What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-02 compared with 2023-05-03 · 180 added, 191 removed, 619 unchanged (37% of the section changed)

16 unchanged sentences

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

As of March 31, 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).

As of June 30, 2023, we had issued master policies with 1,922 customers, including national and regional mortgage banks, money center banks, credit unions, community banks, builder-owned mortgage lenders, internet-sourced lenders and other non-bank lenders.

As of June 30, 2023, we had $191.3 billion of primary insurance-in-force (IIF) and $49.9 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 March 31, 2023, we had 242 employees.

As of June 30, 2023, we had 237 employees.

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

33 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 March 31, 2023 were non-refundable under most cancellation scenarios.

Substantially all of our single premium policies in force as of June 30, 2023 were non-refundable under most cancellation scenarios.

If non-refundable single premium

28 unchanged sentences

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 noteholders, among others.

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

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

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

10/1/2020 – 3/31/2021 (2)

4/1/2021 – 9/30/2021 (3)

Current ceded RIF $ 811,639 $ 929,536 $ 3,236,685 $ 6,591,872 $ 6,860,558

Current first layer retained loss 122,166 122,182 121,177 163,654 146,167

Current reinsurance coverage 147,608 191,044 85,011 282,630 363,596

Eligible coverage $ 269,774 $ 313,226 $ 206,188 $ 446,284 $ 509,763

Subordinated coverage (4)

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

Current amounts are presented as of June 30, 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)

2018 ILN Transaction July 25, 2018 1/1/2017 – 5/31/2018 $ 264,545 $ 142,638 $ 125,312 $ 121,966

2019 ILN Transaction July 30, 2019 6/1/2018 – 6/30/2019 326,905 176,647 123,424 122,085

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

242,351 74,728 121,777 121,177

PMIERs charge on ceded RIF 7.86 % 7.74 % 5.00 % 5.65 % 6.77 %

Overcollateralization (5) (6)

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

367,238 257,809 163,708 163,520

Delinquency Trigger (7)

2021-2 ILN Transaction October 26, 2021 4/1/2021 – 9/30/2021 (4)

363,596 351,215 146,229 146,112

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

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

1 unchanged sentence

(4) Approximately 2% of the production covered by the 2021-2 ILN Transaction has coverage reporting dates between July 1, 2019 and March 31, 2021.

(4) Absent a delinquency trigger, the subordinated coverage is capped at 7.75%, 7.50%, 6.25%, 6.75% and 7.45% for the 2018, 2019, 2020-2, 2021-1 and 2021-2 ILN Transactions, respectively.

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

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

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

delinquency triggers for the 2020-2, 2021-1 and 2021-2 ILN Transactions are equal to seventy-five percent of the subordinated coverage level and assessed on the basis of a three-month rolling average.

Effective July 25, 2023, NMIC exercised its optional call to terminate the 2018 ILN Transaction.

In connection with the termination of the transaction, NMIC’s excess of loss reinsurance agreement with Oaktown Re II Ltd.

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

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

Traditional reinsurance

2 unchanged sentences

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

The reinsurance coverage amount of each XOL Transaction is set to approximate the PMIERs minimum required assets of its reference pool and decreases from the inception of each respective agreement over a ten-year period in the event the PMIERs minimum required assets of the pool declines.

The reinsurance coverage amount of each XOL Transaction is set to approximate the PMIERs minimum required assets of its reference pool and decreases from the inception of each respective agreement (except 2023-1 XOL, which decreases from the end of the covered production period) over a ten-year period in the event the PMIERs minimum required assets of the pool declines.

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

5 unchanged sentences

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.

Current amounts are presented as of June 30, 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)

9 unchanged sentences

(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.

(4) The 2023-1 XOL Transaction provides coverage for production generated between October 1, 2022 and June 30, 2023.

The current reinsurance coverage and current first layer retained loss will decrease in future periods to the extent the PMIERs minimum required assets of the covered pool declines.

Quota share reinsurance

15 unchanged sentences

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.

Such selective termination rights arise when, among other reasons, a reinsurer experiences a

deterioration in its capital position below a prescribed threshold and/or a reinsurer breaches (and fails to cure) its collateral posting obligations under the relevant agreement.

