What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-03 compared with 2022-11-02 · 230 added, 253 removed, 580 unchanged (45% of the section changed)

12 unchanged sentences

MI plays a critical role in the U.S.

housing market by mitigating mortgage credit risk and facilitating the secondary market sale of high loan-to-value (LTV) ( i.e., above 80%) residential loans to the GSEs, who are otherwise restricted by their charters from purchasing or guaranteeing high-LTV mortgages that are not covered by certain credit protections.

housing market by mitigating mortgage credit risk and facilitating the secondary market sale of high-LTV ( i.e., above 80%) residential loans to the GSEs, who are otherwise restricted by their charters from purchasing or guaranteeing high-LTV mortgages that are not covered by certain credit protections.

Such credit protection and secondary market sales allow lenders to increase their capacity for mortgage commitments and expand financing access to existing and prospective homeowners.

1 unchanged sentence

Since formation, we have sought to establish customer relationships with a broad group of mortgage lenders and build a diversified, high-quality insured portfolio.

As of September 30, 2022, we had issued master policies with 1,843 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 September 30, 2022, we had $179.2 billion of primary insurance-in-force (IIF) and $46.3 billion of primary risk-in-force (RIF).

As of March 31, 2023, we had issued master policies with 1,900 customers, including national and regional mortgage banks, money center banks, credit unions, community banks, builder-owned mortgage lenders, internet-sourced lenders and other non-bank lenders.

As of March 31, 2023, we had $186.7 billion of primary insurance-in-force (IIF) and $48.5 billion of primary risk-in-force (RIF).

We believe that our success in acquiring a large and diverse group of lender customers and growing a portfolio of high-quality IIF traces to our founding principles, whereby we aim to help qualified individuals achieve their homeownership goals, ensure that we remain a strong and credible counter-party, deliver a high-quality customer service experience, establish a differentiated risk management approach that emphasizes the individual underwriting review or validation of the vast majority of the loans we insure, utilizing our proprietary Rate GPS ® pricing platform to dynamically evaluate risk and price our policies, and foster a culture of collaboration and excellence that helps us attract and retain experienced industry leaders.

1 unchanged sentence

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

As of September 30, 2022, we had 246 employees.

As of March 31, 2023, we had 242 employees.

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

2 unchanged sentences

Conditions and Trends Affecting Our Business

COVID-19 and Other Developments

On January 30, 2020, the 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 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.

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.

Macroeconomic Developments

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 new insurance written (NIW) volume, or contribute to an increase in our future default and claim experience.

Key Factors Affecting Our Results

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

New Insurance Written, Insurance-In-Force and Risk-In-Force

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

24 unchanged sentences

For single premiums, we receive a single premium payment at origination, which is earned over the estimated life of the policy.

Substantially all of our single premium policies in force as of September 30, 2022 were non-refundable under most cancellation scenarios.

If non-refundable single premium policies are canceled, we immediately recognize the remaining unearned premium balances as earned premium revenue.

Substantially all of our single premium policies in force as of March 31, 2023 were non-refundable under most cancellation scenarios.

If non-refundable single premium

policies are canceled, we immediately recognize the remaining unearned premium balances as earned premium revenue.

Monthly premiums are recognized in the month billed and when the coverage is effective.

6 unchanged sentences

Our premium rates include certain assumptions regarding repayment or prepayment speeds of the mortgages underlying our policies.

Because premiums are paid at origination on single premium policies and our single premium policies are generally non-refundable on

cancellation, assuming all other factors remain constant, if single premium loans are prepaid earlier than expected, our profitability on these loans is likely to increase and, if loans are repaid slower than expected, our profitability on these loans is likely to decrease.

Because premiums are paid at origination on single premium policies and our single premium policies are generally non-refundable on cancellation, assuming all other factors remain constant, if single premium loans are prepaid earlier than expected, our profitability on these loans is likely to increase and, if loans are repaid slower than expected, our profitability on these loans is likely to decrease.

By contrast, if monthly premium loans are repaid earlier than anticipated, we do not earn any more premium with respect to those loans and, unless we replace the repaid monthly premium loan with a new loan at the same premium rate or higher, our revenue is likely to decline.

15 unchanged sentences

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

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

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

As of September 30, 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.

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 March 31, 2023, the 2021-2 ILN Transaction was deemed to be in Lock Out in connection with the initial build of its target credit enhancement level and will remain in Lock Out until such target credit enhancement level is achieved.

Effective February 28, 2023, a previously triggered Lock-Out Event for the 2018 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 note-holders, among others.

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

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

and Oaktown Re IV Ltd.

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

and Oaktown Re IV Ltd.

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

The following table presents the inception date, covered production p eriod, current reinsurance coverage amount, current first layer retained aggregate loss and detail on the level of overcollateralization under each outstanding ILN Transaction.

Current amounts are presented as of September 30, 2022.

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

Current amounts are presented as of March 31, 2023.

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

23 unchanged sentences

Traditional reinsurance

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

NMIC is a party to four 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, the 2022-3 XOL Transaction, effective October 1, 2022, and the 2023-1 XOL Transaction, effective January 1, 2023 – 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.

2 unchanged sentences

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

As of September 30, 2022, NMIC's first layer aggregate retained loss exposure under the 2022-1 and 2022-2 XOL Transactions, was $133.4 million and $78.9 million, respectively, and the outstanding reinsurance coverage amount provided under each agreement was $284.0 million and $152.3 million, respectively.

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

2 unchanged sentences

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

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

Best Company Inc.

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.

The following table presents the inception date, covered production period, initial and current reinsurance coverage

amount, and initial and current first layer retained aggregate loss under each outstanding XOL Transaction.

Current amounts are presented as of March 31, 2023.

($ 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 $283,077 $133,366 $133,366

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

154,306 152,347 78,906 78,906

2022-3 XOL Transaction October 1, 2022 7/1/2022 – 9/30/2022 96,779 96,197 106,265 106,265

2023-1 XOL Transaction (4)

January 1, 2023 10/1/2022 – 6/30/2023 59,509 59,509 94,977 94,977

(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.

(4) The initial reinsurance coverage, current reinsurance coverage, initial first layer retained loss and current first layer retained loss for the 2023-1 XOL Transaction will increase as incremental covered production is ceded under the transaction through June 30, 2023.

Quota share reinsurance

NMIC is a party to six 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 and the 2022 Seasoned QSR Transaction, effective July 1, 2022 – which we refer to collectively as the QSR Transactions.

