What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-15 compared with 2023-02-15 · 186 added, 209 removed, 764 unchanged (34% of the section changed)

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Conditions and Trends Affecting Our Business

COVID-19 and Other Developments

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

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

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

and global economic activity.

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 resurgent 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 reduce the pace of new business activity in the private mortgage insurance market and negatively impact our future NIW volume, or contribute to an increase in our future default and claim experience.

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We consider an activation to be the point at which we have signed a Master Policy, established IT connectivity and generated a first application or first dollar of NIW from a customer.

During the year ended December 31, 2022, we activated 120 lenders, compared to 122 and 101 for the years ended December 31, 2021 and December 31, 2020, respectively.

During the year ended December 31, 2023, we activated 70 lenders, compared to 120 and 122 for the years ended December 31, 2022 and 2021, respectively.

We also continued to expand our business with existing customers, deepening our existing relationships and capturing what we believe to be an increasing portion of their annual MI volume.

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• cession of premiums under third-party reinsurance arrangements.

Premiums are paid either by the borrower (BPMI) or the lender (LPMI) in a single payment at origination (single premium), on a monthly installment basis (monthly premium) or on an annual installment basis (annual premium).

Premiums are paid either by the borrower (borrower-paid mortgage insurance or BPMI) or the lender (lender-paid mortgage insurance or LPMI) in a single payment at origination (single premium), on a monthly installment basis (monthly premium) or on an annual installment basis (annual premium).

Our net premiums written will differ from our net premiums earned due to policy payment type.

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

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

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

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

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

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

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

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

The respective reinsurance coverage amounts provided by the Oaktown Re Vehicles decrease (over a ten-year period in the case of Oaktown Re III Ltd.

and Oaktown Re V Ltd.

and 12.5-year period in the case of Oaktown Re VI Ltd.

and Oaktown Re VII Ltd.) as the underlying insured mortgages are amortized or repaid, and/or the mortgage insurance coverage is canceled.

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

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

As of December 31, 2022, the 2018 ILN Transaction was deemed to be in Lock Out due to the default experience of its underlying reference pool and the 2021-2 ILN Transaction was deemed to be in Lock Out in connection with the initial build of its target credit enhancement level.

As such, the amortization of reinsurance coverage, and distribution of collateral assets and amortization of insurance-linked notes was suspended for both ILN Transactions.

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

Effective August 31, 2022, a Lock-Out Event for the 2019 ILN Transaction was deemed to have cleared and amortization of the associated reinsurance coverage, and distribution of collateral assets and amortization of the associated insurance-linked notes resumed.

The outstanding reinsurance coverage amounts stop amortizing, and the distribution of collateral assets 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).

At December 31, 2023, the 2019 ILN Transaction was deemed to be in Lock-Out due to the default experience of its underlying pool.

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

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

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

and Oaktown Re IV Ltd., respectively.

In connection with the termination and commutation of each respective agreement, the insurance-linked notes issued by Oaktown Re Ltd.

and Oaktown Re IV Ltd.

Effective July 25, 2023, NMIC exercised its optional call to terminate and commute its previously outstanding excess of loss reinsurance agreement with Oaktown Re II Ltd.

In connection with the termination and commutation of the agreement, the insurance-linked notes issued by Oaktown Re II 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.

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

Current amounts are presented as of December 31, 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)

( $ values in thousands)

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

2019 ILN Transaction July 30, 2019 6/1/2018 – 6/30/2019

$326,905 $159,476 $123,424 $121,751

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

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

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

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

Subordinated coverage (4)

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

242,351 55,792 121,777 121,177

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

Overcollateralization (5) (6)

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

367,238 217,630 163,708 163,394

Delinquency Trigger (7)

2021-2 ILN Transaction

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

363,596 310,567 146,229 145,858

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

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

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

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

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

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

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

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

Traditional Reinsurance

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

NMIC is party to five 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, the 2023-1 XOL Transaction, effective January 1, 2023, and the 2023-2 XOL Transaction, effective July 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.

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 its peak 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.

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Current amounts are presented as of December 31, 2022.