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

6 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

March 31, 2023 March 31, 2022

IIF NIW IIF NIW

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

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

IIF NIW IIF NIW NIW

(In Millions)

4 unchanged sentences

Total $ 192,306 $ 11,478 $ 169,753 $ 16,611 $ 20,212 $ 30,776

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 for the three months and six months ended June 30, 2023 was $11.5 billion and $20.2 billion, respectively, compared to $16.6 billion and $30.8 billion for the three and six months ended June 30, 2022, respectively.

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.

Total IIF increased 13% at June 30, 2023 compared to June 30, 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 86.0% at June 30, 2023 from 76.0% at June 30, 2022, reflecting a slowdown in the pace of refinancing activity during the intervening twelve-month period driven by an increase in interest and mortgage note rates.

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

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

March 31, 2023 March 31, 2022

Primary and pool premiums written and earned For the three months ended June 30, For the six months ended June 30,

2023 2022 2023 2022

(In Thousands)

1 unchanged sentence

Net premiums earned 125,985 120,870 247,739 237,365

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.

Net premiums written decreased 1% and 2% during the three and six months ended June 30, 2023, respectively, compared to the three and six months ended June 30, 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 each of the three and six months ended June 30, 2023 increased 4% compared to the three and six months ended June 30, 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 and a decline in the contribution from single premium policy cancellations.

Pool premiums written and earned for each of the three and six month periods ended June 30, 2023 and 2022 were $0.3 million and $0.6 million, respectively, before giving effect to the 2016 QSR Transaction, under which all of our written and

earned pool premiums are ceded.

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

3 unchanged sentences

Primary portfolio trends As of and for the three months ended

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

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

($ Values In Millions, except as noted below)

34 unchanged sentences

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

Primary IIF As of and for the three months ended

March 31, 2023 March 31, 2022

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

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 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 March 31, 2023 As of March 31, 2022

Primary IIF and RIF As of June 30, 2023 As of June 30, 2022

IIF RIF IIF RIF

(In Millions)

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

June 30, 2023 $ 19,811 $ 5,176 $ — $ —

2022 54,739 14,496 30,249 7,972

12 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

March 31, 2023 March 31, 2022

Primary NIW by FICO For the three months ended June 30, For the six months ended June 30,

2023 2022 2023 2022

(In Millions)

4 unchanged sentences

680-699 413 1,277 755 2,521

<=679 101 738 165 1,323

Total $ 11,478 $ 16,611 $ 20,212 $ 30,776

Weighted average FICO 763 751 762 750

Primary NIW by LTV For the three months ended

March 31, 2023 March 31, 2022

Primary NIW by LTV For the three months ended June 30, For the six months ended June 30,

2023 2022 2023 2022

(In Millions)

5 unchanged sentences

Weighted average LTV 92.0 % 92.2 % 91.9 % 92.1 %

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

March 31, 2023 March 31, 2022

Primary NIW by purchase/refinance mix For the three months ended June 30, For the six months ended June 30,

2023 2022 2023 2022

(In Millions)

Purchase $ 11,233 $ 16,203 $ 19,727 $ 29,601

245 408 485 1,175

Total $ 11,478 $ 16,611 $ 20,212 $ 30,776

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

Primary IIF by FICO As of

March 31, 2023 March 31, 2022

Primary IIF by FICO As of June 30,

($ Values In Millions)

6 unchanged sentences

Total $ 191,306 100 % $ 168,639 100 %

Primary RIF by FICO As of

March 31, 2023 March 31, 2022

Primary RIF by FICO As of June 30,

($ Values In Millions)

6 unchanged sentences

Total $ 49,875 100 % $ 43,260 100 %

Primary IIF by LTV As of

March 31, 2023 March 31, 2022

Primary IIF by LTV As of June 30,

($ Values In Millions)

4 unchanged sentences

Total $ 191,306 100 % $ 168,639 100 %

Primary RIF by LTV As of

March 31, 2023 March 31, 2022

Primary RIF by LTV As of June 30,

($ Values In Millions)

4 unchanged sentences

Total $ 49,875 100 % $ 43,260 100 %

Primary RIF by Loan Type As of

March 31, 2023 March 31, 2022

Primary RIF by Loan Type As of June 30,

Fixed 98 % 99 %

3 unchanged sentences

Total 100 % 100 %

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

As of March 31, 2023

The table below presents selected primary portfolio statistics, by book year, as of June 30, 2023.