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

Best Company, Inc.

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.

3 unchanged sentences

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 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 now retired 2017 and 2020-1 ILN 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 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.

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.

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.

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.

1 unchanged sentence

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.

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.

3 unchanged sentences

Unless otherwise noted, the tables below do not include the effects of our third-party reinsurance arrangements described above.

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

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

IIF NIW IIF NIW NIW

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

March 31, 2023 March 31, 2022

IIF NIW IIF NIW

(In Millions)

4 unchanged sentences

Total $ 187,749 $ 8,734 $ 160,039 $ 14,165

NIW for the three and nine months ended September 30, 2022 was $17.2 billion and $48.0 billion compared to $18.1 billion and $67.2 billion for the three and nine months ended September 30, 2021.

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

Total IIF increased 24% at September 30, 2022 compared to September 30, 2021, primarily due to the NIW generated between such measurement dates, partially offset by the run-off of in-force policies.

Our persistency rate improved to 80.1% at September 30, 2022 from 58.1% at September 30, 2021, reflecting a slowdown in the pace of refinancing activity during the intervening twelve-month period driven by an increase in interest and mortgage note rates.

NIW for the three months ended March 31, 2023 was $8.7 billion compared to $14.2 billion for the three months ended March 31, 2022.

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

Total IIF increased 17% at March 31, 2023 compared to March 31, 2022, 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 85.1% at March 31, 2023 from 71.5% at March 31, 2022, due to a slowdown in the pace of refinancing activity during the intervening twelve-month period driven by an increase in interest and mortgage note rates.

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

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

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

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

March 31, 2023 March 31, 2022

(In Thousands)

1 unchanged sentence

Net premiums earned 121,754 116,495

Net premiums written increased 1% during the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and decreased 2% during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

The year-on-year development in net premiums written reflects growth in our monthly IIF and monthly pay policy premium receipts during the three and nine months ended September 30, 2022, balanced by a decrease in single premium policy production during the periods.

Net premiums earned during the three and nine months ended September 30, 2022 increased 4% and 8%, respectively, compared to the three and nine months ended September 30, 2021.

The increases in the net premiums earned were primarily due to the growth of our IIF, partially offset by a decrease in the contribution from single premium policy cancellations and an increase in total premiums ceded under our reinsurance transactions.

Pool premiums written and earned for the three and nine months ended September 30, 2022 and 2021, were $0.3 million and $0.9 million , and $0.4 million and $1.3 million, respectively, before giving effect to the 2016 QSR Transaction, under which all of our written and earned pool premiums are ceded.

Net premiums written decreased 3% during the three months ended March 31, 2023 compared to the three months ended March 31, 2022, reflecting an increase in total premiums ceded under our reinsurance transactions and a decline in single premium policy production, partially offset by growth in our monthly IIF and monthly pay policy premium receipts.

Net premiums earned during the three months ended March 31, 2023 increased 5% compared to the three months ended March 31, 2022, primarily driven by our NIW production and the growth of our IIF, partially offset by an increase in total premiums ceded under our reinsurance transactions, the run-off of a portion of our prior period monthly policy production and associated premium receipts, and a decline in the contribution from single premium policy cancellations.

Pool premiums written and earned for each of the three months ended March 31, 2023 and 2022 were $0.3 million before giving effect to the 2016 QSR Transaction, under which all of our written and earned pool premiums are ceded.

A portion of our ceded pool premiums written and earned are recouped through profit commission.

3 unchanged sentences

Primary portfolio trends As of and for the three months ended

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

March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022

($ Values In Millions, except as noted below)

30 unchanged sentences

(2) Calculated as end of period RIF divided by end of period IIF.

(3) Calculated as net premiums earned divided by average primary IIF for the p eriod, annualized.

(3) Calculated as net premiums earned divided by average primary IIF for the period, annualized.

(4) Defined as the percentage of IIF that remains on our books after a given twelve-month period.

1 unchanged sentence

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

Primary IIF As of and for the three months ended As of and for the nine months ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Primary IIF As of and for the three months ended

March 31, 2023 March 31, 2022

(In Millions)

7 unchanged sentences

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 September 30, 2022 As of September 30, 2021

Primary IIF and RIF As of March 31, 2023 As of March 31, 2022

IIF RIF IIF RIF

(In Millions)

September 30, 2022 $ 46,695 $ 12,385 $ — $ —

March 31, 2023 $ 8,674 $ 2,243 $ — $ —

2022 55,664 14,730 14,076 3,699

5 unchanged sentences

We utilize certain risk principles that form the basis of how we underwrite and originate NIW.

We have established prudential underwriting standards and loan-level eligibility matrices which prescribe the maximum LTV, minimum borrower FICO score, maximum borrower DTI ratio, maximum loan size, property type, loan type, loan term and occupancy status of loans that we will insure and memorialized these standards and eligibility matrices in our Underwriting Guideline Manual that is publicly available on our website.

We have established prudential underwriting standards and loan-level eligibility matrices which prescribe the maximum LTV, minimum borrower FICO score, maximum borrower debt-to-income (DTI) ratio, maximum loan size, property type, loan type, loan term and occupancy status of loans that we will insure and memorialized these standards and eligibility matrices in our Underwriting Guideline Manual that is publicly available on our website.

Our underwriting standards and eligibility criteria are designed to limit the layering of risk in a single insurance policy.

4 unchanged sentences

We calculate the LTV of a loan as the percentage of the original loan amount to the original purchase value of the property securing the loan.

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

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Primary NIW by FICO For the three months ended

March 31, 2023 March 31, 2022

(In Millions)

4 unchanged sentences

680-699 342 1,244

<=679 288 608 1,611 1,971

Total $ 8,734 $ 14,165

Weighted average FICO 762 748

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

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Primary NIW by LTV For the three months ended

March 31, 2023 March 31, 2022

(In Millions)

5 unchanged sentences

Weighted average LTV 91.6 % 92.1 %

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

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

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

March 31, 2023 March 31, 2022

(In Millions)

Purchase $ 8,494 $ 13,398

295 1,684 1,470 14,012

Total $ 8,734 $ 14,165

1 unchanged sentence

Primary IIF by FICO As of

September 30, 2022 September 30, 2021

March 31, 2023 March 31, 2022

($ Values In Millions)

7 unchanged sentences

Primary RIF by FICO As of

September 30, 2022 September 30, 2021

March 31, 2023 March 31, 2022

($ Values In Millions)

7 unchanged sentences

Primary IIF by LTV As of

September 30, 2022 September 30, 2021

March 31, 2023 March 31, 2022

($ Values In Millions)

5 unchanged sentences

Primary RIF by LTV As of

September 30, 2022 September 30, 2021

March 31, 2023 March 31, 2022

($ Values In Millions)

5 unchanged sentences

Primary RIF by Loan Type As of

September 30, 2022 September 30, 2021

March 31, 2023 March 31, 2022

Fixed 98 % 99 %

3 unchanged sentences

Total 100 % 100 %

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

As of September 30, 2022

The table below presents selected primary portfolio statistics, by book year, as of March 31, 2023.

