What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-15 compared with 2023-02-15 · 313 added, 367 removed, 964 unchanged (41% of the section changed)

1 unchanged sentence

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm ( BDO USA, LLP ;

Report of Independent Registered Public Accounting Firm ( BDO USA, P.C.

San Francisco, CA ;

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We have audited the accompanying consolidated balance sheets of NMI Holdings, Inc.

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statements schedules listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statements schedules listed in the accompanying index appearing under Part IV, Item 15 – Exhibits and Financial Statement Schedules (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 , in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

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The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Reserve for Insurance Claims and Claim Expense

As described in Notes 2 and 7 to the consolidated financial statements, the Company recorded $99.8 million of reserve for insurance claims and claim expenses at December 31, 2022.

The establishment of insurance claims and claim expenses reserve is subject to inherent uncertainty and requires significant judgment by management.

The reserve is established by estimating:

(i) claim severity which is the amount of the claim payment expected to be paid on each loan in default, (ii) claim frequency which is the number of loans in default expected to result in a claim payment, and (iii) the beneficial impact of assistance programs.

Reserve for Insurance Claims and Claim Expenses

As described in Notes 2 and 7 to the consolidated financial statements, the Company’s consolidated reserve for insurance claims and claim expenses balance was $124.0 million at December 31, 2023.

The establishment of the insurance claims and claim expenses reserve is subject to inherent uncertainty and requires significant judgment by management.

The insurance claims reserve is established by estimating:

The claim frequency is determined based on historical experience regarding certain loan factors.

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We identified the Company’s estimation of the reserve for insurance claims and claim expenses as a critical audit matter.

The principal consideration for our determination is the high degree of subjectivity in estimating claim severity, claim frequency and

the beneficial impact of assistance programs.

Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.

The principal consideration for our determination is the high degree of subjectivity in estimating claim severity, claim frequency and the beneficial impact of assistance programs.

The primary procedures we performed to address this critical audit matter included:

• Testing the completeness and accuracy of the underlying loans and claims data used in management’s reserve calculations which supported claim severity, claim frequency estimates and the beneficial impact of assistance programs.

• Testing a sample of the underlying loans and claims data used in management’s insurance claims reserve calculations, which supported estimates of claim severity, claim frequency and the beneficial impact of assistance programs, by agreeing key characteristics of the underlying loans and claims data to source documents and data provided by third party loan servicers.

• Utilizing personnel with specialized knowledge and skill in actuarial methods to assist in:

(i) evaluating the appropriateness of the methodology and the assumptions used by management and management’s specialist, including assessment of the reasonableness of changes in assumptions and inputs used in developing claim severity, claim frequency and the beneficial impact of assistance programs, (ii) developing an independent estimate of the reserve for insurance claims and claim expense using Company and historical mortgage industry data and comparing this independent estimate to management’s and management’s specialist’s estimated reserve and (iii) performing a retrospective review of the prior year reserve estimate against historical figures.

/s/ BDO USA, LLP

(i) evaluating the appropriateness of the methodology and the assumptions used by management and management’s specialist, including assessment of the reasonableness of changes in assumptions and inputs used in developing claim severity, claim frequency and the beneficial impact of assistance programs, (ii) developing an independent estimate of the reserve for insurance claims and claims expense using Company and historical mortgage industry data and comparing this independent estimate to management’s and management’s specialist’s estimated reserve and (iii) performing a retrospective review of the development of the prior year reserve estimate compared to current year actual results and continued estimated reserves.

/s/ BDO USA, P.C.

We have served as the Company's auditor since 2011.

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Prepaid federal income taxes 235,286 154,409

154,409 89,244

Other assets 16,965 18,267

18,267 10,917

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

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Reinsurance funds withheld 1,421 2,674

Warrant liability, at fair value — 2,363

Deferred tax liability, net 301,573 193,859

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Common stock - class A shares, $ 0.01 par value;

86,472,742 shares issued and 83,549,879 shares outstanding as of December 31, 2022 and 85,792,849 shares issued and outstanding as of December 31, 2021 ( 250,000,000 shares authorized)

87,334,138 shares issued and 80,881,280 shares outstanding as of December 31, 2023 and 86,472,742 shares issued and 83,549,879 shares outstanding as of December 31, 2022 ( 250,000,000 shares authorized)

Additional paid-in capital 990,816 972,717

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6,452,858 and 2,922,863 common shares as of December 31, 2023 and December 31, 2022, respectively

Accumulated other comprehensive (loss) income, net of tax ( 204,323 ) 1,485

( 148,921 ) ( 56,575 )

Accumulated other comprehensive loss, net of tax ( 139,917 ) ( 204,323 )

Retained earnings 1,223,153 901,043

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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 expenses" and "Prepaid reinsurance premiums" have been reclassified as "Other assets" in the prior period.

See accompanying notes to consolidated financial statements.

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

Other comprehensive (loss) income, net of tax:

Unrealized (losses) gains in accumulated other comprehensive income, net of tax (benefit) expense of $( 54,608 ), $( 13,768 ) and $ 9,525 for each of the years in the three-year period ended December 31, 2022, respectively

Other comprehensive income (loss), net of tax:

Unrealized gains (losses) in accumulated other comprehensive income, net of tax expense (benefit) of $ 17,113 , $( 54,608 ) and $( 13,768 ) for each of the years in the three-year period ended December 31, 2023, respectively

64,380 ( 205,428 ) ( 51,795 )

Reclassification adjustment for realized (gains) losses included in net income, net of tax expense (benefit) of $ 101 , $ 153 and $( 196 ) for each of the years in the three-years ended December 31, 2022, respectively

Reclassification adjustment for realized losses (gains) included in net income, net of tax (benefit) expense of $( 7 ), $ 101 and $ 153 for each of the years in the three-years ended December 31, 2023, respectively

26 ( 380 ) ( 576 )

Other comprehensive (loss) income, net of tax ( 205,808 ) ( 52,371 ) 36,568

Other comprehensive income (loss), net of tax

64,406 ( 205,808 ) ( 52,371 )

Comprehensive income $ 386,516 $ 87,094 $ 178,759

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Common stock:

class A shares issued related to public offering 15,870 159 219,528 — — — 219,687

Common stock:

class A shares issued related to warrant exercises 86 1 1,982 — — — 1,983

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Share-based compensation expense — — 16,678 — — — 16,678

Change in unrealized investment gains/losses, net of tax expense of $ 9,721

Change in unrealized investment gains/losses, net of tax benefit of $ 13,921

— — — — ( 52,371 ) — ( 52,371 )

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class A shares issued under stock plans, net of shares withheld for employee taxes 596 6 223 — — — 229

Repurchase of common stock ( 2,923 ) — — ( 56,575 ) — — ( 56,575 )

Share-based compensation expense — — 15,425 — — — 15,425

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Common stock:

class A shares issued related to warrant exercises 84 1 1,767 — — — 1,768

Common stock:

class A shares issued under stock plans, net of shares withheld for employee taxes 861 8 1,185 — — — 1,193

1 unchanged sentence

Share-based compensation expense — — 16,914 — — — 16,914

Change in unrealized investment gains/losses, net of tax benefit of $ 54,709

Change in unrealized investment gains/losses, net of tax expense of $ 17,120

— — — — 64,406 — 64,406

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80,881 $ 873 $ 990,816 $ ( 148,921 ) $ ( 139,917 ) $ 1,223,153 $ 1,926,004

* During 2020, we issued 11,368 common shares with a par value of $ 0.01 in connection with the exercise of warrants, which is not identifiable in this schedule due to rounding.

See accompanying notes to consolidated financial statements.

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Adjustments to reconcile net income to net cash provided by operating activities:

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

Net realized investment loss (gains)

33 ( 481 ) ( 729 )

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

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( 80,877 ) ( 65,165 ) ( 42,853 )

Other assets (1) (2)

( 316 ) 236 ( 218 )

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Proceeds from redemptions, maturities and sale of fixed-maturity investments, available-for-sale 143,613 116,663 163,103

Software and equipment ( 10,572 ) ( 12,238 ) ( 12,159 )

Additions to software and equipment

( 9,372 ) ( 10,572 ) ( 12,238 )

Net cash used in investing activities ( 200,000 ) ( 289,786 ) ( 374,180 )

Cash flows from financing activities

Proceeds from issuance of common stock related to public offering, net of issuance costs — — 219,687

Proceeds from issuance of common stock related to employee equity plans 10,549 5,442 4,201

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Taxes paid related to net share settlement of equity awards ( 9,356 ) ( 5,213 ) ( 5,426 )

Proceeds from senior secured notes — — 400,000

Repayments of term loan — — ( 147,750 )

Payments of debt issuance costs — — ( 1,108 )

Repurchases of common stock ( 91,613 ) ( 56,575 ) —

Net cash (used in) provided by financing activities ( 55,828 ) ( 1,830 ) 462,804

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

Net cash used in financing activities

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

Net increase (decrease) in cash, cash equivalents and restricted cash

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

Cash, cash equivalents and restricted cash, beginning of period 44,426 76,646 126,937

2 unchanged sentences

Interest paid $ 29,500 $ 29,500 $ 29,500

Income taxes refunded 20 457 70

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

(2) "Prepaid expenses" have been reclassified as "Other assets" in prior periods.