As of June 30, 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)

18 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 March 31, 2023 is not necessarily representative of the geographic distribution we expect in the future.

Top 10 primary RIF by state As of

March 31, 2023 March 31, 2022

The distribution of our primary RIF as of June 30, 2023 is not necessarily representative of the geographic distribution we expect in the future.

Top 10 primary RIF by state As of June 30,

California 10.4 % 10.8 %

5 unchanged sentences

Illinois 3.9 3.9

Colorado 3.5 3.7

Pennsylvania 3.4 3.3

Colorado 3.4 3.7

Maryland 3.3 3.5

27 unchanged sentences

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

For the three months ended June 30, For the six months ended June 30,

2023 2022 2023 2022

(In Thousands)

14 unchanged sentences

Prior years (3)

1,072 356 1,344 676

Total claims and claim expenses paid 1,126 382 1,398 702

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 $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.

Amounts are presented net of reinsurance and included $39.1 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the six months ended June 30, 2023 and $14.0 million attributed to net case reserves and $4.5 million attributed to net IBNR reserves for the six months ended June 30, 2022.

(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 $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.

Amounts are presented net of reinsurance and included $30.3 million attributed to net case reserves and $4.5 million attributed to net IBNR reserves for the six months ended June 30, 2023 and $17.0 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the six months ended June 30, 2022.

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

Gross reserves of $53.1 million related to prior year defaults remained as of June 30, 2023.

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

For the three months ended

March 31, 2023 March 31, 2022

For the three months ended June 30, For the six months ended June 30,

2023 2022 2023 2022

Beginning default inventory 4,475 5,238 4,449 6,227

4 unchanged sentences

Ending default inventory 4,349 4,271 4,349 4,271

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.

Ending default inventory increased from June 30, 2022 to June 30, 2023, primarily due to the growth and natural seasoning of our insured portfolio, largely offset by cure activity amongst our previous default population.

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

For the three months ended June 30, For the six months ended June 30,

2023 2022 2023 2022

($ Values In Thousands)

2 unchanged sentences

Average amount paid per claim

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

$ 30 $ 20 $ 26 $ 20

62 % 46 % 56 % 43 %

(1) Count includes 17 and 24 claims settled without payment during the three and six months ended June 30, 2023, respectively, and 10 and 16 claims settled without payment during the three and six months ended June 30, 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 21 and 19 claims during the three months ended March 31, 2023 and 2022, respectively.

We paid 46 and 67 claims during the three and six months ended June 30, 2023, respectively, and 24 and 43 claims during the three and six months ended June 30, 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.

Our claims paid experience for the three and six months ended June 30, 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.

Our claims severity for the three and six months ended June 30, 2023 was 62% and 56%, respectively, compared to 46% and 43% for the three and six months ended June 30, 2022, respectively.

Claims severity for the three and six months ended June 30, 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.

2 unchanged sentences

Average reserve per default:

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

As of June 30,

(In Thousands)

3 unchanged sentences

(2) Amount includes claims adjustment expenses.

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.”

Average reserve per default increased from June 30, 2022 to June 30, 2023, primarily due to changes in the composition of our default inventory as measured by the size, vintage and current estimated LTV of defaulted loans, as well as the proportion of such loans benefiting from a forbearance program granted in response to a financial hardship related to COVID-19.

Average reserves per default were further impacted by changes in observed and forecasted housing market conditions and macroeconomic factors between the measurement dates.

GSE Oversight

13 unchanged sentences

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

March 31, 2023 March 31, 2022

As of June 30,

(In Thousands)

1 unchanged sentence

Risk-based required assets 1,317,961 1,240,143

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.

The MI industry is highly competitive and currently consists of six private mortgage insurers, including NMIC, as well as government MIs such as the FHA, USDA or VA.

Private MI companies compete based on service, customer relationships, underwriting and other factors, including price, credit risk tolerance and IT capabilities.

We expect the private MI market to remain competitive, with pressure for industry participants to maintain or grow their market share.

The private MI industry overall competes more broadly with government MIs who significantly increased their share in the MI market following the 2008 Financial Crisis.

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

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

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

Available assets were $2.5 billion at June 30, 2023, compared to $2.2 billion at June 30, 2022.

The $322 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 May 2023.

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

LIBOR Transition

1 unchanged sentence

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

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

We have exposure to USD LIBOR-based financial instruments, such as LIBOR-based securities held in our investment portfolio.

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.

As of June 30, 2023, substantially all of our LIBOR-indexed financial contracts have been transitioned to a SOFR base.

The impact of the transition from LIBOR to SOFR has not and is not expected to have a material impact on our operations and financial results.

Consolidated Results of Operations

Consolidated statements of operations Three months ended

March 31, 2023 March 31, 2022

Consolidated statements of operations For the three months ended June 30, For the six months ended June 30,

2023 2022 2023 2022

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

1 unchanged sentence

Net investment income 16,518 10,921 31,412 21,120

Net realized investment (losses) gains (33) 408

Net realized investment gains (losses) — 53 (33) 461

Other revenues 182 376 346 715

17 unchanged sentences

24.1 % 22.9 % 25.4 % 25.3 %

Three months ended

For the three months ended June 30, For the six months ended June 30,

Non-GAAP financial measures (4)

March 31, 2023 March 31, 2022

2023 2022 2023 2022

($ In Thousands, except for per share data)

6 unchanged sentences

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

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.

Net premiums earned were $126.0 million and $247.7 million for the three and six months ended June 30, 2023, respectively, compared to $120.9 million and $237.4 million for the three and six months ended June 30, 2022, respectively.

The year-on-year increase in net premiums earned in each respective period 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 and a decline in the contribution from single premium policy cancellations.

Net investment income was $16.5 million and $31.4 million for the three and six months ended June 30, 2023, respectively, compared to $10.9 million and $21.1 million for the three and six months ended June 30, 2022, 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 invested asset base, as well as 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.

Other revenues were $0.2 million and $0.3 million for the three and six months ended June 30, 2023, respectively, compared to $0.4 million and $0.7 million for the three and six months ended June 30, 2022, respectively.

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

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

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

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

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.

Insurance claims and claim expenses were $2.9 million and $9.6 million for the three and six months ended June 30, 2023, respectively, compared to insurance claims and claim benefits of $3.0 million and $3.7 million for the three and six months ended June 30, 2022, respectively.

The increase in insurance claims and claim expenses in each respective period was primarily driven by the establishment of initial reserves on newly defaulted loans, 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 $27.4 million and $53.2 million for the three and six months ended June 30, 2023, respectively, compared to $30.7 million and $63.6 million for the three and six months ended June 30, 2022, respectively.

The year-on-year decline in underwriting and operating expenses in each respective period primarily reflects an increase in ceding commissions received upon the introduction of the 2022 Seasoned QSR Transaction effective July 1, 2022, a decrease in the amortization of deferred acquisition costs tied to the increased persistency of our IIF, and a step-down in outsourced technology costs related to our agreement with Tata Consultancy Services, partially offset by an increase in employee compensation costs and miscellaneous IT expenses.

Service expenses were $0.3 million for both the three and six month periods ended June 30, 2023, compared to $0.3 million and $0.8 million for the three and six months ended June 30, 2022, respectively.

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

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.

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

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

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

Interest expense was $8.0 million and $16.1 million for the three and six months ended June 30, 2023, respectively, compared to $8.1 million and $16.1 million for the three and six months ended June 30, 2022, respectively.

Interest expense primarily reflects the carrying costs of the Notes.

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

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.

Income tax expense was $23.8 million and $45.5 million for the three and six months ended June 30, 2023, respectively, compared to $21.7 million and $40.8 million for the three and six months ended June 30, 2022, 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 22.8% and 22.7% for the three and six months ended June 30, 2023, respectively, compared to 22.4% and 22.2% for the three and six months ended June 30, 2022, respectively.