As of March 31, 2023

Book Year Original Insurance Written Remaining Insurance in Force % Remaining of Original Insurance Policies Ever in Force Number of Policies in Force Number of Loans in Default # of Claims Paid Incurred Loss Ratio (Inception to Date) (1)

2 unchanged sentences

($ Values In Millions)

2013 $ 162 $ 5 3 % 655 38 1 1 1.0 % 0.3 % 2.6 %

2014 and prior $ 3,613 $ 198 5 % 15,441 1,248 22 53 3.8 % 0.5 % 1.8 %

2015 12,422 1,158 9 % 52,548 6,488 119 129 2.6 % 0.5 % 1.8 %

13 unchanged sentences

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 September 30, 2022 is not necessarily representative of the geographic distribution we expect in the future.

The distribution of our primary RIF as of March 31, 2023 is not necessarily representative of the geographic distribution we expect in the future.

Top 10 primary RIF by state As of

September 30, 2022 September 30, 2021

March 31, 2023 March 31, 2022

California 10.5 % 10.8 %

1 unchanged sentence

Florida 8.0 8.4

Virginia 4.2 4.9

Georgia 4.1 3.9

Illinois 4.0 3.7

Virginia 4.1 4.5

Washington 4.0 3.7

Illinois 3.9 3.8

Colorado 3.5 3.7

Maryland 3.4 3.8

Pennsylvania 3.4 3.3

Maryland 3.3 3.6

Total 53.6 % 55.2 %

11 unchanged sentences

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 claim 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.

We have not established any claims or claim expense reserves for pool exposure to date.

The actual claims we incur as our portfolio matures are difficult to predict and depend on the specific characteristics of our current in-force book (including the credit score and DTI of the borrower, the LTV ratio of the mortgage and geographic concentrations, among others), as well as the risk profile of new business we write in the future.

In addition, claims experience will be affected by macroeconomic factors such as housing prices, interest rates, unemployment rates and other events, such as natural disasters or global pandemics, and any federal, state or local governmental response thereto.

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

1 unchanged sentence

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 Coronavirus Aid, Relief, and Economic Security Act (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.

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

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

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

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

For the three months ended For the nine months ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Emerging macroeconomic factors, including persistent inflation, elevated 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 contribute to an increase in our future default and claims experience.

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

For the three months ended

March 31, 2023 March 31, 2022

(In Thousands)

4 unchanged sentences

Add claims incurred:

Claims and claim (benefits) expenses incurred:

Claims and claim expenses (benefits) incurred:

Current year (2)

2 unchanged sentences

(20,907) (10,699)

Total claims and claim (benefits) expenses incurred (3,389) 3,204 (7,044) 12,806

Total claims and claim expenses (benefits) incurred 6,701 (619)

Less claims paid:

2 unchanged sentences

Prior years (3)

249 526 925 1,566

Total claims and claim expenses paid 272 320

7 unchanged sentences

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

Amounts are presented net of reinsurance and included $23.3 million attributed to net case reserves and $4.2 million attributed to net IBNR reserves for the nine months ended September 30, 2022 and $14.0 million attributed to net case reserves and $4.8 million attributed to net IBNR reserves for the nine months ended September 30, 2021.

Amounts are presented net of reinsurance and included $22.3 million attributed to net case reserves and $4.9 million attributed to net IBNR reserves for the three months ended March 31, 2023 and $5.2 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the three months ended March 31, 2022.

(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 $29.2 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the nine months ended September 30, 2022 and $1.8 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the nine months ended September 30, 2021.

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

Amounts are presented net of reinsurance and included $16.2 million attributed to net case reserves and $4.5 million attributed to net IBNR reserves for the three months ended March 31, 2023 and $5.8 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the three months ended March 31, 2022.

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

We may increase or decrease our claim estimates and reserves as we learn additional information about individual defaulted loans and continue to observe and analyze loss development trends in our portfolio.

Gross reserves of $58.9 million related to prior year defaults remained as of September 30, 2022.

Gross reserves of $72.7 million related to prior year defaults remained as of March 31, 2023.

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

For the three months ended For the nine months ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

For the three months ended

March 31, 2023 March 31, 2022

Beginning default inventory 4,449 6,227

4 unchanged sentences

Ending default inventory 4,475 5,238

Ending default inventory declined from September 30, 2021 to September 30, 2022 as borrowers initially impacted by the COVID-19 pandemic continued to cure their delinquencies, and fewer new defaults emerged as the acute economic stress of the pandemic crisis continued to recede.

While our default population declined from September 30, 2021 to September 30, 2022, our default inventory remains elevated compared to historical experience due to the continued challenges certain borrowers are facing related to the COVID-19 pandemic and their decision to access the forbearance program for federally backed loans codified under the CARES Act or similar programs made available by private lenders.

As of September 30, 2022, 2,145 of our 4,096 defaulted loans were in a COVID-19 related forbearance program.

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

For the three months ended For the nine months ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

($ In Thousands)

Ending default inventory declined from March 31, 2022 to March 31, 2023, as borrowers initially impacted by the COVID-19 pandemic continued to cure their delinquencies, and contributed to total cure experience that exceeded the number of new defaults that emerged during the intervening period.

New default experience increased during the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily due to the growth and natural seasoning of our insured portfolio.

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 three months ended

March 31, 2023 March 31, 2022

($ Values In Thousands)

Number of claims paid (1)

1 unchanged sentence

Average amount paid per claim

$ 24 $ 28 $ 21 $ 34

55 % 55 % 46 % 60 %

(1) Count include s three and 19 claims settled without payment during the three and nine months ended September 30, 2022, respectively, and six and ten claims settled without payment during the three and nine months ended September 30, 2021 , respectively.

(1) Count includes seven and six claims settled without payment during the three months ended March 31, 2023 and 2022, 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.

