What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-31 compared with 2024-05-01 · 179 added, 140 removed, 615 unchanged (34% of the section changed)

16 unchanged sentences

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

As of March 31, 2024, we had issued master policies with 1,984 customers, including national and regional mortgage banks, money center banks, credit unions, community banks, builder-owned mortgage lenders, internet-sourced lenders and other non-bank lenders.

As of March 31, 2024, we had $199.4 billion of primary insurance-in-force (IIF) and $52.6 billion of primary risk-in-force (RIF).

As of June 30, 2024, we had issued master policies with 2,022 customers, including national and regional mortgage banks, money center banks, credit unions, community banks, builder-owned mortgage lenders, internet-sourced lenders and other non-bank lenders.

As of June 30, 2024, we had $203.5 billion of primary insurance-in-force (IIF) and $54.0 billion of primary risk-in-force (RIF).

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

1 unchanged sentence

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

As of March 31, 2024, we had 234 employees.

As of June 30, 2024, we had 228 employees.

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

33 unchanged sentences

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

Substantially all of our single premium policies in force as of March 31, 2024 were non-

Substantially all of our single premium policies in force as of June 30, 2024 were non-

refundable under most cancellation scenarios.

30 unchanged sentences

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).

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.

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)

11 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.

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.

Traditional Reinsurance

11 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 Current Reinsurance Coverage Initial First Layer Retained Loss Current First Layer Retained Loss (1)

13 unchanged sentences

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

(4) 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.

15 unchanged sentences

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

Under the terms of the 2024 QSR Transaction, NMIC cedes premiums earned related to 20% of the risk on eligible policies written in 2024, in exchange or reimbursement of ceded claims and claim expenses on covered policies, a 20% ceding commission, and a profit commission of up to 56% that varies directly and inversely with ceded claims.

Under the terms of the 2024 QSR Transaction, NMIC cedes premiums earned related to 20% of the risk on eligible policies written in 2024, in exchange for reimbursement of ceded claims and claim expenses on covered policies, a 20% ceding commission, and a profit commission of up to 56% that varies directly and inversely with ceded claims.

NMIC may terminate any or all of the QSR Transactions without penalty if, due to a change in PMIERs requirements, it is no longer able to take full PMIERs asset credit for the RIF ceded under the respective agreements.

8 unchanged sentences

NIW and primary and pool IIF

As of and for the three months ended

March 31, 2024 March 31, 2023

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

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

(In Millions)

4 unchanged sentences

Total $ 12,503 $ 203,501 $ 11,478 $ 192,306 $ 21,901 $ 20,212

NIW increased 8% to $9.4 billion for the three months ended March 31, 2024 compared to $8.7 billion for the three months ended March 31, 2023, primarily due to the growth in our customer franchise and market presence tied to the increased penetration of existing customer accounts and new customer activations.

Primary IIF increased 7% at March 31, 2024 compared to March 31, 2023, primarily due to the NIW generated between such measurement dates, partially offset by the run-off of in-force policies.

Our persistency rate improved to 85.8% at March 31, 2024 from 85.1% at March 31, 2023, and remains historically high due to a continued slowdown in the pace of mortgage refinancing activity tied to the prevailing interest and mortgage rate environment.

NIW for the three and six months ended June 30, 2024 was $12.5 billion and $21.9 billion, respectively, compared to $11.5 billion and $20.2 billion for the three and six months ended June 30, 2023, respectively.

NIW increased year-on-year primarily due to growth in our customer franchise and market presence tied to the increased penetration of existing customer accounts and new customer activations.

Primary IIF increased 6% at June 30, 2024 compared to June 30, 2023, primarily due to the NIW generated between such measurement dates, partially offset by the run-off of in-force policies.

Our persistency rate was 85.4% at June 30, 2024 and 86.0% at June 30, 2023.

Our persistency rate remains historically high due to a continued slowdown in the pace of mortgage refinancing activity tied to the prevailing interest and mortgage rate environment.

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

Primary premiums written and earned

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)

1 unchanged sentence

Net premiums earned 141,168 125,985 277,825 247,739

Net premiums written and earned increased 15% and 12%, respectively, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by growth in our monthly IIF and monthly pay premium receipts, as well as a decline in the total premiums ceded under our reinsurance treaties.

The growth in net premiums earned was partially offset by a decline in the contribution from single premium policy cancellations.

Net premiums written increased 14% and 15%, respectively, and net premiums earned increased 12%, consecutively, during the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, primarily driven by growth in our monthly IIF and monthly pay premium receipts, as well as a decline in the total premiums ceded under our reinsurance treaties.