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

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

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

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

Net income was $80.3 million and $154.7 million for the three and six months ended June 30, 2023, respectively, compared to $75.4 million and $143.1 million for the three and six months ended June 30, 2022, respectively.

Adjusted net income was $80.3 million and $154.8 million for the three and six months ended June 30, 2023, respectively, compared to $74.3 million and $141.8 million for the three and six months ended June 30, 2022, 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 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 was $0.95 and $1.83 for the three and six months ended June 30, 2023, respectively, compared to $0.86 and $1.63 for the three and six months ended June 30, 2022, respectively.

Adjusted diluted EPS was $0.95 and $1.83 for the three and six months ended June 30, 2023, respectively, compared to $0.86 and $1.63 for the three and six months ended June 30, 2022, respectively.

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 March 31,

The non-GAAP financial measures of 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 June 30, For the six months ended June 30,

2023 2022 2023 2022

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

2 unchanged sentences

Net income $ 80,284 $ 75,444 $ 154,742 $ 143,124

Net realized investment losses (gains) 33 (408)

Net realized investment (gains) losses — (53) 33 (461)

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

1 unchanged sentence

Adjusted income before tax 104,049 96,061 200,255 182,567

Income tax expense (benefit) on adjustments (1)

Income tax (benefit) expense on adjustments (1)

— (23) 7 (54)

Adjusted net income $ 80,284 $ 74,339 $ 154,768 $ 141,809

2 unchanged sentences

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

federal corporate income tax rate of 21%, except for those

items that are not eligible for an income tax deduction.

federal corporate income tax rate of 21%, except for those items that are not eligible for an income tax deduction.

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.

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

Consolidated balance sheets March 31, 2023 December 31, 2022

Consolidated balance sheets June 30, 2023 December 31, 2022

(In Thousands)

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Total liabilities and shareholders' equity $ 2,689,850 $ 2,516,030

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.

Total cash and investments were $2.3 billion as of June 30, 2023, compared to $2.1 billion as of December 31, 2022.

Cash and investments at June 30, 2023 included $138.9 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 six months ended June 30, 2023.

Premiums receivable was $72.4 million as of June 30, 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 $59.9 million as of March 31, 2023, compared to $58.6 million as of December 31, 2022.

Net deferred policy acquisition costs were $61.2 million as of June 30, 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.

Reinsurance recoverable was $24.0 million as of June 30, 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 was $154.4 million as of both June 30, 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.

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

Other assets were $38.7 million as of June 30, 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.

Unearned premiums were $105.1 million as of June 30, 2023, compared to $123.0 million as of December 31, 2022.

Accounts payable and accrued expenses were $72.5 million as of June 30, 2023, compared to $74.6 million as of December 31, 2022.

The decrease was primarily driven by the settlement of previously accrued compensation expenses and

certain contractual payables during the six months ended June 30, 2023, partially offset by increases in our reinsurance premium and current tax payables.

Reserve for insurance claims and claim expenses was $110.4 million as of June 30, 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 six months ended June 30, 2023, as well as an increase in the average case reserve held against previously defaulted loans that have aged in their delinquency status.

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

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

Reinsurance funds withheld, which represents our ceded reinsurance premiums written, less our profit and ceding commission receivables related to the 2016 QSR Transaction was $1.7 million as of June 30, 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 ."

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

Net deferred tax liability was $242.1 million as of June 30, 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.

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

Consolidated cash flows For the three months ended March 31,

Consolidated cash flows For the six months ended June 30,

Net cash provided by (used in):

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Net increase in cash and cash equivalents $ 28,893 $ (4,248)

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.

Net cash provided by operating activities was $191.7 million for the six months ended June 30, 2023, compared to $173.8 million for the six months ended June 30, 2022.

Cash provided by operating activities increased during the six months ended June 30, 2023, primarily due to the growth in our investment income, an increase in net premiums receipts and a reduction in the payment of incentive compensation.

Cash used in investing activities for the six months ended June 30, 2023 and June 30, 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 $43.4 million for the six months ended June 30, 2023, compared to $30.3 million for the six months ended June 30, 2022.

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

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

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

As of June 30, 2023, NMIH had $138.9 million of cash and investments.