We paid 16 and 59 claims during the three and nine months ended September 30, 2022, respectively, and 24 and 59 claims during the three and nine months ended September 30, 2021, respectively.

The number of claims paid was modest relative to the size of our insured portfolio and number of defaulted loans we reported in each period, primarily due to the forbearance program and foreclosure moratorium implemented by the GSEs in response to the COVID-19 pandemic and codified under the CARES Act.

Such forbearance and foreclosure programs have extended, and may ultimately interrupt, the timeline over which loans would otherwise progress through the default cycle to a paid claim.

Our claims paid experience for the three and nine months ended September 30, 2022 and 2021, further benefited from broad national house price appreciation.

An increase in the value of the homes collateralizing the mortgages we i nsure provides defaulted borrowers with alternative paths and incentives to cure their loan prior to the development of a claim.

Our claims severity for the three and nine months ended September 30, 2022 was 55% and 46%, respectively, compared to 55% and 60% for the three and nine months ended September 30, 2021, respectively.

Claims severity for the three and nine months ended September 30, 2022 and 2021 remained low compared to historical industry experience, primarily because of the same broad national house price appreciation that our claims paid benefit from.

We paid 21 and 19 claims during the three months ended March 31, 2023 and 2022, 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 morato rium implemented by the GSEs in response to the COVID-19 pandemic and codified under the CARES Act.

Such forbearance and foreclosure programs remain available and may ultimately interrupt, the timeline over which loans would otherwise progress through the default cycle to a paid claim .

Our claims paid experience for the three months ended March 31, 2023 and 2022, further benefited from broad national house price appreciation observed through June 2022.

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.

Although national house prices have contracted from their peak, the scale of decline has been modest relative to the quantum of previous gains, and many borrowers still retain significant net price gains and appreciated equity in their homes.

Our claims severity for each of the three months ended March 31, 2023 and 2022 was 39%.

Claims severity for the three months ended March 31, 2023 and 2022 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.

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:

As of September 30, 2022 As of September 30, 2021

As of March 31, 2023 As of March 31, 2022

(In Thousands)

3 unchanged sentences

(2) Amount includes claims adjustment expenses.

Average reserve per default increased from September 30, 2021 to September 30, 2022 primarily due to the “aging” of early COVID-related defaults.

While we have generally established lower reserves for defaults that we consider to be connected to the COVID-19 pandemic given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs, we have increased such reserves over time as individual defaults remain outstanding or “age.” The increased average reserve per default at September 30, 2022 also reflects an incrementally conservative set of assumptions about future macroeconomic and housing market conditions compared to those assumed at September 30, 2021.

While average reserve per default increased from September 30, 2021 to September 30, 2022, our aggregate gross reserve position declined in the intervening period due to the significant decline in our total default inventory.

Average reserve per default increased from March 31, 2022 to March 31, 2023, primarily due to an incrementally conservative set of assumptions about future macroeconomic and housing market conditions compared to those assumed at March 31, 2022.

The increased average reserve per default at March 31, 2023 also reflects the “aging” of COVID-related defaults.

While we initially established lower reserves for defaults that we considered to be connected to the COVID-19 pandemic given our expectation that forbearance, repayment and modification, and other assistance programs would 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.”

GSE Oversight

6 unchanged sentences

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.

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.

4 unchanged sentences

The following table provides a comparison of the PMIERs available assets and risk-based required asset amount as reported by NMIC as of the dates indicated:

September 30, 2022 September 30, 2021

March 31, 2023 March 31, 2022

(In Thousands)

1 unchanged sentence

Risk-based required assets 1,231,780 1,341,217

Available assets were $2.3 billion at September 30, 2022, compared to $2.0 billion at September 30, 2021.

The $283 million increase in available assets between the dates presented was primarily driven by NMIC's positive cash flow from operations during the intervening period, partially offset by the payment of an ordinary course dividend by NMIC to NMIH in April 2022 and the extraordinary dividend paid from Re One to NMIH following the termination and commutation of the reinsurance agreement between NMIC and Re One in December 2021.

Available assets were $2.5 billion at March 31, 2023, compared to $2.1 billion at March 31, 2022.

The $354 million increase in available assets between the dates presented was primarily driven by NMIC's positive cash flow from operations during the intervening period, partially offset by the payment of an ordinary course dividend from NMIC to NMIH in April 2022.

The decrease in the risk-based required asset amount between the dates presented was primarily due to an increase in the risk ceded under our third-party reinsurance agreements, partially offset by the growth in our gross RIF and aggregate gross-risk based required asset amount.

10 unchanged sentences

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.

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 Three months ended Nine months ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Consolidated statements of operations Three months ended

March 31, 2023 March 31, 2022

Revenues ($ In Thousands, except for per share data)

1 unchanged sentence

Net investment income 14,894 10,199

Net realized investment gains 14 3 475 15

Net realized investment (losses) gains (33) 408

Other revenues 164 339

Total revenues 136,779 127,441

Insurance claims and claim (benefits) expenses (3,389) 3,204 (7,044) 12,806

Insurance claims and claim expenses (benefits) 6,701 (619)

Underwriting and operating expenses 25,786 32,935

14 unchanged sentences

26.7 % 27.7 %

Three months ended Nine months ended

Three months ended

Non-GAAP financial measures (4)

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

March 31, 2023 March 31, 2022

($ In Thousands, except for per share data)

2 unchanged sentences

Adjusted diluted EPS 0.88 0.77

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

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

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

1 unchanged sentence

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

Net premiums earned were $118.3 million and $355.7 million for the three and nine months ended September 30, 2022, respectively, compared to $113.6 million and $330.4 million for the three and nine months ended September 30, 2021, respectively.

The year-on-year increase in net premiums earned in each respective period was primarily driven by the growth of our IIF, partially offset by a decline in the contribution from single premium policy cancellations and an increase in total premiums ceded under our reinsurance transactions.

Net investment income was $11.9 million and $33.1 million for the three and nine months ended September 30, 2022, respectively, compared to $9.8 million and $28.0 million for the three and nine months ended September 30, 2021, respectively.

The year-on-year increase in net investment income in each respective period was primarily driven by the growth in the size of our total investment portfolio, excluding unrealized gains and losses and an increase in book yield tied to the prevailing interest rate and credit spread environment.

Other revenues were $0.3 million and $1.0 million for the three and nine months ended September 30, 2022, respectively, compared to $0.6 million and $1.6 million for the three and nine months ended September 30, 2021, respectively.

