets of the underlying covered mortgages declines and was $286.6 million as of June 30, 2022.

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

NMIC holds optional termination rights under the 2022-1 XOL Transaction, including, among others, an option to terminate the transaction on or after April 1, 2027 at its discretion.

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 S&P, A.M.

Best or both.

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

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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

March 31, 2022 March 31, 2021

IIF NIW IIF NIW

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

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

IIF NIW IIF NIW NIW

(In Millions)

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Total $ 169,753 $ 16,611 $ 138,058 $ 22,751 $ 30,776 $ 49,148

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.

NIW for the three and six months ended June 30, 2022 was $16.6 billion and $30.8 billion compared to $22.8 billion and $49.1 billion for the three and six months ended June 30, 2021.

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

Total IIF increased 23% at June 30, 2022 compared to June 30, 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 76.0% at June 30, 2022 from 53.9% at June 30, 2021, reflecting a slowdown in the pace of refinancing activity during the intervening twelve month period driven by 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

March 31, 2022 March 31, 2021

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

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

(In Thousands)

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Net premiums earned 120,870 110,888 237,365 216,767

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.

For the three and six months ended June 30, 2022, net premium written decreased 6% and 3%, respectively, while net premiums earned increased 9% and 10% , respectively, compared to the three and six months ended June 30, 2021.

The decreases in net premium written were primarily driven by a decrease in single premium policy production from period to period, partially offset by growth in our monthly IIF and monthly pay policy premium receipts.

The increases in the net premium earned were 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 total premiums ceded under our reinsurance transactions.

Pool premiums written and earned for the three and six months ended June 30, 2022 and 2021, were $0.3 million and $0.6 million , and $0.4 million and $0.9 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.

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Primary portfolio trends As of and for the three months ended

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

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

($ Values In Millions, except as noted below)

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

Primary IIF As of and for the three months ended

March 31, 2022 March 31, 2021

Primary IIF 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 Millions)

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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 March 31, 2022 As of March 31, 2021

Primary IIF and RIF As of June 30, 2022 As of June 30, 2021

IIF RIF IIF RIF

(In Millions)

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

June 30, 2022 $ 30,249 $ 7,972 $ — $ —

2021 76,657 19,522 48,314 11,986

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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

March 31, 2022 March 31, 2021

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

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

(In Millions)

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Weighted average FICO 751 754 750 755

Primary NIW by LTV For the three months ended

March 31, 2022 March 31, 2021

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

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

(In Millions)

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Weighted average LTV 92.2 % 91.3 % 92.1 % 91.1 %

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

March 31, 2022 March 31, 2021

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

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

(In Millions)

Purchase $ 16,203 $ 18,911 $ 29,601 $ 36,820

408 3,840 1,175 12,328

Total $ 16,611 $ 22,751 $ 30,776 $ 49,148

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Primary IIF by FICO As of

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021

($ Values In Millions)

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Primary RIF by FICO As of

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021

($ Values In Millions)

7 unchanged sentences

Primary IIF by LTV As of

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021

($ Values In Millions)

5 unchanged sentences

Primary RIF by LTV As of

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021

($ Values In Millions)

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Primary RIF by Loan Type As of

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021

Fixed 99 % 99 %

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Total 100 % 100 %

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

As of March 31, 2022

The table below presents selected primary portfolio statistics, by book year, as of June 30, 2022.

As of June 30, 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)

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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.

The distribution of our primary RIF as of June 30, 2022 is not necessarily representative of the geographic distribution we expect in the future.

Top 10 primary RIF by state As of

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021

California 10.8 % 10.3 %

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Illinois 3.9 3.8

Colorado 3.7 4.1

Washington 3.9 3.6

Colorado 3.7 4.1

Maryland 3.5 3.9

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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 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.

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.

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

For the three months ended For the six months ended

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

(In Thousands)

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Prior years (3)

356 548 676 1,040

Total claims and claim expenses paid 382 548 702 1,052

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(2) Related to insured loans with their most recent defaults occurring in the current year.

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 $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.

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 $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.

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

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

Beginning default inventory 5,238 11,090 6,227 12,209

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Ending default inventory 4,271 8,764 4,271 8,764

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.

Ending default inventory declined from June 30, 2021 to June 30, 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 continued to recede.

While our default population declined from June 30, 2021 to June 30, 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 June 30, 2022, 2,400 of our 4,271 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

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)

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Average amount paid per claim

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

$ 20 $ 37 $ 20 $ 37

46 % 66 % 43 % 64 %

(1) Count include s 10 and 16 claims settled without payment during the three and six months ended June 30, 2022, respectively, and three and four claims settled without payment during the three and six months ended June 30, 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 19 and 16 claims during the three months ended March 31, 2022 and 2021, respectively.

