What changed in this filing

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Item 1. Financial Statements

2024-07-31 compared with 2024-05-01 · 154 added, 118 removed, 580 unchanged (32% of the section changed)

1 unchanged sentence

INDEX TO FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023

Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2024 and 2023 (Unaudited)

Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2024 and 2023 (Unaudited)

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (Unaudited)

Condensed Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023

Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2024 and 2023 (Unaudited)

Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31 and June 30, 2024 and 2023 (Unaudited)

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (Unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited) 11

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Assets (In Thousands, except for share data)

Fixed maturities, available-for-sale, at fair value (amortized cost of $ 2,577,990 and $ 2,542,862 as of March 31, 2024 and December 31, 2023, respectively)

Fixed maturities, available-for-sale, at fair value (amortized cost of $ 2,707,416 and $ 2,542,862 as of June 30, 2024 and December 31, 2023, respectively)

$ 2,520,990 $ 2,371,021

Cash and cash equivalents (including restricted cash of $ 1,137 and $ 1,338 as of March 31, 2024 and December 31, 2023, respectively)

Cash and cash equivalents (including restricted cash of $ 1,152 and $ 1,338 as of June 30, 2024 and December 31, 2023, respectively)

62,629 96,689

18 unchanged sentences

Shareholders' equity

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

87,838,602 shares issued and 80,545,535 shares outstanding as of March 31, 2024 and 87,334,138 shares issued and 80,881,280 shares outstanding as of December 31, 2023 ( 250,000,000 shares authorized)

Common stock - $ 0.01 par value;

87,900,888 shares issued and 79,763,893 shares outstanding as of June 30, 2024 and 87,334,138 shares issued and 80,881,280 shares outstanding as of December 31, 2023 ( 250,000,000 shares authorized)

Additional paid-in capital 993,143 990,816

Treasury Stock, at cost:

7,293,067 and 6,452,858 common shares as of March 31, 2024 and December 31, 2023, respectively

8,136,995 and 6,452,858 common shares as of June 30, 2024 and December 31, 2023, respectively

( 201,323 ) ( 148,921 )

7 unchanged sentences

C ONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

For the three months ended March 31,

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

2024 2023 2024 2023

(In Thousands, except for per share data)

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Other comprehensive (loss) income, net of tax:

Unrealized (losses) gains in accumulated other comprehensive income, net of tax (benefit) expense of $( 2,729 ) and $ 8,633 for the quarters ended March 31, 2024 and 2023, respectively

Unrealized (losses) gains in accumulated other comprehensive income, net of tax (benefit) expense of $( 412 ) and $( 4,120 ) for the three months ended June 30, 2024 and 2023, and $( 3,141 ) and $ 4,513 for the six months ended June 30, 2024 and 2023, respectively

( 1,549 ) ( 15,499 ) ( 11,454 ) 16,977

Reclassification adjustment for realized losses included in net income, net of tax benefit of $ 7 for the quarter ended March 31, 2023

Reclassification adjustment for realized losses included in net income, net of tax benefit of $ 7 for the six months ended June 30, 2023

Other comprehensive (loss) income, net of tax ( 1,549 ) ( 15,499 ) ( 11,454 ) 17,003

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

Common Stock - Class A Additional

Common Stock Additional

Paid-in Capital Treasury Stock, At Cost Accumulated Other Comprehensive Loss Retained Earnings Total

3 unchanged sentences

Common stock:

class A shares issued under stock plans, net of shares withheld for employee taxes 505 5 ( 5,584 ) — — — ( 5,579 )

shares issued under stock plans, net of shares withheld for employee taxes 505 5 ( 5,584 ) — — — ( 5,579 )

Repurchase of common stock ( 840 ) — — ( 25,306 ) — — ( 25,306 )

4 unchanged sentences

Balances, March 31, 2024 80,546 $ 878 $ 989,349 $ ( 174,227 ) $ ( 149,822 ) $ 1,312,203 $ 1,978,381

Common Stock - Class A Additional

Common stock:

shares issued under stock plans, net of shares withheld for employee taxes 62 1 ( 320 ) — — — ( 319 )

Repurchase of common stock ( 844 ) — — ( 27,096 ) — — ( 27,096 )

Share-based compensation expense — — 4,114 — — — 4,114

Change in unrealized investment gains/losses, net of tax benefit of $ 412

— — — — ( 1,549 ) — ( 1,549 )

Net income — — — — — 92,079 92,079

Balances, June 30, 2024 79,764 $ 879 $ 993,143 $ ( 201,323 ) $ ( 151,371 ) $ 1,404,282 $ 2,045,610

See accompanying notes to condensed consolidated financial statements (unaudited).