Current amounts are

presented as of December 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)

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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

January 1, 2023 10/1/2022 – 6/30/2023

89,864 88,351 146,513 146,348

2023-2 XOL Transaction (4)

July 1, 2023 7/1/2023 – 12/31/2023

71,602 71,602 113,372 113,372

(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.

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(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 2023-2 XOL Transaction provides coverage for production generated between July 1, 2023 and December 31, 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

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.

NMIC is 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 (and amended effective January 1, 2024), 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.

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Best or both.

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

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

NMIC previously ceded 100% of the risk under its pool agreement with Fannie Mae;

however, such agreement expired on August 31, 2023 and NMIC no longer cedes pool risk under the 2016 QSR Transaction.

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

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

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

Under the terms of the 2023 QSR Transaction, NMIC cedes premiums earned related to 20% of the risk on eligible policies written from January 1, 2023 to December 31, 2023, in exchange for reimbursement of ceded claims and

claim expenses on covered policies, a 20% ceding commission, and a profit commission of up to 62% that varies directly and inversely with ceded claims.

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

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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.

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

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

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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.

Effective December 31, 2023, NMIC elected to selectively terminate its engagement with certain reinsurers under the 2020 QSR Transaction and concurrently entered into an amended agreement effective January 1, 2024 (the Amended 2020 QSR Transaction) with the remaining reinsurance participants.

Under the Amended 2020 QSR Transaction, NMIC retains consistent coverage with that provided under the original 2020 QSR Transaction and continues to cede premiums earned related to 21% of the risk on eligible policies written from April 1, 2020 to December 31, 2020, in exchange for reimbursement of ceded claims and claim expenses on covered policies, a 36% ceding commission, and a profit commission of up to 50% that varies directly and inversely with ceded claims.

See Item 8, “ Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 6, Reinsurance ” for further discussion of these third-party reinsurance arrangements.

Portfolio Data

The following table presents primary and pool NIW and IIF as of the dates and for the periods indicated.

The following table presents primary and pool IIF and NIW as of the dates and for the periods indicated.

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

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Total $ 197,029 $ 40,473 $ 185,017 $ 58,734 $ 153,572 $ 85,574

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

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

NIW for the years ended December 31, 2023, 2022 and 2021 was $40.5 billion, $58.7 billion and $85.6 billion, respectively.

The sequential decrease in NIW during each successive year was primarily due to a decline in the size of the total mortgage insurance market.

Total IIF increased 6% at December 31, 2023 compared to December 31, 2022, which in turn grew 20% compared to December 31, 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 86% at December 31, 2023, compared to 84% at December 31, 2022 and 64% at December 31, 2021.

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

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

Our persistency rate improved in each successive year primarily due to a slowdown in the pace of refinancing activity tied to rising interest and mortgage note rates.

Our persistency rate as of December 31, 2021 was historically low, reflecting the impact of significant mortgage refinancing activity during the preceding twelve-month period due to record low interest and mortgage rates.

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

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Net premiums earned 510,768 475,266 444,294

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

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

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

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

Net premiums written increased 4% during the year ended December 31, 2023 compared to the year ended December 31, 2022, reflecting the growth in our monthly IIF and monthly pay premium receipts, partially offset by an increase in total premiums ceded under our reinsurance treaties and a decline in single premium policy production.

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

Net premiums earned increased 7% during both the years ended December 31, 2023 and 2022.

The sequential increase in net premiums earned during each successive year was primarily driven by our NIW production and the growth of our IIF, partially offset by the increase in total premiums ceded under our reinsurance treaties and a decline in the contribution from single premiums policy cancellations.

Pool premiums written and earned for the years ended December 31, 2023, 2022 and 2021 were $0.7 million, $1.2 million and $1.6 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.

Our pool insurance agreement with Fannie Mae expired on August 31, 2023 and we will not recognize any pool premiums written, earned or ceded in connection with the agreement in future periods.