We paid 24 and 43 claims during the three and six months ended June 30, 2022, respectively, and 19 and 35 claims during the three and six months ended June 30, 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 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 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.

Our claims paid experience for the three and six months ended June 30, 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 i nsure 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 six months ended June 30, 2022 was 46% and 43%, respectively, compared to 66% and 64% for the three and six months ended June 30, 2021, respectively.

Claims severity for the three and six months ended June 30, 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 March 31, 2022 As of March 31, 2021

As of June 30, 2022 As of June 30, 2021

(In Thousands)

$ 21.3 $ 10.6

Total $ 23.1 $ 11.6

1 unchanged sentence

(2) Amount includes claims adjustment expenses.

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.

Average reserve per default increased from June 30, 2021 to June 30, 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.” Our average reserve per default at June 30, 2022 also reflects an incrementally conservative set of assumptions about future macroeconomic and housing market conditions compared to those assumed at June 30, 2021.

While average reserve per default increased from June 30, 2021 to June 30, 2022, our aggregate gross reserve position declined in the intervening period due to the significant 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:

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021

(In Thousands)

1 unchanged sentence

Risk-based required assets 1,240,143 1,170,854

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, partially offset by an increase in the risk ceded under our third-party reinsurance agreements.

Available assets were $2.2 billion at June 30, 2022, compared to $1.9 billion at June 30, 2021.

The $282 million increase in available assets between the dates presented was primarily driven by NMIC's positive cash flow from operations during the intervening period, partially offset by the ordinary course dividend paid by NMIC to NMIH in April 2022 and the extraordinary dividend paid by Re One to NMIH following the termination and commutation of the reinsurance agreement between NMIC and Re One in December 2021.

The increase in the risk-based required asset amount between the dates presented was primarily due to the growth of our gross RIF, largely 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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Consolidated Results of Operations

Consolidated statements of operations Three months ended

March 31, 2022 March 31, 2021

Consolidated statements of operations Three months ended Six months ended

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

10 unchanged sentences

22.9 % 35.5 % 25.3 % 36.2 %

Three months ended

Three months ended Six months ended

Non-GAAP financial measures (4)

March 31, 2022 March 31, 2021

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

($ in thousands, except for per share data)

2 unchanged sentences

Adjusted diluted EPS 0.86 0.67 1.63 1.29

(1) Loss ratio is calculated by dividing insurance claims and claim expenses by net premiums earned.

(1) Loss ratio is calculated by dividing insurance claims and claim (benefits) expenses by net premiums earned.

(2) Expense ratio is calculated by dividing underwriting and operating expenses by net premiums earned.

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

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.

Net premiums earned were $120.9 million and $237.4 million for the three and six months ended June 30, 2022, respectively, compared to $110.9 million and $216.8 million for the three and six months ended June 30, 2021, 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 a decline in the contribution from single premium policy cancellations and an increase in total premiums ceded under our reinsurance transactions.

Net investment income was $10.9 million and $21.1 million for the three and six months ended June 30, 2022, respectively, compared to $9.4 million and $18.2 million for the three and six months ended June 30, 2021, respectively.

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.

Other revenues were $0.4 million and $0.7 million for the three and six months ended June 30, 2022, respectively, compared to $0.5 million and $1.0 million for the three and six months ended June 30, 2021, respectively.

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

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

The year-on-year decline in other revenues in each respective period 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.

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

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.

Insurance claims and claim expenses were a benefit of $3.0 million and $3.7 million for the three and six months ended June 30, 2022, respectively, compared to insurance claims and claim expenses of $4.6 million and $9.6 million for the three and six months ended June 30, 2021, respectively.

Insurance claims and claim expenses during the three and six months ended June 30, 2022 benefited from cure activity and the associated release of a portion of the reserves we established for anticipated claims payments in prior periods, and a decrease in the number of new defaults emerging on loans impacted by the COVID-19 pandemic.

Underwriting and operating expenses were $30.7 million and $63.6 million for the three and six months ended June 30, 2022, respectively, compared to $34.7 million and $68.8 million for the three and six months ended June 30, 2021, respectively.

The year-on-year decline in underwriting and operating expenses in each respective period was primarily due to a decrease in the amortization of deferred policy acquisition costs tied to the increased persistency of our IIF, a step-down in technology costs related to our agreement with Tata Consultancy Services and a decline in capital markets transaction costs, partially offset by an increase in travel and entertainment expenses tied to the easing of COVID-19 related restrictions, as well as an increase in depreciation and amortization incurred in connection with the completion and implementation of certain software and equipment initiatives.

Service expenses were $0.3 million and $0.8 million for the three and six months ended June 30, 2022, respectively, compared to $0.5 million and $1.1 million for the three and six months ended June 30, 2021, respectively.

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

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

The year-on-year decline in service expenses in each respective period 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 $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.

Interest expense was $8.1 million and $16.1 million for the three and six months ended June 30, 2022, respectively, compared to $7.9 million and $15.8 million for the three and six months ended June 30, 2021, respectively.

Interest expense primarily reflects the carrying costs of the Notes.

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 $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.

Income tax expense was $21.7 million and $40.8 million for the three and six months ended June 30, 2022, respectively, compared to $16.1 million and $30.7 million for the three and six months ended June 30, 2021, 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 22.4% 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, 2022, respectively.

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

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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 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.

Our effective tax rates for the three and six months ended June 30, 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 $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.

Net income was $75.4 million and $143.1 million for the three and six months ended June 30, 2022, respectively, compared to $57.5 million and $110.4 million for the three and six months ended June 30, 2021, respectively.

Adjusted net income was $74.3 million and $141.8 million for the three and six months ended June 30, 2022, respectively, compared to $58.1 million and $111.5 million for the three and six months ended June 30, 2021, 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, as well as declines in our insurance claims and claim expenses and underwriting and operating expenses, partially offset by an increase in our income tax expense.

Diluted EPS was $0.86 and $1.63 for the three and six months ended June 30, 2022, respectively, compared to $0.65 and $1.27 for the three and six months ended June 30, 2021, respectively.

Adjusted diluted EPS was $0.86 and $1.63 for the three and six months ended June 30, 2022, respectively, compared to $0.67 and $1.29 for the three and six months ended June 30, 2021, respectively.

Diluted and adjusted diluted EPS increased primarily due to growth in net income and adjusted net income.

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 March 31,

Non-GAAP Financial Measure Reconciliations For the three months ended June 30, For the six months ended June 30,

2022 2021 2022 2021

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

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Net realized investment gains (53) (12) (461) (12)

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

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

Capital market transaction costs (55) 1,615 205 1,993

25 unchanged sentences

The change in fair value of our warrant liability can vary significantly across periods and is influenced principally by equity market and general economic factors that do not impact or reflect our current period operating results.

Furthermore, all unexercised warrants expired in April 2022 and, as such, no change in fair value will be recognized in future reporting periods.

We believe trends in our operating performance can be more clearly identified by excluding fluctuations related to the change in fair value of our warrant liability.

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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 March 31, 2022 December 31, 2021

Consolidated balance sheets June 30, 2022 December 31, 2021

(In Thousands)

19 unchanged sentences

Total liabilities and shareholders' equity $ 2,392,288 $ 2,450,581

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.

Total cash and investments were $2.1 billion as of June 30, 2022, compared to $2.2 billion as of December 31, 2021.

Cash and investments at June 30, 2022 included $114.4 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 six months ended June 30, 2022, partially offset by cash generated from operations.

Premiums receivable was $63.7 million as of June 30, 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 $59.7 million as of March 31, 2022, compared to $59.6 million as of December 31, 2021.

Net deferred policy acquisition costs were $59.8 million as of June 30, 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 were $1.7 million as of June 30, 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 $20.1 million as of March 31, 2022, compared to $20.3 million as of December 31, 2021.

Reinsurance recoverable was $19.6 million as of June 30, 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.

Other assets increased to $123.6 million as of June 30, 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.

Other assets included $89.2 million of tax and loss bonds held by the Company at both June 30, 2022 and December 31, 2021.

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

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.

Unearned premiums were $135.7 million as of June 30, 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 six months ended June 30, 2022.

Accounts payable and accrued expenses were $58.9 million as of June 30, 2022, compared to $72.0 million as of December 31, 2021.

The decrease was primarily driven by the settlement of previously accrued compensation expenses, premium taxes and other contractual payables during the six months ended June 30, 2022, partially offset by an increase in reinsurance payables associated with the 2022-1 XOL Transaction.

Reserve for insurance claims and claim expenses was $98.5 million as of June 30, 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.

The decrease was partially offset by an increase in the average reserve carried 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.

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 $5.3 million as of March 31, 2022, compared to $5.6 million as of December 31, 2021.

Reinsurance funds withheld, which represents our ceded reinsurance premiums written, less our profit and ceding commission receivables related to the 2016 QSR Transaction was $4.5 million as of June 30, 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 $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.

All unexercised warrants expired at their contractual maturity in April 2022.

No warrants or warrant liability remained at June 30, 2022.

Warrant liability was $2.4 million at December 31, 2021.

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 $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.

Net deferred tax liability was $161.7 million at June 30, 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, and was largely 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.

Other liabilities increased to $12.6 million as of June 30, 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 three months ended March 31,

Consolidated cash flows For the six months ended June 30,

Net cash provided by (used in):

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Financing activities (30,326) (722)

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.

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

Net cash provided by operating activities was $173.8 million for the six months ended June 30, 2022, compared to $182.5 million for the six months ended June 30, 2021.

The decrease in cash provided by operating activities year-on-year was primarily driven by a decline in premium written tied to a reduction in single premium policies written during the six months ended June 30, 2022.

Cash used in investing activities for the six months ended June 30, 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 $30.3 million for the six months ended June 30, 2022, compared to $0.7 million for the six months ended June 30, 2021.

Cash used in financing activities during the six months ended June 30, 2022 primarily relates to the repurchase of common stock.

Liquidity and Capital Resources

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

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

As of June 30, 2022, NMIH had $114.4 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.

NMIC paid a $34.9 million ordinary course dividend to NMIH in April 2022, representing its full ordinary course dividend capacity payable under Wisconsin law for 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.

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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.

During the six months ended June 30, 2022, NMIH repurchased 1.7 million shares of common stock pursuant to a trading plan under Rule 10b-18 of the Exchange Act, at a total cost of $30.4 million, including associated costs.

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

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.

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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.

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 Secured Overnight Financing Rate (SOFR) (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 March 31, 2022, the applicable commitment fee was 0.35%.

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

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 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.

a maximum debt-to-total capitalization ratio of 35%, 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 at June 30, 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 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 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.

At June 30, 2022, NMIC reported $2,169 million available assets against $1,240 million risk-based required assets, for a $929 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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As such, the PMIERs generally imposes a stricter financial requirement than the state RTC standard.

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

As of June 30, 2022, NMIC's performing primary RIF, net of reinsurance, was approximately $24.6 billion.

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

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.

Based on NMIC's total statutory capital of $2.1 billion (including contingency reserves) as of June 30, 2022, NMIC's RTC ratio was 11.9:1.

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

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

At June 30, 2022, NMIC had $2.0 billion of cash and investments, including $50 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 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.

During the twelve-month period ended June 30, 2022, NMIC generated $267 million of cash flow from operations and received an additional $109 million of cash flow on 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.

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NMIC's financial strength is rated "Baa1" by Moody's and "BBB" by S&P.

In June 2020, Moody's affirmed its financial strength rating of NMIC and its "Ba2" rating of NMIH's 2021 Revolving Credit Facility, and assigned a "Ba2" rating to the Notes.

Moody's ratings outlook is stable.

In June 2020, S&P assigned a "BB" rating to NMIH's senior secured Notes.

In April 2021, S&P upgraded its outlook from negative to positive for the financial strength rating of NMIC's and NMIH's long-term counter-party credit profile.

NMIH’s Notes are rated “Ba1” by Moody’s and its long-term counter-party credit profile is rated “BB” by S&P.

Moody's outlook for both its ratings is stable and S&P’s outlook for both its ratings is positive.

For more information, see Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4, Debt."

Consolidated Investment Portfolio

The primary objectives of our investment activity are to preserve capital and generate investment income, while maintaining sufficient liquidity to cover our operating needs.

The primary objectives of our investment activity are to generate investment income and preserve capital, while maintaining sufficient liquidity to cover our operating needs.

We aim to achieve diversification by type, quality, maturity, and industry.

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Our investment portfolio is comprised entirely of fixed maturity instruments.

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%.

As of June 30, 2022, the fair value of our investment portfolio was $2.0 billion and we held an additional $72.4 million of cash and equivalents.

Pre-tax book yield on the investment portfolio for the six months ended June 30, 2022 was 2.0%.

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 March 31, 2022 December 31, 2021

Percentage of portfolio's fair value June 30, 2022 December 31, 2021

Corporate debt securities 61 % 64 %

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Investment portfolio ratings at fair value (1)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Total 100 % 100 %

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(2) Includes +/– ratings.

(3) We held one security with a BB+ rating at June 30, 2022, which is not identifiable in the table due to rounding.

All of our investments are rated by one or more nationally recognized statistical rating organizations.

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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 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.

We did not recognize an allowance for credit loss for any security in the investment portfolio as of June 30, 2022 or December 31, 2021, 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 2021.

As of June 30, 2022, the investment portfolio had gross unrealized losses of $199.4 million, of which $41.7 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.

The increase in 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.

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