Net premiums earned were $121.8 million for the three months ended March 31, 2023, compared to $116.5 million for the three months ended March 31, 2022.

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

and a decline in the contribution from single premium policy cancellations.

Net investment income was $14.9 million for the three months ended March 31, 2023, compared to $10.2 million for the three months ended March 31, 2022.

The increase in net investment income was primarily driven by an increase in the book yield of the investment portfolio tied to the deployment of new cash flows and reinvestment of rolling maturities at incrementally higher rates, as well as the growth in the size of our total invested asset base.

Other revenues were $0.2 million for the three months ended March 31, 2023, compared to $0.3 million for the three months ended March 31, 2022.

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 decline in other revenues in each respective period relates to a decrease in NMIS' outsourced loan review volume.

The decrease in other revenues 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 a benefit of $3.4 million and $7.0 million for the three and nine months ended September 30, 2022, respectively, compared to insurance claims and claim expenses of $3.2 million and $12.8 million for the three and nine months ended September 30, 2021, respectively.

Insurance claims and claim expenses during the three and nine months ended September 30, 2022 benefited from cure activity and the associated release of a portion of the reserves we established for anticipated claims payments in prior periods.

Underwriting and operating expenses were $27.1 million and $90.8 million for the three and nine months ended September 30, 2022, respectively, compared to $34.7 million and $103.5 million for the three and nine months ended September 30, 2021, respectively.

The year-on-year decline in underwriting and operating expenses in each respective period was driven by a decrease in the amortization of deferred policy acquisition costs tied to the increased persistency of our IIF, a step-down in technology costs related to our agreement with Tata Consultancy Services (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 during the three and nine months ended September 30, 2022 further benefited from an increase in ceding commissions received upon the introduction of the 2022 Seasoned QSR Transaction effective July 1, 2022.

Service expenses were $0.2 million and $1.0 million for the three and nine months ended September 30, 2022, respectively, compared to $0.8 million and $1.9 million for the three and nine months ended September 30, 2021, respectively.

Insurance claims and claim expenses were $6.7 million for the three months ended March 31, 2023, compared to insurance claims and claim benefits of $0.6 million for the three months ended March 31, 2022.

The increase in insurance claims and claim expenses was primarily driven by the establishment of initial reserves on newly defaulted loans during the three months ended March 31, 2023, as well as an increase in the average case reserve held against previously defaulted loans that have aged in their delinquency status, and was partially offset by the release of a portion of the reserves we established for anticipated claims payments in prior periods in connection with cure activity and ongoing analysis of recent loss development trends.

Underwriting and operating expenses were $25.8 million for the three months ended March 31, 2023, compared to $32.9 million for the three months ended March 31, 2022.

The decrease in underwriting and operating expenses reflects an increase in ceding commissions received upon the introduction of the 2022 Seasoned QSR Transaction effective July 1, 2022, a step-down in technology costs related to our agreement with Tata Consultancy Services (TCS) and a decrease in employee compensation costs, partially offset by an increase in travel and entertainment expenses tied to the easing of COVID-19 related restrictions.

Underwriting and operating expenses for the year ended March 31, 2023 further reflect a benefit related to the recognition of our deferred policy acquisition costs, which slowed in connection with the increased persistency of our IIF.

Service expenses were $0.1 million for the three months ended March 31, 2023, compared to $0.4 million for the three months ended March 31, 2022.

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

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

The decline in service expenses was driven by a decrease in NMIS' outsourced loan review volume and a negotiated decrease in the cost of services procured from third-party providers.

Amounts incurred as service expenses generally correspond with amounts recognized in other revenues in the same periods.

Interest expense was $8.0 million and $24.1 million for the three and nine months ended September 30, 2022, respectively, compared to $7.9 million and $23.8 million for the three and nine months ended September 30, 2021, respectively.

Interest expense was $8.0 million for each of the three months ended March 31, 2023 and 2022.

Interest expense primarily reflects the carrying costs of the Notes.

The increase in interest expense period-to-period was due to an increase in commitment fees associated with the 2021 Revolving Credit Facility which had extended its borrowing capacity from $110 million to $250 million in November 2021.

See Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4, Debt.

Income tax expense was $21.8 million and $62.6 million for the three and nine months ended September 30, 2022, respectively, compared to $17.3 million and $48.0 million for the three and nine months ended September 30, 2021, respectively.

The year-on-year increase in income tax expense in each respective period was primarily driven by growth in our pre-tax income.

Our effective tax rate on pre-tax income was 22.1% for the three and nine months ended September 30, 2022, respectively, compared to 22.3% and 21.9% for the three and nine months ended September 30, 2021, respectively.

Income tax expense was $21.7 million for the three months ended March 31, 2023, compared to $19.1 million for the three months ended March 31, 2022.

The increase in income tax expense was primarily driven by growth in our pre-tax income.

Our effective tax rate on pre-tax income was 22.6% for the three months ended March 31, 2023 compared to 22.0% for the three months ended March 31, 2022.

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

1 unchanged sentence

Our provision for income taxes for interim periods is established based on our estimated annual effective tax rate for a given year and reflects the impact of discrete tax effects in the period in which they occur.

Our effective tax rates for the three and nine months ended September 30, 2022 and 2021 reflect the discrete tax effects of the vesting of RSUs and exercise of options, and the change in fair value of our warrant liability in each period.

Our effective tax rates for the three months ended March 31, 2023 and 2022 reflect the discrete tax effects of the vesting of RSUs and exercise of options.

See Item 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 8, Income Taxes.

Net income was $76.8 million and $220.0 million for the three and nine months ended September 30, 2022, respectively, compared to $60.2 million and $170.6 million for the three and nine months ended September 30, 2021, respectively.

Adjusted net income was $76.8 million and $218.6 million for the three and nine months ended September 30, 2022, respectively, compared to $61.8 million and $173.3 million for the three and nine months ended September 30, 2021, respectively.

The year-on-year increases in net income and adjusted net income in each respective period were primarily driven by growth in our total revenues, as well as declines in our insurance claims and claim expenses and underwriting and operating expenses, partially offset by an increase in our income tax expense.

Diluted EPS was $0.90 and $2.53 for the three and nine months ended September 30, 2022, respectively, compared to $0.69 and $1.96 for the three and nine months ended September 30, 2021, respectively.

Adjusted diluted EPS was $0.90 and $2.53 for the three and nine months ended September 30, 2022, respectively, compared to $0.71 and $2.00 for the three and nine months ended September 30, 2021, respectively.