Income taxes (paid) refunded

( 20 ) 20 457

See accompanying notes to consolidated financial statements.

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(NMIS), through which we offer outsourced loan review services to mortgage loan originators.

We operate as a single segment for the purposes of assessing performance and making operating decisions.

Basis of Presentation

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Actual results could differ from those estimates.

Certain prior period amounts have been reclassified to conform to current period presentation.

COVID-19 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.

Summary of Accounting Principles

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Assumptions and estimates are required to apply these principles where actual measurement is not possible or practical.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Insurance Premium Revenue Recognition

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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.

Concentrations

For the years ended December 31, 2023, 2022 and 2021, no customer accounted for more than 10% of our consolidated revenues.

At December 31, 2022, December 31, 2021 and December 31, 2020 approximately 11 %, 10 % and 11 %, respectively, of our total risk-in-force (RIF) was concentrated in California.

At December 31, 2023, 2022 and 2021 approximately 10 %, 11 % and 10 %, respectively, of our total risk-in-force (RIF) was concentrated in California.

Reserves 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 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 incurred but not reported (IBNR) reserves.

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

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

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 incurred but not reported (IBNR) reserves.

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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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

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

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 statement of operations 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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" The portion of a security impairment attributed to other non-credit related factors is recognized in other comprehensive income, net of taxes.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

We have elected to present accrued interest receivable separately from available for sale securities on our consolidated balance sheets.

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We did not write off any accrued interest receivable during the years ended December 31, 2023, 2022 or 2021.

We consider items such as commercial paper with original maturities of 90 days or less to be short-term investments.

We consider items such as U.S.

Treasury Bills and commercial paper with original maturities of 12 months or less to be short-term investments.

Deferred Policy Acquisition Costs (DAC)

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Premium Deficiency Reserves

We consider whether a premium deficiency exists and premium deficiency reserve is required at each fiscal quarter using best estimate assumptions as of the testing date.

Per ASC 944, a premium deficiency reserve shall be recognized if the sum of expected claim costs and claim adjustment expenses, expected dividends to policyholders, unamortized acquisition costs and maintenance costs exceeds future premiums, existing reserves and anticipated investment income.

We consider whether a premium deficiency exists and a premium deficiency reserve is required at each fiscal quarter using best estimate assumptions as of the testing date.

A premium deficiency reserve is established if the net present value of expected future claim costs, claim adjustment expenses, policyholder dividends, unamortized acquisition costs and maintenance costs exceeds the net present value of expected future premiums, anticipated investment income and existing reserves for a specified group of policies.

We have determined that no premium deficiency reserves were necessary for any of the years in the three-year period ended December 31, 2023.

We cede insurance risk through the use of reinsurance contracts and follow reinsurance accounting for those transactions where significant risk is transferred.

We account for premiums, claims and claim expenses that are ceded to reinsurers on basis consistent with that which we use to account for the original policies we issue and pursuant to the terms of our reinsurance contracts.

We account for premiums ceded or otherwise paid to reinsurers as a reduction to premium revenue.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

October 1, 2021 (the 2022 QSR Transaction), July 1, 2022 (the 2022 Seasoned QSR Transaction), and January 1, 2023 (the 2023 QSR Transaction), which we refer to collectively as the QSR Transactions.

NMIC entered into quota share reinsurance treaties effective September 1, 2016 (the 2016 QSR Transaction), January 1, 2018 (the 2018 QSR Transaction), April 1, 2020 (the 2020 QSR Transaction and, as amended January 1, 2024, the Amended 2020 QSR Transaction), January 1, 2021 (the 2021 QSR Transaction), October 1, 2021 (the 2022 QSR Transaction), July 1, 2022 (the 2022 Seasoned QSR Transaction), and January 1, 2023 (the 2023 QSR Transaction), which we refer to collectively as the QSR Transactions.

We earn profit and ceding commissions in connection with the QSR Transactions (see Note 6, " Reinsurance ").

Profit commissions represent a percentage of the profits recognized by reinsurers that are returned to us, based on the level of claims and claim expenses that we cede.

We recognize any profit commissions we earn as an increase to premium revenue.

Ceding commissions are calculated as a percentage of ceded written premiums under the 2016 QSR Transaction and as a percentage of ceded earned premiums under the 2018, 2020, 2021, 2022, 2022 Seasoned and 2023 QSR Transactions, and are intended to cover our costs of acquiring and servicing direct policies.

We recognize any profit commissions we earn as a decrease to ceded earned premiums.

Ceding commissions are calculated as a percentage of ceded written premiums under the 2016 QSR Transaction and as a percentage of ceded earned premiums under the 2018, 2020 (and Amended 2020), 2021, 2022, 2022 Seasoned and 2023 QSR Transactions, and are intended to cover our costs of acquiring and servicing direct policies.

We recognize any ceding commissions generated under the QSR Transactions in a manner consistent with our recognition of earnings on the underlying reinsured policies.

6 unchanged sentences

The allowance for credit loss established with respect to our reinsurance recoverables was deemed immaterial as of December 31, 2023 and 2022.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Variable Interest Entities

NMIC is a party to excess-of-loss reinsurance agreements with Oaktown Re II Ltd., Oaktown Re III Ltd., Oaktown Re V Ltd., Oaktown Re VI Ltd., and Oaktown Re VII Ltd.

(special purpose reinsurance entities collectively referred to as the Oaktown Re Vehicles) effective July 25, 2018, July 30, 2019, October 29, 2020, April 27, 2021, and October 26, 2021, respectively.

NMIC is a party to excess-of-loss reinsurance agreements with Oaktown Re III Ltd., Oaktown Re V Ltd., Oaktown Re VI Ltd., and Oaktown Re VII Ltd.

(special purpose reinsurance entities collectively referred to as the Oaktown Re Vehicles) effective July 30, 2019, October 29, 2020, April 27, 2021, and October 26, 2021, respectively.

At inception of the respective reinsurance agreements, we determined that each of the Oaktown Re Vehicles was a variable interest entity (VIE), as defined under GAAP Accounting Standards Codification (ASC) 810, because they did not have sufficient equity at risk to finance their respective activities.

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The liability method measures the expected future tax effects of temporary differences at the enacted tax rates applicable for the period in which the deferred asset or liability is expected to be realized or settled.

Temporary differences are differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements that would result in future increases or decreases in taxes owed on a cash basis compared to amounts already recognized as tax expense in the consolidated statement of operations.

We purchase non-interest bearing U.S.

2 unchanged sentences

See Note 10, " Income Taxes ", for further discussion of the tax and loss bonds and other income tax matters.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

We accounted for warrants to purchase our common shares in accordance with ASC 470-20, Debt with Conversion and Other Options and ASC 815-40 Derivatives and Hedging - Contracts in Entity's Own Equity .

Our outstanding warrants were settled through either (i) physical settlement method, or (ii) cashless exercise, where the number of shares issued upon exercise of the warrants was reduced to cover the cost of the exercise in lieu of the holder remitting a cash payment for the exercise price.

All unexercised warrants expired in April 2022 after the 10th anniversary of the date issued.

The number of warrants and exercise price were subject to anti-dilution provisions whereby the number of warrants may have been increased and their exercise price may been adjusted downward under certain circumstances.

The anti-dilutive adjustments may have been in excess of any dilution incurred by the warrant holders, and may have been triggered by events that are not dilutive.

As a result, the warrants were classified as a liability.

We revalued the warrants at the end of each reporting period, and any change in fair value was reported in the statements of operations in the period in which the change occurred.

We calculated the fair value of the warrants using a Black-Scholes option-pricing model in combination with a binomial model.

Share-Based Compensation

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RSU grants may contain a service condition, or performance and service conditions.

RSU grants are valued at our stock price on the date of grant less the present value of anticipated dividends.

RSU grants are valued at our stock price on the date of grant less the present value of anticipated dividends, and we recognize their fair value as compensation expense over their requisite service or performance and service periods.

We account for stock option and RSU forfeitures as they occur.

Share-based compensation is recorded in “Underwriting and Operating Expenses” on the consolidated statements of operations and comprehensive income.

Earnings Per Share (EPS)

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Diluted earnings per share is based on the weighted average number of common shares outstanding and common share equivalents that would be issuable upon the vesting of existing service-based and certain performance and service-based RSUs, and exercise of vested and unvested stock options and outstanding warrants.