Portfolio Statistics

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$ 408 $ 323 $ 435

Average premium yield (3)

Average net premium yield (3)

0.27 % 0.28 % 0.34 %

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(In Millions)

December 31, 2022 $ 56,579 $ 14,965 $ — $ — $ — $ —

2023 $ 38,586 $ 10,162 $ — $ — $ — $ —

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2020 27,428 7,210 34,656 8,860 43,795 11,023

2019 7,602 2,030 9,194 2,423 12,407 3,249

2018 and before 8,579 2,201 10,773 2,758 14,915 3,798

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($ Values In Millions)

2013 $ 162 $ 5 3 % 655 34 — 1 0.2 % 0.2 % — %

2014 and prior $ 3,613 $ 157 4 % 15,441 980 20 57 3.7 % 0.5 % 2.0 %

2015 12,422 990 8 % 52,548 5,561 84 141 2.5 % 0.4 % 1.5 %

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(3) Calculated as the number of loans in default divided by number of policies in force.

(4) Excludes a $0.7 million termination fee incurred in connection with the amendment of the 2020 QSR Transaction.

Geographic Dispersion

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Florida 7.6 8.2 8.6

Virginia 4.1 4.7 5.1

Georgia 4.1 4.1 3.8

Illinois 3.9 3.6 3.8

Washington 4.0 3.9 3.7

Colorado 3.5 3.8 4.1

Illinois 4.0 3.9 3.6

Virginia 3.9 4.1 4.7

Pennsylvania 3.4 3.4 3.3

Maryland 3.3 3.4 3.7

Colorado 3.2 3.5 3.8

Total 52.4 % 53.8 % 55.3 %

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A loan is considered to be in default as of the payment date at which a borrower has missed the preceding two or more consecutive monthly payments.

We establish reserves for loans that have been reported to us in default by servicers, referred to as case reserves, and additional loans that we estimate (based on actuarial review and other factors) to be in default that have not yet been reported to us by servicers, referred to as IBNR.

We also establish reserves for claim expenses, which represent the estimated cost of the claim administration process, including legal and other fees and other general expenses of administering the claim settlement process.

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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.

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

The effectiveness of forbearance and other such assistance programs can be further enhanced by the availability of various repayment and loan modification options which typically allow borrowers to amortize or, in certain instances, outright defer payments otherwise missed during a period of dislocation over an extended length of time.

We generally observe that forbearance, repayment and modification, and other assistance programs are an effective tool to bridge dislocated borrowers from a time of acute stress to a future date when they can resume timely payment of their mortgage obligations, and note higher cure rates on defaults benefitting from broad-based assistance programs than would otherwise be expected on similarly situated loans that did not benefit from such programs.

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.

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 ratio 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.

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

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

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

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

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

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

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

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

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

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 years ended December 31,

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Add claims incurred:

Claims and claim (benefits) expenses incurred:

Claims and claim expenses (benefits) incurred:

Current year (2)

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(56,390) (48,762) (11,128)

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

Total claims and claim expenses (benefits) incurred (4)

21,895 (3,594) 12,305

Less claims paid:

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3,575 1,314 2,017

Reinsurance terminations

Total claims and claim expenses paid 3,684 1,388 2,033

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Amounts are presented net of reinsurance and included $50.9 million attributed to net case reserves and $4.5 million attributed to net IBNR reserves for the year ended December 31, 2023, $42.5 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the year ended December 31, 2022, and $6.3 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the year ended December 31, 2021.

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

(4) Excludes a $0.7 million termination fee for the year ended December 31, 2023 incurred in connection with the amendment of the 2020 QSR Transaction.

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.

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claims paid (199) (81) (82)

claims denied (6) (4) (7)

rescission and claims denied

Ending default inventory 5,099 4,449 6,227

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

Ending default inventory increased from December 31, 2022 to December 31, 2023, primarily due to the growth and natural seasoning of our insured portfolio, largely offset by cure activity within our default population.

Ending default inventory decreased from December 31, 2021 to December 31, 2022, as borrowers initially impacted by the COVID-19 pandemic cured their delinquencies and fewer new defaults emerged as the acute economic stress of the pandemic receded.

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

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55 % 49 % 59 %

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

(1) Count includes 70, 30 and 15 claims settled without payment during the years ended December 31, 2023, 2022 and 2021, respectively.

(2) Severity represents the total amount of claims paid including claim expenses divided by the related RIF on the loan at the time the claim is perfected, and is calculated including claims settled without payment.

The Company paid 81, 82 and 143 claims for the years ended December 31, 2022, 2021 and 2020, respectively.

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

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

Our claims paid experience for the years ended December 31, 2022, 2021 and 2020, further benefited from broad national house price appreciation.

We paid 199, 81 and 82 claims during the years ended December 31, 2023, 2022 and 2021, respectively.

The number of claims paid in each year was modest relative to the size of our insured portfolio and we generally observe that the borrowers of the loans we insure are well-situated with strong credit profiles, stable 30-year fixed rate mortgages, manageable debt service obligations and significant appreciated equity in their homes.

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

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

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

Claims paid during the years ended December 31, 2022 and 2021 further benefited from the forbearance and other assistance programs implemented by the GSEs in response to the COVID-19 pandemic and codified under the CARES Act, which served to bridge dislocated borrowers from a time of acute stress to a point when they can resume timely payment of their mortgage obligations and interrupted the cycle through which certain loans may otherwise have progressed from an initial default to a paid claim.

Such programs were largely phased out by 2023.

Our claims severity for the years ended December 31, 2023, 2022 and 2021 was 55%, 49% and 59%, respectively.

Our claims severity for each year was below long-term industry norms and benefited from the same broad national house price appreciation that supported our claims paid experience.

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

An increase in the value of the homes collateralizing the mortgages we insure provides additional equity support to our risk exposure and raises the prospect of a third-party sale of a foreclosed property, which can mitigate the severity of our settled claims.

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(2) Amount includes claims adjustment expenses.

Average reserve per default increased from December 31, 2022 to December 31, 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.

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

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

While we initially established lower reserves for defaults that we consider to be connected to the COVID-19 pandemic given our expectation that forbearance, repayment and modification, and other assistance programs will aid affected borrowers and drive higher cure rates on such defaults than we would otherwise expect to experience on similarly situated loans that did not benefit from broad-based assistance programs, we have increased such reserves over time as individual defaults remain outstanding or “age.

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

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

While we initially established lower reserves for defaults that we consider to be connected to the COVID-19 pandemic given our expectation that forbearance, repayment and modification, and other assistance programs 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 increased such reserves over time as individual defaults remained outstanding or “aged.

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

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

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

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

GSE Oversight

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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, XOL 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.

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 .

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

We certified to the GSEs by April 15, 2023 that NMIC was in full compliance with the PMIERs as of December 31, 2022.

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

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

We continuously monitor NMIC's compliance with the PMIERs.

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Available assets $ 2,717,804 $ 2,378,627 $ 2,041,193

Risk-based required asset amount 1,203,708 1,186,272 984,372

Risk-based required assets

1,516,140 1,203,708 1,186,272

Available assets were $2.7 billion at December 31, 2023, compared to $2.4 billion at December 31, 2022 and $2.0 billion at December 31, 2021.

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

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

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

The sequential increase in available assets between the dates presented was primarily driven by NMIC's positive cash flow from operations during the intervening periods, partially offset by the payment of ordinary course dividends from NMIC to NMIH during each year.

Risk-based required assets were $1.5 billion at December 31, 2023, compared to $1.2 billion at December 31, 2022 and 2021.

The increase in the r isk-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.

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

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We periodically engage third parties to evaluate and test the adequacy of such security measures, controls and procedures.

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

In addition, we have a business continuity plan that is designed to mitigate the operational impact of certain disruptive events, including disruptions to our IT systems, and we have an incident response plan that is designed to address information security incidents, including any breaches of our IT systems.

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

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This policy provides coverage for (i) claims related to, among other things, unauthorized network or computer access, unintentional disclosure or misuse of personally identifiable information in our possession, and unintentional failure to disclose a breach, and (ii) certain costs related to privacy notification, crisis management, cyber extortion, data recovery, business interruption and reputational harm.

For further information, see Part I, Item 1C, "Cybersecurity."

LIBOR Transition

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

their current form after June 30, 2023.

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

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

We 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.

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

Financial Conduct Authority, 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.