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

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

NMIC paid a $98.0 million ordinary course dividend to NMIH in May 2023, representing its full ordinary course dividend capacity payable under Wisconsin law for 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.

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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 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.

The authorization provides NMIH the flexibility, based on market and business conditions, stock price and other factors, to repurchase stock from time to time through open market repurchases, privately negotiated transactions, or other means, including pursuant to Rule 10b5-1 trading plans.

During the six months ended June 30, 2023, NMIH repurchased 1.7 million shares of common stock at a total cost of $41.1 million, including associated costs and applicable taxes.

As of June 30, 2023, $27.7 million of repurchase authority remained available under the program.

On July 31, 2023, our Board of Directors approved a new $200 million share repurchase program (excluding associated costs and applicable taxes) effective through December 31, 2025.

Concurrent with the new authorization, our Board also approved an extension of our existing $125 million share repurchase program through December 31, 2025 to align its remaining tenor with that of the new $200 million program.

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

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

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

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

The 2021 Revolving Credit Facility matures on the earlier of (x) November 29, 2025 or (y) if any existing senior secured notes remain outstanding on such date, February 28, 2025, and accrues interest at a variable rate equal to, at our discretion, (i) a Base Rate (as defined in the 2021 Revolving Credit Facility, subject to a floor of 1.00% per annum) plus a margin of 0.375% to 1.875% per annum, or (ii) the Adjusted Term 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 March 31, 2023, the applicable commitment fee was 0.30%.

As of June 30, 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 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.

We were in compliance with all covenants at June 30, 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 by 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.

1 unchanged sentence

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

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

On May 12, 2023, NMIC paid a $98.0 million ordinary course dividend to NMIH, representing its full ordinary course dividend capacity payable under Wisconsin law for 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.

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

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

At June 30, 2023, NMIC reported $2,491 million available assets against $1,318 million risk-based required assets for a $1,173 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.

1 unchanged sentence

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

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

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

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

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

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

As of June 30, 2023, NMIC's performing primary RIF, net of reinsurance, was approximately $26.4 billion.

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

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.

Based on NMIC's total statutory capital of $2.3 billion (including contingency reserves) as of June 30, 2023, NMIC's RTC ratio was 11.3:1.

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

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

At March 31, 2023, NMIC had $2.2 billion of cash and investments, including $58.3 million of cash and cash equivalents.

At June 30, 2023, NMIC had $2.2 billion of cash and investments, including $16.1 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 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.

During the twelve-month period ended June 30, 2023, NMIC generated $338 million of cash flow from operations and received an additional $300 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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NMIH’s Notes are rated “Ba1” by Moody’s and its long-term counter-party credit profile is rated “BB” by S&P.

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

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

Consolidated Investment Portfolio

5 unchanged sentences

Our investment portfolio is comprised entirely of fixed maturity instruments.

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%.

As of June 30, 2023, the fair value of our investment portfolio was $2.2 billion and we held an additional $73.3 million of cash and cash equivalents.

Pre-tax book yield on the investment portfolio for the six months ended June 30, 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 March 31, 2023 December 31, 2022

Percentage of portfolio's fair value June 30, 2023 December 31, 2022

Corporate debt securities 58 % 60 %

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Investment portfolio ratings at fair value (1)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

AAA 14 % 19 %

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(2) Includes +/– ratings.

(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.

(3) We held one security with a BB+ rating at June 30, 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 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 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.

We did not recognize an allowance for credit loss for any security in the investment portfolio as of June 30, 2023 or December 31, 2022, and we did not record any provision for credit loss for investment securities during the three or six month periods ended June 30, 2023 or June 30, 2022.

As of June 30, 2023, the investment portfolio had gross unrealized losses of $234.6 million, of which $224.9 million were associated with securities that 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 were associated with securities that had been in an unrealized loss position for a period of twelve months or longer.

We evaluated the securities in an unrealized loss position as of June 30, 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 June 30, 2023 are not indicative of the ultimate collectability of the current amortized cost of the securities.

Rather, the unrealized losses on securities held as of June 30, 2023 were primarily driven by fluctuations in interest rates, and to a lesser extent, movements in credit spreads following the purchase of those 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