NMI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

Common Stock Additional

Paid-in Capital Treasury Stock, At Cost Accumulated Other Comprehensive Loss Retained Earnings Total

3 unchanged sentences

Common stock:

class A shares issued under stock plans, net of shares withheld for employee taxes 396 4 ( 2,610 ) — — — ( 2,606 )

shares issued under stock plans, net of shares withheld for employee taxes 396 4 ( 2,610 ) — — — ( 2,606 )

Repurchase of common stock ( 666 ) — — ( 14,862 ) — — ( 14,862 )

4 unchanged sentences

Balances, March 31, 2023 83,280 $ 869 $ 973,599 $ ( 71,437 ) $ ( 171,821 ) $ 975,501 $ 1,706,711

Common stock:

shares issued under stock plans, net of shares withheld for employee taxes 56 1 20 — — — 21

Repurchase of common stock ( 1,046 ) — — ( 26,238 ) — — ( 26,238 )

Share-based compensation expense — — 3,676 — — — 3,676

Change in unrealized investment gains/losses, net of tax benefit of $ 4,120

— — — — ( 15,499 ) — ( 15,499 )

Net income — — — — — 80,284 80,284

Balances, June 30, 2023 82,290 $ 870 $ 977,295 $ ( 97,675 ) $ ( 187,320 ) $ 1,055,785 $ 1,748,955

See accompanying notes to condensed consolidated financial statements (unaudited).

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the three months ended March 31,

For the six months ended June 30,

Cash flows from operating activities (In Thousands)

4 unchanged sentences

Net amortization of premium on investment securities 785 2,077

Loss on extinguishment of debt 6,966 —

Amortization of debt discount and debt issuance costs 1,052 966

22 unchanged sentences

Taxes paid related to net share settlement of equity awards ( 10,178 ) ( 5,296 )

Proceeds from senior unsecured notes 419,705 —

Repayments of senior secured notes ( 405,080 ) —

Payments of debt issuance costs ( 7,730 ) —

Repurchases of common stock ( 52,054 ) ( 40,792 )

Net cash used in financing activities ( 51,057 ) ( 43,377 )

Net increase in cash, cash equivalents and restricted cash 43,037 38,678

Net (decrease) increase in cash, cash equivalents and restricted cash ( 34,060 ) 28,893

Cash, cash equivalents and restricted cash, beginning of period 96,689 44,426

Cash, cash equivalents and restricted cash, end of period $ 62,629 $ 73,319

Supplemental disclosures of cash flow information

Interest paid $ 14,013 $ 14,750

Income taxes paid 20 1

See accompanying notes to condensed consolidated financial statements (unaudited).

41 unchanged sentences

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.

” 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.

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 condensed 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.

1 unchanged sentence

Cost Gross Unrealized Fair

As of March 31, 2024 (In Thousands)

As of June 30, 2024 (In Thousands)

Treasury securities and obligations of U.S.

16 unchanged sentences

Total investments $ 2,542,862 $ 12,498 $ ( 184,339 ) $ 2,371,021

We did not own any mortgage-backed securities in our asset-backed securities portfolio at March 31, 2024 or December 31, 2023.

We did not own any mortgage-backed securities in our asset-backed securities portfolio at June 30, 2024 or December 31, 2023.

We periodically recognize unsettled trade receivables or payables in connection with our investing activity.

Unsettled trade receivables represent funds due but not yet received for the sale or maturity of investments at period end.

Unsettled trade payables represent funds due but not yet paid for investments purchased at period end.

“Other Assets” on our condensed consolidated balance sheets included $ 43.0 million of unsettled trade receivables related to the maturity of certain investment securities at June 30, 2024.

No unsettled trade receivables or payables were outstanding at December 31, 2023.

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents a breakdown of the fair value of our corporate debt securities by issuer industry group as of March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

The following table presents a breakdown of the fair value of our corporate debt securities by issuer industry group as of June 30, 2024 and December 31, 2023:

June 30, 2024 December 31, 2023

Financial 35 % 35 %

1 unchanged sentence

Utilities 12 13

Technology 9 8

Industrial 10 9

Technology 8 8

Communications 8 9

Total 100 % 100 %

As of March 31, 2024 and December 31, 2023, approximately $ 5.2 million and $ 5.3 million, respectively, of our cash and investments were held in the form of U.S.

As of both June 30, 2024 and December 31, 2023, approximately $ 5.3 million of our cash and investments were held in the form of U.S.

Treasury securities on deposit with various state insurance departments to satisfy regulatory requirements.

Scheduled Maturities

The amortized cost and fair value of available-for-sale securities as of March 31, 2024 and December 31, 2023, by contractual maturity, are shown below.

The amortized cost and fair value of available-for-sale securities as of June 30, 2024 and December 31, 2023, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

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

As of March 31, 2024 Amortized

As of June 30, 2024 Amortized

(In Thousands)

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Aging of Unrealized Losses

As of March 31, 2024, the investment portfolio had gross unrealized losses of $ 190.2 million, of which $ 187.5 million were associated with securities that had been in an unrealized loss position for a period of twelve months or longer.

As of June 30, 2024, the investment portfolio had gross unrealized losses of $ 190.1 million, of which $ 184.8 million were associated with securities that had been in an unrealized loss position for a period of twelve months or longer.

As of December 31, 2023, the investment portfolio had gross unrealized losses of $ 184.3 million, of which $ 183.1 million were associated with securities that had been in an unrealized loss position for a period of twelve months or longer.

4 unchanged sentences

# of Securities Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses

As of March 31, 2024 ($ In Thousands)

As of June 30, 2024 ($ In Thousands)

Treasury securities and obligations of U.S.

16 unchanged sentences

Allowance for Credit Losses

As of March 31, 2024 and December 31, 2023, 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 three months ended March 31, 2024 or 2023.

We evaluated the securities in an unrealized loss position as of March 31, 2024, assessing their credit ratings as well as any adverse conditions specifically related to the security.

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 March 31, 2024 are not indicative of the ultimate collectability of the current amortized cost of the securities.

Rather, the unrealized losses on securities held as of March 31, 2024 were primarily driven by fluctuations in interest rates, and to a lesser extent, movements in credit spreads following the purchase of those securities.

As of June 30, 2024 and December 31, 2023, 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 three or six months ended June 30, 2024 or 2023.

We evaluated the securities in an unrealized loss position as of June 30, 2024, assessing their credit ratings as well as any adverse conditions specifically related to the security.

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 June 30, 2024 are not indicative of the ultimate collectability of the current amortized cost of the securities.

Rather, the unrealized losses on securities held as of June 30, 2024 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

The following table presents the components of net investment income:

For the three months ended March 31,

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

2024 2023 2024 2023

(In Thousands)

3 unchanged sentences

Net investment income $ 20,688 $ 16,518 $ 40,124 $ 31,412

(1) Includes interest income recognized on cash and cash equivalents of $ 1.1 million and $ 0.2 million during the three months ended March 31, 2024 and 2023, respectively.

(1) Includes interest income recognized on cash and cash equivalents of $ 1.8 million and $ 2.9 million during the three and six months ended June 30, 2024, respectively, and $ 0.4 million and $ 0.7 million during the three and six months ended June 30, 2023, respectively.

NMI HOLDINGS, INC.

1 unchanged sentence

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

For the three months ended March 31,

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

2024 2023 2024 2023

(In Thousands)

40 unchanged sentences

(Level 3) Fair Value

As of March 31, 2024 (In Thousands)

As of June 30, 2024 (In Thousands)

Treasury securities and obligations of U.S.

21 unchanged sentences

Total assets $ 286,890 $ 2,180,820 $ — $ 2,467,710

There were no transfers between Level 2 and Level 3 of the fair value hierarchy during the three months ended March 31, 2024, or the year ended December 31, 2023.

There were no transfers between Level 2 and Level 3 of the fair value hierarchy during the six months ended June 30, 2024 or the year ended December 31, 2023.

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 amounts due under our then outstanding $ 150 million term loan.

At March 31, 2024, the Notes were carried at a cost of $ 398.0 million, net of unamortized debt issuance costs of $ 2.0 million, and had a fair value of $ 404.3 million as assessed under our Level 2 hierarchy.

On May 21, 2024, we issued $ 425 million aggregate principal amount of senior unsecured notes that mature on August 15, 2029 (the 2024 Notes).

Proceeds from the 2024 Notes offering were primarily used to repay our then outstanding $ 400 million senior secured notes (the 2020 Notes).

At June 30, 2024, the 2024 Notes were carried at a cost of $ 414.2 million, net of unamortized debt issuance costs and an original issue discount totaling $ 10.8 million, and had a fair value of $ 421.6 million as assessed under our Level 2 hierarchy.

At December 31, 2023, the 2020 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.

Senior Secured Notes

At March 31, 2024, we had $ 400 million aggregate principal amount of senior secured notes outstanding.

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.

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.

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

Senior Unsecured Notes

At June 30, 2024, we had $ 425 million aggregate principal amount of senior unsecured notes outstanding.

The 2024 Notes were issued pursuant to an indenture dated May 21, 2024 and bear interest at a rate of 6.00 %, payable semi-annually on February 15 and August 15.

Proceeds from the 2024 Notes offering were primarily used to repay the $ 400 million aggregate principal amount outstanding and associated amounts due on the redemption of the 2020 Notes.

Remaining proceeds are available for general corporate purposes.

The 2024 Notes mature on August 15, 2029.

We may elect to redeem the 2024 Notes in whole or in part at any time prior to July 15, 2029 at a price equal to the greater of (1) the aggregate principal balance outstanding plus the present value of all

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

We may elect to redeem the Notes in whole or in part at any time on or after 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.

In connection with the Notes offering, we recorded capitalized debt issuance costs of $ 7.4 million.

future interest payments due through July 15, 2029, and (2) the aggregate principal balance due plus any accrued and unpaid interest.

We may elect to redeem the 2024 Notes in whole or in part at any time on or after July 15, 2029 at a price equal to 100 % of the aggregate principal amount of the 2024 Notes to be redeemed plus accrued and unpaid interest thereon .

In connection with the 2024 Notes offering, we recorded capitalized debt issuance costs and an original issue discount of $ 10.9 million.

Such amounts will be amortized over the contractual life of the 2024 Notes using the effective interest method.

The effective interest rate on the 2024 Notes is 6.583 %.

At March 31, 2024 and December 31, 2023, approximately $ 2.0 million and $ 2.4 million, respectively, of unamortized debt issuance costs remained.

At March 31, 2024 and December 31, 2023, $ 9.8 million and $ 2.5 million, respectively, of accrued and unpaid interest on the Notes was included in “Accounts Payable and Accrued Expenses” on the condensed consolidated balance sheets.

At June 30, 2024, $ 10.8 million of unamortized debt issuance costs and original issue discounts remained.

At December 31, 2023, $ 2.4 million of unamortized debt issuance costs remained related to the 2020 Notes.

During the six months ended June 30, 2024, we recorded a $ 6.8 million loss related to the redemption of the 2020 Notes in “Interest Expense” on our condensed consolidated statements of comprehensive income.

At June 30, 2024 and December 31, 2023, $ 2.8 million and $ 2.5 million, respectively, of accrued and unpaid interest was included in “Accounts Payable and Accrued Expenses” on our condensed consolidated balance sheets.

Revolving Credit Facility

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.

As of March 31, 2024 and December 31, 2023, no amounts were drawn under the 2021 Revolving Credit Facility.

On April 29, 2024, we entered into a new $ 250 million five-year unsecured revolving credit facility (the 2024 Revolving Credit Facility) to replace our then outstanding $ 250 million four-year secured revolving credit facility (the 2021 Revolving Credit Facility).

The 2024 Revolving Credit Facility matures on May 21, 2029.

Borrowings under the 2024 Revolving Credit Facility may be used for general corporate purposes, including to support growth, 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 2024 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 2024 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 June 30, 2024 and December 31, 2023, no amounts were drawn under the 2024 or 2021 Revolving Credit Facilities, respectively.

Under the 2024 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 March 31, 2024, the applicable commitment fee was 0.225 %.

For the three months ended March 31, 2024, we recorded $ 0.2 million of commitment fees in interest expense.

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.

As of June 30, 2024, the applicable commitment fee was 0.225 %.

For the three and six months ended June 30, 2024, we recorded $ 0.2 million and $ 0.3 million, respectively, of commitment fees in interest expense.

We incurred debt issuance costs of $ 2.1 million in connection with the 2024 Revolving Credit Facility and had $ 0.6 million of unamortized debt issuance costs associated with the 2021 Revolving Credit Facility remaining at the time of its replacement.

Combined unamortized debt issuance costs are amortized through interest expense on a straight-line basis over the contractual life of the 2024 Revolving Credit Facility.

At March 31, 2024 and December 31, 2023, remaining unamortized deferred debt issuance costs were $ 0.7 million and $ 0.8 million, respectively, in “Other Assets” on our condensed consolidated balance sheets.

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

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

We were in compliance with all covenants at March 31, 2024.

At June 30, 2024 and December 31, 2023, unamortized deferred debt issuance costs of $ 2.6 million and $ 0.8 million, respectively, were recorded in “Other Assets” on our condensed consolidated balance sheets.

Under the 2024 Revolving Credit Facility we are subject to certain covenants, including a maximum debt-to-total capitalization ratio of 35 %, a minimum consolidated net worth requirement (as defined therein), and a requirement to maintain compliance with the financial standards prescribed by the PMIERs (subject to any GSE approved waivers).

We were in compliance with all covenants at June 30, 2024.

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.

3 unchanged sentences

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

For the three months ended March 31,

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

2024 2023 2024 2023

(In Thousands)

16 unchanged sentences

NMIC makes risk premium payments to the Oaktown Re Vehicles for the applicable outstanding reinsurance coverage amount and pays an additional amount for anticipated operating expenses (capped at $ 250 thousand per year).

NMIC ceded aggregate premiums to the Oaktown Re Vehicles of $ 6.0 million and $ 9.1 million during the three months ended March 31, 2024 and 2023, respectively.

NMIC ceded aggregate premiums to the Oaktown Re Vehicles of $ 5.9 million and $ 11.8 million during the three and six months ended June 30, 2024, respectively, and $ 8.8 million and $ 17.9 million during the three and six months ended June 30, 2023, respectively.

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 three months ended March 31, 2024 and 2023, 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 three and six months ended June 30, 2024 and 2023, 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.

11 unchanged sentences

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 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

The outstanding reinsurance coverage amounts stop amortizing, and the distribution of collateral assets to ILN Transaction noteholders and amortization of

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

agreement, are triggered (each, a Lock-Out Event).

Effective March 31, 2024, a previously triggered 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.

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).

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.

1 unchanged sentence

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

Current amounts are presented as of March 31, 2024.

Current amounts are presented as of June 30, 2024.

( $ values in thousands)

12 unchanged sentences

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 condensed consolidated balance sheets includes restricted amounts of $ 1.1 million and $ 1.3 million as of March 31, 2024 and December 31, 2023, respectively.

“Cash and Cash Equivalents” on our condensed consolidated balance sheets includes restricted amounts of $ 1.2 million and $ 1.3 million as of June 30, 2024 and December 31, 2023, 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.

5 unchanged sentences

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 $ 9.2 million and $ 7.2 million during the three months ended March 31, 2024 and 2023, respectively.

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 $ 9.4 million and $ 18.6 million during the three and six months ended June 30, 2024, respectively, and $ 7.7 million and $ 14.9 million during the three and six months ended June 30, 2023, 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 three months ended March 31, 2024 and 2023, as the aggregate first layer risk retention for each agreement was not exhausted during such periods.

NMIC did not cede any incurred losses on covered policies under the XOL Transactions during the three and six months ended June 30, 2024 and 2023, 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.

9 unchanged sentences

Current amounts are presented as of March 31, 2024.

Current amounts are presented as of June 30, 2024.

($ values in thousands) Inception Date Covered Production Initial Reinsurance Coverage

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(3) Approximately 1 % of the production covered by the 2022-2 XOL Transaction has coverage reporting dates between January 4, 2021 and March 31, 2022.

(4) Effective January 1, 2024, the initial reinsurance coverage and initial first layer retained loss amounts increased due to revised contractual terms.

(4) The initial reinsurance coverage, current reinsurance coverage, initial first layer retained loss and current first layer retained loss for the 2024 XOL Transaction will increase as incremental covered production is ceded under the transaction through December 31, 2024.

39 unchanged sentences

The following table shows amounts related to the QSR Transactions:

As of and for the three months ended

March 31, 2024 March 31, 2023

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

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(In Thousands)

1 unchanged sentence

Ceded premiums earned ( 41,555 ) ( 42,002 ) ( 82,824 ) ( 84,098 )

Ceded claims and claim expenses

Ceded claims and claim (benefits) expenses

( 138 ) 803 521 2,768

Ceding commission earned 10,222 9,877 20,514 19,842

10 unchanged sentences

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

The reinsurance recoverable on loss reserves related to the 2016 QSR Transaction was $ 1.6 million and $ 1.7 million as of March 31, 2024 and December 31, 2023, respectively.

The reinsurance recoverable on loss reserves related to the 2016 QSR Transaction was $ 1.4 million and $ 1.7 million as of June 30, 2024 and December 31, 2023, respectively.

In accordance with the terms of the 2018, 2020, 2021, 2022, 2022 Seasoned, 2023 and 2024 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.

1 unchanged sentence

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, 2022, 2022 Seasoned, 2023, and 2024 QSR Transactions was $ 26.3 million and $ 25.8 million as of March 31, 2024 and December 31, 2023, respectively.

The aggregate reinsurance recoverable on loss reserves related to the 2018, 2020, 2021, 2022, 2022 Seasoned, 2023, and 2024 QSR Transactions was $ 25.9 million and $ 25.8 million as of June 30, 2024 and December 31, 2023, respectively.

We remain directly liable for all claim payments if we are unable to collect the recoverables due from our reinsurers and, as such, we actively monitor and manage our counterparty credit exposure to our reinsurance providers.

1 unchanged sentence

We actively monitor the counterparty credit profiles of our reinsurers and each is required to partially collateralize its obligations under the terms of the QSR Transactions.

The allowance for credit loss established against our reinsurance recoverable was deemed immaterial as of March 31, 2024 and December 31, 2023.

The allowance for credit loss established against our reinsurance recoverable was deemed immaterial as of June 30, 2024 and December 31, 2023.

Reserves for Insurance Claims and Claim Expenses

3 unchanged sentences

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.

As of March 31, 2024, we held gross reserves for insurance claims and claim expenses of $ 127.2 million.

During the three months ended March 31, 2024, we paid 42 claims totaling $ 1.1 million, including 41 claims covered under the QSR Transactions representing $ 0.3 million of ceded claims and claim expenses.

We had 5,109 loans in default in our primary insured portfolio as of March 31, 2024, which represented a 0.80 % default rate against 635,662 total policies in-force and 5,099 loans in default in our primary portfolio as of December 31, 2023, which represented a 0.81 % default rate against 629,690 total policies in-force.

As of June 30, 2024, we held gross reserves for insurance claims and claim expenses of $ 125.4 million.

During the six months ended June 30, 2024, we paid 101 claims totaling $ 3.0 million, including 97 claims covered under the QSR Transactions representing $ 0.7 million of ceded claims and claim expenses.

We had 4,904 loans in default in our primary insured portfolio as of June 30, 2024, which represented a 0.76 % default rate against 645,276 total policies in-force and 5,099 loans in default in our primary portfolio as of December 31, 2023, which represented a 0.81 % default rate against 629,690 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.

4 unchanged sentences

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

For the three months ended March 31,

For the six months ended June 30,

(In Thousands)

23 unchanged sentences

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

Amounts are presented net of reinsurance and included $ 25.9 million attributed to net case reserves and $ 6.6 million attributed to net IBNR reserves for the three months ended March 31, 2024 and $ 22.3 million attributed to net case reserves and $ 4.9 million attributed to net IBNR reserves for the three months ended March 31, 2023.

Amounts are presented net of reinsurance and included $ 43.1 million attributed to net case reserves and $ 6.4 million attributed to net IBNR reserves for the six months ended June 30, 2024 and $ 39.1 million attributed to net case reserves and $ 5.0 million attributed to net IBNR reserves for the six months ended June 30, 2023.

(3) Related to insured loans with defaults occurring in prior years, which have been continuously in default before the start of the current year.

Amounts are presented net of reinsurance and included $ 22.4 million attributed to net case reserves and $ 6.3 million attributed to net IBNR reserves for the three months ended March 31, 2024 and $ 16.2 million attributed to net case reserves and $ 4.5 million attributed to net IBNR reserves for the three months ended March 31, 2023.

Amounts are presented net of reinsurance and included $ 39.2 million attributed to net case reserves and $ 6.3 million attributed to net IBNR reserves for the six months ended June 30, 2024 and $ 30.3 million attributed to net case reserves and $ 4.5 million attributed to net IBNR reserves for the six months ended June 30, 2023.

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.

The amount of claims incurred relating to current year defaults increased during the three months ended March 31, 2024, compared to the same period in the prior year, primarily due to an increase in the total number of new delinquencies emerging during the period tied to the growth and natural seasoning of our portfolio, partially offset by a decrease in the average case reserve established against newly defaulted loans.

Our provision for claims and claim expenses during both the three months ended March 31, 2024 and 2023 benefited from favorable development on prior year defaults.

We recognized $ 29.3 million and $ 20.9 million of favorable prior year development during the three months ended March 31, 2024 and 2023, respectively, primarily due to cure activity and ongoing analysis of recent loss development trends.

The amount of claims incurred relating to current year defaults increased during the six months ended June 30, 2024, compared to the same period in the prior year, primarily due to an increase in the total number of new delinquencies emerging during the period tied to the growth and natural seasoning of our portfolio, partially offset by a decrease in the average case reserve established against newly defaulted loans.

Our provision for claims and claim expenses during both the six months ended June 30, 2024 and 2023 benefited from favorable development on prior year defaults.

We recognized $ 46.4 million and $ 35.3 million of favorable prior year development during the six months ended June 30, 2024 and 2023, 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 $ 85.1 million related to prior year defaults remained as of March 31, 2024.

Gross reserves of $ 61.4 million related to prior year defaults remained as of June 30, 2024.

Earnings per Share (EPS)

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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:

For the three months ended March 31,

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

2024 2023 2024 2023

(In Thousands, except for per share data)

8 unchanged sentences

$ 1.13 $ 0.95 $ 2.22 $ 1.83

Anti-dilutive shares 9 4 3 1

We are a U.S.

3 unchanged sentences

federal and various state income tax returns, filed by NMIH on behalf of itself and its subsidiaries.

Our effective tax rate on our pre-tax income was 22.3 % and 22.6 % for the three months ended March 31, 2024 and 2023, respectively.

Our effective tax rate on pre-tax income was 22.4 % and 22.3 % for the three and six months ended June 30, 2024, respectively, compared to 22.8 % and 22.7 % for the three and six months ended June 30, 2023, respectively.

Our provision for income taxes for interim reporting periods is established based on our estimated annual effective tax rate for a given year.

2 unchanged sentences

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

As a result, our interim provision for income taxes for the three months ended March 31, 2024 primarily represents a change in our net deferred tax liability.

As of March 31, 2024 and December 31, 2023, we held $ 235.3 million of tax and loss bonds in “Prepaid Federal Income Taxes” on our condensed consolidated balance sheets.

As a result, our interim provision for income taxes for the three and six months ended June 30, 2024 and 2023 primarily represents a change in our net deferred tax liability.

As of June 30, 2024 and December 31, 2023, we held $ 235.3 million of tax and loss bonds in “Prepaid Federal Income Taxes” on our condensed consolidated balance sheets.

Stockholders' Equity

1 unchanged sentence

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.

Concurrent with the new authorization, our Board of Directors also approved an extension of our initial $ 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 three months ended March 31, 2024, we repurchased 0.8 million shares at an average price of $ 29.98 per share (excluding associated costs and applicable taxes).

During the six months ended June 30, 2024, we repurchased 1.7 million shares at an average price of $ 30.89 per share (excluding associated costs and applicable taxes).

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).

As of March 31, 2024, we had $ 151.8 million of repurchase authority remaining under our current program.

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

As of June 30, 2024, we had $ 124.9 million of repurchase authority remaining under our program.

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

and disclosures as appropriate.

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.

We evaluate litigation and other legal developments that could 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.

6 unchanged sentences

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 and $ 2.7 million reserve for premium write-offs at March 31, 2024 and December 31, 2023, respectively.

We established a $ 2.2 million and $ 2.7 million reserve for premium write-offs at June 30, 2024 and December 31, 2023, respectively.

We separately recognize an allowance for credit losses for premiums receivable based on credit losses expected to arise over the life of the receivable.

Due to the nature of our insurance policies (a necessary precondition for access to mortgage credit for covered borrowers) and the short duration of the related receivables, we do not typically experience credit losses against our premium receivables and the allowance for credit loss established on premium receivable was deemed immaterial at March 31, 2024 and December 31, 2023.

Regulatory Information

3 unchanged sentences

The Wisconsin OCI recognizes only statutory accounting practices prescribed or permitted by the state of Wisconsin for determining and reporting the financial condition and results of operations of an insurance company and for determining its solvency under Wisconsin insurance laws.

NMIC and Re One generated combined statutory net income of $ 34.7 million and $ 21.8 million for the three months ended March 31, 2024 and 2023, respectively.

NMIC and Re One generated combined statutory net income of $ 36.0 million and $ 70.7 million for the three and six months ended June 30, 2024, respectively, compared to $ 28.1 million and $ 49.9 million for the three and six months ended June 30, 2023, respectively.

The Wisconsin OCI has imposed a prescribed accounting practice for the treatment of statutory contingency reserves that differs from the treatment promulgated by the NAIC.

3 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 surplus, contingency reserve, statutory capital and risk-to-capital (RTC) ratio as of March 31, 2024 and December 31, 2023.

March 31, 2024 December 31, 2023

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents NMIC's statutory surplus, contingency reserve, statutory capital and risk-to-capital (RTC) ratio as of June 30, 2024 and December 31, 2023.

June 30, 2024 December 31, 2023

(In Thousands)

5 unchanged sentences

(1) Represents the total of the statutory surplus and contingency reserve.

Re One had $ 2.1 million and $ 2.0 million of statutory capital at March 31, 2024 and December 31, 2023, respectively.

NMIH is not subject to any limitations on its ability to pay dividends except those generally applicable to corporations

NMI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

that are incorporated in Delaware.

Re One had $ 2.1 million and $ 2.0 million of statutory capital at June 30, 2024 and December 31, 2023, respectively.

NMIH is not subject to any limitations on its ability to pay dividends except those generally applicable to corporations that are incorporated in Delaware.

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

NMIC and Re One are subject to certain rules and regulations prescribed by jurisdictions in which they are authorized to operate and the GSEs that may restrict their ability to pay dividends to NMIH.

NMIC has the capacity to pay $ 96.3 million of aggregate ordinary dividends to NMIH during the twelve-month period ending December 31, 2024.

NMIC has the capacity to pay $ 96.3 million of aggregate ordinary dividends to NMIH during the twelve-month period ending December 31, 2024, and on May 30, 2024, NMIC paid a $ 96.3 million ordinary course dividend to NMIH.

Subsequent Events

On April 29, 2024, we entered into a new $ 250 million five-year unsecured revolving credit facility (the 2024 Revolving Credit Facility) to replace, upon close, our existing 2021 (secured) Revolving Credit Facility.

Borrowings under the 2024 Revolving Credit Facility may be used for general corporate purposes, including to support growth, new business production and operations, and will accrue interest and carry undrawn commitment fees identical to those incurred under the 2021 Revolving Credit Facility.

Under the 2024 Revolving Credit Facility we will be subject to certain covenants, including a maximum debt-to-total capitalization ratio of 35 %, compliance with the PMIERs financial requirements (subject to any GSE approved waivers), and a minimum consolidated net worth requirement (as defined therein).

We will no longer be subject to a minimum statutory capital covenant.

Closing of the 2024 Revolving Credit Facility is subject to the satisfaction of certain terms and conditions contained therein.

Effective July 25, 2024, NMIC exercised its optional call to terminate the 2019 ILN Transaction.

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

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

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

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

What changed 10-Q

Item 1. Financial Statements