Portfolio Statistics

2 unchanged sentences

Primary portfolio trends As of and for the three months ended

March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023

June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023

($ Values In Millions, except as noted below)

34 unchanged sentences

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

Primary IIF As of and for the three months ended March 31,

Primary IIF As of and for the three months ended June 30,

As of and for the six months ended June 30,

2024 2023 2024 2023

(In Millions)

7 unchanged sentences

The table below presents a summary of our primary IIF and RIF by book year as of the dates indicated.

Primary IIF and RIF As of March 31,

Primary IIF and RIF As of June 30,

IIF RIF IIF RIF

15 unchanged sentences

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

Primary NIW by FICO For the three months ended March 31,

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

2024 2023 2024 2023

(In Millions)

4 unchanged sentences

680-699 635 413 1,165 755

<=679 296 101 479 165

Total $ 12,503 $ 11,478 $ 21,901 $ 20,212

Weighted average FICO 757 763 757 762

Primary NIW by LTV For the three months ended March 31,

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

2024 2023 2024 2023

(In Millions)

5 unchanged sentences

Weighted average LTV 92.3 % 92.0 % 92.3 % 91.9 %

Primary NIW by purchase/refinance mix For the three months ended March 31,

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

2024 2023 2024 2023

(In Millions)

Purchase $ 12,257 $ 11,233 $ 21,414 $ 19,727

246 245 487 485

Total $ 12,503 $ 11,478 $ 21,901 $ 20,212

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

Primary IIF by FICO As of March 31,

Primary IIF by FICO As of June 30,

($ Values In Millions)

6 unchanged sentences

Total $ 203,501 100 % $ 191,306 100 %

Primary RIF by FICO As of March 31,

Primary RIF by FICO As of June 30,

($ Values In Millions)

6 unchanged sentences

Total $ 53,956 100 % $ 49,875 100 %

Primary IIF by LTV As of March 31,

Primary IIF by LTV As of June 30,

($ Values In Millions)

4 unchanged sentences

Total $ 203,501 100 % $ 191,306 100 %

Primary RIF by LTV As of March 31,

Primary RIF by LTV As of June 30,

($ Values In Millions)

4 unchanged sentences

Total $ 53,956 100 % $ 49,875 100 %

Primary RIF by Loan Type As of March 31,

Primary RIF by Loan Type As of June 30,

Fixed 98 % 98 %

3 unchanged sentences

Total 100 % 100 %

The table below presents selected primary portfolio statistics, by book year, as of March 31, 2024.

As of March 31, 2024

The table below presents selected primary portfolio statistics, by book year, as of June 30, 2024.

As of June 30, 2024

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

18 unchanged sentences

The following table shows the distribution by state of our primary RIF as of the dates indicated.

The distribution of our primary RIF as of March 31, 2024 is not necessarily representative of the geographic distribution we expect in the future.

Top 10 primary RIF by state As of March 31,

The distribution of our primary RIF as of June 30, 2024 is not necessarily representative of the geographic distribution we expect in the future.

Top 10 primary RIF by state As of June 30,

California 10.1 % 10.4 %

14 unchanged sentences

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

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

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

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

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

2024 2023 2024 2023

(In Thousands)

14 unchanged sentences

Prior years (3)

1,471 1,072 2,323 1,344

Total claims and claim expenses paid 1,471 1,126 2,323 1,398

7 unchanged sentences

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

Amounts are presented net of reinsurance and included $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.

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.

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

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

Beginning default inventory 5,109 4,475 5,099 4,449

4 unchanged sentences

Ending default inventory 4,904 4,349 4,904 4,349

Ending default inventory increased from March 31, 2023 to March 31, 2024, primarily due to the growth and natural seasoning of our insured portfolio, largely offset by cure activity within our default population during the intervening period.

Ending default inventory increased from June 30, 2023 to June 30, 2024, primarily due to the growth and natural seasoning of our insured portfolio, largely offset by cure activity within our default population during the intervening period.

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

For the three months ended March 31,

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

2024 2023 2024 2023

($ Values In Thousands)

2 unchanged sentences

Average amount paid per claim

(1) Count includes 16 and seven claims settled without payment during the three months ended March 31, 2024 and 2023, respectively.

$ 32 $ 30 $ 30 $ 26

54 % 62 % 54 % 56 %

(1) Count includes 19 and 35 claims settled without payment during the three and six months ended June 30, 2024, respectively, and 17 and 24 claims settled without payment during the three and six months ended June 30, 2023, respectively.

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

We paid 42 and 21 claims during the three months ended March 31, 2024 and 2023, respectively.

We paid 59 and 101 claims during the three and six months ended June 30, 2024, respectively, and 46 and 67 claims during the three and six months ended June 30, 2023, respectively.

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

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

Our claims severity for the three months ended March 31, 2024 and 2023 was 54% and 39%, respectively.

Our claims severity was 54% for both the three and six months ended June 30, 2024 compared to 62% and 56% for the three and six months ended June 30, 2023, respectively.

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

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

The number of claims paid and our severity experience in future periods may be impacted by developing economic cycles and each could increase if house price declines serve to limit the alternative paths and incentives to cure delinquencies that are available to defaulted borrowers or erode the equity value of the homes collateralizing the mortgages we insure.

The number of claims paid and our severity experience in future periods may be impacted if developing economic cycles impose financial strain on borrowers, and each could increase if house price declines serve to limit the alternative paths and incentives to cure delinquencies that are available to defaulted borrowers or erode the equity value of the homes collateralizing the mortgages we insure.

The following table provides detail on our average reserve per default, before giving effect to reserves ceded under the QSR Transactions, as of the dates indicated:

Average reserve per default:

As of March 31,

As of June 30,

(In Thousands)

3 unchanged sentences

(2) Amount includes claims adjustment expenses.

Average reserve per default increased from March 31, 2023 to March 31, 2024, primarily due to changes in the composition of our default inventory as measured by the size, vintage and current estimated LTV of defaulted loans, as well as the proportion of such loans benefiting from a forbearance program granted in response to a financial hardship related to COVID-19.

Average reserve per default increased modestly from June 30, 2023 to June 30, 2024, primarily due to changes in the composition of our default inventory as measured by the size, vintage and current estimated LTV of defaulted loans.

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

14 unchanged sentences

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

As of March 31,

As of June 30,

(In Thousands)

2 unchanged sentences

1,651,569 1,317,961

Available assets were $2.8 billion at March 31, 2024, compared to $2.5 billion at March 31, 2023.

Available assets were $2.8 billion at June 30, 2024, compared to $2.5 billion at June 30, 2023.

The $336 million increase in available assets between the dates presented was primarily driven by NMIC's positive cash flow from operations during the intervening period, partially offset by the payment of an ordinary course dividend from NMIC to NMIH in May 2024.

Net risk-based required assets were $1.6 billion at March 31, 2024, compared to $1.2 billion at March 31, 2023.

The $330 million increase in the risk-based required asset amount between the dates presented was primarily due to the growth in our

gross RIF and aggregate gross risk-based required asset amount.

Net risk-based required assets reflect $1.8 billion and $1.9 billion, respectively, of aggregate PMIERs risk-based required asset credit for reinsurance as of March 31, 2024 and 2023.

Available assets at June 30, 2024 excludes $43 million of unsettled trade receivables due on the maturity of certain investments.

Net risk-based required assets were $1.7 billion at June 30, 2024, compared to $1.3 billion at June 30, 2023.

The $334 million increase in the risk-based required asset amount between the dates presented was primarily due to the growth in our gross RIF and aggregate gross risk-based required asset amount.

Consolidated Results of Operations

Consolidated statements of operations For the three months ended March 31,

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

2024 2023 2024 2023

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

15 unchanged sentences

Loss ratio (1)

0.2 % 2.3 % 1.4 % 3.9 %

Expense ratio (2)

2 unchanged sentences

20.3 % 24.1 % 22.4 % 25.4 %

For the three months ended March 31,

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

Non-GAAP financial measures (4)

2024 2023 2024 2023

($ In Thousands, except for per share data)

4 unchanged sentences

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

(3) Combined ratio may not foot due to rounding.

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

Net premiums earned were $136.7 million for the three months ended March 31, 2024, compared to $121.8 million for the three months ended March 31, 2023.

The increase in net premiums earned was primarily driven by growth in our monthly IIF and monthly pay premium receipts, as well as a decline in the total premiums ceded under our reinsurance treaties, partially offset by a decline in the contribution from single premium policy cancellations.

Net investment income was $19.4 million for the three months ended March 31, 2024, compared to $14.9 million for the three months ended March 31, 2023.

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

Other revenues were $0.2 million for the three months ended March 31, 2024 and 2023.

Net premiums earned were $141.2 million and $277.8 million for the three and six months ended June 30, 2024, respectively, compared to $126.0 million and $247.7 million for the three and six months ended June 30, 2023, respectively.

The year-on-year increase in net premiums earned in each respective period was primarily driven by growth in our monthly IIF and monthly pay premium receipts, as well as a decline in the total premiums ceded under our reinsurance treaties.

Net investment income was $20.7 million and $40.1 million for the three and six months ended June 30, 2024, respectively, compared to $16.5 million and $31.4 million for the three and six months ended June 30, 2023, respectively.

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

Other revenues were $0.3 million and $0.4 million for the three and six months ended June 30, 2024, respectively, compared to $0.2 million and $0.3 million for the three and six months ended June 30, 2023, respectively.

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

3 unchanged sentences

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

Insurance claims and claim expenses were $3.7 million for the three months ended March 31, 2024, compared to $6.7 million for the three months ended March 31, 2023.

The decrease in insurance claims and claim expenses for the three months ended March 31, 2024 was primarily driven by the release of a portion of the reserves we established for anticipated claims payments in prior periods (in connection with cure activity and ongoing analysis of loss development trends), partially offset by the establishment of initial reserves on newly defaulted loans during the period, as well as an increase in the average case reserve held against previously defaulted loans that aged in their delinquent status.

Underwriting and operating expenses were $29.8 million for the three months ended March 31, 2024, compared to $25.8 million for the three months ended March 31, 2023.

The increase in underwriting and operating expenses primarily reflects an increase in employee compensation costs and the adjustments to the amortization of certain deferred policy acquisition costs.

Service expenses were $0.1 million for the three months ended March 31, 2024 and 2023.

Insurance claims and claim expenses were $0.3 million and $4.0 million for the three and six months ended June 30, 2024, respectively, compared to $2.9 million and $9.6 million for the three and six months ended June 30, 2023, respectively.

The decrease in insurance claims and claim expenses in each respective period was primarily driven by the release of a portion of the reserves we established for anticipated claims payments in prior periods (in connection with cure activity and ongoing analysis of loss development trends), partially offset by the establishment of initial reserves on newly defaulted loans during the periods, as well as an increase in the average case reserve held against previously defaulted loans that aged in their delinquent status.

Underwriting and operating expenses were $28.3 million and $58.1 million for the three and six months ended June 30, 2024, respectively, compared to $27.4 million and $53.2 million for the three and six months ended June 30, 2023, respectively.

The increase in underwriting and operating expenses in each respective period primarily reflects an adjustment to the pace of amortization of certain deferred policy acquisition costs, as well as an increase in employee compensation costs, partially offset by an increase in ceding commissions received under our QSR Transactions and a decline in certain technology expenses.

Service expenses were $0.2 million and $0.3 million for the three and six months ended June 30, 2024, respectively, compared to $0.3 million for both the three and six months ended June 30, 2023.

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

1 unchanged sentence

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

Interest expense was $8.0 million for the three months ended March 31, 2024 and 2023.

Interest expense primarily reflects the carrying costs of the Notes.

Interest expense was $14.7 million and $22.7 million for the three and six months ended June 30, 2024, respectively, compared to $8.0 million and $16.1 million for the three and six months ended June 30, 2023, respectively.

Interest expense for the three and six months ended June 30, 2024 includes $7.0 million of non-recurring costs related to the refinancing of the 2020 Notes and 2021 Revolving Credit Facility.

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

Income tax expense was $25.5 million for the three months ended March 31, 2024, compared to $21.7 million for the three months ended March 31, 2023.

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

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

Income tax expense was $26.6 million and $52.1 million for the three and six months ended June 30, 2024, respectively, compared to $23.8 million and $45.5 million for the three and six months ended June 30, 2023, respectively.

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

Our effective tax rate on pre-tax income was 22.4% 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.

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

1 unchanged sentence

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

Our effective tax rates for the three months ended March 31, 2024 and 2023 reflect the discrete tax effects of the vesting of RSUs and exercise of options.

Our effective tax rates for the three and six months ended June 30, 2024 and 2023 reflect the discrete tax effects of the vesting of RSUs and exercise of options.

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

Net income and adjusted net income were $89.0 million each for the three months ended March 31, 2024, compared to $74.5 million each for the three months ended March 31, 2023.

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

Diluted EPS and adjusted diluted EPS were $1.08 each for the three months ended March 31, 2024, compared to $0.88 each for the three months ended March 31, 2023.

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

Net income was $92.1 million and $181.1 million for the three and six months ended June 30, 2024, respectively, compared to $80.3 million and $154.7 million for the three and six months ended June 30, 2023, respectively.

Adjusted net income was $97.6 million and $186.6 million for the three and six months ended June 30, 2024, respectively, compared to $80.3 million and $154.8 million for the three and six months ended June 30, 2023, respectively.

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

The increase in net income in each respective period was further offset by an increase in our interest expense related to

non-recurring costs incurred in connection with the refinancing of the 2020 Notes and 2021 Revolving Credit Facility.

Such amounts are excluded from the calculation of adjusted net income.

Diluted EPS was $1.13 and $2.22 for the three and six months ended June 30, 2024, respectively, compared to $0.95 and $1.83 for the three and six months ended June 30, 2023, respectively.

Adjusted diluted EPS was $1.20 and $2.28 for the three and six months ended June 30, 2024, respectively, compared to $0.95 and $1.83 for the three and six months ended June 30, 2023, respectively.

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

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

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

Non-GAAP Financial Measure Reconciliations For the three months ended June 30, For the six months ended June 30,

2024 2023 2024 2023

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

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Net realized investment losses

Capital markets transaction costs

6,966 — 6,966 —

Adjusted income before tax $ 125,610 $ 104,049 $ 240,177 $ 200,255

Income tax expense on adjustments (1)

1,463 — 1,463 7

Adjusted net income $ 97,582 $ 80,284 $ 186,632 $ 154,768

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Adjusted diluted EPS is defined as adjusted net income divided by adjusted weighted average diluted shares outstanding.

Adjusted weighted average diluted shares outstanding is defined as weighted average diluted shares outstanding, adjusted for changes in the dilutive effect of non-vested shares that would otherwise have occurred had GAAP net income been calculated in accordance with adjusted net income.

calculated in accordance with adjusted net income.

There will be no adjustment to weighted average diluted shares outstanding in the years that non-vested shares are anti-dilutive under GAAP.

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• Capital markets transaction costs .

reinsurance transactions that may vary in their size and timing due to factors such as market opportunities, tax and capital profile, and overall market cycles.

Capital markets transaction costs result from activities that are undertaken to improve our debt profile or enhance our capital position through activities such as debt refinancing and capital markets reinsurance transactions that may vary in their size and timing due to factors such as market opportunities, tax and capital profile, and overall market cycles.

• Other infrequent, unusual or non-operating items .

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

Consolidated balance sheets March 31, 2024 December 31, 2023

Consolidated balance sheets June 30, 2024 December 31, 2023

(In Thousands)

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(1) “Reinsurance funds withheld ” has been reclassified as “Other liabilities ” in the prior period.

Total cash and investments were $2.5 billion as of March 31, 2024 and December 31, 2023.

Cash and investments at March 31, 2024 included $91.9 million held by NMIH.

The increase in total cash and investments reflects the addition of incremental cash provided by operating activities, partially offset by share repurchase activity and an increase in the unrealized loss position of our fixed income portfolio primarily tied to changes in interest rates during the three months ended March 31, 2024.

Premiums receivable was $75.4 million as of March 31, 2024, compared to $76.5 million as of December 31, 2023.

The decrease was primarily driven by the settlement of previously outstanding receivables, partially offset by the growth of our monthly premium policies in force, where premiums are generally paid one month in arrears.

Net deferred policy acquisition costs were $62.8 million as of March 31, 2024, compared to $62.9 million as of December 31, 2023.

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

Reinsurance recoverable was $27.9 million as of March 31, 2024, compared to $27.5 million as of December 31, 2023.

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

Prepaid federal income taxes were $235.3 million as of March 31, 2024 and December 31, 2023.

Total cash and investments were $2.6 billion as of June 30, 2024, compared to $2.5 billion as of December 31, 2023.

Cash and investments at June 30, 2024 included $149.2 million held by NMIH.

Premiums receivable was $76.5 million as of both June 30, 2024 and December 31, 2023.

Premiums receivable represents premiums due on our mortgage insurance policies and may fluctuate based on changes in our monthly premium policies in force, where premiums are generally paid one month in arrears, and the pace of settlement of previously outstanding receivables in a given period.

Net deferred policy acquisition costs were $63.2 million as of June 30, 2024, compared to $62.9 million as of December 31, 2023.

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

Reinsurance recoverable was $27.3 million as of June 30, 2024, compared to $27.5 million as of December 31, 2023.

The decrease was driven by a decline in ceded losses recoverable under our QSR Transactions.

Prepaid federal income taxes were $235.3 million as of June 30, 2024 and December 31, 2023.

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

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

Other assets were $41.2 million as of March 31, 2024, compared to $40.4 million as of December 31, 2023.

The increase was primarily driven by an increase in prepaid expenses, partially offset by a reduction in our right-of-use assets tied to the amortization of the operating lease for our corporate headquarters.

Unearned premiums were $85.8 million as of March 31, 2024, compared to $92.3 million as of December 31, 2023.

The decrease was driven by the amortization of existing unearned premiums through earnings in accordance with the expiration of risk on related single premium policies and the cancellations of other single premium policies, partially offset by single premium policy originations during the three months ended March 31, 2024.

Accounts payable and accrued expenses were $81.8 million as of March 31, 2024, compared to $86.2 million as of December 31, 2023.

The decrease was primarily driven by the settlement of previously accrued compensation expenses and premium taxes payable, partially offset by an increase in accrued and unpaid interest on the Notes which is payable semi-annually in June and December.

Reserve for insurance claims and claim expenses was $127.2 million as of March 31, 2024, compared to $124.0 million as of December 31, 2023.

The increase was primarily driven by the establishment of initial reserves on newly defaulted loans during the three months ended March 31, 2024, as well as an increase in the average case reserve held against previously defaulted loans that aged in their delinquent status.

Other assets were $87.1 million as of June 30, 2024, compared to $40.4 million as of December 31, 2023.

The increase was primarily driven by a $43.0 million increase in unsettled trade receivables due on the maturity of certain investments at June 30, 2024.

Debt was $414.2 million as of June 30, 2024, compared to $397.6 million as of December 31, 2023.

Debt as of June 30, 2024 represented the carrying value of the $425 million aggregate principal amount 2024 Notes which issued in May 2024.

Debt at December 31, 2023 represented the carrying value of the $400 million aggregate principal amount 2020 Notes, which were redeemed in full upon the completion of the 2024 Notes offering.

For more information see Item 1, “ Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4, Debt.”

Unearned premiums were $78.3 million as of June 30, 2024, compared to $92.3 million as of December 31, 2023.

Accounts payable and accrued expenses were $77.9 million as of June 30, 2024, compared to $86.2 million as of December 31, 2023.

The decrease was primarily driven by the settlement of previously accrued compensation expenses and certain vendor payables, partially offset by an increase in current tax and reinsurance premium payables.

Reserve for insurance claims and claim expenses was $125.4 million as of June 30, 2024, compared to $124.0 million as of December 31, 2023.

The increase was primarily driven by the establishment of initial reserves on newly defaulted loans during the six months ended June 30, 2024, as well as an increase in the average case reserve held against previously defaulted loans that aged in their delinquent status.

The increase in the reserves for insurance claims and claim expenses was partially offset by the release of a portion of the reserves we established for anticipated claims payments in prior periods (in connection with cure activity and ongoing analysis of recent loss development trends), as well as the payment of previously reserved claims during the period.

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

Net deferred tax liability was $322.7 million as of March 31, 2024, compared to $301.6 million as of December 31, 2023.

Net deferred tax liability was $348.3 million as of June 30, 2024, compared to $301.6 million as of December 31, 2023.

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

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

Consolidated cash flows For the three months ended March 31,

Consolidated cash flows For the six months ended June 30,

Net cash provided by (used in):

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Financing activities (51,057) (43,377)

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

Net cash provided by operating activities was $111.6 million for the three months ended March 31, 2024, compared to $89.8 million for the three months ended March 31, 2023.

Cash provided by operating activities increased during the three months ended March 31, 2024, primarily due to an increase in our net premium receipts, growth in our investment income and a reduction in technology service costs paid under our long-term IT services agreement with TCS, partially offset by an increase in short-term employee incentive payments, premium taxes paid and net claim settlement costs.

Cash used in investing activities for the three months ended March 31, 2024 and 2023 reflects the purchase of fixed and short-term maturities with cash provided by operating activities, and the reinvestment of coupon payments, maturities and sale proceeds within our investment portfolio.

Cash used in financing activities was $30.8 million for the three months ended March 31, 2024, compared to $17.4 million for the three months ended March 31, 2023.

Net (decrease) increase in cash and cash equivalents

$ (34,060) $ 28,893

Net cash provided by operating activities was $229.4 million for the six months ended June 30, 2024, compared to $191.7 million for the six months ended June 30, 2023.

Cash provided by operating activities increased during the six months ended June 30, 2024, primarily due to an increase in our net premium receipts, growth in our investment income and a reduction in technology service costs paid under our long-term IT services agreement with Tata Consultancy Services, partially offset by an increase in short-term employee incentive payments, premium taxes paid and net claim settlement costs.

Cash used in investing activities for the six months ended June 30, 2024 and 2023 reflects the purchase of fixed and short-term maturities with cash provided by operating activities, and the reinvestment of coupon payments, maturities and sale proceeds within our investment portfolio.

Cash used in financing activities was $51.1 million for the six months ended June 30, 2024, compared to $43.4 million for the six months ended June 30, 2023.

Cash used in financing activities primarily relates to the repurchase of common stock and taxes paid on the net share settlement of equity awards for certain employees.

Cash used in financing activities for the six months ended June 30, 2024 further reflects the net impact of the redemption of the 2020 Notes and issuance of the 2024 Notes during the period.

Liquidity and Capital Resources

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

As of March 31, 2024, NMIH had $91.9 million of cash and investments.

As of June 30, 2024, NMIH had $149.2 million of cash and investments.

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

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

NMIC paid a $96.3 million ordinary course dividend to NMIH on May 30, 2024, representing its full ordinary course dividend capacity payable under Wisconsin insurance laws for the twelve-month period ending December 31, 2024.

NMIH also has access to $250 million of undrawn revolving credit capacity under the 2024 Revolving Credit Facility.

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

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

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

During the three months ended March 31, 2024, NMIH repurchased 0.8 million shares of common stock at a total cost of $25.3 million, including associated costs and applicable taxes.

As of March 31, 2024, NMIH had $151.8 million of repurchase authority remaining.

During the six months ended June 30, 2024, NMIH repurchased 1.7 million shares of common stock at a total cost of $52.4 million, including associated costs and applicable taxes.

As of June 30, 2024, NMIH had $124.9 million of repurchase authority remaining.

On May 21, 2024, NMIH completed the $425 million sale of the 2024 Notes, raising net proceeds of $414.1 million after giving effect to offering expenses and an initial underwriting discount.

Net proceeds from the offering were primarily used to effect the redemption of the $400 million aggregate principal amount 2020 Notes.

In June 2024, NMIH contributed remaining net proceeds of the offering to NMIC.

For more information, see Item 1, “ Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4, Debt.”

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

Among such agreements, the Wisconsin OCI has approved the allocation of interest expense on the Notes and the 2021 Revolving Credit Facility to NMIC to the extent proceeds from such offering and facility are distributed to NMIC or used to repay, redeem or otherwise defease amounts raised by NMIC under prior credit arrangements that have previously been distributed to NMIC.

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

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

Among such agreements, the Wisconsin OCI has approved the allocation of interest expense on the 2024 Notes and 2024 Revolving Credit Facility to NMIC, to the extent proceeds from such offering and facility are contributed to NMIC or used to repay, redeem or otherwise defease amounts raised by NMIC under prior credit arrangements that have previously been distributed to NMIC.

The 2024 Notes mature on August 15, 2029 and bear interest at a rate of 6.00%, payable semi-annually on February 15 and August 15.

The 2024 Revolving Credit Facility matures on May 21, 2029, and accrues 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 SOFR Rate (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.

Borrowings under the 2024 Revolving Credit Facility may be used for general corporate purposes, including to support the growth of our new business production and operations.

Under the 2024 Revolving Credit Facility, NMIH is required to pay a quarterly commitment fee on the average daily undrawn amount of 0.175% to 0.525%, based on the applicable corporate credit rating at the time.

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

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

We are subject to certain covenants under the 2024 Revolving Credit Facility, including:

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

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

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.

NMIC and Re One are subject to certain capital and dividend rules and regulations prescribed by jurisdictions in which they are authorized to operate and by the GSEs.

Under Wisconsin law, NMIC and Re One may pay dividends up to specified levels ( i.e., “ordinary” dividends) with 30 days' prior notice to the Wisconsin OCI.

Under Wisconsin insurance laws, NMIC and Re One may pay dividends up to specified levels ( i.e., “ordinary” dividends) with 30 days' prior notice to the Wisconsin OCI.

Dividends in larger amounts, or “extraordinary” dividends, are subject to the Wisconsin OCI's prior approval.

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

NMIC has the capacity to pay

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

On May 30, 2024, NMIC paid a $96.3 million ordinary course dividend to NMIH, representing its full ordinary course dividend capacity payable under Wisconsin insurance laws for the twelve-month period ending December 31, 2024.

As an approved insurer under PMIERs, NMIC would generally be subject to additional restrictions on its ability to pay dividends to NMIH if it failed to meet the financial requirements prescribed by PMIERs.

Approved insurers that fail to meet the prescribed PMIERs financial requirements are not permitted to pay dividends without prior approval from the GSEs.

Approved insurers that fail to meet the

prescribed PMIERs financial requirements are not permitted to pay dividends without prior approval from the GSEs.

NMIH may require liquidity to fund the capital needs of its insurance subsidiaries.

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

At March 31, 2024, NMIC reported $2,822 million available assets against $1,562 million net risk-based required assets for a $1,260 million “excess” funding position.

At June 30, 2024, NMIC reported $2,828 million available assets against $1,652 million net risk-based required assets for a $1,176 million “excess” funding position.

Available assets at June 30, 2024 excludes $43 million of unsettled trade receivables due on the maturity of certain investments.

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

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

As of March 31, 2024, NMIC had a RTC ratio of 11.7:1 with $31.1 billion of performing primary RIF, net of reinsurance, and $2.6 billion of total statutory capital, including contingency reserves.

As of June 30, 2024, NMIC had a RTC ratio of 12.4:1 with $33.1 billion of performing primary RIF, net of reinsurance, and $2.7 billion of total statutory capital, including contingency reserves.

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

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

At March 31, 2024, NMIC had $2.4 billion of cash and investments, including $76.9 million of cash and cash equivalents.

At June 30, 2024, NMIC had $2.4 billion of cash and investments, including $23.4 million of cash and cash equivalents.

NMIC's principal liquidity demands include funds for the payment of (i) reimbursable holding company expenses, (ii) premiums ceded under our reinsurance transactions (iii) claims payments, and (iv) taxes as due or otherwise deferred through the purchase of tax and loss bonds.

NMIC's cash inflow is generally significantly in excess of its cash outflow in any given period.

During the twelve-month period ended March 31, 2024, NMIC generated $340 million of cash flow from operations and received an additional $240 million of cash flow on the maturity, sale and redemption of securities held in its investment portfolio.

During the twelve-month period ended June 30, 2024, NMIC generated $360 million of cash flow from operations and received an additional $298 million of cash flow on the maturity, sale and redemption of securities held in its investment portfolio.

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

, are of a contractually predetermined amount and due at a contractually predetermined date).

NMIC's only use of cash that develops along an unscheduled path is claims payments.

foreclosure moratorium and other borrower assistance programs (which were broadly applied in response to the COVID-19 pandemic and serve to further extend the default-to-foreclosure-to-claim cycle timeline), we do not expect NMIC to use a meaningful amount of cash to settle claims in the near-term.

NMIC's only use of cash with the potential to develop along an unscheduled path is claims payments.

Given the relatively small size of our current population of defaulted policies, the generally extended duration of the default-to-foreclosure-to-claim cycle, and the potential availability of forbearance, foreclosure moratorium and other borrower assistance programs (which were broadly applied in response to the

COVID-19 pandemic and serve to further extend the default-to-foreclosure-to-claim cycle timeline), we do not expect NMIC to use a meaningful amount of cash to settle claims in the near-term.

Debt and Financial Strength Ratings

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

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

NMIH's 2024 Notes are rated “BBB-” by Fitch and “Baa3” by Moody's.

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

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Our investment portfolio is comprised entirely of fixed maturity instruments.

As of March 31, 2024, the fair value of our investment portfolio was $2.4 billion and we held an additional $139.7 million of cash and cash equivalents.

Pre-tax book yield on the investment portfolio for the three months ended March 31, 2024 was 2.9%.

As of June 30, 2024, the fair value of our investment portfolio was $2.5 billion and we held an additional $62.6 million of cash and cash equivalents.

Pre-tax book yield on the investment portfolio for the six months ended June 30, 2024 was 2.9%.

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

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

Percentage of portfolio's fair value March 31, 2024 December 31, 2023

Percentage of portfolio's fair value June 30, 2024 December 31, 2023

Corporate debt securities 63 % 61 %

Municipal debt securities 24 25

Cash, cash equivalents, and short-term investments 6 5

Treasury securities and obligations of U.S.

government agencies 5 7

Cash, cash equivalents, and short-term investments 6 5

Asset-backed securities 2 2

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Investment portfolio ratings at fair value (1)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Total 100 % 100 %

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(3) Includes +/– ratings.

(4) We held one security with a BB+ rating at March 31, 2024 and December 31, 2023, which is not identifiable in the table due to rounding.

(4) We held one security with a BB+ rating at June 30, 2024 and December 31, 2023, which is not identifiable in the table due to rounding.

All of our investments are rated by one or more nationally recognized statistical rating organizations.

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Investment Securities - Allowance for credit losses

We did not recognize an allowance for credit loss for any security in the investment portfolio as of March 31, 2024 or December 31, 2023, and we did not record any provision for credit loss for investment securities during the three months ended March 31, 2024 or 2023.

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 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.

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.

We did not recognize an allowance for credit loss for any security in the investment portfolio as of June 30, 2024 or December 31, 2023, and we did not record any provision for credit loss for investment securities during the three or six month periods ended June 30, 2024 or 2023.

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.

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.

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.

Critical Accounting Estimates

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis