What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-14 compared with 2024-02-15 · 163 added, 210 removed, 740 unchanged (34% of the section changed)

26 unchanged sentences

Macroeconomic Developments

Macroeconomic factors, including resurgent inflation, elevated interest rates, flagging consumer confidence and increasing jobless claims could have a pronounced impact on the housing market, the mortgage insurance industry and our business in future periods.

Macroeconomic factors, including persistent inflation, elevated interest rates, flagging consumer confidence and increasing jobless claims could have a pronounced impact on the housing market, the mortgage insurance industry and our business in future periods.

A marked decline in housing demand, a significant and protracted decrease in house prices or a sustained increase in unemployment could reduce the pace of new business activity in the private mortgage insurance market and negatively impact our future NIW volume, or contribute to an increase in our future default and claim experience.

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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.

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

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

The respective reinsurance coverage amounts provided by the Oaktown Re Vehicles decrease over a 12.5-year period as the underlying insured mortgages are amortized or repaid, and/or the mortgage insurance coverage is canceled.

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

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

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

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

NMIC holds optional termination rights under each ILN Transaction, including, among others, an optional call feature

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

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

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

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

Effective July 25, 2024 and December 27, 2024, NMIC exercised its optional termination rights to terminate its previously outstanding reinsurance agreements with and associated insurance-linked-notes issued by Oaktown Re III Ltd.

and by Oaktown Re V Ltd., respectively.

In connection with the terminations, NMIC's excess of loss reinsurance agreements with Oaktown Re III Ltd.

and Oaktown Re V Ltd.

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

and Oaktown Re V Ltd.

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

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

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

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

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

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

2021-1 ILN Transaction April 27, 2021 10/1/2020 – 3/31/2021 (2)

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

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

(2) Approximately 1% of the production covered by the 2021-1 ILN Transaction has coverage reporting dates between July 1, 2019 and September 30, 2020.

1 unchanged sentence

Traditional Reinsurance

NMIC is party to five excess-of-loss reinsurance agreements with broad panels of third-party reinsurers – the 2022-1 XOL Transaction, effective April 1, 2022, the 2022-2 XOL Transaction, effective July 1, 2022, the 2022-3 XOL Transaction, effective October 1, 2022, the 2023-1 XOL Transaction, effective January 1, 2023, and the 2023-2 XOL Transaction, effective July 1, 2023 – which we refer to collectively as the XOL Transactions.

NMIC is party to six excess-of-loss reinsurance agreements with broad panels of third-party reinsurers – the 2022-1 XOL Transaction, effective April 1, 2022, the 2022-2 XOL Transaction, effective July 1, 2022, the 2022-3 XOL Transaction, effective October 1, 2022, the 2023-1 XOL Transaction, effective January 1, 2023, the 2023-2 XOL Transaction, effective July 1, 2023, and the 2024 XOL Transaction, effective January 1, 2024 – which we refer to collectively as the XOL Transactions.

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

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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 XOL Transaction.

Current amounts are

presented as of December 31, 2023.

Current amounts are presented as of December 31, 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)

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2022-3 XOL Transaction October 1, 2022 7/1/2022 – 9/30/2022 96,779 83,634 106,265 105,417

96,779 96,197 106,265 106,265

2023-1 XOL Transaction

January 1, 2023 10/1/2022 – 6/30/2023

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

2023-1 XOL Transaction January 1, 2023 10/1/2022 – 6/30/2023 89,864 82,315 146,513 145,716

2023-2 XOL Transaction

July 1, 2023 7/1/2023 – 12/31/2023 100,777 95,304 136,875 136,715

2024 XOL Transaction (4)

January 1, 2024 1/1/2024 – 12/31/2024

162,500 162,500 312,172 312,172

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

(4) The 2024 XOL Transaction provides coverage for production generated between January 1, 2024 and December 31, 2024.

The current reinsurance coverage and current first layer retained loss will decrease in future periods to the extent the PMIERs minimum required assets of the covered pool declines.

In October 2024, NMIC entered into two sequential excess-of-loss reinsurance treaties that will provide aggregate coverage for mortgage insurance policies to be written in 2025 and 2026 (the 2025 XOL Transaction and 2026 XOL Transaction, respectively).

Under the terms of each agreement, NMIC will retain a first layer of aggregate loss exposure on covered policies and its reinsurance counterparties will then provide second layer loss protection up to a defined reinsurance coverage amount (of $283.8 million for the 2025 XOL Transaction and $164.2 million for the 2026 XOL Transaction).