As of December 31, 2023, all of our LIBOR-indexed financial contracts and substantially all of our LIBOR-indexed investment holdings have been transitioned to a Secured Overnight Financing Rate (SOFR) base.

The impact of the transition from LIBOR to SOFR did not have a material impact on our operations or financial results.

Consolidated Results of Operations

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Net investment income 67,512 46,406 38,072

Net realized investment gains 481 729 930

Net realized investment (losses) gains (33) 481 729

Other revenues 756 1,192 1,977

Total revenues 579,003 523,345 485,072

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

Insurance claims and claim expenses (benefits) 22,618 (3,594) 12,305

Underwriting and operating expenses 110,699 117,490 142,303

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Adjusted diluted EPS 3.84 3.39 2.73

(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.

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Net premiums earned were $510.8 million, $475.3 million and $444.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

The sequential increase in net premiums earned during each successive year 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 $67.5 million, $46.4 million and $38.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

The sequential increase in net investment income during each successive year 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 growth in the size of our total invested asset base.

Other revenues were $0.8 million, $1.2 million and $2.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

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

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

Insurance claims and claim expenses were $22.6 million for the year ended December 31, 2023, compared to insurance claims and claim benefits of $3.6 million for the year ended December 31, 2022 and insurance claims and claim expenses of $12.3 million for the year ended December 31, 2021.

The increase in insurance claims and claim expenses for the year ended December 31, 2023 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 aged in their delinquency status, 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 loss development trends.

We recognized insurance claims and claim benefits for the year ended December 31, 2022 as 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 loss development trends exceeded the initial reserves established on newly defaulted loans and the increase in reserves held against previously defaulted loans that aged in their delinquency status during the period.

Underwriting and operating expenses were $110.7 million, $117.5 million and $142.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Underwriting and operating expenses decreased $24.8 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, driven by a decrease in the amortization of deferred policy acquisition costs tied to the improved persistency of our IIF, a decrease in payroll and stock-based compensation costs, a step-down in technology costs related to our agreement with Tata Consultancy Services (TCS) and a decline in capital markets transaction costs, partially offset by an increase in travel and entertainment expenses tied to the easing of COVID-19 related restrictions, as well as an increase in depreciation and amortization incurred in connection with the completion and implementation of certain software and equipment initiatives.

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

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

The decline in underwriting and operating expenses for the year ended December 31, 2023 primarily reflects a decrease in the amortization of deferred acquisition costs tied to the increased persistency of our IIF during the period, a full-year impact of ceding commissions received in connection with the 2022 Seasoned QSR Transaction (which was in effect for only a portion of the year ended December 31, 2022), and a step-down in technology costs related to our agreement with TCS, partially offset by an increase in employee compensation costs and miscellaneous IT expenses.

The decline in underwriting and operating expenses for the year ended December 31, 2022 primarily reflects a decrease in the amortization of deferred acquisition costs tied to the increased persistency of our IIF during the period, an increase in ceding commissions received upon the introduction of the 2022 Seasoned QSR Transaction effective July 1, 2022, a decrease in employee compensation costs, and a step-down in technology costs related to our agreement with TCS, partially offset by an increase in miscellaneous IT expenses and travel and entertainment costs.

Service expenses were $0.8 million, $1.1 million and $2.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

The sequential decline in service expenses in each successive year was primarily driven by a decrease in NMIS' outsourced loan review volume.

The sequential decline in service expenses in each successive year primarily reflects a decline in NMIS' outsourced loan review volume.

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

Interest expense was $32.2 million, $32.2 million and $31.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Interest expense increased during the year ended December 31, 2022 compared to the year ended December 31, 2021 due to an increase in commitment fees associated with the 2021 Revolving Credit Facility which had extended its borrowing capacity from $110 million to $250 million in November 2021.

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

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

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

Interest expense primarily reflects the carrying costs of the Notes.

For further information, see Item 8, “ Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 5, Debt.

Income tax expense was $90.6 million, $84.4 million and $65.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

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Our effective income tax rate on pre-tax income was 22.0%, 22.4% and 22.1% for the years ended December 31, 2023, 2022 and 2021, respectively.

Our effective tax rate decreased for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to an increase in the tax benefit realized from excess share-based compensation for stock options exercised in the period.