Diluted and adjusted diluted EPS increased primarily due to growth in net income and adjusted net income, as well as a decline in the number of weighted average diluted shares outstanding tied to share repurchase activity.

Net income was $74.5 million for the three months ended March 31, 2023, compared to $67.7 million for the three months ended March 31, 2022 and adjusted net income was $74.5 million for the three months ended March 31, 2023, compared to $67.5 million for the three months ended March 31, 2022.

The increases in net income and adjusted net income were primarily driven by growth in our total revenues, as well as a decline in our underwriting and operating expenses, partially offset by increases in our insurance claims and claim expenses and income tax expense.

Diluted EPS and adjusted diluted EPS were $0.88 for the three months ended March 31, 2023, compared to diluted EPS and adjusted diluted EPS of $0.77 for the three months ended March 31, 2022.

Diluted and adjusted diluted EPS increased primarily due to growth in our net income and adjusted net income, as well as a decline in the number of weighted average diluted shares outstanding tied to share repurchase activity.

The non-GAAP financial measures adjusted income before tax, adjusted net income and adjusted diluted EPS are presented to enhance the comparability of financial results between periods.

Non-GAAP Financial Measure Reconciliations For the three months ended September 30, For the nine months ended September 30,

2022 2021 2022 2021

Non-GAAP Financial Measure Reconciliations For the three months ended March 31,

As reported ($ In Thousands, except for per share data)

2 unchanged sentences

Net income $ 74,458 $ 67,680

Net realized investment gains (14) (3) (475) (15)

Net realized investment losses (gains) 33 (408)

Gain from change in fair value warrant liability — (93)

Capital market transaction costs — 260

Other infrequent, unusual or non-operating items

— 1,289 — 1,289

Adjusted income before tax 96,206 86,506

Income tax (benefit) expense on adjustments (1)

(3) 139 (57) 555

Income tax expense (benefit) on adjustments (1)

Adjusted net income $ 74,484 $ 67,470

4 unchanged sentences

items that are not eligible for an income tax deduction.

Such non-deductible items include gains or losses from the change in the fair value of our warrant liability and certain costs incurred in connection with the CEO transition, which are limited under Section 162(m) of the Internal Revenue Code.

Explanation and Reconciliation of Our Use of Non-GAAP Financial Measures

12 unchanged sentences

Although adjusted income before tax, adjusted net income and adjusted diluted EPS exclude certain items that have occurred in the past and are expected to occur in the future, the excluded items:

(1) are not viewed as part of the operating performance of our primary activities;

(1) are not viewed as part of the operating

performance of our primary activities;

or (2) are impacted by market, economic or regulatory factors and are not necessarily indicative of operating trends, or both.

3 unchanged sentences

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

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

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

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.

8 unchanged sentences

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

Consolidated balance sheets September 30, 2022 December 31, 2021

Consolidated balance sheets March 31, 2023 December 31, 2022

(In Thousands)

4 unchanged sentences

Software and equipment, net 31,830 31,930

Prepaid reinsurance premiums 1,454 2,393

Reinsurance recoverable 23,479 21,587

Prepaid federal income tax 154,409 154,409

Other assets 39,069 36,045

5 unchanged sentences

Reinsurance funds withheld 2,313 2,674

Warrant liability — 2,363

Deferred tax liability, net 223,368 193,859

3 unchanged sentences

Total liabilities and shareholders' equity $ 2,633,776 $ 2,516,030

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

Cash and investments at September 30, 2022 included $97.4 million held by NMIH.

The decrease in total cash and investments reflects an increase in the unrealized loss positions of our fixed income portfolio tied to the prevailing interest rate and credit spread environment and share repurchases during the nine months ended September 30, 2022, partially offset by cash generated from operations.

Premiums receivable was $67.2 million as of September 30, 2022, compared to $60.4 million as December 31, 2021.

Total cash and investments were $2.3 billion as of March 31, 2023, compared to $2.1 billion as of December 31, 2022.

Cash and investments at March 31, 2023 included $65.7 million held by NMIH.

The increase in total cash and investments reflects the addition of incremental cash provided by operating activities, as well as a decrease in the unrealized loss position of our fixed income portfolio partially offset by share repurchase activity during the three months ended March 31, 2023.

Premiums receivable was $70.2 million as of March 31, 2023, compared to $69.7 million as of December 31, 2022.

The increase was primarily driven by growth in our monthly premium policies in force, where premiums are generally paid one month in arrears.

Net deferred policy acquisition costs were $59.5 million as of September 30, 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 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 $1.5 million as of September 30, 2022, compared to $2.4 million as of December 31, 2021.

Prepaid reinsurance premiums, which represent the unearned premiums on single premium policies ceded under the 2016 QSR Transaction, decreased due to the continued amortization of previously ceded unearned premiums.

Reinsurance recoverable was $19.8 million as of September 30, 2022, compared to $20.3 million as of December 31, 2021.

The decrease was driven by a decrease in ceded losses recoverable associated with our QSR Transactions.

Other assets increased to $124.1 million as of September 30, 2022, compared to $113.3 million as of December 31, 2021.

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

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

Net deferred policy acquisition costs were $59.9 million as of March 31, 2023, compared to $58.6 million as of December 31, 2022.

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

Reinsurance recoverable was $23.5 million as of March 31, 2023, compared to $21.6 million as of December 31, 2022.

The increase was driven by an increase in ceded losses recoverable under our QSR Transactions.

Prepaid federal income tax was $154.4 million as of both March 31, 2023 and December 31, 2022.

Prepaid federal income tax represents tax and loss bonds purchased in connection with our claimed tax deduction for our statutory contingency reserve position.

See Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 8, Income Taxes.

Unearned premiums were $130.7 million as of September 30, 2022, compared to $139.2 million as of December 31, 2021.

The decrease was driven by the amortization of existing unearned premiums through earnings in accordance with the

expiration of risk on related single premium policies and the cancellations of other single premium policies, partially offset by single premium policy originations during the nine months ended September 30, 2022.

Accounts payable and accrued expenses were $73.9 million as of September 30, 2022, compared to $72.0 million as of December 31, 2021.

The increase was primarily driven by accrued and unpaid interest on the Notes which is payable semi-annually in June and December and reinsurance premiums payable, partially offset by the settlement of previously accrued compensation expenses, premium taxes and other contractual payables during the nine months ended September 30, 2022.

Reserve for insurance claims and claim expenses was $94.9 million as of September 30, 2022, compared to $103.6 million as of December 31, 2021.

The decrease was primarily driven by a release of a portion of the reserves we established for anticipated claims payments in prior periods, cure activity, and a decline in the total size of our default population.

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

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

Other assets were $39.1 million as of March 31, 2023, compared to $36.0 million as of December 31, 2022.

The increase was primarily driven by increases in our accrued investment income and prepaid expenses.

Unearned premiums were $114.1 million as of March 31, 2023, compared to $123.0 million as of December 31, 2022.

The decrease was driven by the amortization of existing unearned premiums through earnings in accordance with the expiration of risk on related single premium policies and the cancellations of other single premium policies, partially offset by single premium policy originations during the three months ended March 31, 2023.

Accounts payable and accrued expenses were $70.3 million as of March 31, 2023, compared to $74.6 million as of December 31, 2022.

The decrease was primarily driven by the settlement of previously accrued payroll, bonuses and certain contractual payables during the three months ended March 31, 2023, partially offset by an increase in accrued and unpaid interest on the Notes which is payable semi-annually in June and December, as well as an increase in reinsurance premiums payable.

Reserve for insurance claims and claim expenses was $108.2 million as of March 31, 2023, compared to $99.8 million as of December 31, 2022.

The increase was primarily driven by the establishment of initial reserves on newly defaulted loans during the three months ended March 31, 2023, as well as an increase in the average case reserve held against previously defaulted loans that have aged in their delinquency status.

The increase in the reserves for insurance claims and claim expenses was partially offset by the release of a portion of the reserves we established for anticipated claims payments in prior periods in connection with cure activity and ongoing analysis of recent loss development trends.

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

Reinsurance funds withheld, which represents our ceded reinsurance premiums written, less our profit and ceding commission receivables related to the 2016 QSR Transaction was $3.7 million as of September 30, 2022, compared to $5.6 million as of December 31, 2021.

Reinsurance funds withheld, which represents our ceded reinsurance premiums written, less our profit and ceding commission receivables related to the 2016 QSR Transaction was $2.3 million as of March 31, 2023, compared to $2.7 million as of December 31, 2022.

The decrease relates to the continued decline in ceded premiums written on single premium policies, due to the end of the reinsurance coverage period for new business under the 2016 QSR Transaction at December 31, 2017.

See Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 5, Reinsurance ."

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

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

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

For further information regarding the valuation of our warrant liability and its impact on our results of operations and financial position, see Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 3, Fair Value of Financial Instruments.

Net deferred tax liability was $166.6 million at September 30, 2022, compared to $164.2 million at December 31, 2021.

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

Net deferred tax liability was $223.4 million as of March 31, 2023, compared to $193.9 million as of December 31, 2022.

The increase was primarily due to an increase in the claimed deductibility of our statutory contingency reserve and the decrease in unrealized losses recorded in other comprehensive income.

For further information regarding income taxes and their impact on our results of operations and financial position, see Item 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 8, Income Taxes ."

Other liabilities increased to $12.4 million as of September 30, 2022, compared to $3.2 million as of December 31, 2021.

The increase was primarily driven by the recognition of an incremental lease liability in connection with the modification of the operating lease for our corporate headquarters in January 2022.

The following table summarizes our consolidated cash flows from operating, investing and financing activities:

Consolidated cash flows For the nine months ended September 30,

Consolidated cash flows For the three months ended March 31,

Net cash provided by (used in):

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Financing activities (17,406) (4,680)

Net increase (decrease) in cash and cash equivalents $ 49,166 $ (29,677)

Net cash provided by operating activities was $281.6 million for the nine months ended September 30, 2022, compared to $281.4 million for the nine months ended September 30, 2021.

Cash provided by operating activities during the nine months ended September 30, 2022 reflects a reduction in technology service costs paid under our long-term IT services agreement with TCS, largely offset by a decline in premium written tied to a decrease in single premium policies written during the period.

Cash used in investing activities for the nine months ended September 30, 2022 and 2021 reflects the purchase of fixed and short-term maturities with cash provided by operating activities, and the reinvestment of coupon payments, maturities and sale proceeds within our investment portfolio.

Cash used in financing activities was $50.3 million for the nine months ended September 30, 2022, compared to $0.5 million for the nine months ended September 30, 2021.

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

Net increase in cash and cash equivalents $ 38,678 $ 54,260

Net cash provided by operating activities was $89.8 million for the three months ended March 31, 2023, compared to $80.3 million for the three months ended March 31, 2022.

Cash provided by operating activities increased during the three months ended March 31, 2023, primarily due to a decline in short-term employee incentive payments and a reduction in technology service costs paid under our long-term IT services agreement with TCS, partially offset by a decline in net premiums written tied to a decrease in single premium policy production and an increase in ceded premiums written under our reinsurance agreements.

Cash used in investing activities for the three months ended March 31, 2023 and 2022 reflects the purchase of fixed and short-term maturities with cash provided by operating activities, and the reinvestment of coupon payments, maturities and sale proceeds within our investment portfolio.

Cash used in financing activities was $17.4 million for the three months ended March 31, 2023, compared to $4.7 million for the three months ended March 31, 2022.

Cash used in financing activities primarily relates to the repurchase of common stock.

Liquidity and Capital Resources

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

As of September 30, 2022, NMIH had $97.4 million of cash and investments.

As of March 31, 2023, NMIH had $65.7 million of cash and investments.

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

NMIC paid a $34.9 million ordinary course dividend to NMIH in April 2022, representing its full ordinary course dividend capacity payable under Wisconsin law for the twelve-month period ending December 31, 2022.

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 1, " Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4, Debt."

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.

On February 10, 2022, our Board of Directors approved a $125 million share repurchase program (excluding associated costs and applicable taxes) 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 nine months ended September 30, 2022, NMIH repurchased 2.7 million shares of common stock pursuant to a trading plans under Rule 10b-18 and Rule 10b5-1 of the Exchange Act, at a total cost of $51.2 million, including associated costs.

As of September 30, 2022, $73.8 million of repurchase authority remained available under the program.

During the three months ended March 31, 2023, NMIH repurchased 0.7 million shares of common stock pursuant to a trading plan under Rule 10b-18 of the Exchange Act, at a total cost of $14.9 million, including associated costs and applicable taxes.

As of March 31, 2023, $53.7 million of repurchase authority remained available under the program.

NMIH has entered into tax and expense-sharing agreements with its subsidiaries which have been approved by the Wisconsin OCI, with such approvals subject to change or revocation at any time.

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The Notes mature on June 1, 2025 and bear interest at a rate of 7.375%, payable semi-annually on June 1 and December 1.

The 2021 Revolving Credit Facility matures on the earlier of (x) November 29, 2025 or (y) if any existing senior secured notes remain outstanding on such date, February 28, 2025, and accrues interest at a variable rate equal to, at our discretion, (i) a Base Rate (as defined in the 2021 Revolving Credit Facility, subject to a floor of 1.00% per annum) plus a margin of 0.375% to 1.875% per annum or (ii) the Adjusted Term Secured Overnight Financing Rate (SOFR) (as defined in the 2021 Revolving Credit Facility) plus a margin of 1.375% to 2.875% per annum, with the margin in each of (i) or (ii) based on our applicable corporate credit rating at the time.

The 2021 Revolving Credit Facility matures on the earlier of (x) November 29, 2025 or (y) if any existing senior secured notes remain outstanding on such date, February 28, 2025, and accrues interest at a variable rate equal to, at our discretion, (i) a Base Rate (as defined in the 2021 Revolving Credit Facility, subject to a floor of 1.00% per annum) plus a margin of 0.375% to 1.875% per annum or (ii) the Adjusted Term SOFR Rate (as defined in the 2021 Revolving Credit Facility) plus a margin of 1.375% to

2.875% per annum, with the margin in each of (i) or (ii) based on our applicable corporate credit rating at the time.

Borrowings under the 2021 Revolving Credit Facility may be used for general corporate purposes, including to support the growth of our new business production and operations.

Under the 2021 Revolving Credit Facility, NMIH is required to pay a quarterly commitment fee on the average daily undrawn amount of 0.175% to 0.525%, based on the applicable corporate credit rating at the time.

As of September 30, 2022, the applicable commitment fee was 0.30%.

As of March 31, 2023, the applicable commitment fee was 0.30%.

We are subject to certain covenants under the 2021 Revolving Credit Facility, including:

a maximum debt-to-total capitalization ratio of 35%, a requirement to maintain compliance with the PMIERs financial requirements (subject to any GSE approved waivers), and minimum consolidated net worth and statutory capital requirements (respectively, as defined therein).

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

We were in compliance with all covenants at March 31, 2023.

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 .

On April 1, 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 September 30, 2022, NMIC reported $2,275 million available assets against $1,173 million risk-based required assets, for a $1,102 million "excess" funding position.

At March 31, 2023, NMIC reported $2,481 million available assets against $1,232 million risk-based required assets for a $1,249 million "excess" funding position.

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

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As 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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As such, the PMIERs generally imposes a stricter financial requirement than the state RTC standard.

As of September 30, 2022, NMIC's performing primary RIF, net of reinsurance, was approximately $23.7 billion.

As of March 31, 2023, NMIC's performing primary RIF, net of reinsurance, was approximately $25.2 billion.

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

Based on NMIC's total statutory capital of $2.2 billion (including contingency reserves) as of September 30, 2022, NMIC's RTC ratio was 10.9:1.

Based on NMIC's total statutory capital of $2.3 billion (including contingency reserves) as of March 31, 2023, NMIC's RTC ratio was 10.8:1.

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

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

At September 30, 2022, NMIC had $2.0 billion of cash and investments, including $108 million of cash and equivalents.

At March 31, 2023, NMIC had $2.2 billion of cash and investments, including $58.3 million of cash and cash 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 September 30, 2022, NMIC generated $272 million of cash flow from operations and received an additional $162 million of cash flow on the maturity, sale and redemption of securities held in its investment portfolio.

During the twelve-month period ended March 31, 2023, NMIC generated $295 million of cash flow from operations and received an additional $266 million of cash flow on the maturity, sale and redemption of securities held in its investment portfolio.

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

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NMIC's 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.

Given the breadth and duration of forbearance programs available to borrowers, separate foreclosure moratoriums that remain available, 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.

Debt and Financial Strength Ratings

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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.

The outlook for all ratings provided by Moody's and S&P’s is stable.

Consolidated Investment Portfolio

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Our investment portfolio is comprised entirely of fixed maturity instruments.

As of September 30, 2022, the fair value of our investment portfolio was $2.0 billion and we held an additional $125.8 million of cash and equivalents.

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

As of March 31, 2023, the fair value of our investment portfolio was $2.2 billion and we held an additional $83.1 million of cash and cash equivalents.

Pre-tax book yield on the investment portfolio for the three months ended March 31, 2023 was 2.5%.

Book yield is calculated as period-to-date net investment income divided by the average amortized cost of the investment portfolio.

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The following tables present a breakdown of our investment portfolio and cash and cash equivalents by investment type and credit rating:

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

Percentage of portfolio's fair value March 31, 2023 December 31, 2022

Corporate debt securities 60 % 60 %

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Investment portfolio ratings at fair value (1)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

AAA 13 % 19 %

Total 100 % 100 %

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(2) Includes +/– ratings.

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

(3) We held one security with a BB+ rating at March 31, 2023 and 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

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

As of September 30, 2022, the investment portfolio had gross unrealized losses of $275.2 million, of which $173.4 million had been in an unrealized loss position for a period of twelve months or longer.

We did not recognize an allowance for credit loss for any security in the investment portfolio as of March 31, 2023 or December 31, 2022, and we did not record any provision for credit loss for investment securities during the three months ended March 31, 2023 or 2022.

As of March 31, 2023, the investment portfolio had gross unrealized losses of $215.8 million, of which $209.2 million had been in an unrealized loss position for a period of twelve months or longer.

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.

The increase in the aggregate size of the unrealized loss position as of September 30, 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 September 30, 2022, assessing their credit ratings as well as any adverse conditions specifically related to the security.

Based upon our estimate of the amount and timing of cash flows to be collected over the remaining life of each instrument, we believe the unrealized losses as of September 30, 2022 are not indicative of the ultimate collectability of the current amortized cost of the securities.

The decrease in the aggregate size of the unrealized loss position as of March 31, 2023, was primarily driven by fluctuations in interest rates and, to a lesser extent, movements in credit spreads since December 31, 2022.

We evaluated the securities in an unrealized loss position as of March 31, 2023, assessing their credit ratings as well as any adverse conditions specifically related to the security.

Based upon our estimate of the amount and timing of cash flows to be collected over the remaining life of each instrument, we believe the unrealized losses as of March 31, 2023 are not indicative of the ultimate collectability of the current amortized cost of the securities.

Critical Accounting Estimates

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis