Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of December 31, 2021, pursuant to Rule 13a-15(e) under the Exchange Act. Management applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature, can provide only reasonable assurance regarding management's control objectives. Management does not expect that our disclosure controls and procedures will prevent or detect all errors and fraud. A control system, irrespective of how well it is designed and operated, can only provide reasonable assurance and cannot guarantee that it will succeed in its stated objectives.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.
Internal Control Over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision of our Chief Executive Officer and Chief Financial Officer, our management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria set forth in the Internal Control-Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2022. The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in their report, which appears below.
There was no change in our internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
128
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
NMI Holdings, Inc.
Emeryville, California
Opinion on Internal Control over Financial Reporting
We have audited NMI Holdings, Inc.'s (the "Company's") internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria .
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated balance sheets of the Company and subsidiaries at December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2022 and the related notes and financial statement schedules listed in the accompanying index and our report dated February 14, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying "Item 9A, Controls and Procedures." Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ BDO USA, LLP
San Francisco, California
February 14, 2023
129
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
130
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated by reference to, and will be contained in, our definitive proxy statement, which will be filed within 120 days after December 31, 2022. Accordingly, we have omitted the information from this Item pursuant to General Instruction G (3) of Form 10-K.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to, and will be contained in, our definitive proxy statement, which will be filed within 120 days after December 31, 2022. Accordingly, we have omitted the information from this Item pursuant to General Instruction G (3) of Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated by reference to, and will be contained in, our definitive proxy statement, which will be filed within 120 days after December 31, 2022. Accordingly, we have omitted the information from this Item pursuant to General Instruction G (3) of Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated by reference to, and will be contained in, our definitive proxy statement, which will be filed within 120 days after December 31, 2022. Accordingly, we have omitted the information from this Item pursuant to General Instruction G (3) of Form 10-K.
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated by reference to, and will be contained in, our definitive proxy statement, which will be filed within 120 days after December 31, 2022. Accordingly, we have omitted the information from this Item pursuant to General Instruction G (3) of Form 10-K.
131
PART IV
Item 15. Exhibits and Financial Statement Schedules
1. Financial Statements — See the " Index to Financial Statements " included in Item 8 of this report for a list of the financial statements filed as part of this report.
2. Financial Statement Schedules — See the " Index to Financial Statement Schedules " on page 137 of this report for a list of the financial statement schedules filed as part of this report.
3. Exhibits
Exhibit Number
Description
3.1 Second Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
3.2 Fourth Amended and Restated By-Laws (incorporated herein by reference to Exhibit 3.2 to our Form 8-K, filed on November 10, 2022)
4.1 Indenture, dated as of June 19, 2020, among NMI Holdings, Inc., NMI Services, Inc. as the Initial Guarantor, and the Bank of New York Mellon Trust Company, N.A. as Trustee and Notes Collateral Agent (incorporated herein by reference to Exhibit 4.1 to our Form 8-K, filed on June 19, 2020)
4.2 Description of Securities (incorporated by reference to Exhibit 4.8 to our Form 10-8, filed on February 16, 2022)
10.1 ~ NMI Holdings Inc. 2012 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.1 to our Form S-1 Registration Statement (registration No. 333-191635), filed on October 9, 2013)
10.2 ~ Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Restricted Stock Unit Award Agreement ( F or Management ) (Other than CEO and CFO) (incorporated herein by reference to Exhibit 10.3 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
10.3 ~ Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement (For CEO and CFO ) (incorporated herein by reference to Exhibit 10.5 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
10.4 ~ Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement ( F or Management ) (incorporated herein by reference to Exhibit 10.6 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
10.5 ~ Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement (F or Non-Em p loyee Directors ) (incorporated herein by reference to Exhibit 10.7 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
10.6 ~ Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement (For CEO/CFO) (incorporated herein by reference to Exhibit 10.8 to our Form 10-K, filed on February 17, 2017)
10.7 ~ Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement (F or Employees ) (incorporated herein by reference to Exhibit 10.9 to our Form 10-K, filed on February 17, 2017)
10.8 ~ Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Restricted Stock Unit Award Agreement (F or Independent Directors ) (incorporated herein by reference to Exhibit 10.30 to our Form 10-Q, filed on May 2, 2019)
10.9 ~ Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Restricted Stock Unit Award Agreement ( For Employees ) (incorporated herein by reference to Exhibit 10.31 to our Form 10-Q, filed on May 2, 2019)
10.10 ~ Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Agreement ( F or Employees ) (incorporated herein by reference to Exhibit 10.32 to our Form 10-Q, filed on May 2, 2019)
10.11 ~ NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan (incorporated herein by reference to Appendix A to our 2022 Annual Proxy Statement, filed on March 29, 2022)
10.12 ~ Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (For CEO) (incorporated herein by reference to Exhibit 10.19 to our Form 10-Q filed on August 1, 2017)
10.13 ~ Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (Executive Officers ) (incorporated herein by reference to Exhibit 10.20 to our Form 10-Q filed on August 1, 2017)
132
10.14 ~ Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (For Employees ) (incorporated herein by reference to Exhibit 10.21 to our Form 10-Q filed on August 1, 2017)
10.15 ~ Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (For Independent Directors ) (incorporated herein by reference to Exhibit 10.22 to our Form 10-Q filed on August 1, 2017)
10.16 ~ Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Nonqualified Stock Option Award Agreement (For CEO) (incorporated herein by reference to Exhibit 10.23 to our Form 10-Q filed on August 1, 2017)
10.17 ~ Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Nonqualified Stock Option Award Agreement (For Executive Officers and Employees ) (incorporated herein by reference to Exhibit 10.24 to our Form 10-Q filed on August 1, 2017)
10.18 ~ Form of NMI Holdings, Inc. 2014 Omnibus Incentive Plan Performance Based Restricted Stock Unit Award Agreement ( F or CEO) (incorporated herein by reference to Exhibit 10.26 to our Form 10-K, filed on February 17, 2017)
10.19 ~ Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (Performance Based) (incorporated herein by reference to Exhibit 10.38 to our Form 10-Q, filed on May 7, 2020)
10.20 ~ Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Independent Directors (incorporated herein by reference to Exhibit 10.33 to our Form 10-Q, filed on May 2, 2019)
10.21 ~ Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Employees (incorporated herein by reference to Exhibit 10.34 to our Form 10-Q, filed on May 2, 2019)
10.22 ~ Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Nonqualified Stock Option Agreement for Employees (incorporated herein by reference to Exhibit 10.35 to our Form 10-Q, filed on May 2, 2019)
10.23 ~ Form of Indemnification Agreement between NMI Holdings, Inc. and its directors and certain executive officers (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on November 25, 2014)
10.24 ~ NMI Holdings, Inc. Severance Benefit Plan (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on February 17, 2016)
10.25 ~ NMI Holdings, Inc. Amended and Restated Change in Control Severance Benefit Plan (incorporated herein by reference to Exhibit 10.30 to our Form 10-Q, filed on October 30, 2018)
10.26 ~ NMI Holdings, Inc. Clawback Policy (incorporated herein by reference to Exhibit 10.2 to our Form 8-K, filed on February 23, 2017)
10.27 ~ Offer Letter by and between NMI Holdings, Inc. and William Leatherberry, dated July 11, 2014 (incorporated herein by reference to Exhibit 10.10 to our Form 10-Q, filed on April 28, 2016)
10.28 ~ Employment Letter by and between NMI Holdings, Inc. and Bradley M. Shuster, effective as of January 1, 2019 (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on December 28, 2018)
10.29 ~ Offer Letter by and between NMI Holdings, Inc. and Adam Pollitzer, dated September 9, 2021 (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on September 9,2021)
10.30 ~ Offer Letter by and between NMI Holdings, Inc. and Ravi Mallela, dated December 20, 2021 (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on December 21, 2021)
10.31 + Commitment Letter dated July 12, 2013 for Bulk Fannie Mae-Paid Loss-on-Sale Mortgage Insurance on the Portfolio of approximately $5.46 billion Purchased by Fannie Mae and Identified by Fannie Mae as Deal No. 2013 MIRT 01 and by the Company as Policy No. P-0001-01 (incorporated herein by reference to Exhibit 10.14 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
10.32 Amended and Restated Credit Agreement, dated as of November 29, 2021, by and among the Company, the lender parties thereto and JPMorgan Chase Bank, N.A. as administrative agent (incorporated herein by reference to Exhibit 10.1 to our Form 8-K filed on November 30, 2021)
21.1 Subsidiaries of NMI Holdings, Inc. (incorporated herein by reference to Exhibit 21.1 to our Form 10-Q, filed on October 30, 2015)
22.1 Guaranteed Securities by Subsidiary Guarantor (incorporated herein by reference to Exhibit 22.1 to our Form 10-K, filed on February 16, 2022)
23.1 Consent of BDO USA, LLP
31.1 Principal Executive Officer's Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
133
31.2 Principal Financial Officer's Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 # Certifications of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 The following financial information from NMI Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2022 formatted in XBRL (eXtensible Business Reporting Language):
(i) Consolidated Balance Sheets as of December 31, 2022 and 2021
(ii) Consolidated Statements of Operations and Comprehensive Income (Loss) for each of the three years in the period ended December 31, 2022
(iii) Consolidated Statements of Changes in Shareholders' Equity for each of the three years in the period ended December 31, 2022
(iv) Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2022, and
(v) Notes to Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
~ Indicates a management contract or compensatory plan or contract.
+ Confidential treatment granted as to certain portions, which portions have been filed separately with the SEC.
# In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibit 32 hereto are deemed to accompany this Form 10-K and will not be deemed "filed" for purposes of Section 18 of the Exchange Act or deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act except to the extent that the registrant specifically incorporates it by reference.
134
Item 16. Form 10-K Summary
None.
135
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NMI HOLDINGS, INC.
Date: February 14, 2023
By: /s/ Adam S. Pollitzer
Name: Adam S. Pollitzer
Title: Chief Executive Officer
Signature Title Date
/s/ Adam S. Pollitzer
Adam S. Pollitzer
/s/ Ravi Mallela Chief Executive Officer
(Principal Executive Officer)
February 14, 2023
Ravi Mallela
/s/ Nicholas D. Realmuto Chief Financial Officer
(Principal Financial Officer) February 14, 2023
Nicholas D. Realmuto
/s/ Bradley M. Shuster Controller February 14, 2023
Bradley M. Shuster
/s/ Steven L. Scheid Executive Chairman February 14, 2023
Steven L. Scheid
/s/ James G. Jones Director February 14, 2023
James G. Jones
/s/ Regina Muehlhauser Director February 14, 2023
Regina Muehlhauser
/s/ Michael Montgomery Director February 14, 2023
Michael Montgomery
/s/ Michael Embler Director February 14, 2023
Michael Embler
/s/ Lynn S. McCreary Director February 14, 2023
Lynn S. McCreary
/s/ Priya Huskins Director February 14, 2023
Priya Huskins
Director February 14, 2023
136
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule I — Summary of Investments — other than investments in related parties as of December 31, 2022
F- 1
Schedule II — Financial Information of Registrant as of December 31, 2022
F- 2
Schedule IV — Reinsurance as of December 31, 2022
F- 6
All other schedules are omitted because the required information is not present or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in our Consolidated Financial Statements and notes thereto.
137
NMI HOLDINGS, INC.
SCHEDULE I
SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 2022 Amortized Cost Fair Value Amount Reflected on Balance Sheet
(In Thousands)
U.S. Treasury securities and obligations of U.S. government agencies $ 82,301 $ 79,932 $ 79,932
Municipal debt securities 563,972 483,176 483,176
Corporate debt securities 1,457,589 1,293,642 1,293,642
Asset-backed securities 74,762 68,558 68,558
Total bonds 2,178,624 1,925,308 1,925,308
Short-term investments 174,123 174,081 174,081
Total investments $ 2,352,747 $ 2,099,389 $ 2,099,389
F-1
NMI HOLDINGS, INC.
SCHEDULE II - FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
PARENT COMPANY ONLY
December 31, 2022 December 31, 2021
(In Thousands, except for share data)
Assets
Fixed maturities, available-for-sale, at fair value $ 83,918 $ 84,854
Cash and cash equivalents 4,940 21,181
Investment in subsidiaries, at equity in net assets 2,092,457 1,951,124
Accrued investment income 440 367
Due from affiliates, net 83,018 86,366
Software and equipment, net 31,930 32,047
Other assets (1)
15,408 7,234
Total assets $ 2,312,111 $ 2,183,173
Liabilities
Debt $ 396,051 $ 394,623
Accounts payable and accrued expenses 34,697 42,246
Warrant liability, at fair value — 2,363
Deferred tax liability, net 255,550 175,254
Other liabilities 12,086 2,901
Total liabilities 698,384 617,387
Shareholders' equity
Common stock - class A shares, $ 0.01 par value; 86,472,742 shares issued and 83,549,879 shares outstanding as of December 31, 2022 and 85,792,849 shares issued and outstanding as of December 31, 2021 ( 250,000,000 shares authorized)
865 858
Additional paid-in capital 972,717 955,302
Treasury stock, at cost: 2,922,863 and 0 common shares as of December 31, 2022 and December 31, 2021, respectively
( 56,575 ) —
Accumulated other comprehensive (loss) income, net of tax ( 204,323 ) 1,485
Retained earnings 901,043 608,141
Total shareholders' equity 1,613,727 1,565,786
Total liabilities and shareholders' equity $ 2,312,111 $ 2,183,173
(1) "Prepaid expenses" have been reclassified as "Other assets" in the prior period.
F-2
NMI HOLDINGS, INC.
SCHEDULE II - FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF OPERATIONS
PARENT COMPANY ONLY
For the years ended December 31,
2022 2021 2020
(In Thousands)
Revenues
Net investment income $ 1,204 $ 327 $ 398
Net realized investment (losses) gains ( 13 ) 10 23
Total revenues 1,191 337 421
Expenses
Other operating expenses 7,590 8,264 9,262
Interest expense — 68 —
Gain from change in fair value of warrant liability ( 1,113 ) ( 566 ) ( 2,907 )
Total expenses 6,477 7,766 6,355
Equity in net income of subsidiaries 378,406 303,970 217,134
Income before income taxes 373,120 296,541 211,200
Income tax expense 80,218 65,411 39,634
Net income $ 292,902 $ 231,130 $ 171,566
Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains in accumulated other comprehensive income, net of tax (benefit) expense of $( 748 ), $( 95 ), and $ 25 for each of the years in the three-year period ended December 31, 2022, respectively
( 2,815 ) ( 357 ) 94
Reclassification adjustment for realized losses (gains) included in net income, net of tax (benefit) expense of $( 3 ), $ 2 and $ 5 for each of the years in the three-year period ended December 31, 2022, respectively
10 ( 8 ) ( 18 )
Equity in other comprehensive (loss) income of subsidiaries ( 203,003 ) ( 52,006 ) 36,492
Other comprehensive (loss) income, net of tax ( 205,808 ) ( 52,371 ) 36,568
Comprehensive income $ 87,094 $ 178,759 $ 208,134
F-3
NMI HOLDINGS, INC.
SCHEDULE II - FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
PARENT COMPANY ONLY
For the years ended December 31,
2022 2021 2020
Cash flows from operating activities (In Thousands)
Net income $ 292,902 $ 231,130 $ 171,566
Adjustments to reconcile net income to net cash provided by operating activities:
Gain from change in fair value of warrant liability ( 1,113 ) ( 566 ) ( 2,907 )
Net realized investment losses (gains) 13 ( 10 ) ( 23 )
Depreciation and amortization 789 801 807
Amortization of debt discount and debt issuance costs 1,846 1,861 4,036
Deferred income taxes 81,057 66,941 45,483
Share-based compensation expense 15,425 16,678 11,115
Changes in operating assets and liabilities:
Investment in subsidiaries, at equity in net assets ( 343,477 ) ( 302,165 ) ( 217,134 )
Accrued investment income ( 73 ) ( 104 ) ( 44 )
Receivable from affiliates 3,348 ( 9,474 ) ( 14,651 )
Other assets (1)
518 ( 496 ) 84
Accounts payable and accrued expenses ( 8,731 ) 10,068 4,592
Net cash provided by operating activities 42,504 14,664 2,924
Cash flows from investing activities
Capitalization of subsidiaries ( 800 ) ( 800 ) ( 445,448 )
Purchase of short-term investments ( 110,076 ) ( 10,640 ) ( 19,897 )
Purchase of fixed-maturity investments, available-for-sale — ( 2,797 ) ( 53,504 )
Proceeds from maturity of short-term investments 86,995 — 41,228
Proceeds from redemptions, maturities and sale of fixed-maturity investments, available-for-sale 19,673 4,464 20,241
Software and equipment 1,291 ( 1,026 ) ( 2,633 )
Net cash used in investing activities ( 2,917 ) ( 10,799 ) ( 460,013 )
Cash flows from financing activities
Proceeds from issuance of common stock related to public offering, net of issuance costs — — 219,687
Proceeds from issuance of common stock related to employee equity plans 5,442 4,201 8,871
Proceeds from issuance of common stock related to warrant exercises 518 503 —
Taxes paid related to net share settlement of equity awards ( 5,213 ) ( 5,426 ) ( 8,961 )
Proceeds from senior secured notes — — 400,000
Repayments of term loan — — ( 147,750 )
Payments of debt issuance costs — ( 1,108 ) ( 9,043 )
Repurchase of common stock ( 56,575 ) — —
Net cash (used in) provided by financing activities ( 55,828 ) ( 1,830 ) 462,804
Net (decrease) increase in cash, cash equivalents and restricted cash ( 16,241 ) 2,035 5,715
Cash, cash equivalents and restricted cash, beginning of period 21,181 19,146 13,431
Cash, cash equivalents and restricted cash, end of period $ 4,940 $ 21,181 $ 19,146
(1) "Prepaid expenses" have been reclassified as "Other assets" in the prior periods.
F-4
NMI HOLDINGS, INC.
SCHEDULE II - FINANCIAL INFORMATION OF REGISTRANT
SUPPLEMENTAL NOTES
PARENT COMPANY ONLY
Note A
The NMI Holdings, Inc. (Parent Company) financial statements represent the stand-alone financial statements of the Parent Company. These financial statements have been prepared on the same basis and using the same accounting policies as described in the consolidated financial statements included herein. Refer to the Parent Company's consolidated financial statements for additional information.
Note B
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 that may restrict their ability to pay dividends to NMIH. 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 ( i.e. ,"extraordinary" dividends), are subject to the Wisconsin OCI's prior approval. Under Wisconsin law, 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. On April 1, 2022, NMIC paid a $ 34.9 million ordinary course dividend to NMIH and has the capacity to pay aggregate ordinary dividends of $ 98.0 million to NMIH during the twelve-month period ending December 31, 2023.
The remaining net assets from dividend capacity are considered restricted. As of December 31, 2022, the amount of restricted net assets held by our consolidated insurance subsidiaries, which represents our equity investment in those insurance subsidiaries less their aggregate dividend capacity, totaled $ 2.1 billion, compared to $ 2.0 billion as of December 31, 2021.
Note C
The Parent Company provides certain services to its subsidiaries. The Parent Company allocates to its subsidiaries corporate expense it incurs in the capacity of supporting those subsidiaries, based on either an allocated percentage of time spent or internally allocated capital. Total operating expenses allocated to subsidiaries for each of the years in the three-year period ended December 31, 2022 were $ 148.4 million, $ 149.4 million and $ 152.9 million, respectively. Amounts charged to the subsidiaries for operating expenses are based on actual cost, without any mark-up. The Parent Company considers these charges fair and reasonable. The subsidiaries reimburse the Parent Company for these costs in a timely manner, which has the impact of improving the cash flows of the Parent Company.
F-5
NMI HOLDINGS, INC.
SCHEDULE IV - FINANCIAL INFORMATION OF REGISTRANT
REINSURANCE
Gross Amount Ceded to Other Companies Assumed from Other Companies Net Amount Percentage of Amount Assumed to Net
For the years ended December 31, (In Thousands)
2022 $ 594,127 $ 118,861 $ — $ 475,266 — %
2021 536,630 92,336 — 444,294 —
2020 472,998 75,826 — 397,172 —
F-6