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

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

For further information regarding income taxes and their impact on our results of operations and financial position, see Item 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 10, Income Taxes.

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Adjusted net income was $322.1 million, $291.6 million and $236.8 million, for the same periods, respectively.

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

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

The increase in net income and adjusted net income during each successive year reflects the growth in our total revenues and decline in underwriting and operating expenses, as well as the changes in our insurance claims and claim expenses and income tax expense during the periods.

Diluted earnings per share (EPS) was $3.84, $3.39 and $2.65 for the years ended December 31, 2023, 2022 and 2021, respectively.

Adjusted diluted EPS was $3.84, $3.39 and $2.73 for the same periods, respectively.

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

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

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

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

Diluted and adjusted diluted EPS for the years ended December 31, 2023 and 2022 further benefited from a decline in the number of weighted average diluted shares outstanding tied to share repurchase activity during the periods.

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 years ended December 31,

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Net income $ 322,110 $ 292,902 $ 231,130

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

Net realized investment losses (gains)

33 (481) (729)

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

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Adjusted income before tax $ 412,736 $ 375,916 $ 303,238

Income tax (benefit) expense on adjustments (1)

(58) 806 1,324

Income tax expense (benefit) on adjustments (1)

Adjusted net income $ 322,136 $ 291,571 $ 236,837

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

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

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

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

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

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

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

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.

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Prepaid federal income taxes 235,286 154,409

154,409 89,244

Other assets 40,384 36,045

36,045 26,451

Total assets $ 2,940,507 $ 2,516,030

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Reinsurance funds withheld 1,421 2,674

Warrant liability — 2,363

Deferred tax liability, net 301,573 193,859

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Total liabilities and shareholders' equity $ 2,940,507 $ 2,516,030

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

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

Total cash and investments were $2.5 billion as of December 31, 2023, compared to $2.1 billion as of December 31, 2022.

Cash and investments at December 31, 2023 included $113.7 million held by NMIH.

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

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

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

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 primarily tied to the prevailing interest rate environment, partially offset by share repurchase activity during the year ended December 31, 2023.

Premiums receivable was $76.5 million as of December 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 $62.9 million as of December 31, 2023, compared to $58.6 million as of December 31, 2022.

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.

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 $27.5 million as of December 31, 2023, compared to $21.6 million as of December 31, 2022.

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

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

Prepaid federal income taxes were $235.3 million as of December 31, 2023, compared to $154.4 million as of December 31, 2022.

The increase was driven by the purchase of $80.9 million of tax and loss bonds during the year ended December 31, 2023.

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

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

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

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

Commitments and Contingencies.

For further information, see Item 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 10, Income Taxes.

Other assets were $40.4 million as of December 31, 2023, compared to $36.0 million as of December 31, 2022.

The increase was primarily driven by an increase in our accrued investment income, partially offset by a reduction in our right-of-use (ROU) assets tied to the amortization of the operating lease for our corporate headquarters.

Unearned premiums were $92.3 million as of December 31, 2023, compared to $123.0 million as of December 31, 2022.

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Accounts payable and accrued expenses were $86.2 million as of December 31, 2023, compared to $74.6 million as of December 31, 2022.

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

The increase was primarily driven by an increase in reinsurance premiums payable, accrued compensation expenses and premium and other taxes payables, partially offset by the settlement of certain contractual payments due during the year ended December 31, 2023.

Reserve for insurance claims and claim expenses was $124.0 million as of December 31, 2023, compared to $99.8 million as of December 31, 2022.

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.

The increase was primarily driven by the establishment of initial reserves on newly defaulted loans during the year ended December 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, as well as the payment of previously reserved claims during the period.

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

1 unchanged sentence

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.

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

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

No warrants or warrant liability remained at December 31, 2022.

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

For further information regarding the valuation of our warrant liability and its impact on our results of operations and financial position, see Item 8, " Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 4, Fair Value of Financial Instruments.

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

Net deferred tax liability was $301.6 million as of December 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, partially offset by the increase in unrealized losses recorded in other comprehensive income.

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

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Financing activities (90,420) (55,828) (1,830)

Net (decrease) increase in cash and cash equivalents $ (32,220) $ (50,291) $ 85,848

Net increase (decrease) in cash and cash equivalents

$ 52,263 $ (32,220) $ (50,291)

Net cash provided by operating activities was $342.7 million, $313.4 million and $325.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

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

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

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

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

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

Cash provided by operating activities increased during the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to the growth in our investment income, an increase in net premium receipts and a reduction in the payment of cash compensation, partially offset by an increase in the purchase of tax and loss bonds during the period.

Cash provided by operating activities declined during the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to an increase in the purchase of tax and loss bonds during the period, as well as a decrease in premium written tied to a decline in single premium policies written during the period, both of which were largely offset by a reduction in the technology service costs paid under our long-term IT services agreement with TCS.

Cash used in investing activities for the years ended December 31, 2023, 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 $90.4 million, $55.8 million, and $1.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Cash used in financing activities during the years ended December 31, 2023 and 2022 primarily relates to the repurchase of common stock.

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

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

Liquidity and Capital Resources

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

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

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

As of December 31, 2022, $68.4 million of repurchase authority remained available under the program.

On February 10, 2022, our Board of Directors authorized a $125 million share repurchase program (excluding associated costs and applicable taxes) effective through December 31, 2023.

On July 31, 2023, our Board of Directors authorized 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 of Directors 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.

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 year ended December 31, 2023, NMIH repurchased 3.5 million shares of common stock at a total cost of $92.3 million, including associated costs and applicable taxes.

As of December 31, 2023, NMIH had $176.9 million of repurchase authority remaining.

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

In January 2024, Moody's upgraded its insurance financial strength rating of NMIC and its rating of the Notes.

As a result of the upgrade, the commitment fee due under the 2021 Revolving Credit Facility will be reduced to 0.225% in future periods.

We are subject to certain covenants under the 2021 Revolving Credit Facility.

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

The credit agreement for

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

The credit agreement for 2021 Revolving Credit Facility also prohibits, restricts or limits, among other things, NMIH's and its subsidiaries' ability to (i)

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

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

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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.

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

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

NMIC's PMIERs minimum risk-based required asset amount is also adjusted for its reinsurance transactions (as approved by the GSEs).

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

As of December 31, 2022, NMIC's performing primary RIF, net of reinsurance, was approximately $25.0 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 December 31, 2022, NMIC's RTC ratio was 11.1:1.

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

As of December 31, 2023, NMIC had a RTC ratio of 11.4:1 with $29.0 billion of performing primary RIF, net of reinsurance, and $2.5 billion of total statutory capital, including contingency reserves.

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 December 31, 2022, NMIC had $2.0 billion of cash and investments, including $37 million of cash and equivalents.

At December 31, 2023, NMIC had $2.4 billion of cash and investments, including $27.5 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.

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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 general duration of the default to foreclosure to claim cycle and the potential availability of forbearance, foreclosure moratorium and other borrower assistance programs, we do not expect NMIC to use a meaningful amount of cash to settle claims in the near-term.

Debt and Financial Strength Ratings

NMIC's financial strength is rated "Baa1" by Moody's and "BBB" by S&P.

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.

NMIC's financial strength is rated “A-” by Fitch Ratings (Fitch), “A3” by Moody's and “BBB+” by S&P.

NMIH's Notes are rated “BBB+” by Fitch and “Baa3” by Moody's, and its long-term counter-party credit profile is “BB+” by S&P.

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

Consolidated Investment Portfolio

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Our investment portfolio is comprised entirely of fixed maturity instruments.

As of December 31, 2022, the fair value of our investment portfolio was $2.1 billion and we held an additional $44 million of cash and equivalents.

As of December 31, 2023, the fair value of our investment portfolio was $2.4 billion and we held an additional $96.7 million of cash and cash equivalents.

Pre-tax book yield on the investment portfolio for the year ended December 31, 2023 was 2.6%.

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Municipal debt securities 25 23

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

treasury securities and obligations of U.S.

government agencies 7 4

Cash, cash equivalents, and short-term investments 5 10

Asset-backed securities 2 3

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(1) Excluding certain operating cash accounts.

(2) The decline in the percentage of AAA-rated securities held at December 31, 2023 compared to December 31, 2022 primarily reflects the downgrade of U.S.

government debt by Fitch during the intervening period.

(3) Includes +/– ratings.

(3) We held one security with a BB+ rating at December 31, 2022, which is not identifiable in the table due to rounding.

(4) We held one security with a BB+ rating at December 31, 2023 and 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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We did not recognize an allowance for credit loss for any security in the investment portfolio as of December 31, 2023 or 2022, and we did not record any provision for credit loss for investment securities during the years ended December 31, 2023 or 2022.

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

As of December 31, 2021, the investment portfolio had gross unrealized losses of $23.2 million, of which $6.5 million had been in an unrealized loss position for a period of twelve months or longer.

The increase in the aggregate size of the unrealized loss position as of December 31, 2022, was primarily driven by fluctuations in interest rates and, to a lesser extent, movements in credit spreads following the purchase date of certain securities.

As of December 31, 2023, the investment portfolio had gross unrealized losses of $184.3 million, of which $183.1 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 December 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 December 31, 2022 are not indicative of the ultimate collectability of the current amortized cost of the securities.

Based upon our assessment of the amount and timing of cash flows to be collected over the remaining life of each instrument, we believe the unrealized losses as of December 31, 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 December 31, 2023 were primarily driven by fluctuations in interest rates, and to a lesser extent, movements in credit spreads following the purchase of those securities.

We are a U.S.

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and exclusions from income may include the fair value fluctuation of our warrant liability.

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

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

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

At December 31, 2023, we had a federal net operating loss carryforward of $1.2 million, which expire in varying amounts in 2030 and 2031, and state net operating loss carryforwards of $136.5 million, which begin to expire in varying amounts in 2031.

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

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

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

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

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

As of December 31, 2023, $176.9 million of repurchase authority remained available under the share repurchase program authorized by our Board of Directors through December 31, 2025.

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

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Premiums written on pool transactions are earned over the period that coverage is provided.

Our pool insurance agreement with Fannie Mae expired on August 31, 2023 and we will not recognize any pool premiums written or earned in connection with the agreement in future periods.

Reserve for Insurance Claims and Claim Expenses

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A loan is considered to be in "default" as of the payment date at which a borrower has missed the preceding two or more consecutive monthly payments.

We also establish reserves for claim expenses, which represent the estimated cost of the claim administration process, including legal and other fees, as well as other general expenses of administering the claim settlement process.

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Any adjustments required due to changes in effective yields and prepayment assumptions are recognized on a prospective basis.

We recognize an impairment on a security through the consolidated statement of operations and comprehensive income if (i) we intend to sell the impaired security;

We recognize an impairment on a security through the consolidated statements of operations and comprehensive income if (i) we intend to sell the impaired security;

or (ii) it is more likely than not that we will be required to sell the impaired security prior to recovery of its amortized cost basis.

If a sale is intended or likely to be required, we write down the amortized cost basis of the security to fair value and recognize the full amount of the impairment through the statement of operations as a " Realized Investment Loss ."

If a sale is intended or likely to be required, we write down the amortized cost basis of the security to fair value and recognize the full amount of the impairment through the consolidated statements of operations and comprehensive income as a "Realized Investment Loss."

For securities in an unrealized loss position where a sale is not intended or likely to be required, we further assess if the decline in fair value below amortized cost is driven by a credit related impairment, considering several items including, but not limited to:

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

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

During the year ended December 31,

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

During the year ended December 31, 2023, we slowed the rate and recognized a $7.3 million reduction of DAC amortization due to improvement in the persistency of certain prior book years' insurance in-force tied to an increase in interest and mortgage note rates and decrease in the pace of mortgage refinancing activity during the period.

During the year ended December 31, 2021, we accelerated the rate and recognized an additional $11.1 million of DAC amortization due

to the significant increase in mortgage refinancing activity and material decline in persistency on certain prior book years' insurance in-force experienced during the period.

Premium Deficiency Reserves

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

What changed 10-K

Item 7. Management’s Discussion and Analysis