What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-07-31 · 145 added, 150 removed, 644 unchanged (31% 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 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).

As of September 30, 2024, we had issued master policies with 2,062 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 September 30, 2024, we had $207.5 billion of primary insurance-in-force (IIF) and $55.3 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 June 30, 2024, we had 228 employees.

As of September 30, 2024, we had 229 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 June 30, 2024 were non-

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

refundable under most cancellation scenarios.

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

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

and Oaktown Re V Ltd.

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

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

4 unchanged sentences

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

Effective July 25, 2024, NMIC exercised its optional call to terminate a reinsurance agreement with and the associated insurance-linked notes issued by Oaktown Re III Ltd.

In connection with the termination, 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.

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

Current amounts are

presented as of June 30, 2024.

Current amounts are presented as of September 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)

2019 ILN Transaction July 30, 2019 6/1/2018 – 6/30/2019 $ 326,905 $ 143,430 $ 123,424 $ 121,588

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

8 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 June 30, 2024.

Current amounts are presented as of September 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)

32 unchanged sentences

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

Additionally, under the terms of the QSR Transactions, NMIC may elect to selectively terminate its engagement with individual reinsurers on a run-off basis ( i.e.

Additionally, under the

terms of the QSR Transactions, NMIC may elect to selectively terminate its engagement with individual reinsurers on a run-off basis ( i.e.

, reinsurers continue providing coverage on all risk ceded prior to the termination date, with no new cessions going forward) or cut-off basis ( i.e.

3 unchanged sentences

Portfolio Data

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

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

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

NIW and primary and pool IIF

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

NIW and primary IIF

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

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

(In Millions)

1 unchanged sentence

Single 240 18,297 296 19,473 678 692

Primary 12,503 203,501 11,478 191,306 21,901 20,212

Pool — — — 1,000 — —

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

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.

$ 12,218 $ 207,538 $ 11,334 $ 194,781 $ 34,119 $ 31,546

NIW for the three and nine months ended September 30, 2024 was $12.2 billion and $34.1 billion, respectively, compared to $11.3 billion and $31.5 billion for the three and nine months ended September 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.

Primary IIF increased 7% at September 30, 2024 compared to September 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 85.5% at September 30, 2024 and 86.2% at September 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.

1 unchanged sentence

Primary premiums written and earned

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

For the three months ended September 30, For the nine months ended September 30,

2024 2023 2024 2023

2 unchanged sentences

Net premiums earned 143,343 130,089 421,168 377,828

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.

Net premiums written increased 11% and 13%, respectively, and net premiums earned increased 10% and 11%, respectively, during the three and nine months ended September 30, 2024 compared to the three and nine months ended September 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

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

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

As of and for the six months ended June 30,

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

2024 2023 2024 2023

8 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 June 30,

Primary IIF and RIF As of September 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 June 30, For the six months ended June 30,

Primary NIW by FICO For the three months ended September 30, For the nine months ended September 30,

2024 2023 2024 2023

8 unchanged sentences

Weighted average FICO 757 758 757 761

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

Primary NIW by LTV For the three months ended September 30, For the nine months ended September 30,

2024 2023 2024 2023

6 unchanged sentences

Weighted average LTV 92.3 % 92.4 % 92.3 % 92.1 %

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

Primary NIW by purchase/refinance mix For the three months ended September 30, For the nine months ended September 30,

2024 2023 2024 2023

4 unchanged sentences

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 June 30,

Primary IIF by FICO As of September 30,

($ Values In Millions)

6 unchanged sentences

Total $ 207,538 100 % $ 194,781 100 %

Primary RIF by FICO As of June 30,

Primary RIF by FICO As of September 30,

($ Values In Millions)

6 unchanged sentences

Total $ 55,253 100 % $ 51,011 100 %

Primary IIF by LTV As of June 30,

Primary IIF by LTV As of September 30,

($ Values In Millions)

4 unchanged sentences

Total $ 207,538 100 % $ 194,781 100 %

Primary RIF by LTV As of June 30,

Primary RIF by LTV As of September 30,

($ Values In Millions)

4 unchanged sentences

Total $ 55,253 100 % $ 51,011 100 %

Primary RIF by Loan Type As of June 30,

Primary RIF by Loan Type As of September 30,

Fixed 98 % 98 %

3 unchanged sentences

Total 100 % 100 %

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

As of June 30, 2024

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

As of September 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 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,

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

Top 10 primary RIF by state As of September 30,

California 10.1 % 10.3 %

6 unchanged sentences

Pennsylvania 3.4 3.4

Colorado 3.2 3.4

Maryland 3.1 3.3

North Carolina 3.1 3.0

Total 51.6 % 52.0 %

4 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.

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 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 June 30, For the six months ended June 30,

For the three months ended September 30, For the nine months ended September 30,

2024 2023 2024 2023

14 unchanged sentences

Current year (2)

180 65 180 119

Prior years (3)

9 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 $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.

Amounts are presented net of reinsurance and included $63.2 million attributed to net case reserves and $7.0 million attributed to net IBNR reserves for the nine months ended September 30, 2024 and $54.4 million attributed to net case reserves and $5.8 million attributed to net IBNR reserves for the nine months ended September 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 $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.

Amounts are presented net of reinsurance and included $49.8 million attributed to net case reserves and $6.3 million attributed to net IBNR reserves for the nine months ended September 30, 2024 and $41.1 million attributed to net case reserves and $4.5 million attributed to net IBNR reserves for the nine months ended September 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 $61.4 million related to prior year defaults remained as of June 30, 2024.

Gross reserves of $45.1 million related to prior year defaults remained as of September 30, 2024.

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

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

For the three months ended September 30, For the nine months ended September 30,

2024 2023 2024 2023

5 unchanged sentences

Ending default inventory 5,712 4,594 5,712 4,594

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.

Ending default inventory increased from September 30, 2023 to September 30, 2024, primarily due to the growth and seasoning of our insured portfolio, partially 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 June 30, For the six months ended June 30,

For the three months ended September 30, For the nine months ended September 30,

2024 2023 2024 2023

1 unchanged sentence

Number of claims paid (1)

67 62 168 129

Total amount paid for claims $ 2,692 $ 1,402 $ 5,714 $ 3,132

2 unchanged sentences

64 % 46 % 58 % 51 %

(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.

(1) Count includes 21 and 56 claims settled without payment during the three and nine months ended September 30, 2024, respectively, and 23 and 47 claims settled without payment during the three and nine months ended September 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 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.

We paid 67 and 168 claims during the three and nine months ended September 30, 2024, respectively, and 62 and 129 claims during the three and nine months ended September 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 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 was 64% and 58% for the three and nine months ended September 30, 2024, respectively, compared to 46% and 51% for the three and nine months ended September 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.

3 unchanged sentences

Average reserve per default:

As of June 30,

As of September 30,

(In Thousands)

3 unchanged sentences

(2) Amount includes claims adjustment expenses.

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.

Average reserve per default decreased from September 30, 2023 to September 30, 2024, primarily due to changes in observed and forecasted housing market conditions and macroeconomic factors, as well as changes in the composition of our default inventory as measured by the size, vintage and current estimated LTV of defaulted loans between the measurement dates.

GSE Oversight

13 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 June 30,

As of September 30,

(In Thousands)

2 unchanged sentences

1,735,790 1,414,233

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

Available assets were $3.0 billion at September 30, 2024, compared to $2.6 billion at September 30, 2023.

The $404 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.

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.

Net risk-based required assets were $1.7 billion at September 30, 2024, compared to $1.4 billion at September 30, 2023.

The $322 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.

On August 21, 2024, the GSEs and FHFA updated PMIERs to revise the Available Asset credit mortgage insurers will receive for certain assets based on several factors, including asset class and credit rating.

The updated PMIERs will take effect on a phased basis beginning March 31, 2025 and will be fully implemented on September 30, 2026.

We do not expect the updated PMIERs to have a material impact on our available assets and risk-based required assets, and we expect to remain in full compliance with the existing and updated PMIERs, as applicable, prior to, on and after March 31, 2025.

Consolidated Results of Operations

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

Consolidated statements of operations For the three months ended September 30, For the nine months ended September 30,

2024 2023 2024 2023

21 unchanged sentences

27.5 % 25.0 % 24.1 % 25.2 %

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

For the three months ended September 30, For the nine months ended September 30,

Non-GAAP financial measures (3)

6 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.

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

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.

Net premiums earned were $143.3 million and $421.2 million for the three and nine months ended September 30, 2024, respectively, compared to $130.1 million and $377.8 million for the three and nine months ended September 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.

Net investment income was $22.5 million and $62.6 million for the three and nine months ended September 30, 2024, respectively, compared to $17.9 million and $49.3 million for the three and nine months ended September 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 were $0.3 million and $0.7 million for the three and nine months ended September 30, 2024, respectively, compared to $0.2 million and $0.6 million for the three and nine months ended September 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 $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.

Insurance claims and claim expenses were $10.3 million and $14.3 million for the three and nine months ended September 30, 2024, respectively, compared to $4.8 million and $14.4 million for the three and nine months ended September 30, 2023, respectively.

The increase in insurance claims and claim expenses for the three months ended September 30, 2024 was primarily driven by the establishment of initial reserves on newly defaulted loans, as well as an increase in the average case reserve held against previously defaulted loans that have aged in their delinquency status, and was partially offset by the release of a portion of the reserves we established for anticipated claims payments in prior periods in connection with cure activity and ongoing analysis of recent loss development trends.

Underwriting and operating expenses were $29.2 million and $87.3 million for the three and nine months ended September 30, 2024, respectively, compared to $27.7 million and $81.0 million for the three and nine months ended September 30, 2023, respectively.

The increase in underwriting and operating expenses in each respective period primarily reflects an increase in employee compensation costs and an adjustment to the pace of amortization of certain deferred policy acquisition 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 $0.5 million for the three and nine months ended September 30, 2024, respectively, compared to $0.2 million and $0.6 million for the three and nine months ended September 30, 2023, respectively.

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 $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.

Interest expense was $7.1 million and $29.8 million for the three and nine months ended September 30, 2024, respectively, compared to $8.1 million and $24.1 million for the three and nine months ended September 30, 2023, respectively.

Interest expense for the three months ended September 30, 2024 reflects the lower interest rate achieved on the 2024 Notes as compared to the 2020 Notes they refinanced.

Interest expense for the nine months ended September 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 $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.

Income tax expense was $26.5 million and $78.6 million for the three and nine months ended September 30, 2024, respectively, compared to $23.3 million and $68.8 million for the three and nine months ended September 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.

Our effective tax rate on pre-tax income was 22.2% and 22.3% for the three and nine months ended September 30, 2024, respectively, compared to 21.8% and 22.4% for the three and nine months ended September 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 and six months ended June 30, 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 nine months ended September 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 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.

Net income was $92.8 million and $273.9 million for the three and nine months ended September 30, 2024, respectively, compared to $84.0 million and $238.7 million for the three and nine months ended September 30, 2023, respectively.

Adjusted net income was $92.8 million and $279.5 million for the three and nine months ended September 30, 2024, respectively, compared to $84.0 million and $238.7 million for the three and nine months ended September 30, 2023, respectively.

Net income and adjusted net income increased in each respective period primarily due to growth in our total revenues, partially offset by increases in our income tax expense and underwriting and operating expenses.

Net income for the nine months ended September 30, 2024 includes 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 EPS was $1.15 and $3.36 for the three and nine months ended September 30, 2024, respectively, compared to $1.00 and $2.83 for the three and nine months ended September 30, 2023, respectively.

Adjusted diluted EPS was $1.15 and $3.43 for the three and nine months ended September 30, 2024, respectively, compared to $1.00 and $2.83 for the three and nine months ended September 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 June 30, For the six months ended June 30,

Non-GAAP Financial Measure Reconciliations For the three months ended September 30, For the nine months ended September 30,

2024 2023 2024 2023

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Capital markets transaction costs

6,966 — 6,966 —

Adjusted income before tax $ 119,337 $ 107,300 $ 359,514 $ 307,555

Income tax expense on adjustments (1)

1,463 — 1,463 7

Adjusted net income $ 92,818 $ 83,955 $ 279,450 $ 238,723

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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.

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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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 June 30, 2024 December 31, 2023

Consolidated balance sheets September 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 $2.6 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.

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 six months ended June 30, 2024.

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.

Total cash and investments were $2.8 billion as of September 30, 2024, compared to $2.5 billion as of December 31, 2023.

Cash and investments at September 30, 2024 included $148.3 million held by NMIH.

The increase in total cash and investments reflects the addition of incremental cash provided by operating activities and a decrease in the unrealized loss position of our fixed income portfolio primarily tied to changes in interest rates, partially offset by share repurchase activity during the nine months ended September 30, 2024.

Premiums receivable was $78.5 million as of September 30, 2024, compared to $76.5 million as of December 31, 2023.

Net deferred policy acquisition costs were $63.8 million as of September 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.

Reinsurance recoverable was $29.2 million as of September 30, 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 September 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 $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.

Other assets were $44.5 million as of September 30, 2024, compared to $40.4 million as of December 31, 2023.

The increase was primarily driven by an increase in accrued investment income and prepaid expenses, as well as the capitalization of deferred debt issuance costs incurred in connection with the establishment of the 2024 Revolving Credit Facility, partially offset by a reduction in our right-of-use assets tied to the amortization of the operating lease for our corporate headquarters.

Debt was $414.7 million as of September 30, 2024, compared to $397.6 million as of December 31, 2023.

Debt as of September 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.

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 six months ended June 30, 2024.

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.

Unearned premiums were $71.6 million as of September 30, 2024, compared to $92.3 million as of December 31, 2023.

Accounts payable and accrued expenses were $111.0 million as of September 30, 2024, compared to $86.2 million as of December 31, 2023.

The increase was primarily driven by an increase in unsettled trade payables related to the purchase of certain investment securities at September 30, 2024, as well as accrued and unpaid interest on the 2024 Notes, which is payable semi-annually beginning in February 2025, and was partially offset by the settlement of certain contractual payables and accrued expenses during the nine months ended September 30, 2024.

Reserve for insurance claims and claim expenses was $135.5 million as of September 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 nine months ended September 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 $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.

Net deferred tax liability was $380.9 million as of September 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, as well as the decrease in unrealized losses recorded in other comprehensive income.

For further information regarding income taxes and their impact on our results of operations and financial position, see Item 1, “ Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 8, Income Taxes .”

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

Consolidated cash flows For the six months ended June 30,

Consolidated cash flows For the nine months ended September 30,

Net cash provided by (used in):

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Financing activities (67,997) (62,621)

Net (decrease) increase in cash and cash equivalents

Net increase in cash and cash equivalents

$ 36,630 $ 132,037

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.

Net cash provided by operating activities was $357.8 million for the nine months ended September 30, 2024, compared to $312.6 million for the nine months ended September 30, 2023.

Cash provided by operating activities increased during the nine months ended September 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 taxes paid, short-term employee incentive payments and net claim settlement costs.

Cash used in investing activities for the nine months ended September 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 $68.0 million for the nine months ended September 30, 2024, compared to $62.6 million for the nine months ended September 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.

Cash used in financing activities for the nine months ended September 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 June 30, 2024, NMIH had $149.2 million of cash and investments.

As of September 30, 2024, NMIH had $148.3 million of cash and investments.

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

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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 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.

During the nine months ended September 30, 2024, NMIH repurchased 2.1 million shares of common stock at a total cost of $69.4 million, including associated costs and applicable taxes.

As of September 30, 2024, NMIH had $108.1 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.

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

As of September 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 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 were in compliance with all covenants at September 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 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.

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.

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

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

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

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

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Under NMIC's ILN and XOL Transactions, it generally receives credit for the PMIERs risk-based required asset amount on ceded RIF to the extent such requirement is within the subordinated coverage (excess of loss detachment threshold) afforded by the transaction.

The updated PMIERs will take effect on a phased basis beginning March 31, 2025 and will be fully implemented on September 30, 2026.

We do not expect the updated PMIERs to have a material impact on our available assets and risk-based required assets , and we expect to remain in full compliance with the existing and updated PMIERs, as applicable, prior to, on and after March 31, 2025.

NMIC is also subject to state regulatory minimum capital requirements based on its RIF.

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

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.

As of September 30, 2024, NMIC had a RTC ratio of 12.6:1 with $35.0 billion of performing primary RIF, net of reinsurance, and $2.8 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 June 30, 2024, NMIC had $2.4 billion of cash and investments, including $23.4 million of cash and cash equivalents.

At September 30, 2024, NMIC had $2.7 billion of cash and investments, including $92.8 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 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.

During the twelve-month period ended September 30, 2024, NMIC generated $370 million of cash flow from

operations and received an additional $214 million of cash flow on the maturity and redemption of securities held in its investment portfolio.

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

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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.

NMIC's financial strength is rated “A-” by Fitch Ratings (Fitch) and “A3” by Moody's.

In October 2024, S&P upgraded NMIC's financial strength rating from “BBB+” to “A-”.

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

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Our investment portfolio is comprised entirely of fixed maturity instruments.

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%.

As of September 30, 2024, the fair value of our investment portfolio was $2.7 billion and we held an additional $133.3 million of cash and cash equivalents.

Pre-tax book yield on the investment portfolio for the nine months ended September 30, 2024 was 3.0%.

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 June 30, 2024 December 31, 2023

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

Corporate debt securities 64 % 61 %

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Investment portfolio ratings at fair value (1)

June 30, 2024 December 31, 2023

September 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 June 30, 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 September 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 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.

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

As of September 30, 2024, the investment portfolio had gross unrealized losses of $128.0 million, of which $127.5 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 September 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 September 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 September 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