Common share equivalents are excluded from EPS computations in the periods in which they have an anti-dilutive effect.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Share Repurchases

2 unchanged sentences

Cash and Cash Equivalents

We consider items such as certificates of deposit and money market funds with original maturities of 90 days or less to be cash equivalents.

We consider items such as U.S.

Treasury Bills, certificates of deposit and money market funds with original maturities of 90 days or less to be cash equivalents.

Software and Equipment

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Amortization and depreciation are calculated on a straight-line basis over the estimated useful life of the respective assets, typically from three to five years , unless factors indicate a shorter useful life.

We amortize leasehold improvements over the shorter of the lives of the leases or estimated service lives of the leasehold improvements.

Amortization and depreciation expense is recorded in “ Underwriting and Operating Expenses ” on the consolidated statements of operations and comprehensive income.

For further detail, see Note 11, “ Software and Equipment.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

We recognize right-of-use (ROU) assets and corresponding lease liabilities for our lease arrangements.

Lease liabilities are established based on the estimated present value of lease payments over the relevant lease term.

We estimate a discount rate for each lease based on our estimated incremental borrowing rate at the commencement date of the relevant lease.

We estimate a discount rate for each lease based on our estimated incremental borrowing rate at the commencement date of the relevant lease, taking into consideration the cost of any outstanding collateralized borrowings we have at such time with adjustment for the terms of the lease agreement, and prevailing market conditions and macroeconomic factors at the time of its commencement.

ROU assets are measured as the associated lease liability plus any direct costs incurred in connection with the initial establishment of the lease, less any lease incentives received.

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Premiums receivable may be written off prior to 120 days in the ordinary course of business for non-credit events including, but not limited to, the modification or refinancing of an underlying insured loan.

We established a $ 2.3 million reserve for premium write-offs at December 31, 2022 and 2021.

We established a $ 2.7 million and $ 2.3 million reserve for premium write-offs at December 31, 2023 and 2022, respectively.

Other Revenues

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

Other revenues represent underwriting fee revenue from our subsidiary, NMIS, which provides outsourced loan review

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

services to mortgage loan originators.

NMIS fees are earned and recognized as services are provided.

Recent Accounting Pronouncements – Adopted

In August 2020, the Financial Accounting Standards Board (the FASB) issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40).

The update simplifies the accounting for convertible instruments and contracts on an entity's own equity, including warrants, eliminating certain triggers for derivative accounting.

We adopted this ASU on January 1, 2022 and determined it did not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements - Not Yet Adopted In August 2018, the FASB issued ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (Topic 944).

In August 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (Topic 944).

The update provides guidance to the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity.

1 unchanged sentence

The standard will now take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

We adopted this ASU on January 1, 2023 and determined it did not have a material impact on our consolidated financial statements.

We adopted this ASU on January 1, 2023 and determined it did not have a material impact on our consolidated financial statements as none of our contracts were within scope of the update.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848).

The update provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting.

Reference rate reform refers to the global transition away from referencing the London Interbank Offered Rate (LIBOR) in financial contracts, which is expected to be discontinued during a transition period from 2021 through 2023.

The ASU includes optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

certain criteria are met.

Reference rate reform refers to the global transition away from referencing the London Interbank Offered Rate (LIBOR) in financial contracts.

Topic 848 includes optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.

This standard may be elected and applied prospectively over time from March 12, 2020 through December 31, 2022 as reference rate reform activities occur.

In December 2022, the FASB issued ASU 2022-06, which extended the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

We continue to monitor the impact the discontinuance of LIBOR will have on our contracts and other transactions;

however, the adoption of, and future elections under ASU 2020-04 and ASU 2022-06 are not expected to have a material impact on our consolidated financial statements as the ASUs will ease, if warranted, the requirements for accounting for the future effects of the rate reform.

We hold all investments on an available-for-sale basis and evaluate each position quarterly for impairment.

We adopted Topic 848 on September 30, 2023 and determined it did not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements – Not yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280).

The update expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

The standard will take effect for all public business entities, including those that have only a single reportable segment for fiscal years beginning after December 15, 2023.

We are currently evaluating the impact the adoption of this ASU will have, if any, on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740).

The update enhances the disclosure requirements related to tax rate reconciliations and income taxes paid.

The standard will take effect for public business entities for fiscal years beginning after December 15, 2025.

Early adoption is permitted.

We are currently evaluating the impact the adoption of this ASU will have, if any, on our consolidated financial statements.

We hold all investments on an available-for-sale basis at fair value on our consolidated balance sheets and evaluate each position quarterly for impairment.

We recognize an impairment on a security through the statement of operations 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 consolidated statement of operations and comprehensive income as a "Net Realized Investment Loss." To the extent we determine that a security impairment is credit-related, an impairment loss is recognized through the statement of operations as a provision for credit loss expense.

The portion of a security impairment attributed to other non-credit related factors is recognized in other comprehensive income, net of taxes.

If a sale is intended or likely to be required, we recognize an impairment loss equivalent to the difference of the amortized cost basis of the security and its fair value through the consolidated statements of operations and comprehensive income as a “Net Realized Investment Loss.” In the event of an impairment of a security that we intend to and have the ability to hold to maturity, we evaluate the drivers of the impairment to determine the portion that is credit related and the portion that is non-credit related.

The portion of impairment loss that is attributed to credit related factors is recognized through the statement of operations as a provision for credit loss and the portion that is attributed to non-credit related factors is recognized in other comprehensive income, net of taxes.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Fair Values and Gross Unrealized Gains and Losses on Investments

21 unchanged sentences

The following table presents a breakdown of the fair value of our corporate debt securities by issuer industry group as of December 31, 2023 and 2022:

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

December 31, 2023 December 31, 2022

1 unchanged sentence

Consumer 26 24

Communications 11 11

Utilities 13 11

Technology 8 9

Industrial 9 8

Communications

Technology 8 8

Total 100 % 100 %

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Because most asset-backed securities provide for periodic payments throughout their lives, they are listed below in a separate category.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

As of December 31, 2023 Amortized

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For those securities in an unrealized loss position, the length of time the securities were in such a position is as follows:

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Less Than Twelve Months Twelve Months or Greater Total

8 unchanged sentences

Total 36 $ 127,266 $ ( 1,274 ) 523 $ 1,737,189 $ ( 183,065 ) 559 $ 1,864,455 $ ( 184,339 )

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Less Than Twelve Months Twelve Months or Greater Total

1 unchanged sentence

As of December 31, 2022 ($ In Thousands)

Treasury securities and obligations of U.S.

government agencies 19 $ 77,164 $ ( 2,260 ) 4 $ 2,768 $ ( 109 ) 23 $ 79,932 $ ( 2,369 )

Municipal debt securities 57 143,097 ( 12,942 ) 181 340,079 ( 67,854 ) 238 483,176 ( 80,796 )

1 unchanged sentence

Asset-backed securities 12 13,527 ( 1,097 ) 14 55,031 ( 5,107 ) 26 68,558 ( 6,204 )

Short-term investments 12 104,236 ( 227 ) — — — 12 104,236 ( 227 )

Total 241 $ 772,198 $ ( 36,225 ) 367 $ 1,188,415 $ ( 218,467 ) 608 $ 1,960,613 $ ( 254,692 )

1 unchanged sentence

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

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

We evaluated the securities in an unrealized loss position as of December 31, 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.

Net Investment Income

4 unchanged sentences

Investment income (1)

$ 68,214 $ 47,720 $ 39,385

Investment expenses ( 702 ) ( 1,314 ) ( 1,313 )

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

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

The following table presents the components of net realized investment gains:

(1) Includes interest income recognized on cash and cash equivalents of $ 2.3 million and $ 0.4 million for the years ended December 31, 2023 and 2022, respectively.

Interest income recognized on cash and cash equivalents was de minimis for the year ended December 31, 2021.

The following table presents the components of net realized investment (losses) gains:

For the years ended December 31,

3 unchanged sentences

Gross realized investment losses ( 33 ) ( 9 ) —

Net realized investment gains $ 481 $ 729 $ 930

Net realized investment (losses) gains

$ ( 33 ) $ 481 $ 729

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Fair Value of Financial Instruments

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DECEMBER 31, 2023

Liabilities classified as Level 3

We calculate the fair value of outstanding warrants utilizing Level 3 inputs, including a Black-Scholes option-pricing model, in combination with a binomial model, and we value the pricing protection features within the warrants using a Monte-Carlo simulation model.

Variables in the model include the risk-free rate of return, dividend yield, expected life and expected volatility of our stock price.

All outstanding and unexercised warrants expired in April 2022 and there was no warrant liability remaining as of December 31, 2022.

The following tables present the level within the fair value hierarchy at which our financial instruments were measured:

31 unchanged sentences

Total assets $ 298,439 $ 1,845,376 $ — $ 2,143,815

Warrant liability — — 2,363 2,363

Total liabilities $ — $ — $ 2,363 $ 2,363

There were no transfers between Level 2 and Level 3 of the fair value hierarchy during the years ended December 31, 2023 or 2022.

The following table provides a roll-forward of Level 3 liabilities measured at fair value:

For the years ended December 31,

Warrant Liability 2022 2021 2020

(In Thousands)

Balance, January 1 $ 2,363 $ 4,409 $ 7,641

Change in fair value of warrant liability included in earnings ( 1,113 ) ( 566 ) ( 2,907 )

Issuance of common stock on warrant exercise ( 1,250 ) ( 1,480 ) ( 325 )

Balance, December 31 $ — $ 2,363 $ 4,409

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

All outstanding and unexercised warrants expired in April 2022 and there was no warrant liability remaining as of December 31, 2022.

For more information on the expiration of warrants and changes in the fair value of the warrant liability during the years ended December 31, 2022, 2021 and 2020, see Note 9, "Warrants" .

The following table outlines the key inputs and assumptions used to calculate the fair value of the warrant liability in the Black-Scholes option-pricing model as of the dates indicated:

As of December 31,

Common stock price $ 21.85 $ 22.65

Risk free interest rate 0.07 % 0.11 %

Expected life 0.31 years 1.31 years

Expected volatility 26.3 % 83.7 %

Dividend yield — % — %

Financial Instruments Not Measured at Fair Value

On June 19, 2020, we issued $ 400 million aggregate principal amount of senior secured notes that mature on June 1, 2025 (the Notes) and used a portion of the proceeds from the Notes offering to repay the outstanding amount due under our $ 150 million term loan (2018 Term Loan).

On June 19, 2020, we issued $ 400 million aggregate principal amount of senior secured notes that mature on June 1, 2025 (the Notes) and used a portion of the proceeds from the Notes offering to repay amounts due under our then outstanding $ 150 million term loan.

At December 31, 2023, the Notes were carried at a cost of $ 397.6 million, net of unamortized debt issuance costs of $ 2.4 million, and had a fair value of $ 401.9 million as assessed under our Level 2 hierarchy.

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At December 31, 2023, we had $ 400 million aggregate principal amount of senior secured notes outstanding.

The Notes were issued pursuant to an indenture dated June 19, 2020 (the Indenture) and bear interest at a rate of 7.375 %, payable semi-annually on June 1 and December 1.

The Notes were issued pursuant to an indenture dated June 19, 2020 and bear interest at a rate of 7.375 %, payable semi-annually on June 1 and December 1.

The Notes mature on June 1, 2025.

At any time, or from time to time, prior to March 1, 2025, we may elect to redeem the Notes in whole or in part at a price based on 100 % of the aggregate principal amount of any Notes redeemed plus the "Applicable Premium," plus accrued and unpaid interest thereon.

Applicable Premium is defined as the greater of (1) 1.0 % of the principal amount of the Notes, or (2) the excess of the present value of the principal value of the Notes plus all future interest payments over the principal amount.

At any time on or after March 1, 2025, we may elect to redeem the Notes in whole or in part at a price equal to 100 % of the aggregate principal amount of the Notes to be redeemed plus accrued and unpaid interest thereon.

We may elect to redeem the Notes in whole or in part at any time prior to March 1, 2025 at a price based on 100 % of the aggregate principal amount of any Notes redeemed plus the “Applicable Premium,” plus accrued and unpaid interest thereon.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

We may elect to redeem the Notes in whole or in part at any time prior to March 1, 2025 at a price equal to 100 % of the aggregate principal amount of the Notes to be redeemed plus accrued and unpaid interest thereon.

Interest expense for the Notes includes interest and the amortization of capitalized debt issuance costs.

6 unchanged sentences

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

Borrowings under the 2021 Revolving Credit Facility may be used for general corporate purposes, including to support the growth of our new business production and operations, and accrue interest at a variable rate equal to, at our discretion, (i) a Base Rate (as defined in the 2021 Revolving Credit Facility) subject to a floor of 1.00 % per annum) plus a margin of 0.375 % to 1.875 % per annum or (ii) the Adjusted Term Secured Overnight Financing Rate (SOFR, as defined in the 2021 Revolving Credit Facility) plus a margin of 1.375 % to 2.875 % per annum, with the margin in each of (i) or (ii) based on our applicable corporate credit rating at the time.

Borrowings under the 2021 Revolving Credit Facility may be used for general corporate purposes, including to support the growth of our new business production and operations, and accrue interest at a variable rate equal to, at our discretion, (i) a Base Rate (as defined in the 2021 Revolving Credit Facility) subject to a floor of 1.00 % per annum plus a margin of 0.375 % to 1.875 % per annum, or (ii) the Adjusted Term Secured Overnight Financing Rate (as defined in the 2021 Revolving Credit Facility) plus a margin of 1.375 % to 2.875 % per annum, with the margin in each of (i) or (ii) based on our applicable corporate credit rating at the time.

As of December 31, 2023 and 2022, no amounts were drawn under the 2021 Revolving Credit Facility.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

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

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

For the years ended December 31, 2022 and 2021, we recorded $ 0.8 million and $ 0.4 million of commitment fees in interest expense, respectively.

For the years ended December 31, 2023, 2022 and 2021, we recorded $ 0.8 million, $ 0.8 million and $ 0.4 million of commitment fees in interest expense, respectively.

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 incurred debt issuance costs of $ 1.1 million in connection with the 2021 Revolving Credit Facility and had $ 0.6 million of unamortized debt issuance costs associated with the 2020 Revolving Credit Facility remaining at the time of its amendment and replacement.

Combined unamortized debt issuance will be amortized through interest expense on a straight-line basis over the contractual life of the 2021 Revolving Credit Facility.

At December 31, 2022 and 2021, remaining unamortized deferred debt issuance costs were $ 1.2 million and $ 1.6 million, respectively.

Combined unamortized debt issuance costs are amortized through interest expense on a straight-line basis over the contractual life of the 2021 Revolving Credit Facility.

At December 31, 2023 and 2022, remaining unamortized deferred debt issuance costs were $ 0.8 million and $ 1.2 million, respectively, in “Other Assets” on our consolidated balance sheets.

We are subject to certain covenants under the 2021 Revolving Credit Facility, including, but not limited to, the following:

2 unchanged sentences

We enter into third-party reinsurance transactions to actively manage our risk, ensure compliance with PMIERs, state regulatory and other applicable capital requirements, (respectively, as defined therein), and support the growth of our business.

The Wisconsin Office of the Commissioner of Insurance (Wisconsin OCI) has approved and the GSEs have indicated their non-objection to all such transactions (subject to certain conditions and ongoing review, including levels of approved capital credit).

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

The effect of our reinsurance agreements on premiums written and earned is as follows:

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Insurance-Linked Notes

NMIC is a party to reinsurance agreements with Oaktown Re II Ltd., Oaktown Re III Ltd., Oaktown Re V Ltd., Oaktown Re VI Ltd., and Oaktown Re VII Ltd.

NMIC is a party to reinsurance agreements with Oaktown Re III Ltd., Oaktown Re V Ltd., Oaktown Re VI Ltd., and Oaktown Re VII Ltd.

(special purpose reinsurance entities collectively referred to as the Oaktown Re Vehicles) effective July 30, 2019, October 29, 2020, April 27, 2021, and October 26, 2021, respectively.

Each agreement provides NMIC with aggregate excess-of-loss reinsurance coverage on a defined portfolio of mortgage insurance policies.

4 unchanged sentences

NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure under each excess-of-loss agreement.

NMIC did not cede any incurred losses on covered policies to the Oaktown Re Vehicles during the years ended

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

December 31, 2022, 2021 and 2020, as the aggregate first layer risk retention for each applicable agreement was not exhausted during such periods.

NMIC did not cede any incurred losses on covered policies to the Oaktown Re Vehicles during the years ended December 31, 2023, 2022 and 2021, as the aggregate first layer risk retention for each applicable agreement was not exhausted during such periods.

Under the terms of each excess-of-loss reinsurance agreement, the Oaktown Re Vehicles are required to fully collateralize their outstanding reinsurance coverage amount to NMIC with funds deposited into segregated reinsurance trusts.

2 unchanged sentences

Each Oaktown Re Vehicle financed its respective collateral requirement through the issuance of mortgage insurance-linked notes to unaffiliated investors.

Such insurance-linked notes mature ten years from the inception date of each reinsurance agreement (except the notes issued by Oaktown Re VI Ltd.

and Oaktown Re VII Ltd., which have a 12.5 year maturity).

We refer to NMIC's reinsurance agreements with and the insurance-linked note issuances by Oaktown Re Vehicles individually as the 2018 ILN Transaction, 2019 ILN Transaction, 2020-2 ILN Transaction, 2021-1 ILN Transaction, and 2021-2 ILN Transaction, and collectively as the ILN Transactions.

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

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

Such insurance-linked notes mature ten years (in the case of the notes issued by Oaktown Re III Ltd.

and Oaktown Re V Ltd.) and 12.5 years (in the case of the notes issued by Oaktown Re VI Ltd.

and Oaktown Re VII Ltd.) from the inception date of their associated reinsurance agreement.

We refer to NMIC’s reinsurance agreements with and the insurance-linked note issuances by Oaktown Re Vehicles individually as the 2019 ILN Transaction, 2020-2 ILN Transaction, 2021-1 ILN Transaction, and 2021-2 ILN Transaction, and collectively as the ILN Transactions.

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.

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

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

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

and Oaktown Re IV Ltd., respectively.

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

and Oaktown Re IV Ltd.

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

The 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.

NMI HOLDINGS, INC.

1 unchanged sentence

DECEMBER 31, 2023

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 period, initial and current reinsurance coverage amount, and initial and current first layer retained aggregate loss under each outstanding ILN Transaction.

3 unchanged sentences

2019 ILN Transaction July 30, 2019 6/1/2018 – 6/30/2019 $ 326,905 $ 159,476 $ 123,424 $ 121,751

2019 ILN Transaction July 30, 2019 6/1/2018 - 6/30/2019 326,905 204,127 123,424 122,257

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

2 unchanged sentences

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

2021-2 ILN Transaction (5)

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

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

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

3 unchanged sentences

(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.

(5) As of December 31, 2022, the current reinsurance coverage amount on the 2021-2 ILN Transactions is equal to the initial reinsurance coverage amount, as the reinsurance coverage provided by Oaktown Re VII Ltd.

will not begin to amortize until its target credit enhancement level is reached.

Under the terms of our ILN Transactions, we are required to maintain a certain level of restricted funds in premium deposit accounts with Bank of New York Mellon until the respective notes have been redeemed in full.

"Cash and cash equivalents" on our consolidated balance sheet includes restricted amounts of $ 2.2 million and $ 3.2 million as of December 31, 2022 and 2021, respectively.

“ Cash and Cash Equivalents ” on our consolidated balance sheets includes restricted amounts of $ 1.3 million and $ 2.2 million as of December 31, 2023 and 2022, respectively.

The restricted balances required under these transactions will decline over time as the outstanding principal balance of the respective insurance-linked notes are amortized.

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.

Under the terms of the XOL Transactions, NMIC makes risk premium payments to its third-party reinsurance providers for the outstanding reinsurance coverage amount and ceded aggregate premiums of $ 13.9 million during the year ended December 31, 2022.

Under the terms of the XOL Transactions, NMIC makes risk premium payments to its third-party reinsurance providers for the outstanding reinsurance coverage amount and ceded aggregate premiums of $ 31.2 million and $ 13.9 million during the years ended December 31, 2023 and 2022, respectively.

NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure under each agreement.

NMIC did not cede any incurred losses on covered policies under the XOL Transactions during the year ended December 31, 2022, as the aggregate first layer risk retention for each agreement was not exhausted during the period.

NMIC did not cede any incurred losses on covered policies under the XOL Transactions during the years ended December 31, 2023 and 2022, as the aggregate first layer risk retention for each agreement was not exhausted during such periods.

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

NMIC may also elect to terminate the XOL Transactions at any point if the outstanding reinsurance coverage amount amortizes to 10% or less of the reinsurance coverage amount provided at inception, or if it determines that it will no longer be able to take full PMIERs asset credit for the coverage.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

longer be able to take full PMIERs asset credit for the coverage.

Additionally, under the terms of the treaties, NMIC may selectively terminate its engagement with individual reinsurers under certain circumstances.

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

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

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

Best Company Inc.

2 unchanged sentences

Current amounts are presented as of December 31, 2023.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

( $ values in thousands)

5 unchanged sentences

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.

1 unchanged sentence

(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.

2 unchanged sentences

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 Mae.

The 2016 QSR Transaction is scheduled to terminate on December 31, 2027, except with respect to the ceded pool risk, which is scheduled to terminate on August 31, 2023.

NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2020, or at the end of any calendar quarter thereafter, which would result in NMIC recapturing the related risk.

The 2016 QSR Transaction is scheduled to terminate on December 31, 2027, except with respect to the ceded pool risk, which expired on August 31, 2023.

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.

The 2018 QSR Transaction is scheduled to terminate on December 31, 2029.

NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2022, or at the end of any calendar quarter thereafter, which would result in NMIC recapturing the related risk.

Under the terms of the 2020 QSR Transaction, NMIC cedes premiums earned related to 21 % of the risk on eligible policies written from April 1, 2020 to December 31, 2020.

The 2020 QSR Transaction is scheduled to terminate on December 31, 2030.

NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2023, or at the end of any calendar quarter thereafter, which would result in NMIC recapturing the related risk.

Under the terms of the 2021 QSR Transaction, NMIC cedes premiums earned related to 22.5 % of the risk on eligible policies written from January 1, 2021 to October 30, 2021.

The 2021 QSR Transaction is scheduled to terminate on December 31,

NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2024, or at the end of any calendar quarter thereafter, which would result in NMIC recapturing the related risk.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Under the terms of the 2022 QSR Transaction, NMIC cedes premiums earned related to 20 % of the risk on eligible policies written primarily between October 30, 2021 and December 31, 2022.

The 2022 QSR Transaction is scheduled to terminate on December 31, 2032.

NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2025 or semi-annually thereafter, which would result in NMIC recapturing the related risk.

NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2024 or semi-annually thereafter, which could result in NMIC recapturing the related risk.

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

1 unchanged sentence

The 2023 QSR Transaction is scheduled to terminate on December 31, 2033.

NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2026 or semi-annually thereafter, which would result in NMIC recapturing the related risk.

NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2025 or semi-annually thereafter, which could result in NMIC recapturing the related risk.

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

and Oaktown Re IV Ltd.

reinsurance transactions, after the consideration of coverage provided by other QSR

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Transactions.

reinsurance transactions, after the consideration of coverage provided by other QSR Transactions.

The 2022 Seasoned QSR Transaction is scheduled to terminate on June 30, 2032.

NMIC has the option, based on certain conditions, to terminate the agreement as of June 30, 2025 or quarterly thereafter through December 31, 2027 with the payment of a termination fee, and as of March 31, 2028 or quarterly thereafter without the payment of a termination fee.

Such termination would result in NMIC recapturing the related risk.

Such termination could result in NMIC recapturing the related risk.

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.

6 unchanged sentences

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

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

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 will retain consistent coverage with that provided under the original 2020 QSR Transaction and continue to cede premiums earned related to 21 % of the risk on eligible policies written from April 1, 2020 to December 31, 2020.

NMIC will receive an enhanced ceding commission under the Amended 2020 QSR Transaction.

The Amended 2020 QSR Transaction is scheduled to terminate on December 31, 2030 and NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2025, or at the end of any calendar quarter thereafter, which could result in NMIC recapturing the related risk.

The following table shows amounts related to the QSR Transactions:

7 unchanged sentences

Profit commission 90,006 80,714 59,104

Ceded premiums written under the 2016 QSR Transaction are recorded on the balance sheet as prepaid reinsurance premiums and amortized to ceded premiums earned in a manner consistent with the recognition of revenue on direct premiums.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Ceded premiums written under the 2016 QSR Transaction are recorded as prepaid reinsurance premiums in "Other Assets" on our consolidated balance sheets and amortized to ceded premiums earned in a manner consistent with the recognition of revenue on direct premiums.

Under all other QSR Transactions, premiums are ceded on an earned basis as defined in the agreement.

NMIC receives a 20 % ceding commission for premiums ceded under the QSR Transactions, except with respect to the 2022 Seasoned QSR Transaction under which it receives a 35 % ceding commission.

NMIC also receives a profit commission under each of the QSR Transactions, provided that the loss ratios on loans covered under the 2016, 2018, 2020, 2021, 2022 QSR and 2022 Seasoned QSR Transactions, generally remain below 60 %, 61 %, 50 %, 57.5 %, 62 %, and 55 % respectively, as measured annually.

NMIC receives a 20 % ceding commission for premiums ceded under the QSR Transactions, except with respect to the 2022 Seasoned QSR Transaction under which it receives a 35 % ceding commission and the Amended 2020 QSR Transaction under which it receives a 36 % ceding commission.

NMIC also receives a profit commission under each of the QSR Transactions, provided that the loss ratios on loans covered under the 2016, 2018, 2020 (2020 Amended), 2021, 2022, 2022 Seasoned and 2023 QSR Transactions, generally remain below 60 %, 61 %, 50 % ( 50 % as amended), 57.5 %, 62 %, 55 % and 62 %, respectively, as measured annually.

Ceded claims and claim expenses under each of the QSR Transactions reduce the respective profit commission received by NMIC on a dollar-for-dollar basis.

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The reinsurance recoverable on loss reserves related to the 2016 QSR Transaction was $ 1.7 million and $ 2.6 million as of December 31, 2023 and 2022, respectively.

In accordance with the terms of the 2018, 2020, 2021, 2022 and 2023 QSR and 2022 Seasoned QSR Transactions, cash payments for ceded premiums earned are settled on a quarterly basis, offset by amounts due to NMIC for ceding and profit commissions.

In accordance with the terms of the 2018, 2020 (2020 Amended), 2021, 2022, 2022 Seasoned and 2023 QSR Transactions, cash payments for ceded premiums earned are settled on a quarterly basis, offset by amounts due to NMIC for ceding and profit commissions.

Any loss recoveries and any potential profit commission to NMIC are also recognized quarterly.

NMIC's reinsurance recoverable balance is supported by trust accounts established and maintained by each reinsurer in accordance with the PMIERs funding requirements for risk ceded to non-affiliates.

The aggregate reinsurance recoverable on loss reserves related to the 2018, 2020, 2021 and 2022 QSR and 2022 Seasoned QSR Transactions was $ 19.0 million and $ 15.7 million as of December 31, 2022 and 2021, respectively.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

The aggregate reinsurance recoverable on loss reserves related to the 2018, 2020, 2021, 2022, 2022 Seasoned and 2023 QSR Transactions was $ 25.8 million and $ 19.0 million as of December 31, 2023 and 2022, respectively.

Reserves for Insurance Claims and Claim Expenses

3 unchanged sentences

As of December 31, 2022, we had 4,449 primary loans in default and held gross reserves for insurance claims and claim expenses of $ 99.8 million.

As of December 31, 2023, we held gross reserves for insurance claims and claim expenses of $ 124.0 million.

During the year ended December 31, 2023, we paid 199 claims totaling $ 5.2 million, including 186 claims covered under the QSR Transactions representing $ 1.0 million of ceded claims and claim expenses.

In 2013, we entered into a pool insurance transaction with Fannie Mae.

The pool transaction includes a deductible, which represents the amount of claims to be absorbed by Fannie Mae before we are obligated to pay any claims.

We only establish reserves for pool risk if we expect claims to exceed this deductible.

At December 31, 2022, 49 loans in the pool were in default.

These 49 loans represented approximately $ 3.7 million of RIF.

Due to the size of the remaining deductible, our expectation that a limited number of loans in default will progress to a claim and the expected severity on such claim submissions (all loans in the pool had LTV ratios under 80 % at origination), we did not establish any case or IBNR reserves for pool risk at December 31, 2022.

In connection with the settlement of pool claims, we applied $ 1.0 million to the pool deductible through December 31, 2022.

At December 31, 2022, the remaining pool deductible was $ 9.4 million.

We have not paid any pool claims to date.

100 % of our pool RIF is reinsured under the 2016 QSR Transaction.

We had 4,449 loans in default in our primary insured portfolio as of December 31, 2022 which represented a 0.75 % default rate against 594,142 total policies in-force.

We had 6,227 loans in default in our primary insured portfolio as of December 31, 2021, which represented a 1.22 % default rate against 512,316 total policies in-force.

We had 5,099 loans in default in our primary insured portfolio as of December 31, 2023, which represented a 0.81 % default rate against 629,690 total policies in-force and 4,449 loans in default in our primary portfolio as of December 31, 2022, which represented a 0.75 % default rate against 594,142 total policies in-force.

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

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

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, the FHFA and GSEs introduced new repayment and loan modification options to further 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.

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

NMI HOLDINGS, INC.

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DECEMBER 31, 2023

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

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,

6 unchanged sentences

Add claims incurred:

Claims and claim (benefits) expenses incurred:

Claims and claim expenses (benefits) incurred:

Current year (2)

2 unchanged sentences

( 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:

3 unchanged sentences

3,575 1,314 2,017

Reinsurance terminations

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

10 unchanged sentences

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.

The amount of claims incurred relating to current year defaults increased during the year ended December 31, 2023, compared to the years ended December 31, 2022 and 2021, primarily due to an increase in the average case reserve established against newly defaulted loans, as well as an increase in the total number of new delinquencies emerging during the period tied to the growth and natural seasoning of our portfolio.

Our provision for claims and claim expenses during the years ended December 31, 2023, 2022 and 2021 benefited from favorable development on prior year defaults.

We recognized $ 56.4 million, $ 48.8 million and $ 11.1 million of favorable prior year development during the years ended December 31, 2023, 2022 and 2021, respectively, primarily due to cure activity and ongoing analysis of recent loss development trends.

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

Gross reserves of $ 24.0 million related to prior year defaults remained as of December 31, 2023.

The following tables provide claim development data by accident year (or the year in which a default has occurred) and a reconciliation to the reserve for insurance claims and claim expenses.

The information about net incurred losses and paid claims development for the years ended prior to 2023 is presented as supplementary information.

NMI HOLDINGS, INC.

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DECEMBER 31, 2023

The following tables provide claim development data by accident year and a reconciliation to the reserve for insurance claims and claim expenses:

Cumulative Incurred Claims and Allocated Claims Adjustment Expenses, net of Reinsurance (1)

As of December 31, 2023

Accident Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total of IBNR Defaults (2)

Accident Year

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Total of IBNR Defaults (2)

($ In Thousands)

23 unchanged sentences

2021 16 274 914

2022 74 1,252

Total $ 20,305

4 unchanged sentences

Cumulative Paid Claims and Claims Adjustment Expenses, net of Reinsurance ( 20,305 )

All outstanding liabilities before 2014, net of reinsurance

Liabilities for unpaid claims and allocated claims adjustment expenses, net of reinsurance 94,763

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DECEMBER 31, 2023

The following table shows the average percentage of claims and allocated claims adjustment expenses paid in the years following the incurrence of a claim as of December 31, 2022:

Average annual percentage payout of incurred claims and allocated claims adjustment expenses by age, net of reinsurance

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9

The following is supplementary information shows the average percentage of claims and allocated claims adjustment expenses paid in the years following the incurrence of a claim as of December 31, 2023:

Average annual percentage payout of incurred claims and allocated claims adjustment expenses by age, net of reinsurance (unaudited)

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Claims duration disclosure 3 % 36 % 25 % 9 % 3 % 4 % 0 % 2 % 0 % 0 %

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Diluted EPS is based on the weighted average number of shares of common stock outstanding and common stock equivalents that would be issuable upon the vesting of service-based and performance and service-based RSUs, and the exercise of vested and unvested stock options and outstanding warrants.

The number of shares issuable for RSUs subject to performance and service based vesting requirements are only included in diluted shares if the relevant performance measurement period has commenced and results during such period meet the necessary performance criteria.

The following table reconciles the net income and the weighted average shares of common stock outstanding used in the computations of basic and diluted EPS of common stock:

7 unchanged sentences

Gain from change in fair value of warrant liability (1)

— ( 1,113 ) ( 566 )

Diluted net income $ 322,110 $ 291,789 $ 230,564

4 unchanged sentences

Anti-dilutive shares 2 18 3

We issued 992 thousand warrants in connection with a private placement of our common stock in April 2012 with a ten-year contractual term that expired in April 2022.

Each warrant provided the holder thereof the right to purchase one share of common stock at an exercise price equal to $ 10.00 .

The warrants were issued with an aggregate fair value of $ 5.1 million.

On April 24, 2022, 90 thousand warrants expired unexercised, resulting in a gain of approximately $ 0.9 million.

No warrants remained outstanding as of December 31, 2022.

During the year ended December 31, 2022, 110 thousand warrants were exercised resulting in the issuance of 84 thousand shares of common stock.

Upon exercise, we reclassified approximately $ 1.3 million of warrant fair value from warrant liability to additional paid-in capital.

During the year ended December 31, 2021, 113 thousand warrants were exercised resulting in the issuance of 86 thousand shares of common stock.

Upon exercise, we reclassified approximately $ 1.5 million of warrant fair value from warrant liability to additional paid-in capital.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

(1) We issued 992 thousand warrants in connection with a private placement of our common stock in April 2012.

The warrants were issued with a ten-year contractual term and all unexercised warrants expired in April 2022.

Changes in the fair value of warrants were reported in our consolidated statements of operations and comprehensive income in the period in which such changes occurred.

No warrants remained outstanding as of December 31, 2023 or 2022.

