What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-15 compared with 2022-02-16 · 304 added, 440 removed, 669 unchanged (53% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes thereto included below in Item 8 of this report and the Risk Factors included above in Item 1A of this report.

In addition, investors should review the " Cautionary Note Regarding Forward-Looking Statements " above.

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As of December 31, 2022, we had issued master policies with 1,875 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 December 31, 2021, we had $152.3 billion of primary insurance-in-force (IIF) and $38.7 billion of primary RIF.

As of December 31, 2022, we had $184.0 billion of primary IIF and $47.6 billion of primary RIF.

We believe that our success in acquiring a large and diverse group of lender customers and growing a portfolio of high-quality IIF traces to our founding principles, whereby we aim to help qualified individuals achieve their homeownership goals, ensure that we remain a strong and credible counter-party, deliver a 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.

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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

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

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

Conditions and Trends Affecting Our Business

COVID-19 and Other Developments

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

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

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

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

The global dislocation caused by COVID-19 was unprecedented.

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

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

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

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

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

and poses significant risk globally.

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

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

Potential Impact on the U.S.

Housing Market and Mortgage Insurance Industry

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

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

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

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

and one noted for its significant housing market dislocation.

Such differences include:

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

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

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

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

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

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

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

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

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

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

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

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

In this context, total U.S.

mortgage insurance industry new insurance written (NIW) volume increased to record levels following the onset of the COVID-19 pandemic and the persistency of existing in-force insured risk across the industry declined meaningfully.

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

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

Potential Impact on NMI's Business Performance and Financial Position

We had 247 employees at December 31, 2021 , including 83 who typically work at our corporate headquarters in Emeryville, CA and 164 who typically work from home in locations across the country.

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

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

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

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

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

We intend to continue offering such flexibility following the pandemic and expect that a significant number of our headquarters-based employees will elect to continue to engage on a full-time or part-time distributed basis.

In January 2022, we modified the lease for our corporate headquarters to reflect our new real estate needs.

Under terms of the modified lease, we reduced the square footage of our leased space and secured a reduction in pricing and incremental leasehold improvement concessions.

The modified lease term extends through March 2030.

New Business Production

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

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

We wrote $85.6 billion of NIW during the year ended December 31, 2021, up 36% compared to the year ended December 31, 2020 and 90% compared to the year ended December 31, 2019.

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

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

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

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

At December 31, 2021, the weighted average FICO score of our RIF was 753 and we had a 3% mix of below 680 FICO score.

Similarly, at December 31, 2021, the weighted average LTV ratio (at origination) of our insured portfolio was 92.5% and we had a 11% mix of 97% LTV risk.

Delinquency Trends and Claims Expense

At December 31, 2021, we had 6,227 defaulted loans in our primary insured portfolio, which represented a 1.22% default rate against our 512,316 total policies in-force, and identified 7,019 loans that were enrolled in a forbearance program, including 4,751 of those in default status.

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

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

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

As of January 31, 2022, our default population was 5,912, representing a 1.14% default rate.

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

Default and Forbearance Activity as of

12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021

Number of loans in default 12,209 11,090 8,764 7,670 6,227

Default rate (1)

3.06% 2.54% 1.86% 1.56% 1.22%

Number of loans in forbearance 19,464 14,805 11,889 9,342 7,019

Forbearance rate (2)

4.87% 3.39% 2.52% 1.90% 1.37%

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

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

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

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

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

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

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

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

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

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

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

At December 31, 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.

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

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

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

default status for a prolonged period of time.

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

Regulatory Capital Position

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

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

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

At December 31, 2021, we reported $2,041 million available assets against $1,186 million risk-based required assets.

Our "excess" funding position was $855 million.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

At December 31, 2021, we had an aggregate $560 million of overcollateralization available across our ILN Transactions to absorb an increase in the PMIERs risk-based required asset amount on ceded RIF.

The following table provides detail on the level of overcollateralization of each of our ILN Transactions at December 31, 2021:

($ values in thousands) 2017 ILN Transaction 2018 ILN Transaction

2019 ILN Transaction

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

Ceded RIF $ 1,083,899 $ 1,165,012 $ 1,315,183 $ 2,830,192 $ 4,337,381 $ 8,025,754 $ 7,692,023

First Layer Retained Loss 121,163 122,569 122,548 169,488 121,177 163,708 146,229

Reinsurance Coverage 27,425 158,489 231,877 49,879 155,129 367,238 363,596

Eligible Coverage $ 148,588 $ 281,058 $ 354,425 $ 219,367 $ 276,306 $ 530,946 $ 509,825

Subordinated Coverage (1)

13.71% 24.12% 26.95% 7.75% 6.25% 6.62% 6.63%

PMIERs Charge on Ceded RIF 6.13% 8.01% 7.82% 6.18% 5.57% 6.02% 6.50%

Overcollateralization (2) (3)

$ 27,425 $ 158,489 $ 231,877 $ 49,879 $ 34,581 $ 47,709 $ 10,133

Delinquency Trigger (4)

4.0% 4.0% 4.0% 6.0% 4.7% 5.0% 5.0%

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

(2) Overcollateralization for each of the 2017, 2018, 2019 and 2020-1 ILN Transactions is equal to their current reinsurance coverage as the PMIERs required asset amount on RIF ceded under each transaction is currently below its remaining first layer retained loss.

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

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

delinquency triggers for the 2020-1, 2020-2, 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.

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

We estimate, however, that we will remain in compliance with our PMIERs asset requirements even if the forbearance-driven default rate on our in-force portfolio materially exceeds its current level, given our $855 million excess available asset position at December 31, 2021, the nationwide applicability of the 70% haircut on delinquent policies subject to a forbearance program accessed in response to a financial hardship related to the COVID-19 pandemic, and the increasing PMIERs relief automatically provided under each of our quota share treaties and ILN Transactions.

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

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

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

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

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

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

As of December 31, 2021, we had $2.2 billion of consolidated cash and investments, including $106 million of cash and investments at NMIH.

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

See Item 8, "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 15, Common Stock." On June 19, 2020, NMIH also completed the sale of $400 million aggregate principal amount of senior secured notes, raising net proceeds of $244 million after giving effect to offering expenses and the repayment of the $150 million principal amount outstanding under our 2018 Term Loan.

See Item 8, "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 5, Debt." NMIH contributed approximately $445 million of capital to NMIC following completion of its respective Notes and common stock offerings.

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

The 2021 Revolving Credit Facility is undrawn and fully available to NMIH.

Amounts drawn under the 2021 Revolving Credit Facility are available as directed for NMIH needs or may be down-streamed to support the requirements of our operating subsidiaries if we so decide.

See Item 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 5, Debt ." NMIH also has access to $34.9 million of ordinary course dividend capacity available from NMIC without the prior approval of the Wisconsin OCI.

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

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

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

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

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

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

The Wisconsin OCI refreshed its approval of the debt service agreement and provided for the additional reimbursement by NMIC of interest expense due on our Notes and 2021 Revolving Credit Facility at the time each transaction was completed.

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

At December 31, 2021, NMIC had $2.1 billion of cash and investments, including $55 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 December 31, 2021, NMIC generated $307 million of cash flow from operations and received an additional $117 million of cash flow from the maturity, sale and redemption of securities held in its investment portfolio.

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

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

NMIC's only use of cash that develops along an unscheduled path is claims payments.

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

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

There was broad discussion at the onset of the COVID-19 pandemic and concerns about potential liquidity challenges that servicers might face in the event of widespread borrower utilization of forbearance programs.

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

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

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

Through December 31, 2021, we did not see any notable changes in servicer payment practices, with servicers generally continuing to remit monthly premium payments as scheduled, including those for policies covering loans that are in a forbearance program.

Investment portfolio

At December 31, 2021, we had $2.2 billion of cash and invested assets.

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

At December 31, 2021, our investment portfolio was comprised of 100% fixed income assets with 100% of our holdings rated investment grade and our portfolio having an average rating of "A+." At December 31, 2021, our portfolio was in a $7.2 million aggregate unrealized gain position;

it was highly liquid

and highly diversified with no Level 3 asset positions and no single issuer concentration greater than 1.3%.

We did not record any allowance for credit losses in the portfolio during the year ended December 31, 2021, as we expect to recover the amortized cost basis of all securities held.

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

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

Other Conditions and Trends Impacting Our Business

and global economic activity.

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

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

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

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

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

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

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

It is also possible that emerging macroeconomic factors, including persistent inflation, increasing interest rates, 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.

A marked decline in housing demand, a significant and protracted decrease in house prices or a sustained increase in unemployment could reduce the pace of new business activity in the private mortgage insurance market and negatively impact our future NIW volume, or contribute to an increase in our future default and claim experience.

Key Factors Affecting Our Results

Customer Development

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

Under an excess-of-loss agreement, the ceding insurer is typically responsible for losses up to an agreed-upon threshold and the reinsurer then provides coverage in excess of such threshold up to a maximum agreed-upon limit.

Under an excess-of-loss agreement, the ceding insurer is typically responsible

for losses up to an agreed-upon threshold and the reinsurer then provides coverage in excess of such threshold up to a maximum agreed-upon limit.

We expect to continue to evaluate reinsurance opportunities in the normal course of business.

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 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.

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

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

Best Company, Inc.

Best) or both.

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.

Under the terms of the 2018 QSR Transaction, NMIC cedes premiums earned related to 25% of the risk on eligible policies written in 2018 and 20% of the risk on eligible policies written in 2019, in exchange for reimbursement of ceded claims and claim expenses on covered policies, a 20% ceding commission, and a profit commission of up to 61% that varies directly and inversely with ceded claims.

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

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

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

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

Under the terms of the 2023 QSR Transactions, NMIC will cede premiums earned related to 20% of the risk on eligible policies written in 2023, in exchange for reimbursement of ceded claims and 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.

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

In connection with the termination, NMIC recaptured approximately $500 million of previously ceded primary RIF and stopped ceding new premiums written with respect to the recaptured risk.

With this termination, ceded premiums written under the 2016 QSR Transaction decreased from 25% to 20.5% on eligible policies.

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

Excess-of-loss reinsurance

Insurance-linked notes

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

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

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

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

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

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

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 and current reinsurance coverage amount, and initial and current first layer retained aggregate loss under each of 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).

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.

Effective August 31, 2022, a Lock-Out Event for the 2019 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.

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 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 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 264,545 158,489 125,312 122,569

2019 ILN Transaction July 30, 2019 6/1/2018 - 6/30/2019 326,905 231,877 123,424 122,548

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)

($ 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)

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

2021-1 ILN Transaction (5)

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

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

2021-2 ILN Transaction (5)

October 26, 2021 4/1/2021 - 9/30/2021 (4)

Ceded RIF $ 855,081 $ 968,433 $ 3,404,929 $ 6,924,354 $ 6,989,626

Current First Layer Retained Loss 122,202 122,257 121,177 163,665 146,204

Current Reinsurance Coverage 158,489 204,127 95,729 305,139 363,596

Eligible Coverage $ 280,691 $ 326,384 $ 216,906 $ 468,804 $ 509,800

Subordinated coverage (4)

32.83% 33.70% 6.25% 6.75% 7.29%

(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.

PMIERs charge on ceded RIF 7.85% 7.57% 4.98% 6.01% 6.72%

Overcollateralization (5) (6)

$ 158,489 $ 204,127 $ 47,484 $ 52,921 $ 39,881

Delinquency Trigger (7)

4.0% 4.0% 4.7% 5.1% 5.5%

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

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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.

(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.

(4) Absent a delinquency trigger, the subordinated coverage is capped at 7.5%, 6.25%, 6.75% and 7.45% for the 2019, 2020-2, 2021-1 and 2021-2 ILN Transactions, respectively.

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

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

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

delinquency triggers for the 2020-2, 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 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 S&P, A.M.

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

NMIC is a party to seven 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 each of the QSR Transactions, NMIC cedes a proportional share of its risk on eligible policies to panels of third-party reinsurance providers.

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

Best or both.

Under the terms of the 2022 QSR Transaction, NMIC cedes premiums earned related to 20% of the risk on eligible policies written between October 30, 2021 and December 31, 2022, in exchange for reimbursement of ceded claims and 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 Transactions, NMIC cedes premiums earned related to 20% of the risk on eligible policies written from January 1, 2023 to 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 RIF ceded under the respective agreements.

Additionally, under the terms of the QSR Transactions, NMIC may elect to selectively 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.

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

In connection with the termination, NMIC recaptured approximately $500 million of previously ceded primary RIF and stopped ceding new premiums written with respect to the recaptured risk.

With this termination, ceded premiums written under the 2016 QSR Transaction decreased from 25% to 20.5% on eligible policies.

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

See Item 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 6, 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 years ended

December 31, 2021 December 31, 2020 December 31, 2019

Primary and pool IIF and NIW As of and for the years ended December 31,

2022 2021 2020

IIF NIW IIF NIW IIF NIW

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Total $ 185,017 $ 58,734 $ 153,572 $ 85,574 $ 113,107 $ 62,702

For the year ended December 31, 2021, primary NIW increased 36% compared to the year ended December 31, 2020, driven by growth in our customer franchise and market presence tied to the increased penetration of existing customer accounts and new customer account activations.

For the year ended December 31, 2020, primary NIW increased 39% compared to the year ended December 31, 2019, driven by growth in our monthly and single premium policy production tied to an increase in the size of the total mortgage insurance market, as well as the growth of our customer franchise and market presence.

For the year ended December 31, 2022, NIW decreased 31% compared to the year ended December 31, 2021, primarily due to a decline in the size of the total mortgage insurance market.

For the year ended December 31, 2021, NIW increased 36% compared to the year ended December 31, 2020, driven by growth in our customer franchise and market presence tied to the increased penetration of existing customer accounts and new customer account activations.

Total IIF increased 20% at December 31, 2022 compared to December 31, 2021, which in turn grew 36% compared to December 31, 2020, 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 64% at December 31, 2021 from 56% at December 31, 2020, as the pace of refinancing activity slowed and an increasing amount of business written on loans with historically low mortgage note rates since the beginning of the pandemic began to factor in the persistency calculation.

Our persistency rate decreased to 56% at December 31, 2020 from 77% at December 31, 2019, reflecting the impact of increased refinancing activity during the year-ended December 31, 2020.

Our persistency rate improved to 84% at December 31, 2022, compared to 64% at December 31, 2021 and 56% at December 31, 2020.

Our persistency rate improved markedly through December 31, 2022 due to a slowdown in the pace of refinancing activity during the year, driven by an increase in interest and mortgage note rates.

Our persistency rates as of December 31, 2021 and 2020 were historically low, reflecting the impact of significant mortgage refinancing activity during both years.

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

Primary and pool premiums written and earned For the year ended

December 31, 2021 December 31, 2020 December 31, 2019

Primary and pool premiums written and earned For the years ended December 31,

2022 2021 2020

(In Thousands)

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Net premiums earned 475,266 444,294 397,172

For the year ended December 31, 2021, net premiums written and earned increased 21% and 12%, respectively, compared to the year ended December 31, 2020.

For the year ended December 2020, net premiums written and earned increased 17% and 15%, respectively, compared to the year ended December 31, 2019.

The successive year-on-year growth in net premiums written and earned was primarily driven by the growth of our IIF and increased monthly policy production, partially offset by increased cessions under the QSR and ILN Transactions.

Net premiums earned for the year ended December 31, 2020 also benefited from an increase in single premium policy cancellations tied to the increased pace of refinancing activity and policy turnover triggered by the record low interest rate environment that developed following the onset of the COVID-19 pandemic.

Net premiums written decreased 2% during the year ended December 31, 2022 compared to the year ended December 31, 2021, reflecting an increase in cessions under our reinsurance transactions and a decline in single premium policy production, balanced by growth in our monthly IIF and monthly pay policy premium receipts during the year.

Net premiums written increased 21% during the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the growth of our IIF and increased monthly policy production, partially offset by increased cessions under our reinsurance transactions during the year.

Net premiums earned increased 7% and 12% during the years ended December 31, 2022 and 2021, respectively.

The sequential increase in net premiums earned during each successive year was primarily driven by our NIW production and growth of our IIF, partially offset by an increase in total premiums ceded under our reinsurance transactions, a decline in the contribution from single premium policy cancellations and the run-off of a portion of our prior period monthly policy production and associated premium receipts.

Pool premiums written and earned for the years ended December 31, 2022, 2021 and 2020, were $1.2 million, $1.6 million and $2.5 million, respectively, before giving effect to the 2016 QSR Transaction, under which all of our written and earned pool premiums are ceded.

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The table below highlights trends in our primary portfolio as of the dates and for the periods indicated.

Primary portfolio trends As of and for the year ended

December 31, 2021 December 31, 2020 December 31, 2019

($ Values In Millions)

Primary portfolio trends As of and for the years ended December 31,

2022 2021 2020

($ Values In Millions, except as noted below)

New insurance written $ 58,734 $ 85,574 $ 62,702

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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 year ended

December 31, 2021 December 31, 2020 December 31, 2019

Primary IIF As of and for the years ended December 31,

2022 2021 2020

(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

December 31, 2021 December 31, 2020 December 31, 2019

Primary IIF and RIF As of December 31,

2022 2021 2020

IIF RIF IIF RIF IIF RIF

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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 year ended

December 31, 2021 December 31, 2020 December 31, 2019

Primary NIW by FICO For the years ended December 31,

2022 2021 2020

(In Millions)

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Weighted average FICO 750 752 761

Primary NIW by LTV For the year ended

December 31, 2021 December 31, 2020 December 31, 2019

Primary NIW by LTV For the years ended December 31,

2022 2021 2020

(In Millions)

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Weighted average LTV 92.2 % 91.4 % 90.9 %

Primary NIW by purchase/refinance mix For the year ended

December 31, 2021 December 31, 2020 December 31, 2019

Primary NIW by purchase/refinance mix For the years ended December 31,

2022 2021 2020

(In Millions)

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The tables below present our total primary IIF and RIF by FICO and LTV, and total primary RIF by loan type as of the dates indicated.

Primary IIF by FICO As of

December 31, 2021 December 31, 2020 December 31, 2019

Primary IIF by FICO As of December 31,

2022 2021 2020

($ Values In Millions)

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Total $ 183,968 100 % $ 152,343 100 % $ 111,252 100 %

Primary RIF by FICO As of

December 31, 2021 December 31, 2020 December 31, 2019

Primary RIF by FICO As of December 31,

2022 2021 2020

($ Values In Millions)

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Total $ 47,648 100 % $ 38,661 100 % $ 28,164 100 %

Primary IIF by LTV As of

December 31, 2021 December 31, 2020 December 31, 2019

Primary IIF by LTV As of December 31,

2022 2021 2020

($ Values In Millions)

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Total $ 183,968 100 % $ 152,343 100 % $ 111,252 100 %

Primary RIF by LTV As of

December 31, 2021 December 31, 2020 December 31, 2019

Primary RIF by LTV As of December 31,

2022 2021 2020

($ Values In Millions)

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Total $ 47,648 100 % $ 38,661 100 % $ 28,164 100 %

Primary RIF by Loan Type As of

December 31, 2021 December 31, 2020 December 31, 2019

Primary RIF by Loan Type As of December 31,

2022 2021 2020

Fixed 99 % 99 % 99 %

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2021 85,574 72,766 85 % 257,972 227,124 1,323 3 6.5 % 0.5 % 0.6 %

2022 58,734 56,579 96 % 163,281 158,733 312 — 11.8 % 0.2 % 0.2 %

Total $ 338,250 $ 183,968 1,097,405 594,142 4,449 588

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Geographic Dispersion

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

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 December 31, 2022 is not necessarily representative of the geographic distribution we expect in the future.

Top 10 primary RIF by state as of December 31, 2021 As of

December 31, 2021 December 31, 2020 December 31, 2019

Top 10 primary RIF by state As of December 31,

2022 2021 2020

California 10.6 % 10.4 % 11.2 %

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Virginia 4.1 4.7 5.1

Colorado 3.8 4.1 3.4

Georgia 4.1 3.8 3.1

Maryland 3.7 3.7 3.4

Washington 3.7 3.5 3.3

Illinois 3.9 3.6 3.8

Washington 3.9 3.7 3.5

Colorado 3.5 3.8 4.1

Pennsylvania 3.4 3.3 3.4

Maryland 3.4 3.7 3.7

Total 53.8 % 55.3 % 54.0 %

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Adjustments to reserve estimates are reflected in the period in which the adjustment is made.

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

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

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

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

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

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The effectiveness of forbearance programs is enhanced by the availability of various repayment and loan modification

options which allow borrowers to amortize or, in certain instances, outright defer payments otherwise due during the forbearance period over an extended length of time.

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

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

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

At December 31, 2021 and 2020, we generally established lower reserves for defaults that we consider to be connected to the COVID-19 pandemic, given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs.

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

For the year ended

December 31, 2021 December 31, 2020 December 31, 2019

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.

Although we are optimistic that the nationwide COVID-19 vaccination effort and other medical advances will continue

to support a normalization of personal and business activity, the path of the virus remains unknown and subject to risk.

A marked decline in housing demand, a significant and protracted decrease in house prices or a sustained increase in unemployment could contribute to an increase in our future default and claim experience.

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

For the years ended December 31,

2022 2021 2020

(In Thousands)

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Add claims incurred:

Claims and claim expenses incurred:

Claims and claim (benefits) expenses incurred:

Current year (2)

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(48,762) (11,128) (7,696)

Total claims and claim expenses incurred 12,305 59,247 12,507

Total claims and claim (benefits) expenses incurred (3,594) 12,305 59,247

Less claims paid:

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1,314 2,017 4,515

Reinsurance terminations (4)

Total claims and claim expenses paid 1,388 2,033 5,101

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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 $18.1 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the year ended December 31, 2021, $60.8 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for year ended December 31, 2020, and $13.2 million attributed to net case reserves and $1.3 million attributed to net IBNR reserves for year ended December 31, 2019.

Amounts are presented net of reinsurance and included $39.9 million attributed to net case reserves and $4.5 million attributed to net IBNR reserves for the year ended December 31, 2022, $18.1 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the year ended December 31, 2021, and $60.8 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the year ended December 31, 2020.

(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 $6.3 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the year ended December 31, 2021, $6.2 million attributed to net case reserves and $1.3 million attributed to net IBNR reserves for the year ended December 31, 2020, and $1.5 million attributed to net case reserves and $0.7 million attributed to net IBNR reserves for year ended December 31, 2019.

(4) Represents the settlement of reinsurance recoverables in conjunction with the termination of one reinsurer under the 2016 QSR Transaction on a cut-off basis.

See Item 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 6, Reinsurance ," for additional information.

Amounts are presented net of reinsurance and included $42.5 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the year ended December 31, 2022, $6.3 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the year ended December 31, 2021, and $6.2 million attributed to net case reserves and $1.3 million attributed to net IBNR reserves for the year ended December 31, 2020.

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

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.

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 $41.5 million related to prior year defaults remained as of December 31, 2022.

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

For the year ended

December 31, 2021 December 31, 2020 December 31, 2019

For the years ended December 31,

2022 2021 2020

Beginning default inventory 6,227 12,209 1,448

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Ending default inventory 4,449 6,227 12,209

Ending default inventory declined from December 31, 2020 to December 31, 2021 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 December 31, 2020 to December 31, 2021, 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 December 31, 2021, 4,751 of our 6,227 defaulted loans were in a COVID-related forbearance program.

Ending default inventory increased from December 31, 2019 to December 31, 2020 primarily due to the outbreak of the COVID-19 pandemic.

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 year ended

December 31, 2021 December 31, 2020 December 31, 2019

Ending default inventory declined successively during each of the years ended December 31, 2022 and 2021, as borrowers initially impacted by the COVID-19 pandemic during the year ended December 31, 2020 continued to cure their delinquencies and fewer new defaults emerged in each successive period as the acute economic stress of the pandemic continued to recede.

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

For the years ended December 31,

2022 2021 2020

($ Values In Thousands)

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49 % 59 % 80 %

(1) Count includes 15, 9 and 19 claims settled without payment for the years ended December 31, 2021, 2020 and 2019, respectively.

(1) Count includes 30, 15 and nine claims settled without payment for the years ended December 31, 2022, 2021 and 2020, 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 82, 143 and 152 claims for the year ended December 31, 2021, 2020 and 2019, respectively.

The number of claims paid during the years ended December 31, 2020 and 2021 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 pandemic and codified under the CARES Act.

The Company paid 81, 82 and 143 claims for the years ended December 31, 2022, 2021 and 2020, 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 years ended December 31, 2020 and 2021, further benefited from the resiliency of the housing market and broad national house price appreciation.

Our claims paid experience for the years ended December 31, 2022, 2021 and 2020, further benefited from 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 year ended December 31, 2021 was 59% compared to 80% and 74% for the years ended December 31, 2020 and 2019, respectively.

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

Our claims severity for the years ended December 31, 2022, 2021 and 2020 was 49%, 59% and 80%.

Claims severity in each year benefited from the same broad national house price appreciation that supported our claims paid experience.

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.

Our claims severity increased for the year ended December 31, 2020, notwithstanding the resiliency of the housing market and broad national house price appreciation observed during the period, as we settled an increased portion of claims using the percent option instead of through third-party sales during the first half of the year.

Third-party marketing and sales activity was broadly constrained immediately following the outbreak of the COVID-19 pandemic;

claims severity moderated in the second half of 2020 as we were once again able to pursue alternative settlement options.

The number of claims paid and our severity experience in future periods may be impacted by developing economic cycles and each could increase if house price declines serve to limit the alternative paths and incentives to cure delinquencies that are available to defaulted borrowers or erode the equity value of the homes collateralizing the mortgages we insure.

The following table provides detail on our average reserve per default, before giving effect to reserves ceded under the QSR Transactions, as of the dates indicated:

Average reserve per default:

December 31, 2021 December 31, 2020 December 31, 2019

As of December 31,

2022 2021 2020

(In Thousands)

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(2) Amount includes claims adjustment expenses.

Average reserve per default increased from December 31, 2021 to December 31, 2022, primarily due to an incrementally conservative set of assumptions about future macroeconomic and housing market conditions compared to those assumed at December 31, 2021.

The increased average reserve per default at December 31, 2022 also reflects the “aging” of early COVID-related defaults.

While we initially 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.

” While average reserve per default increased from December 31, 2021 to December 31, 2022, our aggregate gross reserve position declined in the intervening period due to the decline in our total default inventory.

The average reserve per default increased from December 31, 2020 to December 31, 2021, primarily due to the “aging” of early COVID-related defaults.

While we have generally established lower reserves for defaults that we consider to be connected to the COVID-19 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 December 31, 2020 to December 31, 2021, far exceeded the growth in our aggregate gross reserve position in the intervening period as the impact of the increase in our average reserve per default was largely offset by the decline in our total default inventory.

The average reserve per default decreased from December 31, 2019 to December 31, 2020, primarily due to new COVID-19 related defaults.

At December 31, 2020, 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.

Historically, our business has been subject to modest seasonality in both NIW production and default experience.

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

The COVID-19 pandemic interrupted this typical seasonal pattern.

The COVID pandemic and resulting shelter-in-place directives spurred record NIW production during the years ended December 31, 2021 and 2020.

Our purchase origination NIW remained elevated throughout the pandemic given the consistently high demand for home ownership.

Normal seasonal purchase origination and NIW patterns may emerge again following the pandemic.

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

Our refinancing origination volume declined as rates increased during the year ended December 31, 2021.

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

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.

Further, the COVID pandemic and resulting shelter-in-place directives spurred record housing demand during the years ended December 31, 2021 and 2020, and purchase origination NIW remained elevated through the entirety of each year given the consistently high demand for home ownership.

Our NIW production during the year ended December 31, 2022 returned to a more normalized seasonal pattern as the impact of the pandemic continued to recede and increasing mortgage rates slowed refinancing activity.

GSE Oversight

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In general, higher quality loans carry lower asset 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 .

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, 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.

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 aggregate gross risk-based required asset amount for performing, primary insurance is subject to a floor of 5.6% of performing primary adjusted RIF , and the risk-based required asset amount for pool insurance considers both factors in the PMIERs tables and the net remaining stop loss for each pool insurance policy.

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

NMIC also has an ongoing obligation to immediately notify the GSEs in writing upon discovery of a failure to meet one or more of the PMIERs requirements.

also has an ongoing obligation to immediately notify the GSEs in writing upon discovery of a failure to meet one or more of the PMIERs requirements.

We continuously monitor NMIC's compliance with the PMIERs.

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:

December 31, 2021 December 31, 2020 December 31, 2019

($ values in thousands)

As of December 31,

2022 2021 2020

(In Thousands)

Available assets $ 2,378,627 $ 2,041,193 $ 1,750,668

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Available assets were $2.4 billion at December 31, 2022, compared to $2.0 billion at December 31, 2021 and $1.8 billion at December 31, 2020.

The $291 million increase in available assets in 2021 was primarily driven by NMIC's positive cash flow from operations during the year.

In June 2020, NMIH completed the sale of 15.9 million shares of common stock raising net proceeds of approximately $220 million and the sale of the $400 million aggregate principal amount of senior secured notes.

N MIH contributed approximately $445 million of capital to NMIC following completion of the Notes and equity offerings.

The $734 million increase in NMIC's available assets in 2020 was driven by the NMIH capital contribution and NMIC's positive cash flow from operations during the year.

The increase in the risk-based required asset amount between the dates presented was primarily driven by growth of our gross RIF, an increase in the risk ceded under our third-party reinsurance agreements and development of our default population.

The sequential increase in available assets between the dates presented was primarily driven by NMIC's positive cash flow from operations during the respective intervening periods.

The increase in available assets during the year ended December 31, 2022 was partially offset by the payments in 2022, of an ordinary course dividend from NMIC to NMIH and an extraordinary dividend from Re One to NMIH following the termination and commutation of the reinsurance agreement between NMIC and Re One.

The increase in the risk-based required asset amount between the dates presented was primarily driven by growth in our gross RIF and aggregate gross risk-based required asset amount, 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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We periodically engage third parties to evaluate and test the adequacy of such security measures, controls and procedures.

In addition, we have a business continuity plan that is designed to allow us to continue to operate in the midst of certain disruptive events, including disruptions to our IT systems, and

we have an incident response plan that is designed to address information security incidents, including any breaches of our IT systems.

In addition, we have a business continuity plan that is designed to allow us to continue to operate in the midst of certain disruptive events, including disruptions to our IT systems, and we have an incident response plan that is designed to address information security incidents, including any breaches of our IT systems.

Despite these safeguards, disruptions to and breaches of our IT systems are possible and may negatively impact our business.

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LIBOR Transition

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

On March 5, 2021, ICE Benchmark Administration Limited (IBA), the administrator for LIBOR, confirmed it would permanently cease the publication of overnight, one-month, three-month, six-month and twelve-month USD LIBOR settings in

their current form after June 30, 2023.

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

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

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

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

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

CEO Transition

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

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

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

We recorded $ 3.8 million of severance, restricted stock modification and other expenses related to this transition during the year ended December 31, 2021.

We reviewed our LIBOR-based contracts and each contains provisions that dictate a transition to an alternative reference rate at the time of the discontinuance of LIBOR.

We will continue to monitor the impact of the phase out of LIBOR;

however, we do not expect the transition will have a material impact on our operations or financial results.

Consolidated Results of Operations

Consolidated statements of operations For the year ended December 31,

Consolidated statements of operations For the years ended December 31,

2022 2021 2020

5 unchanged sentences

Total revenues 523,345 485,072 433,283

Insurance claims and claim expenses 12,305 59,247 12,507

Insurance claims and claim (benefits) expenses (3,594) 12,305 59,247

Underwriting and operating expenses 117,490 142,303 131,610

1 unchanged sentence

Interest expense 32,163 31,796 24,387

(Gain) loss from change in fair value of warrant liability (566) (2,907) 8,657

Gain from change in fair value of warrant liability (1,113) (566) (2,907)

Total expenses 146,040 188,347 215,177

12 unchanged sentences

2022 2021 2020

($ In Thousands, except for per share data)

Adjusted income before tax $ 375,916 $ 303,238 $ 221,506

1 unchanged sentence

Adjusted diluted EPS 3.39 2.73 2.19

(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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Net premiums earned were $475.3 million, $444.3 million and $397.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The sequential increase in net premiums earned during each successive year was primarily driven by the growth of our IIF, partially offset by an increase in cessions made under our QSR and ILN Transactions.

The sequential increase in net premiums earned during each successive year was primarily driven by the growth of our IIF, partially offset by an increase in total premiums ceded under our reinsurance transactions and a decline in the contribution from single premium policy cancellations and the run-off of a portion of our prior period monthly policy production and associated premium receipts.

Net investment income was $46.4 million, $38.1 million and $31.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

The sequential increase in net investment income during each successive year was primarily driven by the growth in the size of our total investment portfolio, excluding unrealized gains and losses.

Other revenues were $1.2 million, $2.0 million and $3.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

The year-on-year changes in other revenues reflect fluctuations in NMIS' outsourced loan review volume.

Other revenues represent underwriting fee revenue generated by our subsidiary, NMIS, which provides outsourced

loan review services to mortgage loan originators.

The sequential decrease in other revenues during each successive year reflects a decline in NMIS' outsourced loan review volume.

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

1 unchanged sentence

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

Insurance claims and claim expenses were $12.3 million, $59.2 million and $12.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Insurance claims and claim expenses decreased $46.9 million for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily reflecting a significant decrease in the number of new defaults emerging on loans impacted by the COVID-19 pandemic.

Insurance claims and claim expenses for the year ended December 31, 2021 also benefited from cure activity and a release of a portion of the reserves we established for anticipated claims payments in prior periods.

Insurance claims and claim expenses increased $46.7 million for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to the outbreak of the COVID-19 pandemic and resulting increase in our default population.

Insurance claims and claim expenses were a benefit of $3.6 million for the year ended December 31, 2022, compared to insurance claims and claim expenses of $12.3 million and $59.2 million for the years ended December 31, 2021 and 2020, respectively.

The sequential decline in insurance claims and claim expenses during each successive year reflects a decrease in the number of new defaults emerging on loans impacted by the COVID-19 pandemic, and benefited from cure activity and the associated release of a portion of the reserves we established for anticipated claims payments in prior periods.

Underwriting and operating expenses were $117.5 million, $142.3 million and $131.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Underwriting and operating expenses increased $10.7 million for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily due to an increase in certain payroll costs incurred in connection with the CEO transition we announced on September 9, 2021, as well as incremental depreciation and amortization incurred in connection with the completion and on-lining of certain development initiatives, an increase in the recognition of previously deferred policy acquisition costs (DAC) taken in connection with in-force portfolio run-off, and growth in other (non-CEO transition) payroll and related amounts.

Underwriting and operating expenses increased $5.0 million for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to an increase in the recognition of previously deferred policy acquisition costs taken in connection with in-force portfolio run-off and an increase in issuance expenses incurred in connection with capital market reinsurance transaction activity, partially offset by reductions in travel and entertainment, and office administration expenses as a result of the COVID-19 pandemic.

Underwriting and operating expenses included capital market reinsurance transaction costs of $4.0 million, $4.6 million and $2.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Underwriting and operating expenses for the year ended December 31 2021 also included $3.8 million of CEO-transition related expenses.

Underwriting and operating expenses decreased $24.8 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, driven by a decrease in the amortization of deferred policy acquisition costs tied to the improved persistency of our IIF, a decrease in payroll and stock-based compensation costs, a step-down in technology costs related to our agreement with Tata Consultancy Services (TCS) 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.

Underwriting and operating expenses for the year ended December 31, 2022 further benefited from an increase in ceding commissions received upon the introduction of the 2022 Seasoned QSR Transaction effective July 1, 2022.

Underwriting and operating expenses increased $10.7 million for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily due to an increase in certain payroll costs incurred in connection with the CEO transition we announced on September 9, 2021, as well as incremental depreciation and amortization incurred in connection with the completion of certain development initiatives, an increase in the recognition of previously deferred policy acquisition costs taken in connection with in-force portfolio run-off and growth in other (non-CEO transition) payroll and related amounts.

Service expenses were $1.1 million, $2.5 million and $2.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

The year-on-year changes in service expenses reflect fluctuations in NMIS' outsourced loan review volume.

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

The sequential decline in service expenses in each successive year was primarily 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 $32.2 million, $31.8 million and $24.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Interest expense increased in connection with the $400 million Notes offering and retirement of the $150 million 2018 Term Loan completed in June 2020.

Interest expense for the year ended December 31, 2021 reflects a full year of carrying costs on the Notes.

Interest expense for the year ended December 31, 2020 reflects a partial year of carrying cost on the Notes and $2.6 million of costs related to the extinguishment of the 2018 Term Loan.

Interest expense increased during the year ended December 31, 2022 compared to the year ended December 31, 2021 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.

Interest expense increased during the year ended December 31, 2021 compared to the year ended December 31, 2020 in connection with the $400 million Notes offering and retirement of the $150 million 2018 Term Loan completed in June 2020.

See Item 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 5, Debt.

Income tax expense was $84.4 million, $65.6 million and $46.5 million for the years ended December 31, 2022, 2021 and 2020.

Income tax expense increased for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily due to the growth in our pre-tax income, as well as an increase in our effective income tax rate.

Income tax expense increased for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to an increase in our effective income tax rate.

taxpayer, we were subject to a U.S.

The sequential increase in income tax expense during each successive year was primarily driven by the growth in our pre-tax income.

taxpayer, we are subject to a U.S.

federal corporate income tax rate of 21%.

Our effective income tax rate on pre-tax income was 22.4%, 22.1% and 21.3% for the years ended December 31, 2022, 2021 and 2020, respectively.

Our effective tax rate increased during each successive year primarily due to a decline in the tax benefit realized from excess share-based compensation for vested restricted stock units (RSUs) and exercised stock options.

information regarding income taxes and their impact on our results of operations and financial position, see Item 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 11, Income Taxes.

Our effective tax rate increased for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to a re-measurement of deferred tax balances related to changes in state income tax rates.

Our effective tax rate increased for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily due to a decline in the tax benefit realized from excess share-based compensation for vested restricted stock units (RSUs), exercised stock options, and the change in the fair value of our warrant liability in the period.

For further information regarding income taxes and their impact on our results of operations and financial position, see Item 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 11, Income Taxes.

Net income was $292.9 million, $231.1 million and $171.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Adjusted net income was $291.6 million, $236.8 million and $173.6 million, for the same periods, respectively.

The increase in net income and adjusted net income for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily driven by growth in our total revenues and a decline in insurance claims and claim expenses, partially offset by an increase in our interest expenses, underwriting and operating expenses, and income tax expenses.

Net income and adjusted net income declined for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to an increase in insurance claims and claim expenses incurred in connection with significant COVID-related default experience, partially offset by an increase in total revenues.

The increase in net income and adjusted net income during each successive year was primarily driven by growth in our total revenues and a decline in insurance claims and claim expenses, partially offset by an increase in income tax expenses.

Net income and adjusted net income for the year ended December 31, 2022 further benefited from a decline in our underwriting and operating expenses during the period.

Diluted earnings per share (EPS) was $3.39, $2.65 and $2.13 for the years ended December 31, 2022, 2021 and 2020, respectively.

Adjusted diluted EPS was $3.39, $2.73 and $2.19 for the same periods, respectively.

Diluted and adjusted diluted EPS increased for the year ended December 31, 2021 compared to the year ended December 31, 2020 due to growth in net income and adjusted net income, respectively, partially offset by an increase in weighted average diluted shares outstanding.

Diluted and adjusted EPS decreased for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to an increase in weighted average diluted shares outstanding, as well as a decline in net income and adjusted net income.

Weighted average diluted shares outstanding increased in connection with the issuance of 15.9 million shares of common stock we completed in June 2020.

Weighted average diluted shares outstanding for the years ended December 31, 2021 and 2020, reflect the inclusion of a full and partial year weighting for the offering, respectively.

Diluted and adjusted diluted EPS increased during each successive year due to growth in our net income and adjusted net income.

Diluted and adjusted diluted EPS for the year ended December 31, 2022 further benefited from a decline in the number of weighted average diluted shares outstanding tied to share repurchase activity during the period.

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 year ended December 31,

Non-GAAP Financial Measure Reconciliations For the years ended December 31,

2022 2021 2020

($ In Thousands, except for per share data)

Income before income tax $ 377,305 $ 296,725 $ 218,106

2 unchanged sentences

Net realized investment gains (481) (729) (930)

(Gain) loss from change in fair value warrant liability (566) (2,907) 8,657

Gain from change in fair value warrant liability (1,113) (566) (2,907)

Capital market transaction costs 205 3,979 7,237

1 unchanged sentence

Adjusted income before tax 375,916 303,238 221,506

Income tax expense on adjustments (2)

Income tax (benefit) expense on adjustments (1)

(58) 806 1,324

1 unchanged sentence

Weighted average diluted shares outstanding 85,999 86,885 79,263

Adjusted diluted effect of non-vested shares — — —

Adjusted weighted average diluted shares outstanding 86,885 79,263 69,721

Adjusted diluted EPS $ 3.39 $ 2.73 $ 2.19

(1) Represents severance, restricted stock modification and other expenses incurred in connection with the CEO transition announced on September 9, 2021.

See "CEO Transition" above.

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

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their measures may not be comparable to those we calculate and present.

Adjusted income before tax is defined as GAAP income before tax, excluding the pre-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains or losses from our investment portfolio, and other infrequent, unusual or non-operating items in the periods in which such items are incurred.

net realized gains or losses from our investment portfolio, and other infrequent, unusual or non-operating items in the periods in which such items are incurred.

Adjusted net income is defined as GAAP net income, excluding the after-tax effects of the gain or loss related to the change in fair value of our warrant liability, periodic costs incurred in connection with capital markets transactions, net realized gains or losses from our investment portfolio, and other infrequent, unusual or non-operating items in the periods in which such items are incurred.

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

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

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

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

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

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Software and equipment, net 31,930 32,047

Prepaid reinsurance premiums 2,393 6,190

Reinsurance recoverable 21,587 20,320

Prepaid federal income taxes (1)

154,409 89,244

Other assets (1) (2)

36,045 26,451

Total assets $ 2,516,030 $ 2,450,581

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Total liabilities and shareholders' equity $ 2,516,030 $ 2,450,581

(1) " Prepaid federal income taxes" have been reclassified from "Other assets" in the prior period.

(2) "Prepaid reinsurance premiums" have been reclassified as "Other assets" in the prior period.

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

Cash and investments at December 31, 2022 included $88.9 million held by NMIH.

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

The decrease in total cash and investments reflects an increase in the unrealized loss position of our fixed income portfolio tied to the prevailing interest rate and credit spread environment, as well as share repurchase activity during the year ended December 31, 2022, partially offset by cash generated from operations.

Excluding unrealized gains and losses, total cash and investments were $2.4 billion at December 31, 2022 compared to $2.1 billion at December 31, 2021.

Premium receivable was $69.7 million as of December 31, 2022, compared to $60.4 million as of December 31, 2021.

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Net deferred policy acquisition costs were $58.6 million as of December 31, 2022, compared to $59.6 million as of December 31, 2021.

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

Prepaid reinsurance premiums were $2.4 million as of December 31, 2021, compared to $6.2 million as of December 31, 2020.

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.

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

Reinsurance recoverable was $21.6 million as of December 31, 2022, compared to $20.3 million as of December 31, 2021.

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

Other assets were $113.3 million as of December 31, 2021, compared to $70.0 million as of December 31, 2020.

The increase was primarily driven by the purchase of $42.9 million of tax and loss bonds during the year ended December 31, 2021.

At December 31, 2021, we held $89.2 million of tax and loss bonds, compared to $46.4 million as of December 31, 2020 .

See Item 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 11, Income Taxes.

Prepaid federal income taxes were $154.4 million as of December 31, 2022, compared to $89.2 million as of December 31, 2021.

The increase was driven by the purchase of $65.2 million of tax and loss bonds during the year ended December 31, 2022.

For more information, see Item 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 11, Income Taxes.

Other assets increased to $36.0 million as of December 31, 2022, compared to $26.5 million as of December 31, 2021.

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

For more information, see Item 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 14.

Commitments and Contingencies.

Unearned premiums were $123.0 million as of December 31, 2022, compared to $139.2 million as of December 31, 2021.

The increase was driven by single premium policy originations during the year ended December 31, 2021, partially offset by the cancellation of other single premium policies and the amortization of existing unearned premiums through earnings in accordance with the expiration of risk on related single premium policies.

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 year ended December 31, 2022.

Accounts payable and accrued expenses were $74.6 million as of December 31, 2022, compared to $72.0 million as of December 31, 2021.

The increase was primarily driven by an increase in reinsurance premiums payable, and accrued payroll and bonuses, and the timing of other contractual payments due, partially offset by the settlement of trade payables in our investment portfolio.

The increase was primarily driven by an increase in reinsurance premiums payable and the timing of other contractual payments due, partially offset by a decrease in accrued compensation expenses and premium taxes.

Reserve for insurance claims and claim expenses was $99.8 million as of December 31, 2022, compared to $103.6 million as of December 31, 2021.

Reserve for insurance claims and claim expenses increased at December 31, 2021, despite a decline in the total size of our default population because of an increase in the average case reserve held against previously defaulted loans and the establishment of initial reserves on newly defaulted loans during the year.

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

The increase in the reserves for insurance claims and claim expenses at December 31, 2021 was partially offset by cure activity and a release of a portion of the reserves we established for anticipated claims payments in prior periods.

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 an increase in the average reserve carried per default.

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

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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 8, " F inancial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 6, Reinsurance ."

Warrant liability was $2.4 million at December 31, 2021, compared to $4.4 million at December 31, 2020.

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

For more information, see, Item 8, " F inancial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 6, Reinsurance ."

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

No warrants or warrant liability remained at December 31, 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 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 4, Fair Value of Financial Instruments.

Net deferred tax liability was $164.2 million at December 31, 2021, compared to $112.6 million at December 31, 2020.

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

Net deferred tax liability was $193.9 million as of December 31, 2022, compared to $164.2 million as of December 31, 2021.

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

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2022 2021 2020

Net cash provided by (used in) provided by:

Net cash provided by (used in):

(In Thousands)

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Net cash provided by operating activities was $313.4 million, $325.7 million and $252.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The sequential increase in cash provided by operating activities during each successive year was primarily driven by growth in premiums written, partially offset by an increase in cash interest expenses and the purchase of tax and loss bonds from year-to-year.

Net cash provided by operating activities for the year ended December 31, 2021 further benefited from a decline in claims paid.

Cash provided by operating activities declined during the year ended December 31, 2022 primarily due to an increase in the purchase of tax and loss bonds during the period, as well as a decrease in premium written tied to a decline in single premium policies written during the period, both of which were largely offset by a reduction in the technology service costs paid under our long-term IT services agreement with TCS.

Cash provided by operating activities increased during the year ended December 31, 2021 primarily due to growth in premiums written, partially offset by a sequential increase in cash interest expenses and the purchase of tax and loss bonds.

Cash used in investing activities for the years ended December 31, 2022, 2021 and 2020 reflects the purchase of fixed and short-term maturities with cash provided by operating activities and, as available, financing activities, and the reinvestment of coupon payments, maturities and sale proceeds within our investment portfolio.

Cash used in investing activities for the year ended December 31, 2020, reflects, in part, the investment of net cash proceeds from the common stock and Notes offerings we completed in June 2020.

Cash used in financing activities was $1.8 million for the year ended December 31, 2021, while cash provided by financing activities was $462.8 million and $2.0 million for the years ended December 31, 2020 and 2019, respectively.

Cash used in financing activities during the year ended December 31, 2021 primarily relates to debt issuance costs paid in connection with the 2021 Revolving Credit Facility and taxes paid on the net share settlement of equity awards for certain employees.

Cash used in financing activities was $55.8 million and $1.8 million for the years ended December 31, 2022 and December 31, 2021, respectively, and cash provided by financing activities was $462.8 million for the year ended December 31, 2020.

Cash used in financing activities during the year ended December 31, 2022 primarily relates to the repurchase of common stock.

Cash used in financing activities during the year ended December 31, 2021 primarily reflects debt issuance costs paid in connection with the 2021 Revolving Credit Facility and taxes paid on the net share settlement of equity awards for certain employees.

Cash provided by financing activities for the year ended December 31, 2020 primarily reflects $219.7 million net cash proceeds raised in connection with our 2020 equity offering and $244.4 million net cash proceeds raised in connection with our 2020 Notes offering.

Cash provided by financing activities for the year ended December 31, 2019 primarily relates to proceeds from the issuance of common stock generated in connection with the exercise of employee stock options.

Liquidity and Capital Resources

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(v) capital support for its subsidiaries;

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

(vi) repurchase of its common stock;

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

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

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As of December 31, 2022, NMIH had $88.9 million of cash and investments.

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

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

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

NMIC has the capacity to pay aggregate ordinary dividends of $98.0 million to NMIH during the twelve-month period ending December 31, 2023.

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

See Item 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 5, Debt ".

NMIC also 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.

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

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

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

During the year ended December 31, 2022, NMIH repurchased 2.9 million shares of common stock pursuant to trading plans under Rule 10b-18 and Rule 10b5-1 of the Exchange Act, at a total cost of $56.6 million, including associated costs.

As of December 31, 2022, $68.4 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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In addition, NMIC must remain at all times in compliance with all applicable "financial requirements" imposed pursuant to the PMIERs, subject to any allowed transition period or forbearance thereunder.

The credit agreement for 2021 Revolving Credit Facility also prohibits, restricts or limits, among other things, NMIH's and its subsidiaries' ability to (i) incur additional indebtedness, (ii) incur liens on their property, (iii) pay dividends or make other distributions, (iv) sell their assets,

(v) make certain loans or investments, (vi) merge or consolidate and (vii) enter into transactions with affiliates, in each case subject to certain limitations, exceptions and qualifications as set forth in the credit agreement for 2021 Revolving Credit Facility.

The credit agreement for

2021 Revolving Credit Facility also prohibits, restricts or limits, among other things, NMIH's and its subsidiaries' ability to (i) incur additional indebtedness, (ii) incur liens on their property, (iii) pay dividends or make other distributions, (iv) sell their assets, (v) make certain loans or investments, (vi) merge or consolidate and (vii) enter into transactions with affiliates, in each case subject to certain limitations, exceptions and qualifications as set forth in the credit agreement for 2021 Revolving Credit Facility.

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

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

Under Wisconsin law, NMIC and Re One may pay dividends up to specified levels ( i.e.

, "ordinary" dividends) with 30 days' prior notice to the Wisconsin OCI.

Under Wisconsin law, NMIC and Re One may pay dividends up to specified levels (i.e., "ordinary" dividends) with 30 days' prior notice to the Wisconsin OCI.

Dividends in larger amounts, or "extraordinary" dividends, are subject to the Wisconsin OCI's prior approval.

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

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

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

Following the commutation, Re One has no risk in force or further obligation on future claims.

In December 2021, Re One distributed $26.0 million to NMIH in the form of a $1.6 million ordinary dividend and a $24.4 million extraordinary dividend.

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

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

(i) pay dividends, make payments of principal or increase payments of interest beyond those commitments made prior to the guidance effective date associated with surplus notes issued by the approved insurer , make any other payments, unless related to expenses incurred in the normal course of business or to commitments made prior to the guidance effective date, or pledge or transfer asset(s) to any affiliate or investor, or (ii) enter into any new arrangements or alter any existing arrangements under tax sharing and intercompany expense-sharing agreements other than renewals and extensions of agreements in effect prior to the guidance effective date.

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

During the year ended December 31, 2022, NMIC paid a $34.9 million ordinary course dividend to NMIH.

NMIC has the capacity to pay aggregate ordinary dividends of $98.0 million to NMIH during the twelve-month period ending December 31, 2023.

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

Approved insurers that fail to meet the prescribed PMIERs financial requirements are not permitted to pay dividends without prior approval from the GSEs.

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

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

At December 31, 2021, NMIC reported $2,041 million available assets against $1,186 million risk-based required assets for an $855 million "excess" funding position.

At December 31, 2022, NMIC reported $2,379 million available assets against $1,204 million risk-based required assets for a $1,175 million "excess" funding position.

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

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

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

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

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

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

Under NMIC's ILN and XOL Transactions, it generally receives credit for the PMIERs risk-based required asset amount on ceded RIF to the extent such requirement is within the subordinated coverage (excess of loss detachment threshold) afforded by the transaction.

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

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Based on NMIC's total statutory capital of $2.2 billion (including contingency reserves) as of December 31, 2022, NMIC's RTC ratio was 11.1:1.

Re One had no risk in force remaining at December 31, 2021 and, as such, did not report a RTC ratio.

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

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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.

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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Municipal debt securities 23 26

Asset-backed securities 5 % 7

Cash, cash equivalents, and short-term investments 10 4

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government agencies 4 1

Asset-backed securities 3 5

Total 100 % 100 %

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(2) Includes +/– ratings.

(3) We held one security with a BB+ rating at December 31, 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

As of December 31, 2021 and 2020, we did not recognize an allowance for credit loss for any security in the investment portfolio and we did not record any provision for credit loss for investment securities during the years ended December 31, 2021 or 2020.

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

As of December 31, 2022, the investment portfolio had gross unrealized losses of $254.7 million, of which $218.5 million had been in an unrealized loss position for a period of twelve months or longer.

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

The increase in the aggregate size of the unrealized loss position as of December 31, 2021, was primarily driven by interest rate movements following the purchase date of certain securities.

Based on current facts and circumstances, we believe the unrealized losses as of December 31, 2021 are not indicative of the ultimate collectability of the current amortized cost of the securities.

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 December 31, 2022, was primarily driven by fluctuations in interest rates and, to a lesser extent, movements in credit spreads following the purchase date of certain securities.

We evaluated the securities in an unrealized loss position as of December 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 December 31, 2022 are not indicative of the ultimate collectability of the current amortized cost of the securities.

We are a U.S.

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At December 31, 2022, we had federal net operating loss carryforwards of $1.5 million, which expire in varying amounts in 2030 and 2031, and state net operating loss carryforwards of $133.2 million, which expire in varying amounts from 2031 to 2043.

Our ability to utilize our remaining federal net operating loss carryforwards is restricted by Section 382 of the Internal Revenue Code (IRC), which imposes annual limitations if there is an "ownership change." As a result of the acquisition of our insurance subsidiaries in 2012, $7.3 million of federal NOLs were subject to annual limitations of $0.8 million through 2016, and $0.3 million thereafter.

Our ability to utilize our remaining federal net operating loss carryforwards is restricted by Section 382 of the Internal Revenue Code (IRC), which imposes annual limitations if there is an "ownership change." As a result of the acquisition of our insurance subsidiaries in 2012, $7.3 million of federal net operating losses were subject to annual limitations of $0.8 million through 2016, $0.5 million in 2017 and $0.3 million, thereafter, through 2028.

Our remaining federal net operating loss carryforwards balance is a result of this limitation.

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

As of December 31, 2021, we held $89.2 million of tax and loss bonds, which are reported as prepaid federal income tax and included in "Other assets" in our consolidated balance sheet.

As of December 31, 2022, we held $154.4 million of tax and loss bonds in "Prepaid federal income taxes" on our consolidated balance sheets.

We record a valuation allowance against the state net operating losses generated by NMIH as NMIH operates at a loss, and we do not expect to utilize such net deferred tax assets in the future.

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The tax liability of each subsidiary that is party to the agreement is limited to the amount of the liability it would incur if it filed separate returns.

The Inflation Reduction Act (IRA) enacted in August 2022 imposed, among other provisions, a 1% excise tax on the net value of stock repurchases made on or after January 1, 2023.

As of December 31, 2022, $68.4 million of repurchase authority remained available under the $125 million share repurchase program authorized by our Board of Directors through December 31, 2023.

We expect future repurchase amounts will be subject to the IRA excise tax as executed;

however, we do not currently expect the excise tax or other provisions of the IRA to have a material impact on our financial condition or result of operations.

Critical Accounting Estimates

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We consider the appropriateness of such inputs at each fiscal quarter and conduct an actuarial review annually to evaluate and, if necessary, update these assumptions.

At December 31, 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.

It is possible that a relatively small change in our estimates for claim frequency or claim severity could have a material impact on our reserve position and our consolidated results of operations, even in a stable macroeconomic environment.

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Subsequent changes (favorable and unfavorable) in credit losses are recognized through the statement of operations as a provision for or a reversal of credit loss expense, and presented as a "Realized Investment Gain or Loss." The portion of a security impairment attributed to other non-credit related factors is recognized in other comprehensive income, net of taxes.

Deferred Policy Acquisition Costs

Deferred Policy Acquisition Costs (DAC)

Costs directly associated with the successful acquisition of mortgage insurance policies, consisting of certain selling expenses and other policy issuance and underwriting expenses, are initially deferred and reported as DAC.

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DAC is amortized to expense in proportion to estimated gross profits over the life of the associated policies.

We revise the rate of amortization to reflect actual experience and changes to

our persistency or loss development assumptions, and may accelerate or slow such rate in future periods as experience and future changes to estimates dictate.

During the years ended December 31, 2021 and 2020, we recognized an additional $11.1 million and $8.6 million, respectively, of DAC amortization due to the significant increase in mortgage refinancing activity and material decline in persistency on certain prior book years' insurance in-force experienced during the period.

We revise the rate of amortization to reflect actual experience and changes to our persistency or loss development assumptions, and may accelerate or slow such rate in future periods as experience and future changes to estimates dictate.

During the year ended December 31, 2021, we accelerated the rate and recognized an additional $11.1 million of DAC amortization due to the significant increase in mortgage refinancing activity and material decline in persistency on certain prior book years' insurance in-force experienced during the period.

During the year ended December 31,

2022, we reverted to a normalized historical amortization rate given the marked improvement in our persistency during the period tied to an increase in interest and mortgage note rates, and slowdown in the pace of refinancing activity during the year.

Premium Deficiency Reserves

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

What changed 10-K

Item 7. Management’s Discussion and Analysis