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

Quota Share Reinsurance

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

NMIC is party to eight quota share reinsurance treaties – the 2016 QSR Transaction, effective September 1, 2016 and as modified April 1, 2019, the 2018 QSR Transaction, effective January 1, 2018, the 2020 QSR Transaction, effective April 1, 2020 and as amended January 1, 2024, the 2021 QSR Transaction, effective January 1, 2021, the 2022 QSR Transaction, effective October 1, 2021, the 2022 Seasoned QSR Transaction, effective July 1, 2022, the 2023 QSR Transaction, effective January 1, 2023 and the 2024 QSR Transaction, effective January 1, 2024 – which we refer to collectively as the QSR Transactions.

Under each of the QSR Transactions, NMIC cedes a proportional share of its risk on eligible policies to panels of third-party reinsurance providers.

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Under the terms of the 2016 QSR Transaction, NMIC cedes premiums written related to 20.5% of the risk on eligible primary policies written for all periods through December 31, 2017 in exchange for reimbursement of ceded claims and claim expenses on covered policies, a 20% ceding commission, and a profit commission of up to 60% that varies directly and inversely with ceded claims.

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

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

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

Under the terms of the 2020 QSR Transaction, NMIC cedes premiums earned related to 21% of the risk on eligible policies written from April 1, 2020 through December 31, 2020, in exchange for reimbursement of ceded claims and claim expenses on covered po licies, a 20% ceding commission, and a profit commission of up to 50% that varies directly and inversely with ceded claims.

Under the terms of the 2020 QSR Transaction, NMIC cedes premiums earned related to 21% of the risk on eligible policies written between April 1, 2020 and December 31, 2020, in exchange for reimbursement of ceded claims and claim expenses on covered po licies, a 36% ceding commission, and a profit commission of up to 50% that varies directly and inversely with ceded claims.

Under the terms of the 2021 QSR Transaction, NMIC cedes premiums earned related to 22.5% of the risk on eligible policies written in 2021 (subject to an aggregate risk written limit which was exhausted on October 30, 2021), in exchange for reimbursement of ceded claims and claim expenses on covered policies, a 20% ceding commission, and a profit commission of up to 57.5% that varies directly and inversely with ceded claims.

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

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

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

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

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

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

Under the terms of the 2022 Seasoned QSR Transaction, NMIC cedes premiums earned related to 95% of the net risk on eligible policies primarily for a seasoned pool of mortgage insurance policies originated between January 1, 2013 to December 31, 2016 and July 1, 2019 to March 31, 2020, that had previously been covered under the retired Oaktown Re Ltd.

and Oaktown Re IV Ltd.

reinsurance transactions, after the consideration of coverage provided by other QSR Transactions, in exchange for reimbursement of ceded claims and claim expenses on covered policies, a 35% ceding commission, and a profit commission of up to 55% that varies directly and inversely with ceded claims.

Under the terms of the 2023 QSR Transaction, NMIC cedes premiums earned related to 20% of the risk on eligible policies written 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 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.

1 unchanged sentence

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

Effective April 1, 2019, NMIC elected to terminate its engagement with one reinsurer under the 2016 QSR Transaction on a cut-off basis.

In connection with the termination, NMIC recaptured approximately $500 million of previously ceded primary RIF and stopped ceding new premiums written with respect to the recaptured risk.

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

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

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

Effective January 1, 2025, NMIC terminated its engagement with one reinsurer under the 2016, 2018 and 2021 QSR Transactions by mutual agreement on a cut-off basis with no termination fees.

Upon termination, NMIC recaptured approximately $100 million of previously ceded primary RIF.

NMIC will stop ceding new premiums with respect to the recaptured risk and ceded premiums under each agreement will decrease by less than 1% in future periods.

In October 2024, NMIC entered into three sequential quota share reinsurance treaties that will provide coverage for mortgage insurance policies to be written in 2025, 2026 and 2027 (the 2025 QSR Transaction, 2026 QSR Transaction and 2027 QSR Transaction, respectively).

Under the terms of the 2025 and 2026 QSR Transactions, NMIC will cede premiums earned related to 20% of the risk on eligible policies written between January 1, 2025 and December 31, 2026, in exchange for reimbursement of ceded claims and claims 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 2027 QSR Transaction, NMIC will cede premiums earned related to 12% of the risk on eligible policies written between January 1, 2027 and December 31, 2027, in exchange for reimbursement of ceded claims and claims expenses on covered policies, a 20% ceding commission, and a profit commission of up to 61% that varies directly and inversely with ceded claims.

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

Portfolio Data

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

The following table presents NIW and 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.

Primary and pool IIF and NIW As of and for the years ended December 31,

As of and for the years ended December 31,

2024 2023 2022

IIF NIW IIF NIW IIF NIW

(In Millions)

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Total $ 46,044 $ 210,183 $ 40,473 $ 197,029 $ 58,734 $ 185,017

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

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

Total IIF increased 6% at December 31, 2023 compared to December 31, 2022, which in turn grew 20% compared to December 31, 2021, primarily due to the NIW generated between such measurement dates, partially offset by the run-off of in-force policies.

Our persistency rate improved to 86% at December 31, 2023, compared to 84% at December 31, 2022 and 64% at December 31, 2021.

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

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

NIW for the year ended December 31, 2024 increased 14% compared to the year ended December 31, 2023, primarily due to growth in our customer franchise and market presence tied to the increased penetration of existing customer accounts and new customer activations.

NIW for the year ended December 31, 2023 decreased 31% compared to the year ended December 31, 2022, primarily due to a decline in the size of the total mortgage insurance market.

Primary IIF increased 7% at December 31, 2024 compared to December 31, 2023, which in turn grew 6% compared to December 31, 2022, 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%, 86% and 84% at December 31, 2024, 2023 and 2022, respectively.

Persistency 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 and pool premiums written and earned For the years ended December 31,

Net premiums written and earned

For the years ended December 31,

2024 2023 2022

2 unchanged sentences

Net premiums earned 564,688 510,768 475,266

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

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

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

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

Pool premiums written and earned for the years ended December 31, 2023, 2022 and 2021 were $0.7 million, $1.2 million and $1.6 million, respectively, before giving effect to the 2016 QSR Transaction, under which all of our written and earned pool premiums are ceded.

A portion of our ceded pool premiums written and earned are recouped through profit commission.

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

Net premiums written increased 12% and 4%, respectively, and net premiums earned increased 11% and 7%, respectively, during the years ended December 31, 2024 and 2023, primarily driven by growth in our monthly IIF and monthly pay premiums receipts.

The sequential increase in net premiums earned during each successive year was partially offset by a decline in the contribution from single premium policy cancellations period-to-period.

Portfolio Statistics

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

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

Geographic Dispersion

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Pennsylvania 3.4 3.4 3.4

Maryland 3.3 3.4 3.7

Colorado 3.2 3.5 3.8

Ohio 3.3 3.0 2.7

North Carolina 3.2 3.0 3.0

Total 51.4 % 51.9 % 52.6 %

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Reserves are also ceded to reinsurers under the QSR Transactions, ILN Transactions and XOL Transactions as applicable under each treaty.

We have not yet ceded reserves under any of the ILN Transactions or XOL Transactions as incurred claims and claim expenses on each respective reference pool remain within our retained coverage layer of each transaction.

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

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

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

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

The actual claims we incur as our portfolio matures are difficult to predict and depend on the specific characteristics of our current in-force book (including the credit score and DTI ratio of the borrower, the LTV ratio of the mortgage and geographic concentrations, among others), as well as the risk profile of new business we write in the future.

concentrations, among others), as well as the risk profile of new business we write in the future.

In addition, claims experience will be affected by macroeconomic factors such as housing prices, interest rates, unemployment rates and other events, such as natural disasters or global pandemics, and any federal, state or local governmental response thereto.

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

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

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

For the years ended December 31,

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Add claims incurred:

Claims and claim expenses (benefits) incurred:

Claims and claim expenses incurred:

Current year (2)

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

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

The “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.

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rescission and claims denied

(39) (17) (6)

Ending default inventory 6,642 5,099 4,449

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

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

The sequential increase in ending default inventory at each successive year end was primarily due to the growth and seasoning of our insured portfolio, partially offset by cure activity within our default population during the intervening periods.

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

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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.

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

Such programs were largely phased out by 2023.

Our claims severity for the years ended December 31, 2024, 2023 and 2022 was 61%, 55% and 49%, respectively.

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

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

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

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:

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(2) Amount includes claims adjustment expenses.

Average reserve per default decreased from December 31, 2023 to December 31, 2024, primarily due to an increase in the proportion of defaults that trace to storm-related activity year-on-year.

We generally observe that storm-related defaults cure at higher rates than other similarly situated loans in default (in non-disaster zones) and scale our reserves accordingly.

Average reserves per default were further impacted by other changes in the composition of our default inventory, as well as changes in observed and forecasted housing market conditions and macroeconomic factors between the measurement dates.

Average reserve per default increased from December 31, 2022 to December 31, 2023, primarily due to changes in the composition of our default inventory as measured by the size, vintage and current estimated LTV of defaulted loans, as well as the proportion of such loans benefiting from a forbearance program granted in response to a financial hardship related to COVID-19.

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

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

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

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

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

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

Default experience is also subject to seasonality due to seasonal patterns in household cash flows, with certain borrowers benefiting from inflows related to bonus payments and tax refunds in the first half of the year and certain borrowers more strained in the second half of the year given the lack of these inflows and increased discretionary spending through the year-end holiday season.

Housing market conditions and macroeconomic factors may serve to mute or magnify these seasonal default trends.

GSE Oversight

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We continuously monitor NMIC's compliance with the PMIERs.

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

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 December 31,

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Available assets $ 3,108,211 $ 2,717,804 $ 2,378,627

Risk-based required assets

Net risk-based required assets

1,828,807 1,516,140 1,203,708

1 unchanged sentence

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

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

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

Net risk-based required assets were $1.8 billion at December 31, 2024, compared to $1.5 billion at December 31, 2023 and $1.2 billion at December 31, 2022.

The increase in the net r isk-based required asset amount between the dates presented was primarily due to the growth in our gross RIF and aggregate gross risk-based required asset amount, partially offset by risk ceded under our third-party reinsurance agreements.

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

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

LIBOR Transition

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

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

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

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

Consolidated Results of Operations

Consolidated statements of operations For the years ended December 31,

2023 2022 2021

Consolidated statements of operations For the years ended December 31, $ Change

2024 2023 2022 2024 vs.

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

1 unchanged sentence

Net investment income 85,316 67,512 46,406 17,804 26 21,106 45

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

Net realized investment gains (losses) 23 (33) 481 56 (170) (514) (107)

Other revenues 944 756 1,192 188 25 (436) (37)

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Interest expense 36,896 32,212 32,163 4,684 15 49 —

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

Gain from change in fair value of warrant liability — — (1,113) — NM (4)

Total expenses 187,560 166,300 146,040 21,260 13 20,260 14

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26.6 % 26.1 % 24.0 %

For the years ended December 31, $ Change

Non-GAAP financial measures (5)

2023 2022 2021

2024 2023 2022 2024 vs.

($ In Thousands, except for per share data)

5 unchanged sentences

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

(4) Not meaningful

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

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

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

Net investment income was $67.5 million, $46.4 million and $38.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

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

Other revenues represent underwriting fee revenue generated by our subsidiary, NMIS, which provides outsourced

loan review services to mortgage loan originators.

The sequential decrease in other revenues during each successive year reflects a decline in NMIS' outsourced loan review volume.

Net premiums earned increased sequentially during each successive year, primarily driven by growth in our monthly IIF and monthly pay premium receipts, partially offset by a decline in the contribution from single premium policy cancellations.

Net premiums earned for the year ended December 31, 2024 further benefited from a year-on-year decline in the total premiums ceded under our reinsurance treaties.

Net investment income increased sequentially during each successive year, 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 represent underwriting fee revenue generated by our subsidiary, NMIS, which provides outsourced loan review services to mortgage loan originators.

Changes in other revenues primarily reflect changes in NMIS' outsourced loan review volume.

Amounts recognized in other revenues generally correspond with amounts incurred as service expenses for outsourced loan review activities in the same periods.

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

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

The increase in insurance claims and claim expenses for the year ended December 31, 2023 was primarily driven by the establishment of initial reserves on newly defaulted loans, as well as an increase in the average case reserve held against previously defaulted loans that aged in their delinquency status, partially offset by the release of a portion of the reserves we established for anticipated claims payments in prior periods in connection with cure activity and ongoing analysis of loss development trends.

We recognized insurance claims and claim benefits for the year ended December 31, 2022 as the release of a portion of the reserves we established for anticipated claims payments in prior periods in connection with cure activity and ongoing analysis of loss development trends exceeded the initial reserves established on newly defaulted loans and the increase in reserves held against previously defaulted loans that aged in their delinquency status during the period.

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

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

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

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

Insurance claims and claim expenses increased during each successive year, primarily driven by an increase in the number of newly defaulted loans that emerged in each successive period and the establishment of initial reserves against such loans, as well as an increase in the average case reserve held against previously defaulted loans that aged in their delinquency status through the periods, 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 increased during the year ended December 31, 2024, primarily reflecting an increase in employee compensation costs and an adjustment to the pace of amortization of deferred policy acquisition costs, partially offset by an increase in ceding commissions received under our QSR Transactions and a decline in certain technology expenses.

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

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

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

Changes in service expenses primarily reflect changes in NMIS' outsourced loan review volume.

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

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

Interest expense primarily reflects the carrying costs of the notes.

Interest expense for the year ended December 31, 2024 includes $7.0 million of non-recurring costs related to the refinancing of the 2020 Notes and 2021 Revolving Credit Facility with the 2024 Notes and 2024 Revolving Credit Facility.

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

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

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

Income tax expense increased sequentially during each successive year and was primarily driven by the growth in our pre-tax income.

taxpayer, we are subject to a U.S.

1 unchanged sentence

Our effective income tax rate on pre-tax income was 22.3%, 22.0% and 22.4% for the years ended December 31, 2024, 2023 and 2022, respectively.

Our effective tax rate increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to the limitation on deductible compensation for covered employees under Section 162(m) of the IRC.

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

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

For further information regarding income taxes and their impact on our results of operations and financial position, see Item 8, “ Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 11, Income Taxes.

Net income was $322.1 million, $292.9 million and $231.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

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

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

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

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

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

Net income and adjusted net income increased in each successive year primarily due to growth in our total revenues, partially offset by increases in our insurance claims and claim expenses and income tax expenses.

The sequential trends in net income and adjusted net income were further impacted by changes in underwriting and operating expenses.

Net income for the year ended December 31, 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 and adjusted diluted EPS increased during each successive year 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 years ended December 31,

2023 2022 2021

Non-GAAP Financial Measure Reconciliations For the years ended December 31, $ Change

2024 2023 2022 2024 vs.

($ In Thousands, except for per share data)

2 unchanged sentences

Net income $ 360,106 $ 322,110 $ 292,902 $ 37,996 12 % $ 29,208 10 %

Net realized investment losses (gains)

Net realized investment (gains) losses

(23) 33 (481) (56) (170) 514 (107)

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

Capital market transaction costs — 205 3,979

Other infrequent, unusual or non-operating items

Gain from change in fair value warrant liability — — (1,113) — NM (2)

Capital market transaction costs 6,966 — 205 6,966 NM (2)

Adjusted income before tax $ 470,354 $ 412,736 $ 375,916 $ 57,618 14 % $ 36,820 10 %

Income tax expense (benefit) on adjustments (1)

1,458 7 (58) 1,451 NM (2)

Adjusted net income $ 365,591 $ 322,136 $ 291,571 $ 43,455 13 % $ 30,565 10 %

3 unchanged sentences

federal corporate income tax rate of 21%, except for those items that are not eligible for an income tax deduction.

(2) Not meaningful.

Explanation and Reconciliation of Our Use of Non-GAAP Financial Measures

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

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

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

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

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

Adjustments to components of pre-tax income are tax effected using the applicable federal statutory tax rate for the respective periods.

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These adjustments, and the reasons for their treatment, are described below.

• Net realized investment gains and losses .

The recognition of net realized investment gains or losses can vary significantly across periods as the timing is highly discretionary and is influenced by factors such as market opportunities, tax and capital profile, and overall market cycles that do not reflect our current period operating results.

• Change in fair value of warrant liability .

1 unchanged sentence

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

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

Furthermore, all unexercised warrants expired in April 2022 and, as such, no change in fair value has been recognized in any reporting periods thereafter.

We believe trends in our operating performance can be more clearly identified by excluding fluctuations related to the change in fair value of our warrant liability.

1 unchanged sentence

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.

• Net realized investment gains and losses .

The recognition of the net realized investment gains or losses can vary significantly across periods as the timing is highly discretionary and is influenced by factors such as market opportunities, tax and capital profile, and overall market cycles that do not reflect our current period operating results.

• Other infrequent, unusual or non-operating items .

3 unchanged sentences

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 December 31, 2023 December 31, 2022

Consolidated balance sheets December 31, 2024 December 31, 2023 $ Change

(In Thousands)

1 unchanged sentence

Cash and cash equivalents 54,308 96,689 (42,381) (44)

Premiums receivable 76,456 69,680

Premiums receivable, net 82,804 76,456 6,348 8

Deferred policy acquisition costs, net 64,327 62,905 1,422 2

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Reserve for insurance claims and claim expenses 152,071 123,974 28,097 23

Reinsurance funds withheld 1,421 2,674

Deferred tax liability, net 386,192 301,573 84,619 28

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Total liabilities and shareholders' equity $ 3,349,973 $ 2,940,507 $ 409,466 14 %

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

Total cash and investments increased due to 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 year ended December 31, 2024.

Cash and investments at December 31, 2024 included $132.2 million held by NMIH.

The increase in total cash and investments reflects the addition of incremental cash provided by operating activities, as well as a decrease in the unrealized loss position of our fixed income portfolio primarily tied to the prevailing interest rate environment, partially offset by share repurchase activity during the year ended December 31, 2023.

Premiums receivable was $76.5 million as of December 31, 2023, compared to $69.7 million as of December 31, 2022.

The increase was primarily driven by growth in our monthly premium policies in force, where premiums are generally paid one month in arrears.

Net deferred policy acquisition costs were $62.9 million as of December 31, 2023, compared to $58.6 million as of December 31, 2022.

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

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

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

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

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

Net 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.

Net software and equipment decreased due to a step-down in capitalized costs related to our agreement with TCS.

Net deferred policy acquisition costs increased due to 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 increased year-on-year as a result of an increase in ceded losses recoverable under our QSR Transactions.

Prepaid federal income taxes increased due to the purchase of $86.9 million of tax and loss bonds during the year ended December 31, 2024.

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

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

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

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

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 year ended December 31, 2023.

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

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

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

The increase was primarily driven by the establishment of initial reserves on newly defaulted loans during the year ended December 31, 2023, as well as an increase in the average case reserve held against previously defaulted loans that have aged in their delinquency status.

Other assets increased primarily driven by an increase in accrued investment income and 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 (ROU) assets tied to the amortization of the operating lease for our corporate headquarters.

Debt as of December 31, 2024 represented the carrying value of the $425 million aggregate principal amount 2024 Notes, which were issued in May 2024.

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

Unearned premiums decreased 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 year ended December 31, 2024.

Accounts payable and accrued expenses increased primarily due to accrued and unpaid interest on the 2024 Notes, which is payable semi-annually beginning in February 2025, as well as an increase in reinsurance premiums payable, partially offset by the settlement of certain contractual payables during the year ended December 31, 2024.

Reserve for insurance claims and claim expenses increased in connection with the establishment of initial reserves on newly defaulted loans during the year ended December 31, 2024, as well as an increase in the average case reserve held against previously defaulted loans that have aged in their delinquency status.

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

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

R einsurance funds withheld, which represents our ceded reinsurance premiums written, less our profit and ceding commission receivables related to the 2016 QSR Transaction was $1.4 million as of December 31, 2023 , compared to $2.7 million as of December 31, 2022 .

The decrease relates to the continued decline in ceded premiums written on single premium policies, due to the end of the reinsurance coverage period for new business under the 2016 QSR Transaction at December 31, 2017.

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

Net deferred tax liability was $301.6 million as of December 31, 2023, compared to $193.9 million as of December 31, 2022.

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

Net deferred tax liability increased due to an increase in the claimed deductibility of our statutory contingency reserve, as well as a decrease in the aggregate unrealized loss position of our fixed income portfolio recorded in other comprehensive income.

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

Consolidated cash flows For the years ended December 31,

2023 2022 2021

Consolidated cash flows For the years ended December 31, $ Change

2024 2023 2022 2024 vs.

Net cash provided by (used in):

3 unchanged sentences

Financing activities (96,699) (90,420) (55,828) (6,279) 7 (34,592) 62

Net increase (decrease) in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

$ (42,381) $ 52,263 $ (32,220) $ (94,644) (181) % $ 84,483 (262) %

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

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

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

Cash used in investing activities for the years ended December 31, 2023, 2022 and 2021 reflects the purchase of fixed and short-term maturities with cash provided by operating activities, and the reinvestment of coupon payments, maturities and sale proceeds within our investment portfolio.

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

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

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

Net cash provided by operating activities increased in each successive year primarily due to an increase in our net premium receipts and growth in our investment income, partially offset by an increase in the purchase of tax and loss bonds from period-to-period.

Cash provided by operating activities for the year ended December 31, 2024, was further impacted by an increase in cash taxes paid and the settlement of previously accrued short-term employee incentive awards.

Cash provided by operating activities for the year ended December 31, 2023, was also impacted by a decline in short-term employee incentive payments.

Cash used in investing activities for the years ended December 31, 2024, 2023 and 2022 reflects the purchase of fixed and short-term maturities with cash provided by operating activities, and the reinvestment of coupon payments, maturities and redemption proceeds within our investment portfolio.

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 year ended December 31, 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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NMIH also has access to $250 million of undrawn revolving credit capacity under the 2024 Revolving Credit Facility.

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

On July 31, 2023, our Board of Directors authorized a new $200 million share repurchase program (excluding associated costs and applicable taxes) effective through December 31, 2025.

Concurrent with the new authorization, our Board of Directors also approved an extension of our existing $125 million share repurchase program through December 31, 2025 to align its remaining tenor with that of the new $200 million program.

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

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

On July 31, 2023, our Board of Directors authorized a $200 million share repurchase program (excluding associated costs and applicable taxes, the 2023 Repurchase Program) effective through December 31, 2025 and extended the 2022 Repurchase Program through December 31, 2025 to align its remaining tenor with that of the 2023 Repurchase Program.

During the year ended December 31, 2024, NMIH repurchased 2.8 million shares of common stock at a total cost of $97.7 million, including associated costs and applicable taxes.

As of December 31, 2024, NMIH had $80.1 million of repurchase authority remaining.

On February 5, 2025, our Board of Directors authorized a new $250 million share repurchase program (excluding associated costs and applicable taxes, the 2025 Repurchase Program) effective through December 31, 2027.

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

Concurrent with the new authorization, our Board of Directors also approved an extension of our existing share repurchase programs through December 31, 2027 to align its remaining tenor with that of the new $250 million program.

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 8, “ Financial Statements - Notes to Consolidated Financial Statements - Note 5, 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.

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

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

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

We are subject to certain covenants under the 2024 Revolving Credit Facility.

Under the 2021 Revolving Credit Facility, NMIH may not permit (i) our debt to total capitalization ratio to exceed 35% as of the last day of any fiscal quarter, (ii) the statutory capital of NMIC to be less than $1,290,314,825 as of the last day of any fiscal quarter, or (iii) our consolidated net worth to be, as of the last day of any fiscal quarter, less than the sum of (A) $1,047,808,462, plus (B) 50% of our cumulative consolidated net income for each fiscal quarter for which such consolidated net income is positive, plus (C) 50% of any increase in our consolidated net worth after September 30, 2021 resulting from certain issuances of equity by or capital contributions to NMIH or our subsidiaries.

Under the 2024 Revolving Credit Facility, NMIH may not permit (i) our debt to total capitalization ratio to exceed 35% as of the last day of any fiscal quarter, or (ii) our consolidated net worth to be, as of the last day of any fiscal quarter, less than the sum of (A) $1,489,742,100, plus (B) 50% of our cumulative consolidated net income for each fiscal quarter for which such consolidated net income is positive, plus (C) 50% of any increase in our consolidated net worth after March 31, 2024 resulting from certain issuances of equity by or capital contributions to NMIH or our subsidiaries.

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

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

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

The credit agreement for 2024 Revolving Credit Facility also prohibits, restricts or limits, among other things, NMIH's and its subsidiaries' ability to (i) incur additional indebtedness, (ii) incur liens on their property, (iii) pay dividends or make other distributions, (iv) sell their assets, (v) make certain loans or investments, (vi) merge or consolidate and (vii) enter into transactions with affiliates, in each case subject to certain limitations, exceptions and qualifications as set forth in the credit agreement for 2024 Revolving Credit Facility.

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

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.

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

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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 December 31, 2023, NMIC reported $2,718 million available assets against $1,516 million risk-based required assets for a $1,202 million "excess" funding position.

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.

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.

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

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At December 31, 2024, NMIC had $2.6 billion of cash and investments, including $10.2 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.

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 December 31, 2023, NMIC generated $333 million of cash flow from operations and received an additional $333 million of cash flow on the maturity, sale and redemption of securities held in its investment portfolio.

During the twelve-month period ended December 31, 2024, NMIC generated $366 million of cash flow from operations and received an additional $229 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.

, 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.

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

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 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.

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

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

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

In January 2025, Fitch revised the outlook for all its ratings from stable to positive.