Share-Based Compensation

3 unchanged sentences

Share-based compensation previously issued under the 2012 Plan remains outstanding following the 2012 Plan expiry to the extent non-exercised or non-vested.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

The 2014 Plan was originally approved by our stockholders at our annual meeting on May 8, 2014 and authorized 4.0 million shares of common stock to be reserved for issuance.

6 unchanged sentences

The vesting period of the stock option grants is also established by the Board at the time of grant and is generally expected to be a three-year period.

For the years ended December 31, 2022, 2021 and 2020, we incurred $ 15.4 million, $ 16.7 million and $ 11.1 million, respectively, of expenses related to awards granted under the Stock Plans.

We recognized gross income tax benefits of $ 3.2 million, $ 3.5 million and $ 2.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

A summary of option activity during the years ended December 31, 2022, 2021 and 2020, is as follows:

For the year ended December 31, 2022 Shares Weighted Average Grant Date Fair Value per Share Weighted Average Exercise Price

(Shares in Thousands)

Options outstanding at December 31, 2021 1,371 $ 5.07 $ 13.78

Options granted — — —

Options exercised ( 225 ) 5.79 15.30

Options forfeited — — —

Options expired — — —

Options outstanding at December 31, 2022 1,146 $ 4.93 $ 13.48

For the year ended December 31, 2021 Shares Weighted Average Grant Date Fair Value per Share Weighted Average Exercise Price

(Shares in Thousands)

Options outstanding at December 31, 2020 1,493 $ 5.02 $ 13.59

Options granted — — —

Options exercised ( 122 ) 4.43 11.42

Options forfeited — — —

Options expired — — —

Options outstanding at December 31, 2021 1,371 $ 5.07 $ 13.78

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

For the years ended December 31, 2023, 2022 and 2021, we incurred $ 16.9 million, $ 15.4 million and $ 16.7 million, respectively, of expenses related to awards granted under the Stock Plans and we recognized associated gross income tax benefits of $ 3.6 million, $ 3.2 million and $ 3.5 million during each respective period.

A summary of option activity during the year ended December 31, 2023 is as follows:

For the year ended December 31, 2023 Shares Weighted Average Grant Date Fair Value per Share Weighted Average Exercise Price

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As of December 31, 2023, all outstanding options had vested and no unrecognized compensation cost related to non-vested stock options remained.

A summary of RSU activity during the years ended December 31, 2022, 2021 and 2020 is as follows:

For the year ended December 31, 2022 Shares Weighted Average Grant Date Fair Value per Share

(Shares in Thousands)

Non-vested restricted stock units at December 31, 2021 1,075 $ 23.59

Restricted stock units granted 691 23.53

Restricted stock units vested ( 511 ) 22.63

Restricted stock units forfeited ( 65 ) 21.90

Non-vested restricted stock units at December 31, 2022 1,190 $ 24.06

For the year ended December 31, 2021 Shares Weighted Average Grant Date Fair Value per Share

(Shares in Thousands)

Non-vested restricted stock units at December 31, 2020 1,062 $ 21.61

Restricted stock units granted 589 23.73

Restricted stock units vested ( 536 ) 19.98

Restricted stock units forfeited ( 40 ) 21.58

Non-vested restricted stock units at December 31, 2021 1,075 $ 23.59

A summary of RSU activity during the year ended December 31, 2023 is as follows:

For the year ended December 31, 2023 Shares Weighted Average Grant Date Fair Value per Share

2 unchanged sentences

Restricted stock units granted 708 22.75

Performance adjustment (1)

Restricted stock units vested (2)

( 575 ) 24.68

Restricted stock units forfeited ( 35 ) 21.77

Non-vested restricted stock units at December 31, 2023 1,336 $ 23.41

At December 31, 2022, we had 1.2 million granted and non-vested RSUs, consisting of 0.8 million RSUs that are subject to service condition vesting requirements and 0.4 million RSUs that are subject to performance and service condition vesting requirements.

The total fair value of RSUs vested during the year ended December 31, 2022 was $ 11.6 million.

The remaining

(1) Performance adjustment represents the difference between the number of target shares at grant date and the number of shares vested at settlement, which can range from 0 % to 200 % of target achievement depending on results over the applicable performance period.

(2) Represents amounts vested during the year, including the impact of performance adjustments for service and performance-based RSUs.

NMI HOLDINGS, INC.

1 unchanged sentence

DECEMBER 31, 2023

weighted average contractual life of non-vested RSUs was 1.27 years.

As of December 31, 2022 and 2021, there was $ 10.2 million and $ 8.8 million of total unrecognized compensation costs related to non-vested RSUs, respectively.

The weighted-average period over which total remaining unrecognized compensation costs related to non-vested RSUs outstanding at December 31, 2022 will be recognized is 1.28 years.

Non-vested RSUs subject to service condition vesting requirements vest over a period ranging from one to three years .

Non-vested RSUs subject to performance and service condition vesting requirements vest after a three-year period, with the number of shares issued upon vesting based on the actual achievement of compound annual book value per share growth compared to a target established at the time of grant.

At December 31, 2023, we had 1.3 million granted and non-vested RSUs with a weighted average remaining contractual life of 1.28 years, consisting of 0.9 million RSUs that are subject to service-based vesting requirements and 0.4 million RSUs that are subject to performance and service-based vesting requirements.

The total fair value of RSUs vested during the year ended December 31, 2023 was $ 14.2 million.

As of December 31, 2023, $ 12.1 million of total unrecognized compensation costs related to non-vested RSUs remained.

Total remaining unrecognized compensation costs related to non-vested RSUs outstanding at December 31, 2023 will be recognized on a weighted average basis over 1.27 years.

Non-vested RSUs subject to service-based vesting requirements vest over a period ranging from one to three years .

Non-vested RSUs subject to performance and service-based vesting requirements vest after a three-year period, with the number of shares issued upon vesting based on the actual achievement of compound annual book value per share growth compared to a target established at the time of grant.

The grant date fair value of non-vested RSUs is measured as the closing price of our common stock on the date of grant less the present value of anticipated dividends to be paid during the vesting period.

15 unchanged sentences

Total income tax expense $ 90,593 $ 84,403 $ 65,595

For the years ended December 31, 2022, 2021 and 2020, we had income tax expenses of $ 84.4 million, $ 65.6 million, and $ 46.5 million, respectively, including amounts related to current state income taxes and changes to our federal and state net deferred tax liability.

The following table presents a reconciliation between the federal statutory income tax rate and our effective income tax rate:

15 unchanged sentences

Unrealized loss on investments $ 36,085 $ 53,205

Net operating loss carry forwards 8,898 8,759

Net operating loss carryforward

Share-based compensation 6,026 6,320

9 unchanged sentences

Capitalized software ( 2,496 ) ( 4,737 )

Unrealized gain on investments — ( 1,503 )

Other ( 2,517 ) ( 1,463 )

5 unchanged sentences

As of December 31, 2023 and 2022, we held $ 235.3 million and $ 154.4 million of tax and loss bonds, respectively, in " Prepaid Federal Income Taxes " on our consolidated balance sheets.

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

Section 382 of the IRC imposes annual limitations on a corporation's ability to utilize its net operating loss carryforwards if it experiences 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.

At December 31, 2023, we had a federal net operating loss carryforward of $ 1.2 million which expires 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.

Section 382 of the IRC imposes annual limitations on a corporation's ability to utilize its net operating loss carryforward if it experiences 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 federal net operating loss carryforward arises from this limitation and the constraint on our ability to utilize the net operating loss carryforward in full during the current period.

At December 31, 2022 and 2021, we recorded valuation allowances of $ 8.9 million and $ 8.6 million, respectively, against state net deferred tax assets that may not be realized in future periods.

We are required to establish a valuation allowance against our deferred tax assets when it is more likely than not that all or a portion of the asset will not be realized.

We assess our need for a valuation allowance on a quarterly basis.

In the course of our review, we assess all available evidence, both positive and negative, including our expectations for future sources of income and contractual cash flows, the availability and application of tax planning strategies, and the potential reversal of temporary tax differences.

At December 31, 2023 and 2022, we recorded valuation allowances of $ 9.2 million and $ 8.9 million, respectively, against state net deferred tax assets.

The valuation allowances for both years primarily relate to state net operating losses generated by NMIH, as NMIH operates at a loss and currently only generates revenue from its investment portfolio.

30 unchanged sentences

No impairments of indefinite-lived intangibles or goodwill were identified during the years ended December 31, 2023, 2022 and 2021.

Commitments and Contingencies

As an approved insurer , NMIC is subject to ongoing compliance with the PMIERs established by each of the GSEs ( italicized terms have the same meaning that such terms have in the PMIERs, as described below).

The PMIERs establish operational, business, remedial and financial requirements applicable to approved insurers .

The PMIERs financial requirements prescribe a risk-based methodology whereby the amount of assets required to be held against each insured loan is determined based on certain loan-level risk characteristics, such as FICO, vintage (year of origination), performing vs.

non-performing ( i.e.

, current vs.

delinquent), LTV and other risk features.

In general, higher quality loans carry lower charges.

Under the PMIERs, approved insurers must maintain available assets that equal or exceed minimum required assets , which is an amount equal to the greater of (i) $ 400 million or (ii) a total risk-based required asset amount .

The risk-based required asset amount is a function of the risk profile of an approved insurer's RIF, assessed on a loan-by-loan basis 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.

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, 2022, that NMIC was in full compliance with the PMIERs as of December 31, 2021.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

We continuously monitor NMIC's compliance with the PMIERs.

We have two operating lease agreements related to our corporate headquarters and a data center facility for which we recognized operating ROU assets and lease liabilities of $ 9.1 million and $ 11.4 million in " Other Assets " and " Other Liabilities ," respectively, on our consolidated balance sheets as of December 31, 2023.

5 unchanged sentences

We did not enter any new operating leases or recognize any new ROU assets or lease liabilities during the year ended December 31, 2023.

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

The following table provides a summary of our ROU asset and lease liability assumptions as of December 31, 2023:

Weighted-average remaining lease term 7.1 years

Weighted average remaining lease term

Weighted average discount rate

6 unchanged sentences

Present value of lease payments $ 11,389

Lease expense is recorded in underwriting and operating expenses on the consolidated statement of operations and comprehensive income.

Lease expense is recorded in “Underwriting and Operating Expenses” on the consolidated statements of operations and comprehensive income.

Our existing leases have original terms that range from two to eight years .

1 unchanged sentence

This renewal option is not included in the calculation of future lease payments due under the existing lease as presented above as it is not reasonably certain to be exercised.

We record a liability when we believe that it is probable that a loss has been incurred, and the amount can be reasonably estimated.

If we determine that a loss is reasonably possible, we disclose an estimate of the possible loss or range of loss.

If no estimate can be made, we disclose the matter as such.

We evaluate litigation and other legal developments that could affect the amount of liability that may need to be accrued, related reasonably possible losses disclosed and make adjustments as appropriate.

Significant judgment is required to determine both the likelihood and the estimated amount of losses related to such matters.

We are currently monitoring litigation regarding the refund of certain mortgage insurance premiums as it pertains to provisions of the Homeowners Protection Act and have been named as a defendant in one such case.

We are unable to assess the outcome of such litigation at this time or its potential impact on us.

Commitments and Contingencies

The PMIERs establish operational, business, remedial and financial requirements applicable to approved insurers .

non-performing ( i.e.

, current vs.

delinquent), LTV ratio and other risk features.

In general, higher quality loans carry lower charges.

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.

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.

We record a litigation liability when we determine that it is probable a litigation loss will be incurred and the amount of such anticipated loss can be reasonably estimated.

In the event we determine that a litigation loss is reasonably possible (though not probable), we disclose an estimate of the possible loss if such estimate can be reasonably established or disclose the matter with no estimate if such estimate cannot be reasonably made.

We evaluate litigation and other legal developments that could

NMI HOLDINGS, INC.

1 unchanged sentence

DECEMBER 31, 2023

affect our accrual for probable losses or our estimated disclosure of possible losses and make ongoing adjustments to our accruals and disclosures as appropriate.

Significant judgment is required to determine both the likelihood and the estimated amount of potential losses related to such matters.

We are currently named as a defendant in a litigation proceeding pertaining to the refund of certain mortgage insurance premiums under the Homeowners Protection Act.

The case was dismissed in September 2023 and is currently pending appeal.

We do not currently expect that it is reasonably possible that we will incur a material loss in connection with the case and have not recorded a litigation liability for this matter.

As of December 31, 2023 and 2022, we had 80.9 million and 83.5 million outstanding shares of Class A common stock, respectively.

3 unchanged sentences

Share repurchase program

On February 10, 2022, our Board of Directors approved a $ 125 million share repurchase program effective through December 31, 2023.

The authorization provides us 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, we repurchased 2.9 million shares at an average price of $ 19.34 per share (excluding associated costs) pursuant to trading plans under Rule 10b-18 and Rule 10b5-1 of the Exchange Act.

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 $ 200 million program.

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

During the year ended December 31, 2023, we repurchased 3.5 million shares at an average price of $ 25.93 per share (excluding associated costs and applicable taxes).

During the year ended December 31, 2022, we repurchased 2.9 million shares at an average price of $ 19.34 per share (excluding associated costs).

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

Regulatory Information

8 unchanged sentences

While such treatment impacts NMIC's statutory net income, it does not have an effect on NMIC's statutory capital position.

The following table presents NMIC's statutory net income (loss), statutory surplus, contingency reserve, statutory capital and risk-to-capital (RTC) ratio as of and for the years ended December 31, 2022, 2021 and 2020:

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

The following table presents NMIC's statutory net income, statutory surplus, contingency reserve, statutory capital and risk-to-capital (RTC) ratio as of and for the years ended December 31, 2023, 2022 and 2021:

As of and for the years ended December 31,

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(In Thousands)

Statutory net income (loss) $ 107,418 $ 34,975 $ ( 20,534 )

Statutory net income

$ 104,464 $ 107,418 $ 34,975

Statutory surplus 963,085 980,225 893,848

9 unchanged sentences

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

NMI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

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

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

Re One recorded a statutory loss of $ 58 thousand for the year ended December 31, 2022, and statutory income of $ 3.0 million and $ 0.4 million for the years ended December 31, 2021 and 2020, respectively.

Re One had $ 5.6 million of statutory capital at December 31, 2022 and 2021.

Re One recorded a statutory loss of $ 0.4 million and $ 58 thousand for the years ended December 31, 2023 and 2022, respectively, and statutory income of $ 3.0 million for the year ended December 31, 2021.

Re One had $ 2.0 million and $ 5.6 million of statutory capital at December 31, 2023 and 2022, respectively.

Debt Service Allocation

21 unchanged sentences

Net investment income 14,894 16,518 17,853 18,247 67,512

Net realized investment gains 408 53 14 6 481

Net realized investment losses

( 33 ) — — — ( 33 )

Other revenues 164 182 217 193 756

Insurance claims and claim (benefit) expenses ( 619 ) ( 3,036 ) ( 3,389 ) 3,450 ( 3,594 )

Insurance claims and claim expenses

6,701 2,873 4,812 8,232 22,618

Underwriting and operating expenses 25,786 27,448 27,749 29,716 110,699

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Interest expense 8,039 8,048 8,059 8,066 32,212

Gain from change in fair value of warrant liability ( 93 ) ( 1,020 ) — — ( 1,113 )

Income before income taxes 96,173 104,049 107,300 105,181 412,703

18 unchanged sentences

Other revenues 339 376 301 176 1,192

Insurance claims and claim expenses (benefits) 4,962 4,640 3,204 ( 500 ) 12,305 (2)

Insurance claims and claim (benefits) expenses

( 619 ) ( 3,036 ) ( 3,389 ) 3,450 ( 3,594 )

Underwriting and operating expenses 32,935 30,700 27,144 26,711 117,490

1 unchanged sentence

Interest expense 8,041 8,051 8,036 8,035 32,163

Loss (gain) from change in fair value of warrant liability 205 ( 658 ) — ( 112 ) ( 566 ) (2)

Gain from change in fair value of warrant liability

( 93 ) ( 1,020 ) — — ( 1,113 )

Income before income taxes 86,747 97,189 98,589 94,780 377,305

8 unchanged sentences

(1) Due to the use of weighted average shares outstanding when calculating EPS, the sum of quarterly per share data may not equal the per share data for the year.

(2) May not foot by summing up the quarterly results due to rounding.

Subsequent events

Quota Share Reinsurance

Effective January 1, 2024, NMIC entered into a quota share reinsurance treaty with a broad panel of highly rated reinsurers that will provide coverage for mortgage insurance policies to be written between January 1, 2024 and December 31, 2024 (the 2024 QSR Transaction).

Under the terms of the agreement, NMIC will cede premiums earned related to 20 % of the risk on eligible policies in exchange for reimbursement of ceded claims and claim expenses on covered policies, a ceding commission equal to 20 % and profit commission of up to 56 % that varies directly and inversely with ceded claims.

Excess-of-Loss Reinsurance

Effective January 1, 2024, NMIC entered into a reinsurance agreement with a broad panel of highly rated reinsurers that provides for up to $ 162.5 million of aggregate excess-of-loss reinsurance coverage for delinquencies that emerge on mortgage insurance policies written between January 1, 2024 and December 31, 2024 (the 2024 XOL Transaction).

For the reinsurance coverage period, NMIC will retain a first layer of aggregate losses on covered policies and the reinsurers then provide second layer loss protection up to $ 162.5 million.

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

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data