What changed in this filing

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Item 1. Business

2023-02-15 compared with 2022-02-16 · 170 added, 123 removed, 621 unchanged (32% of the section changed)

18 unchanged sentences

As of December 31, 2022, we had 242 full-time and part-time employees.

We believe that our success in acquiring a large and diverse group of lender customers and growing a portfolio of high-quality IIF traces to our founding principles, whereby we aim to help qualified individuals achieve their homeownership goals, ensure that we remain a strong and credible counter-party, deliver a unique customer service experience, establish a differentiated risk management approach that emphasizes the individual underwriting review or validation of the vast majority of the loans we insure, utilize 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.

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 our mortgage origination customers help qualified individuals achieve their homeownership goals, ensure that we remain a strong and credible counter-party, deliver a unique customer service experience, establish a differentiated risk management approach that emphasizes the individual underwriting review or validation of the vast majority of the loans we insure, utilize 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 claims payment practices, responsive customer service, financial strength and profitability.

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residential mortgage market attracts and involves participation from a range of private and governmental institutions.

Private industry participants include national and regional mortgage banks, money center banks, mortgage brokers,

community banks, builder-owned mortgage lenders, internet-sourced lenders, commercial, regional and investment banks, savings institutions, credit unions, real estate investment trusts (REITs) and other financial institutions.

Private industry participants include national and regional mortgage banks, money center banks, mortgage brokers, community banks, builder-owned mortgage lenders, internet-sourced lenders, commercial, regional and investment banks, savings institutions, credit unions, real estate investment trusts and other financial institutions.

Government participants include government agencies such as the government MIs ( e.g.

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The private MI industry is highly competitive and currently consists of six active participants, including us, Arch Capital Group Ltd., Essent Group Ltd.

(Essent), Enact Holdings, Inc.

(Enact), MGIC Investment Corporation (MGIC), and Radian Group Inc.

(Essent), Enact Holdings, Inc., MGIC Investment Corporation (MGIC), and Radian Group Inc.

Private mortgage insurers generally compete based on terms of coverage, underwriting guidelines, pricing, customer service (including speed of MI underwriting and decisioning), availability of ancillary products and services (including training and loan review services), financial strength, customer relationships, name recognition and reputation, the strength of management teams and sales organizations, the effective use of technology, and innovation in the delivery and servicing of insurance products.

7 unchanged sentences

Previous rate actions and product introductions continue to impact the government mortgage insurers' market share and by extension the private MI market.

Although there has been broad policy consensus toward the need for increasing private capital participation and decreasing government exposure to credit risk in the U.S.

Although there continues to be broad policy consensus toward the need for continued and consistent private capital participation in the U.S.

housing finance system, it remains difficult to predict whether the combined market share of government MIs will recede to pre-2008 levels.

A range of factors influence a lender's decision to choose private over government MI, including among others, GSE demand, premium rates and other charges, loan eligibility requirements, cancelability, loan size limits and the relative ease of use of private MI products compared to government MI alternatives.

A range of factors influence a lender's decision to choose private over government MI, including among others, GSE demand, policies and loan delivery pricing, mortgage insurance premium rates and other charges, loan eligibility requirements, cancelability, loan size limits and the relative ease of use of private MI products compared to government MI alternatives.

Products and Services

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We have four premium plans:

• single — entire premium is paid upfront at the time coverage is placed;

• single — entire premium is paid upfront at the time the coverage is placed;

• annual — premiums are paid in advance for a subsequent twelve-month period over the life of a policy;

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Refinancing volume, however, does not follow a set seasonal trend and instead is primarily influenced by mortgage rates.

An increase in refinancing volume may limit the seasonal effect of home purchase patterns on mortgage insurance NIW.

Fluctuations in refinancing volume (driven by changes in prevailing mortgage rates) may serve to mute or magnify the seasonal effect of home purchase patterns on mortgage insurance NIW.

Independent Validation and Rescission Relief

We offer post-closing underwriting reviews, which we refer to as "independent validations," for both non-delegated and delegated loans, as described below.

We offer post-close underwriting reviews, which we refer to as "independent validations," for both non-delegated and delegated loans, as described below.

Upon satisfactory completion of an independent validation, which involves reviewing certain post-close documentation to confirm our original assessment of non-delegated loans and performing a comprehensive full-file review for delegated loans, we agree – on an accelerated basis – that we will not rescind coverage under most circumstances.

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Lenders have the ability to select whether or not to pursue early rescission relief and subject their insured loans to our post-close independent validation processes.

Non-delegated lenders who pursue independent validation are required to submit additional loan documentation post-closing that allows us to independently validate such loans, including a loan's closing disclosures, note, executed mortgage and title insurance commitment.

Our 2020 Master Policy provides for a "closing document exception," which permits eligible non-delegated lenders to obtain early rescission relief without post-close independent validations of qualifying loans, if the borrower timely makes the first 12 mortgage payments from their own funds.

Non-delegated lenders who pursue independent validation are required to submit additional loan documentation post-close that allows us to independently validate such loans, including a loan's closing disclosures, note, executed mortgage, borrower authorization form and title insurance commitment.

Our 2020 Master Policy provides for a "closing document exception," which permits eligible non-delegated lenders to obtain early rescission relief without post-close independent validations of qualifying loans, if the borrower makes the first 12 mortgage payments from their own funds in a timely manner.

Loans from non-delegated lenders who do not pursue or submit the documentation necessary for us to complete our independent validation, and are not eligible for a closing document exception remain eligible for 36 or 60-month rescission relief in accordance with the terms of the applicable Master Policy.

Delegated lenders who pursue early rescission relief and subject their insured loans to our post-close independent validation process are required to submit a full file (which contains all the underwriting information and documentation otherwise required by us for a non-delegated underwrite and the above-referenced post-closing documentation) after a loan's coverage effective date.

Delegated lenders who pursue early rescission relief and subject their insured loans to our post-close independent validation process are required to submit a full file (which contains all the underwriting information and documentation otherwise required by us for a non-delegated underwrite and the above-referenced post-close documentation) after a loan's coverage effective date.

We refer to our independent validation of delegated loans as our "Delegated Assurance Review" or "DAR" process.

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Defaults and Claims

The MI claim cycle begins with the receipt of a Notice of Default (NOD) for an insured loan from a loan servicer.

The MI claim cycle begins with the receipt of a default notice for an insured loan from a loan servicer.

Generally, our Master Policies require our insureds to notify us after a loan is two payments in arrears.

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Our claim exposure includes, subject to certain limitations, the covered portion of unpaid loan principal, delinquent interest (subject to a three-year limit) and certain expenses incurred in connection with the default and subsequent foreclosure or sale of the property securing the insured loan.

Under the terms of our Master Policies, our insureds are generally required to file claims within 60 days of acquiring title to a property securing an insured loan (typically through foreclosure) or when there has been an approved short sale.

Under the terms of our Master Policies, our insureds are generally required to file claims within 60 days of the transfer of the title to a property securing an insured loan (typically through foreclosure).

In the years following the 2008 financial crisis, foreclosure timelines and the average time from initial default by a borrower to MI claim submission extended due to legislation and GSE programs requiring mortgage servicers to mitigate losses by offering forbearance and loan modifications prior to pursuing foreclosure on delinquent loans.

7 unchanged sentences

We have rights under our Master Policies to deny a claim under certain conditions, such as when a loan servicer does not produce documents necessary to perfect a claim or when the reason for the underlying loss associated with a claim is not covered by our Master Policies.

When we approve a claim, our Master Policies give us the option to pay (i) the coverage percentage specified for a loan, with the insured retaining title to the underlying property and receiving all proceeds from an eventual sale of the property (the percentage option), (ii) the actual loss incurred by the insured upon sale of the property to a third party, if less than the percentage option, or (iii) the insured's claim amount (as calculated in the applicable Master Policy) in exchange for the insured's conveyance of good and marketable title to the property to us.

When we approve a claim, our Master Policies give us the option to pay (i) the coverage percentage specified for a loan, with the insured retaining title to the underlying property and receiving all proceeds from an eventual sale of the property (the percentage option), (ii) the actual loss incurred by the insured upon sale of the property to a third party, if less than the percentage option, (iii) the loss an insured is reasonably expected to experience upon a future sale of the property to a third-party, or (iv) the insured's claim amount (as calculated in the applicable Master Policy) in exchange for the insured's conveyance of good and marketable title to the property to us.

If we elect to receive title to a property, we will market and sell the acquired property and retain all proceeds.

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Prior to January 10, 2019, Ohio regulation limited the amount of risk a mortgage insurer was permitted to retain on a single loan to 25% of the borrower's indebtedness (after giving effect to third-party reinsurance) and, as a result, the portion of such insurance in excess of 25% was required to be reinsured.

Ohio has repealed this requirement for future periods beginning January 10, 2019.

Ohio repealed this requirement for future periods beginning January 10, 2019.

Several other states previously imposed the same or similar coverage restrictions and repealed these measures prior to 2018.

NMIC and Re One had a reinsurance agreement in place under which Re One provides reinsurance to NMIC on certain insured loans with coverage levels in excess of 25%, after giving effect to third-party reinsurance.

As these state coverage limits have been repealed, the reinsurance coverage provided by Re One to NMIC has been commuted.

Re One does not currently have active insurance exposures.

NMIC and Re One had a reinsurance agreement in place under which Re One provided reinsurance to NMIC on certain insured loans with coverage levels in excess of 25%, after giving effect to third-party reinsurance.

The reinsurance coverage provided by Re One to NMIC was commuted following the repeal of Ohio's state coverage limit and Re One does not currently have any active reinsurance exposure.

Third-Party Reinsurance

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Excess-of-loss reinsurance

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.

(special purpose reinsurance entities collectively referred to as the Oaktown Re Vehicles) effective May 2, 2017, July 25, 2018, July 30, 2019, July 30, 2020, October 29, 2020, April 27, 2021, and October 26, 2021, respectively.

Each agreement provides it with aggregate excess-of-loss reinsurance coverage on defined portfolios of mortgage insurance policies.

Insurance-linked notes

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

(special purpose reinsurance entities collectively referred to as the Oaktown Re Vehicles) effective July 25, 2018, July 30, 2019, October 29, 2020, April 27, 2021, and October 26, 2021, respectively.

Each agreement provides NMIC with aggregate excess-of-loss reinsurance coverage on a defined portfolio of mortgage insurance policies.

Under each agreement, NMIC retains a first layer of aggregate loss exposure on covered policies and the respective Oaktown Re Vehicle then provides second layer loss protection up to a defined reinsurance coverage amount.

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and Oaktown Re VII Ltd., which have a 12.5 year maturity).

We refer to NMIC's reinsurance agreements with and the insurance-linked note issuances by Oaktown Re Vehicles individually as the 2017 ILN Transaction, 2018 ILN Transaction, 2019 ILN Transaction, 2020-1 ILN Transaction, 2020-2 ILN Transaction, 2021-1 ILN Transaction, and 2021-2 ILN Transaction, and collectively as the ILN Transactions.

The respective reinsurance coverage amounts provided by the Oaktown Re Vehicles decrease over a ten-year period or 12.5 year, as applicable, as the underlying insured mortgages are amortized or repaid, and/or the mortgage insurance coverage is canceled.

We refer to NMIC's reinsurance agreements with and the insurance-linked note issuances by Oaktown Re Vehicles individually as the 2018 ILN Transaction, 2019 ILN Transaction, 2020-2 ILN Transaction, 2021-1 ILN Transaction and 2021-2 ILN Transaction, and collectively as the ILN Transactions.

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

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

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

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

A Lock-Out Event was deemed to have occurred, effective June 25, 2020 for each of the 2017, 2018 and 2019 ILN Transactions (related to the default experience of the underlying reference pools for each respective transaction) and at inception of the 2021-1 and 2021-2 ILN Transaction (related to the initial build of its target credit enhancement), and the amortization of reinsurance coverage, and distribution of collateral assets and amortization of insurance-linked notes was suspended for each such ILN Transaction.

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

Effective November 30, 2021, the Lock-Out Event for the 2017 ILN Transaction was deemed to have cleared and amortization of the associated reinsurance coverage, and distribution of collateral assets and amortization of the associated insurance-linked notes resumed.

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

As of December 31, 2022, the 2018 ILN Transaction was deemed to be in Lock Out due to the default experience of its underlying reference pool 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 both ILN Transactions.

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

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

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

Effective March 25, 2022 and April 25, 2022, NMIC exercised its optional clean-up call to terminate and commute its previously outstanding excess of loss reinsurance agreements with Oaktown Re Ltd.

and Oaktown Re IV Ltd., respectively.

In connection with the termination and commutation of each respective agreement, 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 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 December 31, 2022.

( $ values in thousands)

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

2017 ILN Transaction May 2, 2017 1/1/2013 - 12/31/2016 $211,320 $27,425 $126,793 $121,163

2018 ILN Transaction July 25, 2018 1/1/2017 - 5/31/2018 $264,545 $158,489 $125,312 $122,202

2019 ILN Transaction July 30, 2019 6/1/2018 - 6/30/2019 326,905 204,127 123,424 122,257

2020-1 ILN Transaction July 30, 2020 7/1/2019 - 3/31/2020 322,076 49,879 169,514 169,488

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

242,351 95,729 121,777 121,177

2021-1 ILN Transaction (5)

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

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

367,238 305,139 163,708 163,665

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363,596 363,596 146,229 146,204

(1) NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure and cedes reserves for incurred claims and claims expenses to each applicable ILN Transaction and recognizes a reinsurance recoverable if such incurred claims and claims expenses exceed its current first layer retained loss.

(1) NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure and cedes reserves for incurred claims and claim expenses to each applicable ILN Transaction and recognizes a reinsurance recoverable if such incurred claims and claim expenses exceed its current first layer retained loss.

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

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(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) As of December 31, 2021, the current reinsurance coverage amount on the 2021-1 ILN and 2021-2 ILN Transactions is equal to the initial reinsurance coverage amount, as the reinsurance coverage provided by the associated Oaktown Re vehicles will not decrease until a target credit enhancement level is met.

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

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

Traditional reinsurance

NMIC is a party to three excess-of-loss reinsurance agreements with broad panels of third-party reinsurers – the 2022-1 XOL Transaction, effective April 1, 2022, the 2022-2 XOL Transaction, effective July 1, 2022, and the 2022-3 XOL Transaction, effective October 1, 2022 – which we refer to collectively as the XOL Transactions.

Each XOL Transaction provides NMIC with aggregate excess-of-loss reinsurance coverage on a defined portfolio of mortgage insurance policies.

Under each agreement, NMIC retains a first layer of 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 of each XOL Transaction is set to approximate the PMIERs minimum required assets of its reference pool and decreases from the inception of each respective agreement over a ten-year period in the event the PMIERs minimum required assets of the pool declines.

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

NMIC holds optional termination rights which provide it the discretion to terminate each XOL Transaction on or after a specified date.

NMIC may also elect to terminate the XOL Transactions 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 treaties, 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 XOL Transactions 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.

Current amounts are presented as of December 31, 2022.

($ values in thousands) Inception Date Covered Production Initial Reinsurance Coverage Current Reinsurance Coverage Initial First Layer Retained Loss Current First Layer Retained Loss (1)

2022-1 XOL Transaction April 1, 2022 10/1/2021 - 3/31/2022 (2)

$289,741 $282,906 $133,366 $133,366

2022-2 XOL Transaction July 1, 2022 4/1/2022 - 6/30/2022 (3)

154,306 151,013 78,906 78,906

2022-3 XOL Transaction October 1, 2022 7/1/2022 - 9/30/2022 96,779 95,825 106,265 106,265

(1) NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure and cedes reserves for incurred claims and claim expenses to each applicable XOL Transaction and recognizes a reinsurance recoverable if such incurred claims and claim expenses exceed its current first layer retained loss.

(2) Approximately 1% of the production covered by the 2022-1 XOL Transaction has coverage reporting dates between October 21, 2019 and September 30, 2021.

(3) Approximately 1% of the production covered by the 2022-2 XOL Transaction has coverage reporting dates between January 4, 2021 and March 31, 2022.

Quota share reinsurance

Under a quota share reinsurance agreement, the ceding insurer pays a premium in exchange for coverage on an agreed-upon portion of incurred losses.

Quota share arrangements reduce net premiums written and earned and also reduce net RIF, providing capital relief to the ceding insurer and reducing incurred claims in accordance with the terms of the reinsurance agreement.

In addition, reinsurers typically pay ceding commissions as part of quota share transactions, which offset the ceding company's acquisition and underwriting expenses.

Certain quota share agreements include profit commissions that are earned based on loss performance and serve to reduce ceded premiums.

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 and 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.

NMIC is a party to seven 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, the 2022 QSR Transaction, effective October 1, 2021, the 2022 Seasoned QSR Transaction, effective July 1, 2022 and the 2023 QSR Transaction, effective January 1, 2023 – which we refer to collectively as the QSR Transactions.

Under the terms of the 2016 QSR Transaction, NMIC cedes premiums written related to 25% of the risk on eligible primary policies written for all periods through December 31, 2017 and 100% of the risk under our pool agreement with Fannie M ae, in exchange for reimbursement of ceded claims and claim expenses on covered policies, a 20% ceding commission, and a profit commission of up to 60% that varies directly and inversely with ceded claims.

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Under the terms of the 2021 QSR Transaction, NMIC cedes premiums earned related to 22.5% of the risk on eligible policies written in 2021 (subject to an aggregate risk written limit which was exhausted on October 31, 2021), in exchange for reimbursement of ceded claims and claim expenses on covered policies, a 20% ceding commission, and a profit commission of up to 57.5% that varies directly and inversely with ceded claims.

Under the terms of the 2022 QSR Transaction, NMIC cedes premiums earned related to 20% of the risk on eligible policies written primarily between November 1, 2021 and December 31, 2022, in exchange for reimbursement of ceded claims and claims expenses on covered policies, a 20% ceding commission, and a profit commission of up to 62% that varies directly and inversely with ceded claims.

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

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

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

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 obligations under the relevant agreement.

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

In connection with the 2022 QSR Transaction, NMIC entered into the 2023 QSR Transaction as a springing back-to-back quota share agreement.

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

Under the terms of the 2022 Seasoned QSR Transaction, NMIC cedes premiums earned related to 95% of the net risk on eligible policies primarily for a seasoned pool of mortgage insurance policies that had previously been covered under the retired Oaktown Re Ltd.

and Oaktown Re IV Ltd.

reinsurance transactions, after the consideration of coverage provided by other QSR Transactions in exchange for reimbursement of ceded claims and claim expenses on covered policies, a 35% ceding commission, and a profit commission of up to 55% that varies directly and inversely with ceded claims.

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.

Additionally, under the terms of the QSR Transactions, NMIC may elect to selectively terminate its engagement with individual reinsurers on a run-off basis ( i.e.

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

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 obligations under the relevant agreement.

Effective April 1, 2019, NMIC elected to terminate its engagement with one reinsurer under the 2016 QSR Transaction on a cut-off basis.

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

For further discussion of the effect of reinsurance on our business, see Item 7, " Management's Discussion and Analysis of Financial Condition and Results of Operations - Conditions and Trends Impacting our Business - Net Premiums Written and Net Premiums Earned - Effect of reinsurance on our results.

For further discussion of the effect of reinsurance on our business, see Part II, Item 7, " Management's Discussion and Analysis of Financial Condition and Results of Operations - Key Factors Affecting Our Results - Effect of reinsurance on our results.

Enterprise Risk Management

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• setting concentration limits to regulate the aggregation of loan-level risks in our overall portfolio and manage our overall portfolio exposure to certain risk classes that typically experience greater volatility and loss during periods of economic and housing market downturns, such as higher LTV loans, loans with higher borrower DTIs, investor loans, cash-out refinances, certain state concentration levels and several other borrower or loan attributes;

• individually underwriting the significant majority of the loans we insure through our non-delegated platform and DAR validation process, in order to evaluate borrower and loan-level risk characteristics on an individual policy level, and monitor and assess the manufacturing capabilities of our lender customers in order to provide them feedback to help enhance their own production and control processes;

• deploying Rate GPS, our proprietary risk-based pricing platform, to dynamically consider a granular set of risk attributes in our policy pricing process and assign individualized premium rates based on the relative risk and anticipated performance of each loan we insure;

• individually underwriting the majority of the loans we insure through our non-delegated platform and DAR validation process, in order to evaluate borrower and loan-level risk characteristics on an individual policy level, and monitor and assess the manufacturing capabilities of our lender customers in order to provide them feedback to help enhance their own production and control processes;

• designing, developing and deploying Rate GPS ® , our proprietary risk-based pricing platform, to dynamically consider a granular set of risk attributes in our policy pricing process and assign individualized premium rates based on the relative risk and anticipated performance of each loan we insure;

• further utilizing Rate GPS ® to actively manage the flow of business into our portfolio and target loans with higher quality risk characteristics that typically experience lower volatility and loss across market cycles;

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Our investments are rated by one or more nationally recognized statistical rating organizations.

Our investment policies and strategies are subject to change depending upon regulatory, economic and market conditions, and our existing or anticipated financial condition and operating requirements.

Our investment policies

and strategies are subject to change depending upon regulatory, economic and market conditions, and our existing or anticipated financial condition and operating requirements.

We engage a third-party investment manager Allspring Global Investments, formerly Wells Capital Management, Inc., to assist with day-to-day management of our portfolio and implementation of our investment policy.

Human Capital Management

As of December 31, 2021, we had 247 full-time and part-time employees, including 83 who typically work at our corporate headquarters in Emeryville, CA and 164 who typically work from home in locations across the country.

We also engage third-party vendors to provide IT, underwriting and other support services.

As of December 31, 2022, we had 242 full-time and part-time employees, and engaged third-party vendors to provide additional IT, underwriting and other support services.

Our ability to operate efficiently and profitably, to offer products and services that meet the expectations of our customers, and to maintain an effective risk management framework is highly dependent on the competence and integrity of our employees, as well as the employees of the third-party service providers, vendors and others whom we engage.

We prioritize human capital management with the goal of attracting, retaining and developing a high-quality, diverse employee base and aim to foster an employee-driven, collaborative and productive work environment that emphasizes balance between organizational, community and personal goals.

We offer competitive salaries and a comprehensive benefits package that includes annual cash bonuses and equity grants, life, health and supplemental (dental and vision) insurance, paid time off, paid parental leave, emergency backup child and elder care, a 401(k) plan with employer matching contributions, and programs to support employee mental, physical and financial well-being.

We prioritize our employees with the goal of attracting, retaining and developing a high-quality, diverse talent base and aim to foster an employee-driven, collaborative and productive work environment that emphasizes balance between organizational, community and personal goals.

We offer competitive salaries and a comprehensive benefits package that includes annual cash bonuses and equity grants, life, health and supplemental insurance coverage, paid time off, paid caregiver leave, emergency backup child and elder care, a 401(k) Savings Plan with employer matching contributions, and programs to support employee mental, physical and financial well-being.

We grant equity to every one of our employees annually and offer mortgage assistance to support our employees who are first-time homebuyers.

We also encourage and support our employees to continue their educational and professional development with tuition reimbursement and student loan payback programs, and provide paid time off for volunteer activities to allow employees to give back to their communities.

We encourage our employees to continue their educational and professional development, and support those who do with tuition reimbursement and student loan payback programs, as well as ongoing firm wide training initiatives and access to third-party course materials.

We value diversity as a company and believe that diverse perspectives promote innovation and are crucial to the long-term success of our business.

We are committed to supporting diversity, equity and inclusion in our workplace, and have aimed to create an environment that welcomes and supports differences and encourages input and ideas from all.

We have and will continue to take action to (i) enhance cultural awareness throughout the organization by creating substantive learning opportunities for all employees;

As of December 31, 2022, 74% of our employee population identified as members of a diverse group, including 58% as women and 33% as racial/ethnic minorities.

In 2022 we continued to focus on taking action to:

(i) enhance cultural awareness throughout the organization by creating substantive learning opportunities for all employees;

(ii) broaden our leadership pipeline by creating and supporting programs and policies that foster leadership development;

(iii) seek and support diverse backgrounds on our Board of Directors and amongst our management team;

(iv) address potential bias during our hiring, promotion, and evaluation processes;

(iv) address potential bias during our hiring, evaluation and promotion processes;

(v) support an inclusive corporate culture;

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We require our third-party recruiting firms to seek and source diverse candidates and have established an employee inclusion committee to further diversity, equity and inclusion initiatives across our company.

Inclusion committee members reflect a cross-functional and diverse employee mix by gender, ethnicity, race, age and tenure, and work to address diversity topics in areas such as employee and leadership composition, vendor diversity and cultural community outreach.

In 2021, we were recognized as a Great Place to Work® for the sixth consecutive year.

In 2022, we were recognized as a Great Place to Work ® for the seventh consecutive year.

Great Place to Work ® is a global authority on workplace culture, employee experience and leadership, and partners with FORTUNE magazine to produce the annual FORTUNE "100 Best Companies to Work For” list.

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Our main telephone number is (855) 530 - NMIC (6642), and our website address is www.nationalmi.com.

Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports are available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (SEC).

In addition, a written copy of the Company's Business Conduct Policy, containing our code of ethics that is applicable to all of our directors, officers and employees, is available on our website.

In addition, a written copy of the Company's Business Conduct and Ethics Policy, containing our code of ethics that is applicable to all of our directors, officers, employees and third-party vendor contractors, is available on our website.

Information contained or referenced on our website is not incorporated by reference into, and does not form a part of, this report.

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housing finance system.

We routinely meet with regulatory agencies, including our state insurance regulators and the FHFA, the GSEs, our customers and other industry participants to promote the role and value of private mortgage insurance and exchange views on the U.S.

housing finance system.

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As a result, the nature of the private MI industry in the U.S.

is driven in large part by the requirements and practices of the GSEs, which include:

is driven in large part by the requirements and practices of the GSEs, which include, among others:

• the PMIERs, including operational, business and remedial requirements and minimum capital levels applicable to GSE-qualified MI providers;

• the terms that the GSEs require to be included in MI policies for loans that they purchase, including terms governing rescission relief;

• the underwriting standards and loan amount limits that determine what loans are eligible for purchase by the GSEs, which affects the quality of the risk insured by the mortgage insurer and the availability of mortgage loans;

• the underwriting standards and loan amount limits that determine what loans are eligible for purchase by the GSEs, which affect the quality of the risk insured by the mortgage insurer and the availability of mortgage loans;

• the level of MI coverage, subject to the requirements of the GSEs' charters, when MI is used as the required credit enhancement on high-LTV mortgages;

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• the terms on which the GSEs offer lenders relief on their representations and warranties made to a GSE at the time of sale of a loan to a GSE, which creates pressure on private mortgage insurers to alter their rescission rights to conform to the GSE relief;

• the use of data provided by the GSE and the consequences for any unintended disclosure of such information;

• loss mitigation programs established by the GSEs that impact insured mortgages and the circumstances under which servicers must implement such programs;

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In January 2013, the GSEs approved NMIC as a qualified mortgage insurer (as defined in the PMIERs, an approved insurer ).

( Italicized terms have the same meaning that such terms have in the PMIERs.) As an approved insurer , NMIC is subject to ongoing compliance with the PMIERs.The PMIERs establish operational, business, remedial and financial requirements applicable to approved insurers .

( Italicized terms have the same meaning that such terms have in the PMIERs.) As an approved insurer , NMIC is subject to ongoing compliance with the PMIERs.

The PMIERs establish operational, business, remedial and financial requirements applicable to approved insurers , and are updated from time to time by the GSEs.

The GSEs have significant discretion under the PMIERs as well as a broad range of consent rights and notice requirements with respect to various actions of an approved insurer.

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In general, higher quality loans carry lower charges.

Under the PMIERs, approved insurers must maintain available assets that equal or exceed minimum required assets ,

which is an amount equal to the greater of (i) $400 million or (ii) a total risk-based required asset amount .

Under the PMIERs, approved insurers must maintain available assets that equal or exceed minimum required assets , which is an amount equal to the greater of (i) $400 million or (ii) a total risk-based required asset amount .

The risk-based required asset amount is a function of the risk profile of an approved insurer's RIF, assessed on a loan-by-loan basis and considered against certain risk-based factors derived from tables set out in the PMIERs to gross RIF, which is then adjusted on an aggregate basis for reinsurance transactions approved by the GSEs, such as with respect to our ILN Transactions and QSR Transactions.

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

In addition, as set forth in the COVID Guidance, during the COVID-19 Crisis Period, if one or more servicers are unable to continue to remit premiums on loans in default, we, and other approved insurers , have agreed to notify the relevant GSE and give such GSE the opportunity to pay the premium to keep the coverage in force.

By April 15th of each year, NMIC must certify it met all PMIERs requirements as of December 31st of the prior year.

By April 15th of each year, NMIC must certify that it met all PMIERs requirements as of December 31st of the prior year.

We certified to the GSEs by April 15, 2022 that NMIC was in full compliance with the PMIERs as of December 31, 2021.

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NMIC holds a certificate of authority, or insurance license, in all 50 states and D.C.

As a licensed insurer in these jurisdictions, NMIC is subject to ongoing financial reporting, examination and disclosure requirements relating to its business, operations, management or affiliate arrangements.

State Insurance Laws

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State insurance laws and regulations are principally designed for the protection of insured policyholders rather than for the benefit of investors.

Although their scope varies, state insurance laws generally grant broad supervisory powers to insurance regulatory officials to examine insurance companies and interpret and/or enforce rules or exercise discretion affecting almost every significant aspect of the insurance business.

In general, state insurance regulation of our business relates to:

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• affiliate transactions;

• reinsurance requirements;

• reinsurance transactions and related requirements;

• limitations on the types of investment instruments which may be held in an investment portfolio;

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Under Wisconsin law, all transactions involving us, or an affiliate, and an insurance subsidiary, must conform to certain standards, including that the transaction be "reasonable and fair" to the insurance subsidiary.

Wisconsin law also provides that disclosure of certain transactions must be filed with the Wisconsin OCI at least 30 days before the transaction is entered into and that these transactions may be disapproved by the Wisconsin OCI within that period.

Wisconsin law also provides that disclosure of certain affiliate transactions must be filed with the Wisconsin OCI at least 30 days before the transaction is entered into and that these transactions may be disapproved by the Wisconsin OCI within that period.

Under Wisconsin law, domestic insurers, such as NMIC, are required to submit and obtain prior Wisconsin OCI approval on all reinsurance agreements with non-affiliate reinsurers.

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In addition to Wisconsin, other states may limit or restrict our insurance subsidiaries' ability to pay stockholder dividends.

For example, California and New York prohibit mortgage insurers licensed in such states from declaring dividends except from undivided profits remaining above the aggregate of their paid-in capital, paid-in surplus and contingency reserves.

In addition, Florida requires mortgage insurers to hold capital and surplus not less than the lesser of (i) 10% of its total liabilities, or (ii) $100 million.

For example, in California and New York, mortgage insurers licensed in such states are prohibited from declaring dividends except from undivided profits remaining above the aggregate of their paid-in capital, paid-in surplus and contingency reserves.

In addition, Florida requires mortgage insurers to hold surplus of not less than the lesser of (i) 10% of its total liabilities, or (ii) $100 million.

It is possible that Wisconsin, or other states, will adopt revised statutory provisions or interpretations of existing statutory provisions that will be more or less restrictive than those described above or will otherwise take actions that may further restrict the ability of our insurance subsidiaries to pay dividends or make distributions or returns of capital.

Wisconsin has adopted the Risk Management and Own Risk and Solvency Assessment Act, which requires, among other things, that we conduct an Own Risk and Solvency Assessment (ORSA) at least annually to assess the material risks associated with our business and our current and estimated projected future solvency position, and maintain a risk management framework to assess, monitor, manage, and report on material risks.

Additionally, Wisconsin has also adopted the annual enterprise risk reporting and “Corporate Governance Annual Disclosure” requirements of the Model Act.

Wisconsin has adopted the Risk Management and Own Risk and Solvency Assessment Act, which requires, among other things, that we conduct an Own Risk and Solvency Assessment at least annually to assess the material risks associated with our business and our current and estimated projected future solvency position, and maintain a risk management framework to assess, monitor, manage, and report on material risks.

Additionally, Wisconsin has also adopted the annual enterprise risk reporting and “Corporate Governance Annual Disclosure” requirements of the National Association of Insurance Commissioners' (NAIC) model laws.

Wisconsin has adopted the NAIC’s amendments to the model holding company act that implement the filing requirement for the group capital calculation (GCC).

The GCC uses a risk-based capital aggregation methodology for all entities in an insurance holding company system.

It is a tool that provides insurance regulators with a method to aggregate the available capital and the minimum capital of each entity in a group in a way that applies to all companies regardless of their structure.

Under Wisconsin law, the ultimate controlling person of our insurance subsidiaries must file the GCC annually with the Wisconsin OCI.

Mortgage insurers licensed in Wisconsin are required to establish a contingency loss reserve for purposes of statutory accounting, with annual contributions equal to the greater of (i) 50% of net earned premiums for such year or (ii) the minimum policyholders' position (as described below) relating to NIW in the period, divided by 7.

These additions to contingency reserves cannot be withdrawn for a period of 10 years, except as permitted by insurance regulations.

With prior approval from the Wisconsin OCI, an MI company may make early withdrawals from the contingency reserve when incurred losses for a calendar quarter exceed the greater of either (i) 35% of net premiums earned in a calendar year or (ii) 70% of the annual amount contributed to the contingency loss reserve.

With prior approval from the Wisconsin OCI, an MI company may make early withdrawals from the contingency reserve when incurred losses and incurred loss expenses for a calendar quarter exceed the greater of either (i) 35% of net premiums earned in a calendar year or (ii) 70% of the annual amount contributed to the contingency loss reserve.

Under applicable Wisconsin law and the laws of 15 other states, a mortgage insurer must maintain a minimum amount of statutory capital relative to its RIF in order for the mortgage insurer to continue to write new business.

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Wisconsin has formula-based limits that generally result in RTC limits slightly higher than the 25:1 ratio.

We compute RTC ratios for each of our insurance subsidiaries, as well as for our combined insurance operations.

We compute the RTC ratio for NMIC.

The RTC ratio is our net RIF divided by our statutory capital.

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Wisconsin requires a mortgage insurer to maintain a "minimum policyholders' position" as calculated in accordance with the applicable regulations.

Policyholders' position, which is also known as statutory capital, is generally the sum of statutory policyholders' surplus (which increases as a result of statutory net income and capital contributions, and decreases as a result of statutory net loss and capital distributions), plus the statutory contingency reserve.

Policyholders' position, which is also known as statutory capital, is generally the sum of statutory policyholders' surplus (which increases as a result of statutory net income and capital

contributions, and decreases as a result of statutory net loss and capital distributions), plus the statutory contingency reserve.

Under statutory accounting rules, the contingency reserve is reported as a liability on the statutory balance sheet;

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State insurance regulators also have the authority to make changes to current regulations governing mortgage insurance, including, among other things, capital requirements, underwriting standards, claims practices and market conduct regulation.

The National Association of Insurance Commissioners (NAIC) has formed a working group within its Financial Condition (E) Committee, the Mortgage Guaranty Insurance Working Group (the Working Group), to discuss, develop and recommend changes to the solvency and market practices regulation of mortgage insurers, including changes to the Mortgage Guaranty Insurers Model Act (Model Act).

Proposed amendments to the Model Act include, among other changes, adoption of a risk-based capital model.

We, along with other mortgage insurers, have provided feedback to the Working Group since early 2013, including comments on the risk-based capital approach.

The NAIC has formed a working group within its Financial Condition (E) Committee, the Mortgage Guaranty Insurance Working Group (the Working Group), to discuss, develop and recommend changes to the solvency and market practices regulation of mortgage insurers, including changes to the Mortgage Guaranty Insurers Model Act (Model Act).

We, along with other mortgage insurers, have provided feedback to the Working Group since early 2013, including comments on proposed amendments to the Model Act which are still under development at the NAIC.

Most states, including Wisconsin, have enacted anti-inducement and anti-rebate laws applicable to mortgage insurers, which prohibit mortgage insurers from inducing lenders to enter into insurance contracts by offering benefits not specified in the policy, including rebates of insurance premiums.

For example, Wisconsin prohibits mortgage insurers from allowing any commission, fee, remuneration, or other compensation to be paid to, or received by, any insured lender, including any subsidiary or affiliate, officer, director, or employee of any insured, any member of their immediate family, any corporation, partnership, trust, trade association in which any insured is a member, or other entity in which any insured or any such officer, director, or employee or any member of their immediate family has a material financial interest.

MI premium rates are subject to prior approval in certain states, which requirement is designed to protect policyholders against rates that are excessive, inadequate or unfairly discriminatory.

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, the FHA, USDA and VA) and Ginnie Mae.

There is broad policy consensus toward the need for increasing private capital participation and decreasing government exposure to credit risk in the U.S.

There is broad policy consensus toward the need for continued and consistent private capital participation in the U.S.

housing finance system.

However, to date there has been a lack of consensus on the specific changes necessary to return to a larger role for private capital and what size the government's role should be.

On September 6, 2008, the FHFA used its authority to place the GSEs into conservatorship.

As the GSEs' conservator, the FHFA has the authority to control and direct the GSEs' operations, and the FHFA's policy objectives can result in changes to the GSEs' requirements and practices.

While in conservatorship, each GSE has been subject to the terms of Senior Preferred Stock Purchase Agreements with the Treasury Department (PSPAs).

While in conservatorship, each GSE has been subject to the terms of Senior Preferred Stock Purchase Agreements, as amended, with the Treasury Department (PSPAs).

Pursuant to the PSPAs, the Treasury Department committed to invest in the GSEs to the extent required for each to maintain a positive net worth.

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, LTVs above 80%) without MI and subsequently places mortgage insurance with a captive insurer controlled by one of our competitors, which captive in turn cedes 100% of the risk to a panel of offshore reinsurers.

In 2018, Freddie Mac launched the IMAGIN program and Fannie Mae launched the Enterprise-Paid Mortgage Insurance or EPMI program, both of which were discontinued in 2021 but could be relaunched in the future.

Any success of the relaunched or similar programs in the future or even the perception that some of these risk-sharing structures have beneficial features in comparison to private MI ( e.g.

In 2018, Freddie Mac launched the IMAGIN program and Fannie Mae launched the Enterprise-Paid Mortgage Insurance or EPMI program, both of which were suspended in 2021 but could be relaunched in their prior form or in a modified form in the future Any success of the relaunched or similar programs in the future or even the perception that some of these risk-sharing structures have beneficial features in comparison to private MI ( e.g.

, lower costs, reduced counter-party risk due to collateral requirements or more diversified insurance exposures) may create increased competition for private MI on loans traditionally sold to the GSEs with private MI.

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The proposed rule's requirements would also outline the process for the FHFA's review of any new activity and the timelines for approving a new product, including issuing a public notice and requesting public comment about a new product.

Written comments on this notice of proposed rulemaking were due January 8, 2021.

Following the removal of previous Director, the current Acting Director initiated a review of recently proposed rules, including the proposed new activities and products rule, and delayed their implementation.

We cannot predict whether the new activities and products rule will be implemented or, if implemented, what restrictions any final rule may impose on the GSEs.

The new enterprise products and activities final rule was announced on December 20, 2022 and will be effective on February 27, 2023.

The final rule retains the key concepts from the proposed rule but, among other changes, provided certain additional clarifications and requires FHFA to report on determinations made on new activity and new product submissions.

With the GSEs in a prolonged conservatorship, there has been ongoing debate over the future role and purpose of the GSEs in the U.S.

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Supreme Court ruled that the President could remove the FHFA Director other than for cause.

Subsequently, President Biden removed the previous FHFA Director and appointed a new Acting Director to lead the FHFA.

Subsequently, President Biden removed the previous FHFA Director and appointed a new Director to lead the FHFA.

The FHFA leadership change has added uncertainty to what role the GSEs, FHA and private capital, including private mortgage insurance, will play in the residential housing finance system in the future.

On September 14, 2021, the FHFA together with the Treasury Department announced the suspension of certain portions of the 2021 PSPA amendments, specifically those limiting certain GSE lending activities and proposed amendments to the regulatory capital framework that would, among other things, reduce the amount of capital the GSEs are required to hold compared to the final December 2020 rule, including by increasing the capital credit the GSEs receive for the credit risk that they distribute.

It is uncertain if and when these proposed amendments may be adopted into the regulatory capital framework and what form that they may take.

On March 16, 2022, the FHFA adopted the final rule (effective May 16, 2022) (2022 ERCF amendment) that amended the enterprise regulatory capital framework by refining the prescribed leverage buffer amount and credit risk transfer (CRT) securitization framework for the GSEs, which reduced the amount of capital the GSEs are required to hold, including by increasing the capital credit the GSEs receive for the credit risk that they distribute.

The passage and timing of comprehensive GSE reform or incremental change (whether legislative or administrative in nature) is uncertain, making the actual impact on us and our industry difficult to predict.

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QMs under the rule benefit from a statutory presumption of compliance with the ATR rule, thus potentially mitigating the risk of the liability of the creditor and assignees of the loan under TILA.

consumer's application before July 1, 2021, the mandatory compliance date of the CFPB's final General QM and new "Seasoned QM" rules.

On October 20, 2020, the CFPB released a final rule that replaced the January 10, 2021 sunset date for the QM Patch with a provision stating that the GSE Patch will be available only for covered transactions for which the creditor receives the consumer's application before July 1, 2021, the mandatory compliance date of the CFPB's final General QM and new "Seasoned QM" rules.

Following its October rulemaking, on December 10, 2020, the CFPB released two additional final rules amending the definition of a General QM (New QM Definition) by replacing the current 43% DTI ratio limit with price-based thresholds, among other changes, and defining and providing for a Seasoned QM category of mortgage.

The New QM Definition and its safe-harbor statutory compliance protection will apply, under the final rule, to a covered transaction with the following characteristics:

• The loan has an annual percentage rate (APR) that does not exceed the average prime offer rate (APOR) for comparable transactions by 2.25 or more percentage points;

• The loan has an annual percentage rate that does not exceed the average prime offer rate for comparable transactions by 2.25 or more percentage points;

• The loan meets the existing QM product feature and underwriting requirements and limits on points and fees;

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In addition, to satisfy the General QM final rule's "verify" requirement, the rule provides for a safe harbor if the creditor follows specific verification standards, including the single-family underwriting manuals of Fannie Mae and Freddie Mac.

The General QM final rule is effective on March 1, 2021 and originally had a mandatory compliance date of July 1, 2021, after which the Original QM Definition and QM Patch would no longer apply.

The mandatory compliance date for the New QM Definition (and therefore, the preservation of the Original QM Definition and QM Patch) has since been extended to October 1, 2022.

The General QM final rule was effective on March 1, 2021 and originally had a mandatory compliance date of July 1, 2021, after which the Original QM Definition and QM Patch would no longer apply.

The mandatory compliance date for the New QM Definition (and therefore, the preservation of the Original QM Definition and QM Patch) was extended to October 1, 2022.

However, the GSEs announced on April 8, 2021 that, for loan applications received on or after July 1, 2021, they will only purchase loans satisfying the New QM Definition.

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The Seasoned QM final rule includes the points and fees limit and consider and verify standards set forth in the General QM final rule.

The final rule is effective on March 1, 2021, with loans for which creditors receive applications on or after the effective date would be eligible to qualify for Seasoned QM status.

The final rule was effective on March 1, 2021, with loans for which creditors receive applications on or after the effective date would be eligible to qualify for Seasoned QM status.

The Dodd-Frank Act also gave statutory authority to HUD, the VA, and the USDA to develop their own definitions of QM.

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We expect that most lenders will continue to be reluctant to make loans that do not qualify as QMs because absent full compliance with the ATR rule, such loans will not be entitled to a "safe-harbor" presumption of compliance with the ability-to-pay requirements.

It is unclear whether the revised General QM rule or the new Seasoned QM category will have a beneficial or negative impact on access to mortgage credit or the size of the mortgage market.

The Basel Capital Accord, as updated, sets out international benchmarks for assessing banks' capital adequacy requirements, which, among other factors, governs the capital treatment of MI purchased and held on balance sheet by domestic and international banks in respect of their residential mortgage loan origination and securitization activities.

It is still too early to determine whether the revised General QM rule or the new Seasoned QM category will have a beneficial or negative impact on the long-term access to mortgage credit or the size of the mortgage market.

Basel Committee Capital Adequacy Requirements

The Basel Committee on Banking Supervision (Basel Committee), consists of a group of central banks and banking regulators including the United States, developed t he Basel Capital Accord in 1988 to set out international benchmarks for assessing banks' capital adequacy requirements.

The capital adequacy requirements, among other factors, govern the capital treatment of MI purchased and held on balance sheet by domestic and international banks in respect of their residential mortgage loan origination and securitization activities.

In July 2013, U.S.

banking regulators promulgated regulations to implement significant elements of the Basel framework, which we refer to as Basel

The effective date for the U.S.

Basel III regulations was January 1, 2014, although the majority of its provisions are subject to multi-year phase-in periods to achieve full implementation.

Under the "Standardized Approach" in the U.S.

Basel III capital rules, loans secured by one-to-four-family residential properties (residential mortgage exposures) receive a 50% or 100% risk weight.

Generally, first lien residential mortgage exposures that are prudently underwritten, including with respect to regulatory standards for LTV limits, and that are performing according to their original terms receive a 50% risk weight, while all other residential mortgage exposures are assigned a 100% risk weight.

The banking regulators clarified that LTV ratios can account for private MI in determining whether a loan is made in accordance with prudent underwriting standards for purposes of receiving a 50% risk weight;

however, mortgage exposure guaranteed by a government MI will have a lower risk weight, putting private MI at a disadvantage relative to government MI.

The Basel Committee on Banking Supervision (Basel Committee) previously proposed rules that would further reduce the benefit of private MI by not taking into consideration any credit enhancement, including private MI;

banking regulators promulgated regulations to implement significant elements of the Basel framework, which we refer to as Basel III.

In December 2017, the Basel Committee published final revisions to Basel III (informally known as "Basel IV") with target implementation by each participating country by January 1, 2022, later extended to January 1, 2023 due to the Covid-19 pandemic.

Implementation of Basel IV reforms requires national legislation and, therefore, the final rules and the timetable for their implementation in each participating country may be subject to some level of national variation.

As an example, the United Kingdom (UK) and the European Union (EU) have each separately targeted an effective date of January 1, 2025 for their rules implementing the Basel IV reforms to enter into force, but there is some divergence between the content of the UK and EU legislative proposals for implementation.

Under Basel IV, banks using the standardized approach to determine their credit risk may consider mortgage insurance in calculating the exposure amount for real estate.

However, such banks will need to determine the risk-weight for residential mortgages based on the LTV ratio at loan origination, without factoring in mortgage insurance.

Under the standardized approach, after the appropriate risk-weight is determined, the existence of mortgage insurance could be considered, but only if the company issuing the insurance has a lower risk-weight than the underlying exposure.

Mortgage insurance issued by private companies would not meet this test.

Therefore, under Basel IV, mortgage insurance could not mitigate credit and lower the capital charge under the standardized approach.

The Basel Committee previously proposed rules that would further reduce the benefit of private MI by not taking into consideration any credit enhancement, including private MI;

however, those revisions were not implemented, retaining the treatment of mortgage insurance.

On September 9, 2022, the U.S.

banking regulators announced their intent to revise U.S.

regulatory capital requirements to align them with Basel IV.

implementation of Basel IV’s revised standards may mean mortgage insurance would not lower the LTV ratio of residential loans for capital purposes, and therefore may decrease the demand for mortgage insurance.

The announcement that U.S.

federal banking regulators intend to revise U.S.

regulatory capital rules to align with Basel IV confirms speculation but does not provide clarity on when we can expect a proposal or how much time will be provided for banking organizations to implement a final rule.

We believe the existing U.S.

implementation of the Basel III capital framework supports continued use of private MI by portfolio lenders as a risk and capital management tool;

however, with the ongoing implementation of Basel III and the continued evolution of the Basel framework, it is difficult to predict the impact, if any, on the MI industry and the ultimate form of any potential future modifications to the regulations by federal banking regulators.

If the Basel Committee revises the Basel III framework to reduce or eliminate the capital benefit banks receive from insuring low down payment loans with private MI, our current and future business may be adversely affected.

implementation of the Basel IV capital framework supports continued use of private MI by portfolio lenders as a risk and capital management tool;

however, with the ongoing implementation of Basel IV and the continued evolution of the Basel framework, it is difficult to predict the impact, if any, on the MI industry and the ultimate form of any potential future modifications to the regulations by federal banking regulators.

If the Basel Committee revises the Basel IV framework to reduce or eliminate the capital benefit banks receive from insuring low down payment loans with private MI, our current and future business may be adversely affected.

Mortgage Servicing Rules

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As to servicing of delinquent mortgage loans covered by our insurance policies, these rules could contribute to delays in and increased costs associated with foreclosure proceedings and have a negative impact on the cost and resolution of claims.

Homeowners Protection Act of 1998

Homeowners Protection Act of 1998 (HOPA)

HOPA provides for the automatic termination, or cancellation upon a borrower's request, of BPMI, as defined in HOPA, upon satisfaction of certain conditions.

HOPA requires that lenders give borrowers certain notices with regard to the automatic termination or cancellation of BPMI.

HOPA requires that lenders give borrowers certain notices with regard to the automatic

termination or cancellation of BPMI.

These provisions apply to BPMI for purchase money, refinance and construction loans secured by the borrower's principal dwelling.

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Upon expiration in 2011, Congress temporarily extended the deduction for each tax year from 2012 through 2021.

Congress temporarily extended the deduction through December 31, 2021.

Congress has not extended the deduction to the 2022 tax year.

Elimination of the private mortgage insurance tax deduction could have the effect of reducing demand for private MI products.

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Federal Trade Commission (FTC) and the CFPB.

In addition, many states have enacted privacy and data security laws which impose compliance obligations beyond GLBA, including obligations to protect social security numbers, maintain comprehensive information security programs and provide notification if a security breach results in a reasonable belief that unauthorized persons may have obtained access to consumer non-public personal information.

We have adopted certain risk management and security practices designed to facilitate our compliance with these federal and state privacy and information security laws.

In addition, many states have enacted privacy and data security laws which impose compliance obligations beyond GLBA.

These state laws obligate us to protect social security numbers, maintain a comprehensive information security program, submit annual compliance certifications regarding such programs (or an exemption thereto) and notify insurance regulators if a security breach results in a reasonable belief that unauthorized persons may have obtained access to consumer non-public personal information.

For example, New York’s cybersecurity regulation establishes requirements for insurance entities under the New York Department of Financial Services’ jurisdiction, such as NMIC.

The NAIC adopted the Insurance Data Security Model Law

(Cybersecurity Model Law) for entities licensed under the relevant state’s insurance laws.

The Cybersecurity Model Law requires such entities to develop and maintain a risk-based information security program, among other requirements.

Several states, including Wisconsin, have adopted the Cybersecurity Model Law.

State consumer privacy protection laws have also created new rights for their residents regarding certain personal information an organization collects and/or uses about them.

We have adopted certain policies and procedures, and risk management and security practices designed to facilitate our compliance with these federal and state privacy and information security laws.

Fair Credit Reporting Act

FCRA imposes restrictions on the permissible use of credit report information.

The CFPB and FTC each have authority to enforce the FCRA.

The CFPB and FTC each have authority to enforce FCRA.

FCRA has been interpreted by some FTC staff and federal courts to require mortgage insurers to provide "adverse action" notices to consumers if an application for mortgage insurance is declined or offered at higher than the best available rate for the program applied for on the basis of a review of the consumer's credit.

4 unchanged sentences

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

What changed 10-K

Item 1. Business