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

Consolidated Investment Portfolio

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Municipal debt securities 23 25

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

treasury securities and obligations of U.S.

government agencies 4 7

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

Asset-backed securities 1 2

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(1) Excluding certain operating cash accounts.

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

government debt by Fitch during the intervening period.

(2) Includes short-term securities rated A-1+.

(3) Includes +/– ratings.

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

If three or more ratings are available, we assign the middle rating for classification purposes, otherwise we assign the lowest rating.

If three or more

ratings are available, we assign the middle rating for classification purposes, otherwise we assign the lowest rating.

Investment Securities - Allowance for credit losses

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As of December 31, 2024, we held $322.2 million of tax and loss bonds in “ Prepaid Federal Income Taxes” on our consolidated balance sheets.

We record a valuation allowance against the state net operating losses generated by NMIH as NMIH operates at a loss, and we do not expect to utilize such net deferred tax assets in the future.

We record a valuation allowance against the state net operating losses generated by NMIH as NMIH has historically operated at a loss, and we do not expect to utilize such net deferred tax assets in the future.

We continue to evaluate the realizability of our state net deferred tax asset position, and our examination of results through December 31, 2024 and review of future expectations support the continued application of a valuation allowance against such state net deferred tax assets.

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As a result, actual results could differ materially from those estimates.

A summary of the accounting policies that management believes are critical to the preparation of our consolidated financial statements is set forth below.

A summary of the accounting estimates that management believes are critical to the preparation of our consolidated financial statements is set forth below.

Insurance Premium Revenue Recognition

Premiums for primary mortgage insurance policies may be paid in a single payment at origination (single premium), on a monthly installment basis (monthly premium) or on an annual installment basis (annual premium), with such election and payment type fixed at policy inception.

Premiums written at origination for single premium policies are initially deferred as unearned premiums and amortized into earnings over the estimated policy life in accordance with the anticipated expiration of risk, which is primarily derived from the term of the mortgage loans, original LTV and the interest rate for each individual policy.

Monthly premiums are recognized as revenue in the month billed and when coverage is effective.

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Upon cancellation of a policy, all remaining non-refundable deferred and unearned premium is immediately earned, and any refundable deferred and unearned premium is returned to the policyholder and recorded as a reduction to written premium and unearned premium reserve in the period paid.

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

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

Reserve for Insurance Claims and Claim Expenses

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At December 31, 2024, assuming all other estimates remain constant, a one percentage point increase/decrease in our average claim severity factor would cause approximately a +/- $1.4 million change in our reserve position, and a one percentage point increase/decrease in our average claim frequency factor cause approximately a +/- $4.8 million change in our reserve position.

Investments - Credit losses and Other Impairments

We have designated our investment portfolio as available-for-sale and report our invested assets at fair value.

Unrealized gains and losses in the portfolio, net of related tax expense or benefit, are recognized as a component of accumulated other comprehensive income (AOCI) in shareholders' equity.

We measure fair value and classify invested assets in a hierarchy for disclosure purposes consisting of three "levels" based on the observability of inputs available in the marketplace used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

See Item 8, Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 4, Fair Value of Financial Instruments ."

Purchases and sales of investments are recorded on a trade date basis.

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

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

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

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

Premium Deficiency Reserves

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

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

The premium deficiency assessment requires the use of significant judgment and estimates to determine the present value of future premiums, and expected claim costs and expenses.

The present value of future premiums relies on, among other things, assumptions about persistency and repayment patterns on the underlying insured loans.

The present value of expected claim costs and expenses relies on assumptions about the severity of claims, claim rates on current defaults and expected defaults in future periods.

Assumptions used in the premium deficiency calculation can be affected by changes in the macroeconomic environment, including the rate of house price appreciation and prevailing interest rates.

Relatively small changes in estimated claim rates or estimated claim amounts could have a significant impact on our premium deficiency analysis.

If we determine it is necessary and appropriate to establish a premium deficiency reserve, and actual premium patterns and claims experience differ from the assumptions used to establish the reserve, the difference between the actual results and our estimates would affect our consolidated results of operations in future periods.

During the years ended December 31, 2024 and 2023, we slowed the rate and recognized a reduction of DAC amortization by $1.3 million and $7.3 million, respectively, due to the elevated persistency of certain prior book years' insurance in-force tied to a slowdown in the pace of mortgage refinancing activity in connection with the prevailing interest and mortgage rate environment.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis