NMI Holdings, Inc. 10-Q

Item 1. Financial Statements INDEX TO FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets (Unaudited) 6 Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) 7 Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) 8 Condensed Consolidated Statements of Cash Flows (Unaudited) 10 Notes to Condensed Consolidated Financial Statements (Unaudited) 11 5 NMI HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, 2025 December 31, 2024 Assets (In Thousands, except for share data) Fixed maturities, available-for-sale, at fair value (amortized cost of $ 3,016,032 and $ 2,876,343 ) $ 2,929,117 $ 2,723,541 Cash and cash equivalents (including restricted cash of $ 0 and $ 90 ) 84,013 54,308 Premiums receivable, net 83,647 82,804 Accrued investment income 24,376 22,386 Deferred policy acquisition costs, net 64,148 64,327 Software and equipment, net 23,793 25,681 Intangible assets and goodwill 3,634 3,634 Reinsurance recoverable 32,705 32,260 Prepaid federal income taxes 322,175 322,175 Other assets 23,477 18,857 Total assets $ 3,591,085 $ 3,349,973 Liabilities Debt $ 416,073 $ 415,146 Unearned premiums 54,159 65,217 Accounts payable and accrued expenses 86,904 103,164 Reserve for insurance claims and claim expenses 163,033 152,071 Deferred tax liability, net 441,389 386,192 Other liabilities 9,420 10,751 Total liabilities 1,170,978 1,132,541 Commitments and contingencies Shareholders' equity Common stock - $ 0.01 par value; 88,365,509 shares issued and 77,717,841 shares outstanding as of June 30, 2025 and 87,902,626 shares issued and 78,600,726 shares outstanding as of December 31, 2024 ( 250,000,000 shares authorized) 884 879 Additional paid-in capital 1,006,058 1,004,692 Treasury Stock, at cost: 10,647,668 and 9,301,900 common shares as of June 30, 2025 and December 31, 2024, respectively ( 296,047 ) ( 246,594 ) Accumulated other comprehensive loss, net of tax ( 72,757 ) ( 124,804 ) Retained earnings 1,781,969 1,583,259 Total shareholders' equity 2,420,107 2,217,432 Total liabilities and shareholders' equity $ 3,591,085 $ 3,349,973 See accompanying notes to condensed consolidated financial statements (unaudited). 6 NMI HOLDINGS, INC. C ONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED) For the three months ended June 30, For the six months ended June 30, 2025 2024 2025 2024 (In Thousands, except for per share data) Revenues Net premiums earned $ 149,066 $ 141,168 $ 298,432 $ 277,825 Net investment income 24,949 20,688 48,635 40,124 Net realized investment losses ( 400 ) — ( 376 ) — Other revenues 164 266 334 426 Total revenues 173,779 162,122 347,025 318,375 Expenses Insurance claims and claim expenses 13,445 276 17,923 3,970 Underwriting and operating expenses 29,508 28,330 59,683 58,145 Service expenses 110 194 226 331 Interest expense 7,115 14,678 14,221 22,718 Total expenses 50,178 43,478 92,053 85,164 Income before income taxes 123,601 118,644 254,972 233,211 Income tax expense 27,450 26,565 56,262 52,082 Net income $ 96,151 $ 92,079 $ 198,710 $ 181,129 Earnings per share Basic $ 1.23 $ 1.15 $ 2.54 $ 2.25 Diluted $ 1.21 $ 1.13 $ 2.50 $ 2.22 Weighted average common shares outstanding Basic 77,987 80,117 78,197 80,421 Diluted 79,256 81,300 79,557 81,703 Net income $ 96,151 $ 92,079 $ 198,710 $ 181,129 Other comprehensive income (loss), net of tax: Unrealized gains (losses) in accumulated other comprehensive loss, net of tax expense (benefit) of $ 5,570 and $( 412 ) for the three months ended June 30, 2025 and 2024, and $ 13,756 and $( 3,141 ) for the six months ended June 30, 2025 and 2024, respectively 20,955 ( 1,549 ) 51,750 ( 11,454 ) Reclassification adjustment for realized losses included in net income, net of tax benefit of $ 84 and $ 79 for the three and six months ended June 30, 2025, respectively 316 — 297 — Other comprehensive income (loss), net of tax 21,271 ( 1,549 ) 52,047 ( 11,454 ) Comprehensive income $ 117,422 $ 90,530 $ 250,757 $ 169,675 See accompanying notes to condensed consolidated financial statements (unaudited). 7 NMI HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) Common Stock Additional Paid-in Capital Treasury Stock, At Cost Accumulated Other Comprehensive Loss Retained Earnings Total Shares Amount (In Thousands) Balances, December 31, 2024 78,601 $ 879 $ 1,004,692 $ ( 246,594 ) $ ( 124,804 ) $ 1,583,259 $ 2,217,432 Common stock: shares issued under stock plans, net of shares withheld for employee taxes 418 4 ( 7,654 ) — — — ( 7,650 ) Repurchase of common stock ( 718 ) — — ( 26,053 ) — — ( 26,053 ) Share-based compensation expense — — 4,507 — — — 4,507 Change in unrealized investment gains/losses, net of tax expense of $ 8,181 — — — — 30,776 30,776 Net income — — — — — 102,559 102,559 Balances, March 31, 2025 78,301 $ 883 $ 1,001,545 $ ( 272,647 ) $ ( 94,028 ) $ 1,685,818 $ 2,321,571 Common stock: shares issued under stock plans, net of shares withheld for employee taxes 44 1 ( 444 ) — — — ( 443 ) Repurchase of common stock ( 628 ) — — ( 23,400 ) — — ( 23,400 ) Share-based compensation expense — — 4,957 — — — 4,957 Change in unrealized investment gains/losses, net of tax expense of $ 5,654 — — — — 21,271 — 21,271 Net income — — — — — 96,151 96,151 Balances, June 30, 2025 77,717 $ 884 $ 1,006,058 $ ( 296,047 ) $ ( 72,757 ) $ 1,781,969 $ 2,420,107 See accompanying notes to condensed consolidated financial statements (unaudited). 8 NMI HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) Common Stock Additional Paid-in Capital Treasury Stock, At Cost Accumulated Other Comprehensive Loss Retained Earnings Total Shares Amount (In Thousands) Balances, December 31, 2023 80,881 $ 873 $ 990,816 $ ( 148,921 ) $ ( 139,917 ) $ 1,223,153 $ 1,926,004 Common stock: shares issued under stock plans, net of shares withheld for employee taxes 505 5 ( 5,584 ) — — — ( 5,579 ) Repurchase of common stock ( 840 ) — — ( 25,306 ) — — ( 25,306 ) Share-based compensation expense — — 4,117 — — — 4,117 Change in unrealized investment gains/losses, net of tax benefit of $ 2,729 — — — — ( 9,905 ) — ( 9,905 ) Net income — — — — — 89,050 89,050 Balances, March 31, 2024 80,546 $ 878 $ 989,349 $ ( 174,227 ) $ ( 149,822 ) $ 1,312,203 $ 1,978,381 Common stock: shares issued under stock plans, net of shares withheld for employee taxes 62 1 ( 320 ) — — — ( 319 ) Repurchase of common stock ( 844 ) — — ( 27,096 ) — — ( 27,096 ) Share-based compensation expense — — 4,114 — — — 4,114 Change in unrealized investment gains/losses, net of tax benefit of $ 412 — — — — ( 1,549 ) — ( 1,549 ) Net income — — — — — 92,079 92,079 Balances, June 30, 2024 79,764 $ 879 $ 993,143 $ ( 201,323 ) $ ( 151,371 ) $ 1,404,282 $ 2,045,610 See accompanying notes to condensed consolidated financial statements (unaudited). 9 NMI HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the six months ended June 30, 2025 2024 Cash flows from operating activities (In Thousands) Net income $ 198,710 $ 181,129 Adjustments to reconcile net income to net cash provided by operating activities: Net realized investment loss 376 — Depreciation and amortization 5,726 5,990 Net (accretion)/amortization of (discount)/premium on investment securities ( 1,634 ) 785 Loss on extinguishment of debt — 6,966 Amortization of debt discount and debt issuance costs 1,192 1,052 Deferred income taxes 41,361 49,861 Share-based compensation expense 9,464 8,231 Changes in operating assets and liabilities: Premiums receivable, net ( 843 ) 1 Accrued investment income ( 1,990 ) ( 1,654 ) Deferred policy acquisition costs, net 179 ( 343 ) Reinsurance recoverable ( 445 ) 178 Other assets ( 6,089 ) ( 793 ) Unearned premiums ( 11,058 ) ( 13,961 ) Reserve for insurance claims and claim expenses 10,962 1,469 Reinsurance balances, net ( 132 ) ( 314 ) Accounts payable and accrued expenses ( 16,272 ) ( 9,234 ) Net cash provided by operating activities 229,507 229,363 Cash flows from investing activities Purchase of short-term investments ( 91,711 ) ( 101,545 ) Purchase of fixed-maturity investments, available-for-sale ( 253,319 ) ( 236,755 ) Proceeds from maturities of short-term investments 55,100 37,700 Proceeds from maturities and redemptions of fixed-maturity investments, available-for-sale 137,935 92,260 Proceeds from sales of fixed-maturity investments, available-for-sale 13,563 — Additions to software and equipment ( 3,354 ) ( 4,026 ) Net cash used in investing activities ( 141,786 ) ( 212,366 ) Cash flows from financing activities Proceeds from issuance of common stock related to employee equity plans 2,828 4,280 Taxes paid related to net share settlement of equity awards ( 10,921 ) ( 10,178 ) Proceeds from senior unsecured notes — 419,705 Repayments of senior secured notes — ( 405,080 ) Payments of debt issuance costs — ( 7,730 ) Repurchases of common stock ( 49,923 ) ( 52,054 ) Net cash used in financing activities ( 58,016 ) ( 51,057 ) Net increase (decrease) in cash, cash equivalents and restricted cash 29,705 ( 34,060 ) Cash, cash equivalents and restricted cash, beginning of period 54,308 96,689 Cash, cash equivalents and restricted cash, end of period $ 84,013 $ 62,629 Supplemental disclosures of cash flow information Interest paid $ 18,700 $ 14,013 Income taxes paid 22,811 20 See accompanying notes to condensed consolidated financial statements (unaudited). 10 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Organization, Basis of Presentation and Summary of Accounting Principles NMI Holdings, Inc. (NMIH) is a Delaware corporation, incorporated in May 2011 to provide private mortgage guaranty insurance (which we refer to as mortgage insurance or MI) through its wholly-owned insurance subsidiaries, National Mortgage Insurance Corporation (NMIC) and National Mortgage Reinsurance Inc One (Re One). Our common stock is listed on the Nasdaq exchange under the ticker symbol “NMIH.” NMIC, our primary insurance subsidiary, issued its first mortgage insurance policy in April 2013. NMIC is licensed to write mortgage insurance in all 50 states and the District of Columbia (D.C.). Re One historically provided reinsurance coverage to NMIC in accordance with certain statutory risk retention requirements. Such requirements have been repealed and the reinsurance coverage provided by Re One to NMIC has been commuted. Re One remains a wholly-owned, licensed insurance subsidiary; however, it does not currently have active insurance exposures. In August 2015, NMIH capitalized a wholly-owned subsidiary, NMI Services, Inc. (NMIS), through which we offer outsourced loan review services to mortgage loan originators. We operate as a single segment for the purposes of assessing performance and making operating decisions. Basis of Presentation The accompanying unaudited condensed consolidated financial statements, which include the results of NMIH and its wholly-owned subsidiaries, have been prepared in accordance with the instructions to Form 10-Q as prescribed by the SEC for interim reporting and include other information and disclosures required by accounting principles generally accepted in the U.S. (GAAP). Our accounts are maintained in U.S. dollars. These statements should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2024, included in our 2024 10-K. All intercompany transactions have been eliminated. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities as of the balance sheet date. Estimates also affect the reported amounts of income and expenses for the reporting period. Actual results could differ from those estimates. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments (including normal recurring adjustments) that are necessary to present a fair statement of financial position, results of operations and cash flows for the periods presented. The results of operations for the interim period may not be indicative of the results that may be expected for the full year ending December 31, 2025. Significant Accounting Principles There have been no changes to our significant accounting principles as described in Item 8, “ Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 2 - Summary of Accounting Principles” of our 2024 10-K. Recent Accounting Pronouncements – Adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). The update enhances the disclosure requirements related to tax rate reconciliations and income taxes paid, and took effect for all public business entities for annual reporting periods beginning after December 15, 2024. We adopted this ASU on January 1, 2025 and will include enhanced disclosures in our fiscal year-end 2025 annual consolidated financial statements, as applicable. Recent Accounting Pronouncements – Not Yet Adopted In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expense (Topic 220). The update expands disclosure requirements related to certain income statement expenses, including a requirement to provide a tabular disaggregation of certain operating expenses by category. The standard will take effect for all public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact the adoption of this ASU will have, if any, on our consolidated financial statements. 11 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. Investments We hold all investments on an available-for-sale basis at fair value on our condensed consolidated balance sheets and evaluate each position quarterly for impairment. We recognize an impairment on a security through the statement of operations if (i) we intend to sell the impaired security; or (ii) it is more likely than not that we will be required to sell the impaired security prior to recovery of its amortized cost basis. If a sale is intended or likely to be required, we recognize an impairment loss equivalent to the difference of the amortized cost basis of the security and its fair value through the condensed consolidated statements of operations and comprehensive income as a “ Net Realized Investment Loss .” In the event of an impairment of a security that we intend to and have the ability to hold to maturity, we evaluate the drivers of the impairment to determine the portion that is credit related and the portion that is non-credit related. The portion of impairment loss that is attributed to credit related factors is recognized through the statement of operations as a provision for credit loss and the portion that is attributed to non-credit related factors is recognized in other comprehensive income, net of taxes. Fair Values and Gross Unrealized Gains and Losses on Investments Amortized Cost Gross Unrealized Fair Value Gains Losses As of June 30, 2025 (In Thousands) U.S. Treasury securities and obligations of U.S. government agencies $ 113,564 $ 2,645 $ ( 221 ) $ 115,988 Municipal debt securities 669,223 2,145 ( 36,406 ) 634,962 Corporate debt securities 2,073,047 18,202 ( 71,916 ) 2,019,333 Asset-backed securities 39,905 — ( 1,348 ) 38,557 Total bonds 2,895,739 22,992 ( 109,891 ) 2,808,840 Short-term investments 120,293 — ( 16 ) 120,277 Total investments $ 3,016,032 $ 22,992 $ ( 109,907 ) $ 2,929,117 Amortized Cost Gross Unrealized Fair Value Gains Losses As of December 31, 2024 (In Thousands) U.S. Treasury securities and obligations of U.S. government agencies $ 115,342 $ 1,207 $ ( 489 ) $ 116,060 Municipal debt securities 684,523 589 ( 49,867 ) 635,245 Corporate debt securities 1,949,800 3,981 ( 106,141 ) 1,847,640 Asset-backed securities 44,104 1 ( 2,125 ) 41,980 Total bonds 2,793,769 5,778 ( 158,622 ) 2,640,925 Short-term investments 82,574 42 — 82,616 Total investments $ 2,876,343 $ 5,820 $ ( 158,622 ) $ 2,723,541 We did not own any mortgage-backed securities in our asset-backed securities portfolio at June 30, 2025 or December 31, 2024. 12 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table presents a breakdown of the fair value of our corporate debt securities by issuer industry group as of June 30, 2025 and December 31, 2024: June 30, 2025 December 31, 2024 Financial 39 % 40 % Consumer 28 26 Utilities 11 11 Industrial 9 9 Technology 6 7 Communications 6 7 Basic materials 1 — Total 100 % 100 % As of June 30, 2025 and December 31, 2024, approximately $ 5.4 million and $ 5.3 million, respectively, of our cash and investments were held in the form of U.S. Treasury securities on deposit with various state insurance departments to satisfy regulatory requirements. Scheduled Maturities The amortized cost and fair value of available-for-sale securities as of June 30, 2025 and December 31, 2024, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most asset-backed securities provide for periodic payments throughout their lives, they are listed below in a separate category. As of June 30, 2025 Amortized Cost Fair Value (In Thousands) Due in one year or less $ 339,885 $ 338,500 Due after one through five years 1,706,517 1,655,362 Due after five through ten years 922,939 889,975 Due after ten years 6,786 6,723 Asset-backed securities 39,905 38,557 Total investments $ 3,016,032 $ 2,929,117 As of December 31, 2024 Amortized Cost Fair Value (In Thousands) Due in one year or less $ 261,492 $ 260,132 Due after one through five years 1,549,468 1,479,220 Due after five through ten years 995,717 916,885 Due after ten years 25,562 25,324 Asset-backed securities 44,104 41,980 Total investments $ 2,876,343 $ 2,723,541 Aging of Unrealized Losses As of June 30, 2025, the investment portfolio had gross unrealized losses of $ 109.9 million, of which $ 108.5 million were associated with securities that had been in an unrealized loss position for a period of twelve months or longer. As of December 31, 2024, the investment portfolio had gross unrealized losses of $ 158.6 million, of which $ 150.8 million were associated with securities that had been in an unrealized loss position for a period of twelve months or longer. For those securities in an unrealized loss position, the length of time the securities were in such a position is as follows: 13 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Less Than Twelve Months Twelve Months or Greater Total # of Securities Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses As of June 30, 2025 ($ In Thousands) U.S. Treasury securities and obligations of U.S. government agencies 2 $ 2,859 $ ( 1 ) 7 $ 10,760 $ ( 220 ) 9 $ 13,619 $ ( 221 ) Municipal debt securities 3 12,776 ( 92 ) 224 475,672 ( 36,314 ) 227 488,448 ( 36,406 ) Corporate debt securities 28 138,522 ( 1,273 ) 182 919,380 ( 70,643 ) 210 1,057,902 ( 71,916 ) Asset-backed securities 1 233 * 16 38,324 ( 1,348 ) 17 38,557 ( 1,348 ) Short-term investments 16 111,046 ( 16 ) — — — 16 111,046 ( 16 ) Total 50 $ 265,436 $ ( 1,382 ) 429 $ 1,444,136 $ ( 108,525 ) 479 $ 1,709,572 $ ( 109,907 ) Less Than Twelve Months Twelve Months or Greater Total # of Securities Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses As of December 31, 2024 ($ In Thousands) U.S. Treasury securities and obligations of U.S. government agencies 4 $ 8,002 $ ( 98 ) 9 $ 11,510 $ ( 391 ) 13 $ 19,512 $ ( 489 ) Municipal debt securities 25 110,648 ( 1,928 ) 220 471,770 ( 47,939 ) 245 582,418 ( 49,867 ) Corporate debt securities 68 366,113 ( 5,822 ) 226 1,053,862 ( 100,319 ) 294 1,419,975 ( 106,141 ) Asset-backed securities — — — 19 41,559 ( 2,125 ) 19 41,559 ( 2,125 ) Short-term investments 1 1,551 * — — — 1 1,551 * Total 98 $ 486,314 $ ( 7,848 ) 474 $ 1,578,701 $ ( 150,774 ) 572 $ 2,065,015 $ ( 158,622 ) * Amounts not identifiable due to rounding. Allowance for Credit Losses As of June 30, 2025 and December 31, 2024, we did not recognize an allowance for credit loss for any security in the investment portfolio and we did not record any provision for credit loss for investment securities during the three or six months ended June 30, 2025 or 2024. We evaluated the securities in an unrealized loss position as of June 30, 2025, assessing their credit ratings as well as any adverse conditions specifically related to the security. Based upon our assessment of the amount and timing of cash flows to be collected over the remaining life of each instrument, we believe the unrealized losses as of June 30, 2025 are not indicative of the ultimate collectability of the current amortized cost of the securities. Rather, the unrealized losses on securities held as of June 30, 2025 were primarily driven by fluctuations in interest rates, and to a lesser extent, movements in credit spreads following the purchase of those securities. Net Investment Income The following table presents the components of net investment income: For the three months ended June 30, For the six months ended June 30, 2025 2024 2025 2024 (In Thousands) Investment income (1) $ 25,263 $ 20,954 $ 49,298 $ 40,651 Investment expenses ( 314 ) ( 266 ) ( 663 ) ( 527 ) Net investment income $ 24,949 $ 20,688 $ 48,635 $ 40,124 (1) Includes interest income recognized on cash and cash equivalents of $ 1.1 million and $ 2.0 million during the three and six months ended June 30, 2025, respectively, and $ 1.8 million and $ 2.9 million during the three and six months ended June 30, 2024, respectively. 14 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table presents the components of net realized investment gains (losses): For the three months ended June 30, For the six months ended June 30, 2025 2024 2025 2024 (In Thousands) Gross realized investment gains $ — $ — $ 24 $ — Gross realized investment losses ( 400 ) — ( 400 ) — Net realized investment gains (losses) $ ( 400 ) $ — $ ( 376 ) $ — 3. Fair Value of Financial Instruments The following describes the valuation techniques used by us to determine the fair value of our financial instruments: We established a fair value hierarchy by prioritizing the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under this standard are described below: Level 1 – Fair value measurements based on quoted prices in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments. Level 2 – Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 – Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions, which require significant management judgment or estimation about the inputs a hypothetical market participant would use to value that asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assets Classified as Level 1 and Level 2 To determine the fair value of securities available-for-sale in Level 1 and Level 2 of the fair value hierarchy, independent pricing sources have been utilized. One price is provided per security based on observable market data. To ensure securities are appropriately classified in the fair value hierarchy, we review the pricing techniques and methodologies of the independent pricing sources and believe that their policies adequately consider market activity, either based on specific transactions for the issue valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded. A variety of inputs are utilized by the independent pricing sources including benchmark yields, reported trades, non-binding broker/dealer quotes, issuer spreads, two sided markets, benchmark securities, bids, offers and reference data including data published in market research publications. Inputs may be weighted differently for any security, and not all inputs are used for each security evaluation. Market indicators, industry and economic events are also considered. This information is evaluated using a multidimensional pricing model. Quality controls are performed by the independent pricing sources throughout this process, which include reviewing tolerance reports, trading information and data changes, and directional moves compared to market moves. This model combines all inputs to arrive at a value assigned to each security. We have not made any adjustments to the prices obtained from the independent pricing sources. 15 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following tables present the level within the fair value hierarchy at which our financial instruments were measured: Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value As of June 30, 2025 (In Thousands) U.S. Treasury securities and obligations of U.S. government agencies $ 115,988 $ — $ — $ 115,988 Municipal debt securities — 634,962 — 634,962 Corporate debt securities — 2,019,333 — 2,019,333 Asset-backed securities — 38,557 — 38,557 Cash, cash equivalents and short-term investments 204,290 — — 204,290 Total assets $ 320,278 $ 2,692,852 $ — $ 3,013,130 Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value As of December 31, 2024 (In Thousands) U.S. Treasury securities and obligations of U.S. government agencies $ 116,060 $ — $ — $ 116,060 Municipal debt securities — 635,245 — 635,245 Corporate debt securities — 1,847,640 — 1,847,640 Asset-backed securities — 41,980 — 41,980 Cash, cash equivalents and short-term investments 136,924 — — 136,924 Total assets $ 252,984 $ 2,524,865 $ — $ 2,777,849 There were no transfers between Level 2 and Level 3 of the fair value hierarchy during the six months ended June 30, 2025 or the year ended December 31, 2024. Financial Instruments Not Measured at Fair Value On May 21, 2024, we issued $ 425 million aggregate principal amount of senior unsecured notes that mature on August 15, 2029 (the 2024 Notes). Proceeds from the 2024 Notes offering were primarily used to repay our then outstanding $ 400 million senior secured notes (the 2020 Notes). At June 30, 2025, the 2024 Notes were carried at a cost of $ 416.1 million, net of unamortized debt issuance costs and an original issue discount totaling $ 8.9 million, and had a fair value of $ 437.2 million as assessed under our Level 2 hierarchy. At December 31, 2024, the 2024 Notes were carried at a cost of $ 415.1 million, net of unamortized debt issuance costs and an original issue discount totaling $ 9.9 million, and had a fair value of $ 429.6 million. 4. Debt Senior Unsecured Notes At June 30, 2025, we had $ 425 million aggregate principal amount of senior unsecured notes outstanding. The 2024 Notes were issued pursuant to an indenture dated May 21, 2024 and bear interest at a rate of 6.00 %, payable semi-annually on February 15 and August 15. The 2024 Notes mature on August 15, 2029. We may elect to redeem the 2024 Notes in whole or in part at any time prior to July 15, 2029 at a price equal to the greater of (1) the aggregate principal balance outstanding plus the present value of all future interest payments due through July 15, 2029, and (2) the aggregate principal balance due plus any accrued and unpaid interest. We may elect to redeem the 2024 Notes in whole or in part at any time on or after July 15, 2029 at a price equal to 100 % 16 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) of the aggregate principal amount of the 2024 Notes to be redeemed plus accrued and unpaid interest thereon . In connection with the 2024 Notes offering, we recorded capitalized debt issuance costs and an original issue discount of $ 10.9 million. Such amount will be amortized over the contractual life of the 2024 Notes using the effective interest method and included in interest expense. The effective interest rate on the 2024 Notes is 6.583 %. At June 30, 2025 and December 31, 2024, $ 8.9 million and $ 9.9 million, respectively, of unamortized debt issuance costs and original issue discount remained. At June 30, 2025 and December 31, 2024, $ 9.6 million and $ 15.6 million, respectively, of accrued and unpaid interest on the 2024 Notes was included in “Accounts Payable and Accrued Expenses” on our condensed consolidated balance sheets. During the three and six months ended June 30, 2024, we recorded a $ 6.8 million loss related to the redemption of the 2020 Notes in “ Interest Expense” on our condensed consolidated statements of comprehensive income. Revolving Credit Facility On April 29, 2024, we entered into a new $ 250 million five-year unsecured revolving credit facility (the 2024 Revolving Credit Facility) to replace our then outstanding $ 250 million four-year secured revolving credit facility (the 2021 Revolving Credit Facility). The 2024 Revolving Credit Facility matures on May 21, 2029. Borrowings under the 2024 Revolving Credit Facility may be used for general corporate purposes, including to support growth, new business production and operations, and accrue interest at a variable rate equal to, at our discretion, (i) a Base Rate (as defined in the 2024 Revolving Credit Facility) subject to a floor of 1.00 % per annum plus a margin of 0.375 % to 1.875 % per annum, or (ii) the Adjusted Term Secured Overnight Financing Rate (SOFR, as defined in the 2024 Revolving Credit Facility) plus a margin of 1.375 % to 2.875 % per annum, with the margin in each of (i) or (ii) based on our applicable corporate credit rating at the time. As of June 30, 2025 and December 31, 2024, no amounts were drawn under the 2024 Revolving Credit Facility. Under the 2024 Revolving Credit Facility, we are required to pay a quarterly commitment fee on the average daily undrawn amount of 0.175 % to 0.525 %, based on the applicable corporate credit rating at the time. As of June 30, 2025, the applicable commitment fee was 0.225 %. For the three and six months ended June 30, 2025, we recorded $ 0.1 million and $ 0.3 million, respectively, of commitment fees in interest expense. We incurred debt issuance costs of $ 2.1 million in connection with the 2024 Revolving Credit Facility and had $ 0.6 million of unamortized debt issuance costs associated with the 2021 Revolving Credit Facility remaining at the time of its replacement. Combined unamortized debt issuance costs are amortized through interest expense on a straight-line basis over the contractual life of the 2024 Revolving Credit Facility. At June 30, 2025 and December 31, 2024, remaining unamortized deferred debt issuance costs of $ 2.1 million and $ 2.3 million, respectively, were recorded in “Other Assets” on our condensed consolidated balance sheets. Under the 2024 Revolving Credit Facility we are subject to certain covenants, including a maximum debt-to-total capitalization ratio of 35 %, a minimum consolidated net worth requirement (as defined therein), and a requirement to maintain compliance with the financial standards prescribed by the private mortgage insurer eligibility requirements (PMIERs). We were in compliance with all covenants at June 30, 2025. 5. Reinsurance We enter into third-party reinsurance transactions to actively manage our risk, ensure compliance with PMIERs, state regulatory and other applicable capital requirements (respectively, as defined therein), and support the growth of our business. The Wisconsin Office of the Commissioner of Insurance (Wisconsin OCI) has approved and the GSEs have indicated their non-objection to all such transactions (subject to certain conditions and ongoing review). 17 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The effect of our reinsurance agreements on premiums written and earned is as follows: For the three months ended June 30, For the six months ended June 30, 2025 2024 2025 2024 (In Thousands) Net premiums written Direct $ 177,914 $ 166,183 $ 352,329 $ 329,390 Ceded (1) ( 33,861 ) ( 32,369 ) ( 64,890 ) ( 65,331 ) Net premiums written $ 144,053 $ 133,814 $ 287,439 $ 264,059 Net premiums earned Direct $ 182,931 $ 173,633 $ 363,387 $ 343,351 Ceded (1) ( 33,865 ) ( 32,465 ) ( 64,955 ) ( 65,526 ) Net premiums earned $ 149,066 $ 141,168 $ 298,432 $ 277,825 (1) Net of profit commission. Quota Share Reinsurance NMIC is party to nine quota share reinsurance treaties – the 2016 QSR Transaction, effective September 1, 2016 and as modified April 1, 2025, the 2018 QSR Transaction, effective January 1, 2018 and as modified April 1, 2025, the 2020 QSR Transaction, effective April 1, 2020 and as amended January 1, 2024, the 2021 QSR Transaction, effective January 1, 2021 and as modified January 1, 2025, 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, the 2024 QSR Transaction, effective January 1, 2024, and the 2025 QSR Transaction, effective January 1, 2025 – 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 in exchange for reimbursement of ceded claims and claim expenses on covered policies, a ceding commission and a profit commission (up to a contractually defined maximum) 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. Additionally, under the terms of the QSR Transactions, NMIC may elect to selectively terminate its engagement with individual reinsurers on a run-off basis ( i.e. , reinsurers continue providing coverage on all risk ceded prior to the termination date, with no new cessions going forward) or cut-off basis ( i.e. , the reinsurance arrangement is completely terminated with NMIC recapturing all previously ceded risk) under certain circumstances. Such selective termination rights arise when, among other reasons, a reinsurer experiences a deterioration in its capital position below a prescribed threshold and/or a reinsurer breaches (and fails to cure) its collateral posting obligations under the relevant agreement. Each of the third-party reinsurance providers that is party to the QSR Transactions has an insurer financial strength rating of A- or better by S&P, A.M. Best or both. The following table presents the inception date, covered production period, contractual and optional termination dates, current cession rate, ceding commission and profit commission for each outstanding QSR Transaction. Current amounts are presented as of June 30, 2025. 18 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Inception Date Covered Production Contractual Termination date Optional Termination date Ceding Percentage Ceding Commission Profit Commission 2016 QSR 9/1/2016 1/1/2013 – 12/31/2017 12/31/2027 12/31/2020 (1) 1 % 20 % up to 60 % 2018 QSR 1/1/2018 1/1/2018 – 12/31/2018 1/1/2019 – 12/31/2019 12/31/2029 12/31/2022 (1) 21 % 17 % (5) 20 % up to 61 % 2020 QSR 4/1/2020 4/1/2020 – 12/31/2020 12/31/2030 12/31/2025 (1) 21 % 36 % up to 50 % 2021 QSR 1/1/2021 1/1/2021 – 10/30/2021 12/31/2031 12/31/2024 (1) 22 % 20 % up to 58 % 2022 QSR 10/1/2021 10/30/2021 – 12/31/2022 12/31/2032 12/31/2024 (2) 20 % 20 % up to 62 % 2022 Seasoned QSR 7/1/2022 1/1/2013 – 12/31/2016 7/1/2019 –3/31/2020 6/30/2032 6/30/2025 (3) 95 % 35 % up to 55 % 2023 QSR 1/1/2023 1/1/2023 – 12/31/2023 12/31/2033 12/31/2025 (2) 20 % 20 % up to 62 % 2024 QSR 1/1/2024 1/1/2024 – 12/31/2024 12/31/2034 12/31/2027 (1) 20 % 20 % up to 56 % 2025 QSR 1/1/2025 1/1/2025 – 12/31/2025 12/31/2035 12/31/2027 (4) 20 % 20 % up to 62 % (1) NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of the optional termination date, or at the end of any calendar quarter thereafter which could result in NMIC recapturing the related risk. (2) NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of the optional termination, or semi-annually thereafter, which could result in NMIC recapturing the related risk. (3) NMIC has the option, based on certain conditions, to terminate the agreement as of June 30, 2025 or quarterly thereafter through December 31, 2027 with the payment of a termination fee, and as of March 31, 2028 or quarterly thereafter without the payment of a termination fee. Such termination could result in NMIC recapturing the related risk. (4) NMIC also holds a clean-up call that provides for termination of the agreement at its election at any time on or after the date the risk on remaining covered policies falls to 10% or less of the risk on covered policies at December 31, 2025. (5) Under the terms of the 2018 QSR Transaction, NMIC cedes premiums earned related to 21 % of the risk on eligible policies written in 2018 and 17 % of the risk on eligible policies written in 2019. Effective April 1, 2025, NMIC terminated its engagement with substantially all reinsurers under the 2016 QSR Transaction by mutual agreement on a cut-off basis. Upon termination, NMIC recaptured approximately $ 180.1 million of previously ceded primary risk-in-force. The cession rate under the 2016 QSR Transaction decreased from 20 % to 1 % of the remaining at-risk portfolio. Effective July 1, 2025, the remaining coverage under the 2016 QSR Transaction was terminated by mutual agreement on a cut-off basis. Effective April 1, 2025, NMIC terminated one reinsurer under the 2018 QSR Transaction by mutual agreement on a cut-off basis, resulting in a recapture of approximately $ 59.7 million of previously ceded primary RIF to that reinsurer. The cession rate under the 2018 QSR Transaction decreased from 24 % to 21 % on covered policies written in 2018, and from 20 % to 17 % on covered policies written in 2019. Effective June 30, 2025, NMIC elected to selectively terminate its engagement with certain reinsurers under the 2021 QSR Transaction and concurrently entered into an amended agreement effective July 1, 2025 (the Amended 2021 QSR Transaction) with the remaining reinsurance participants. Under the Amended 2021 QSR Transaction, NMIC will cede premiums earned related to 20 % of the risk on eligible policies. NMIC will receive an enhanced ceding commission under the Amended 2021 QSR Transaction. Concurrent with the placement of the 2025 QSR Transaction, NMIC entered into two additional sequential quota share reinsurance treaties that will provide coverage for mortgage insurance policies to be written in 2026 and 2027 (the 2026 QSR Transaction and 2027 QSR Transaction). Under the terms of the 2026 QSR Transaction, NMIC will cede premiums earned related to 20 % of the risk on eligible policies written between January 1, 2026 and December 31, 2026. 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. 19 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table shows amounts related to the QSR Transactions: As of and for the three months ended As of and for the six months ended June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 (In Thousands) Ceded risk-in-force $ 12,764,708 $ 12,815,434 $ 12,764,708 $ 12,815,434 Ceded premiums earned ( 40,227 ) ( 41,555 ) ( 81,238 ) ( 82,824 ) Ceded claims and claim expenses (1) 3,253 ( 138 ) 3,776 521 Ceding commission earned 9,669 10,222 19,437 20,514 Profit commission 19,958 24,351 43,356 47,758 (1) Includes a $ 0.3 million termination fee for the three and six months ended June 30, 2025 incurred in connection with the amendments of the 2016, 2018 and 2021 QSR Transactions. Ceded premiums written under the 2016 QSR Transaction are recorded as prepaid reinsurance premiums in “Other Assets” on our consolidated balance sheets and amortized to ceded premiums earned in a manner consistent with the recognition of revenue on direct premiums. Under all other QSR Transactions, premiums are ceded on an earned basis as defined in the agreement. Ceded claims and claim expenses under each of the QSR Transactions reduce the respective profit commission received by NMIC on a dollar-for-dollar basis. In accordance with the terms of the 2016 QSR Transaction, rather than making a cash payment or transferring investments for ceded premiums written, NMIC established a funds withheld liability, which also includes amounts due to NMIC for ceding and profit commissions. Any loss recoveries and any potential profit commission to NMIC are realized from this account until exhausted. NMIC’s reinsurance recoverable balance is further supported by trust accounts established and maintained by each reinsurer in accordance with the PMIERs funding requirements for risk ceded to non-affiliates. The reinsurance recoverable on loss reserves related to the 2016 QSR Transaction was $ 0.1 million and $ 1.1 million as of June 30, 2025 and December 31, 2024, respectively. In accordance with the terms of the 2018, 2020, 2021, 2022, 2022 Seasoned, 2023, 2024 and 2025 QSR Transactions, cash payments for ceded premiums earned are settled on a quarterly basis, offset by amounts due to NMIC for ceding and profit commissions. Any loss recoveries and any potential profit commission to NMIC are also recognized quarterly. NMIC's reinsurance recoverable balance is supported by trust accounts established and maintained by each reinsurer in accordance with the PMIERs funding requirements for risk ceded to non-affiliates. The aggregate reinsurance recoverable on loss reserves related to the 2018, 2020, 2021, 2022, 2022 Seasoned, 2023, 2024 and 2025 QSR Transactions was $ 32.7 million and $ 31.2 million as of June 30, 2025 and December 31, 2024, respectively. We remain directly liable for all claim payments if we are unable to collect the recoverables due from our reinsurers and, as such, we actively monitor and manage our counterparty credit exposure to our reinsurance providers. We establish an allowance for expected credit loss against our reinsurance recoverable if we do not expect to recover amounts due from one or more of our reinsurance counterparties, and report our reinsurance recoverable net of such allowance, if any. We actively monitor the counterparty credit profiles of our reinsurers and each is required to partially collateralize its obligations under the terms of the QSR Transactions. The allowance for credit loss established against our reinsurance recoverable was deemed immaterial as of June 30, 2025 and December 31, 2024. Excess-of-loss Reinsurance Traditional Reinsurance NMIC is party to seven 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, the 2024 XOL Transaction, effective January 1, 2024, and the 2025 XOL Transaction, effective January 1, 2025 – which we refer to collectively as the XOL Transactions. Each XOL Transaction provides NMIC with aggregate excess-of-loss reinsurance coverage on a defined portfolio of mortgage insurance policies. Under each agreement, NMIC retains a first layer of aggregate loss exposure on covered policies and the reinsurers then provide second layer loss protection up to a defined reinsurance coverage amount. The reinsurance coverage amount of each XOL Transaction is set to approximate the PMIERs minimum required assets of its reference pool and decreases from its peak over a ten-year period in the event the PMIERs minimum required assets of the pool declines. NMIC retains losses in excess of the outstanding reinsurance coverage amount. Under the terms of the XOL Transactions, NMIC makes risk premium payments to its third-party reinsurance providers 20 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) for the outstanding reinsurance coverage amount and ceded aggregate premiums of $ 10.4 million and $ 20.5 million during the three and six months ended June 30, 2025, respectively, and $ 9.4 million and $ 18.6 million during the three and six months ended June 30, 2024, respectively. NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure under each agreement. NMIC did not cede any incurred losses on covered policies under the XOL Transactions during the three and six months ended June 30, 2025 and 2024, as the aggregate first layer risk retention for each agreement was not exhausted during such periods. NMIC holds optional termination rights which provide it the discretion to terminate each XOL Transaction on or after a specified date. NMIC may also elect to terminate the XOL Transactions at any point if the outstanding reinsurance coverage amount amortizes to 10% or less of the reinsurance coverage amount provided at inception, or if it determines that it will no longer be able to take full PMIERs asset credit for the coverage. Additionally, under the terms of the treaties, NMIC may selectively terminate its engagement with individual reinsurers under certain circumstances. Such selective termination rights arise when, among other reasons, a reinsurer experiences a deterioration in its capital position below a prescribed threshold, and/or a reinsurer breaches (and fails to cure) its collateral posting obligation. Each of the third-party reinsurance providers that is party to the XOL Transactions has an insurer financial strength rating of A- or better by S&P Global Ratings (S&P), A.M. Best Company Inc. (A.M. Best) or both. 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 June 30, 2025. ($ values in thousands) Inception Date Covered Production Initial Reinsurance Coverage Current Reinsurance Coverage Initial First Layer Retained Loss Current First Layer Retained Loss (1) 2022-1 XOL April 1, 2022 10/1/2021 – 3/31/2022 (2) $ 289,741 $ 162,837 $ 133,366 $ 130,834 2022-2 XOL July 1, 2022 4/1/2022 – 6/30/2022 (3) 154,306 115,311 78,906 75,934 2022-3 XOL October 1, 2022 7/1/2022 – 9/30/2022 96,779 80,282 106,265 103,453 2023-1 XOL January 1, 2023 10/1/2022 – 6/30/2023 89,864 68,685 146,513 144,245 2023-2 XOL July 1, 2023 7/1/2023 – 12/31/2023 100,777 87,871 136,875 136,240 2024 XOL January 1, 2024 1/1/2024 – 12/31/2024 162,500 162,500 312,172 312,124 2025 XOL (4) January 1, 2025 1/1/2025 – 12/31/2025 131,306 131,306 147,520 147,520 (1) NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure and cedes reserves for incurred claims and claim expenses to each applicable XOL Transaction and recognizes a reinsurance recoverable if such incurred claims and claim expenses exceed its current first layer retained loss. (2) Approximately 1 % of the production covered by the 2022-1 XOL Transaction has coverage reporting dates between October 21, 2019 and September 30, 2021. (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 initial reinsurance coverage, current reinsurance coverage, initial first layer retained loss and current first layer retained loss for the 2025 XOL Transaction will increase as incremental covered production is ceded under the transaction through December 31, 2025. Concurrent with the placement of the 2025 XOL, NMIC entered into an excess-of-loss reinsurance treaty that will provide aggregate coverage for mortgage insurance policies to be written in 2026 (the 2026 XOL Transaction). Under the terms of the 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 $ 164.2 million. NMIC retains losses in excess of the respective reinsurance coverage amounts. NMIC entered into an additional excess-of-loss reinsurance treaty that will provide aggregate coverage for mortgage insurance policies covered under the existing 2021-1 ILN Transaction from April 1, 2026 (the 2026-2 XOL Transaction), at the time of its early redemption. The treaty incepts on April 1, 2026 and will expire on March 31, 2036. Under the terms of the 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 $ 160 million subject to adjustment on the date of inception based on the persistency of the underlying reference pool through such date. NMIC retains losses in excess 21 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) of the respective reinsurance coverage amounts. Insurance-Linked Notes NMIC is a party to reinsurance agreements with Oaktown Re VI Ltd. and Oaktown Re VII Ltd. (special purpose reinsurance entities collectively referred to as the Oaktown Re Vehicles) effective April 27, 2021 and October 26, 2021, respectively. Each agreement provides NMIC with aggregate excess-of-loss reinsurance coverage on a defined portfolio of mortgage insurance policies. Under each agreement, NMIC retains a first layer of aggregate loss exposure on covered policies and the respective Oaktown Re Vehicle then provides second layer loss protection up to a defined reinsurance coverage amount. NMIC then retains losses in excess of the respective reinsurance coverage amounts. NMIC makes risk premium payments to the Oaktown Re Vehicles for the applicable outstanding reinsurance coverage amount and pays an additional amount for anticipated operating expenses (capped at $ 250 thousand per year). NMIC ceded aggregate premiums to the Oaktown Re Vehicles of $ 3.2 million and $ 6.6 million during the three and six months ended June 30, 2025, respectively, and $ 5.9 million and $ 11.8 million during the three and six months ended June 30, 2024, respectively. NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure under each excess-of-loss agreement. NMIC did not cede any incurred losses on covered policies to the Oaktown Re Vehicles during the three and six months ended June 30, 2025 and 2024, as the aggregate first layer risk retention for each applicable agreement was not exhausted during such periods. Under the terms of each excess-of-loss reinsurance agreement, the Oaktown Re Vehicles are required to fully collateralize their outstanding reinsurance coverage amount to NMIC with funds deposited into segregated reinsurance trusts. Such trust funds are required to be invested in short-term U.S. Treasury money market funds at all times. Each Oaktown Re Vehicle financed its respective collateral requirement through the issuance of mortgage insurance-linked notes to unaffiliated investors. Such insurance-linked notes mature 12.5 years from the inception date of their associated reinsurance agreement. We refer to NMIC’s reinsurance agreements with and the insurance-linked note issuances by Oaktown Re Vehicles individually as the 2021-1 ILN Transaction and 2021-2 ILN Transaction, and collectively as the ILN Transactions. The respective reinsurance coverage amounts provided by the Oaktown Re Vehicles decrease over a 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). 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. The following table presents the inception date, covered production period, initial and current reinsurance coverage amount, and initial and current first layer retained aggregate loss under each outstanding ILN Transaction. Current amounts are presented as of June 30, 2025. 22 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ( $ values in thousands) Inception Date Covered Production Initial Reinsurance Coverage Current Reinsurance Coverage Initial First Layer Retained Loss Current First Layer Retained Loss (1) 2021-1 ILN April 27, 2021 10/1/2020 – 3/31/2021 (2) $ 367,238 $ 115,702 $ 163,708 $ 162,547 2021-2 ILN October 26, 2021 4/1/2021 – 9/30/2021 (3) 363,596 205,070 146,229 144,736 (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 2021-1 ILN Transaction has coverage reporting dates between July 1, 2019 and September 30, 2020. (3) Approximately 2 % of the production covered by the 2021-2 ILN Transaction has coverage reporting dates between July 1, 2019 and March 31, 2021. Under the terms of our ILN Transactions, we are required to maintain a certain level of restricted funds in premium deposit accounts with Bank of New York Mellon until the respective notes have been redeemed in full. “Cash and Cash Equivalents” on our condensed consolidated balance sheets includes a de minimis restricted amount as of June 30, 2025 and $ 0.1 million as of December 31, 2024. 6. Reserves for Insurance Claims and Claim Expenses We hold gross reserves in an amount equal to the estimated liability for insurance claims and claim expenses related to defaults on insured mortgage loans. A loan is considered to be in “default” as of the payment date at which a borrower has missed the preceding two or more consecutive monthly payments. We establish reserves for loans that have been reported to us in default by servicers, referred to as case reserves, and additional loans that we estimate (based on actuarial review and other factors) to be in default that have not yet been reported to us by servicers, referred to as incurred but not reported (IBNR) reserves. We also establish reserves for claim expenses, which represent the estimated cost of the claim administration process, including legal and other fees, as well as other general expenses of administering the claim settlement process. As of June 30, 2025, we held gross reserves for insurance claims and claim expenses of $ 163.0 million. During the six months ended June 30, 2025, we paid 188 claims totaling $ 10.7 million, including 182 claims covered under the QSR Transactions representing $ 2.2 million of ceded claims and claim expenses. We had 6,709 loans in default in our primary insured portfolio as of June 30, 2025, which represented a 1.00 % default rate against 668,638 total policies in-force, and 6,642 loans in default in our primary portfolio as of December 31, 2024, which represented a 1.01 % default rate against 659,567 total policies in-force. The size of the reserve we establish for each defaulted loan (and by extension our aggregate reserve for claims and claim expenses) reflects our best estimate of the future claim payment to be made for each individual loan in default. Our future claims exposure is a function of the number of defaulted loans that progress to claim payment (which we refer to as frequency) and the amount to be paid to settle such claims (which we refer to as severity). Our estimates of claims frequency and severity are not formulaic, rather they are broadly synthesized based on historical observed experience for similarly situated loans and assumptions about future macroeconomic factors. 23 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table provides a reconciliation of the beginning and ending gross reserve balances for insurance claims and claim expenses: For the six months ended June 30, 2025 2024 (In Thousands) Beginning balance $ 152,071 $ 123,974 Less reinsurance recoverables (1) ( 32,260 ) ( 27,514 ) Beginning balance, net of reinsurance recoverables 119,811 96,460 Add claims incurred: Claims and claim expenses incurred: Current year (2) 61,356 50,372 Prior years (3) ( 43,766 ) ( 46,402 ) Total claims and claim expenses incurred (4) 17,590 3,970 Less claims paid: Claims and claim expenses paid: Current year (2) 110 — Prior years (3) 8,469 2,323 Reinsurance terminations (5) ( 1,506 ) — Total claims and claim expenses paid 7,073 2,323 Reserve at end of period, net of reinsurance recoverables 130,328 98,107 Add reinsurance recoverables (1) 32,705 27,336 Ending balance $ 163,033 $ 125,443 (1) Related to ceded losses recoverable under the QSR Transactions. See Note 5, “ Reinsurance” for additional information. (2) Related to insured loans with their most recent defaults occurring in the current year. For example, if a loan defaulted in a prior year and subsequently cured and later re-defaulted in the current year, the default would be included in the current year. Amounts are presented net of reinsurance and included $ 51.5 million attributed to net case reserves and $ 8.8 million attributed to net IBNR reserves for the six months ended June 30, 2025 and $ 43.1 million attributed to net case reserves and $ 6.4 million attributed to net IBNR reserves for the six months ended June 30, 2024. (3) Related to insured loans with defaults occurring in prior years, which have been continuously in default before the start of the current year. Amounts are presented net of reinsurance and included $ 34.9 million attributed to net case reserves and $ 8.1 million attributed to net IBNR reserves for the six months ended June 30, 2025 and $ 39.2 million attributed to net case reserves and $ 6.3 million attributed to net IBNR reserves for the six months ended June 30, 2024. (4) Excludes aggregate termination fees of $ 0.3 million for the six months ended June 30, 2025 incurred in connection with the respective amendments of the 2016, 2018 and 2021 QSR Transactions. (5) Represents the settlement of reinsurance recoverables in conjunction with the respective amendments of the 2016, 2018 and 2021 QSR Transactions. See Note 5 , “ Reinsurance” for additional information. The “claims incurred” section of the table above shows claims and claim expenses incurred on defaults occurring in current and prior years, including IBNR reserves, and is presented net of reinsurance. The amount of claims incurred relating to current year defaults increased during the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to an increase in the total number of new delinquencies emerging during the period tied to the growth and natural seasoning of our portfolio, partially offset by a decrease in the average case reserve established against newly defaulted loans. Our provision for claims and claim expenses during both the six months ended June 30, 2025 and 2024 benefited from favorable development on prior year defaults. We recognized $ 43.8 million and $ 46.4 million of favorable prior year development during the six months ended June 30, 2025 and 2024, respectively, primarily due to cure activity and ongoing analysis of recent loss development trends. We may increase or decrease our claim estimates and reserves as we learn additional information about individual defaulted loans, and continue to observe and analyze loss development trends in our portfolio. Gross reserves of $ 86.5 million related to prior year defaults remained as of June 30, 2025. 24 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 7. Earnings per Share (EPS) Basic EPS is based on the weighted average number of shares of common stock outstanding. Diluted EPS is based on the weighted average number of shares of common stock outstanding and common stock equivalents that would be issuable upon the vesting of service-based and performance and service-based restricted stock units (RSUs), and the exercise of vested and unvested stock options. The following table reconciles the net income and the weighted average shares of common stock outstanding used in the computations of basic and diluted EPS of common stock: For the three months ended June 30, For the six months ended June 30, 2025 2024 2025 2024 (In Thousands, except for per share data) Net income – basic and diluted $ 96,151 $ 92,079 $ 198,710 $ 181,129 Basic weighted average shares outstanding 77,987 80,117 78,197 80,421 Dilutive effect of issuable shares 1,269 1,183 1,360 1,282 Diluted weighted average shares outstanding 79,256 81,300 79,557 81,703 Earnings per share Basic $ 1.23 $ 1.15 $ 2.54 $ 2.25 Diluted $ 1.21 $ 1.13 $ 2.50 $ 2.22 Anti-dilutive shares — 9 — 3 8. Segment Reporting We manage our business activities on a consolidated basis under a single reportable operating segment and our Chief Executive Officer (CEO) serves as our Chief Operating Decision Maker (CODM). Our Mortgage Insurance segment provides private mortgage insurance and ancillary loan review services, and our CODM evaluates our performance and allocates resources based on our consolidated financial results, including consolidated revenue, expenses, net income, assets and shareholders' equity. Our CODM reviews these financial metrics to gauge our performance and make strategic decisions, such as whether to reinvest profits in our Mortgage Insurance segment or return capital to shareholders. The significant revenue and expense categories that are regularly reviewed by our CODM align with those presented on our condensed consolidated statements of operations and comprehensive income, and segment assets align with total assets as those presented on our condensed consolidated balance sheets. The accounting policies governing our Mortgage Insurance segment are the same as those described in Item 8, “ Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 2 - Summary of Accounting Principles” of our 2024 10-K. Investment income, also referred to as interest revenue, is reported within “ Net Investment Income ” on our condensed consolidated statements of operations and was $ 25.3 million and $ 49.3 million for the three and six months ended June 30, 2025, respectively, and $ 21.0 million and $ 40.7 million for the three and six months ended June 30, 2024, respectively . Amortization and depreciation expense for software, equipment, and leasehold improvements was $ 2.8 million and $ 5.7 million for the three and six months ended June 30, 2025, respectively, and $ 3.0 million and $ 6.0 million for the three and six months ended June 30, 2024, respectively. 9. Income Taxes We are a U.S. taxpayer and are subject to a statutory U.S. federal corporate income tax rate of 21%. Taxable income is reported on our consolidated U.S. federal and various state income tax returns, filed by NMIH on behalf of itself and its subsidiaries. Our effective tax rate on pre-tax income was 22.2 % and 22.1 % for the three and six months ended June 30, 2025, respectively, compared to 22.4 % and 22.3 % for the three and six months ended June 30, 2024, respectively. Our provision for income taxes for interim reporting periods is established based on our estimated annual effective tax rate for a given year. Our 25 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) effective tax rate may fluctuate between interim periods due to the impact of discrete items not included in our estimated annual effective tax rate, including the tax effects associated with the vesting of RSUs and exercise of options. Such items are treated on a discrete basis in the reporting period in which they occur. As a mortgage guaranty insurance company, we are eligible to claim a tax deduction for our statutory contingency reserve balance, subject to certain limitations outlined under IRC Section 832(e), and only to the extent we acquire tax and loss bonds in an amount equal to the tax benefit derived from the claimed deduction, which is our intent. As a result, our interim provision for income taxes for the three and six months ended June 30, 2025 and 2024 primarily represents a change in our net deferred tax liability. As of June 30, 2025 and December 31, 2024, we held $ 322.2 million of tax and loss bonds in “Prepaid Federal Income Taxes” on our condensed consolidated balance sheets. On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act. Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and development expenses, immediate expensing of certain capital expenditures, and other changes to the U.S. taxation of profits derived from foreign operations. We do not currently expect that the Act will have a material impact on our consolidated financial statements. 10. Stockholders' Equity On July 31, 2023, our Board of Directors authorized the $ 200 million 2023 Repurchase Program (excluding associated costs and applicable taxes) effective through December 31, 2025. On February 5, 2025, our Board of Directors authorized the new $ 250 million 2025 Repurchase Program (excluding associated costs and applicable taxes) effective through December 31, 2027 and extended the 2023 Repurchase Program through December 31, 2027 to align its remaining tenor with that of the 2025 Repurchase Program. The authorization provides us the flexibility, based on market and business conditions, stock price and other factors, to repurchase stock from time to time through open market purchases, privately negotiated transactions, or other means, including pursuant to Rule 10b5-1 trading plans. During the six months ended June 30, 2025, we repurchased 1.3 million shares at an average price of $ 36.49 per share (excluding associated costs and applicable taxes). As of June 30, 2025, we had $ 281.0 million of repurchase authority remaining. 11. Litigation We record a litigation liability when we determine that it is probable a litigation loss will be incurred and the amount of such anticipated loss can be reasonably estimated. In the event we determine that a litigation loss is reasonably possible (though not probable), we disclose an estimate of the possible loss if such estimate can be reasonably established or disclose the matter with no estimate if such estimate cannot be reasonably made. We evaluate litigation and other legal developments that could affect our accrual for probable losses or our estimated disclosure of possible losses and make ongoing adjustments to our accruals and disclosures as appropriate. Significant judgment is required to determine both the likelihood and the estimated amount of potential losses related to such matters. We were named as a defendant in a litigation proceeding pertaining to the refund of certain mortgage insurance premiums under the Homeowners Protection Act. The case was dismissed in September 2023 and the dismissal was affirmed on appeal in June 2025. We do not currently expect that we will incur a material loss in connection with the case and have not recorded a litigation liability for this matter. 12. Premiums Receivable, Net Premiums receivable consists of premiums due on our mortgage insurance policies. If a mortgage insurance premium is unpaid for more than 120 days, the associated receivable is written off against earned premium and the related insurance policy is canceled. Premiums receivable may be written off prior to 120 days in the ordinary course of business for non-credit events including, but not limited to, the modification or refinancing of an underlying insured loan. We established a $ 1.6 million and $ 2.2 million reserve for premium write-offs at June 30, 2025 and December 31, 2024, respectively. We separately recognize an allowance for credit losses for premiums receivable based on credit losses expected to arise over the life of the receivable. Due to the nature of our insurance policies (a necessary precondition for access to mortgage credit for covered borrowers) and the short duration of the related receivables, we do not typically experience credit losses against our premium receivables and the allowance for credit loss established on premium receivable was deemed immaterial at June 30, 2025 and December 31, 2024. 26 NMI HOLDINGS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 13. Regulatory Information Statutory Requirements Our insurance subsidiaries, NMIC and Re One, file financial statements in conformity with statutory accounting principles (SAP) prescribed or permitted by the Wisconsin OCI, NMIC's principal regulator. Prescribed SAP includes state laws, regulations and general administrative rules, as well as a variety of publications of the National Association of Insurance Commissioners (NAIC). The Wisconsin OCI recognizes only statutory accounting practices prescribed or permitted by the state of Wisconsin for determining and reporting the financial condition and results of operations of an insurance company and for determining its solvency under Wisconsin insurance laws. NMIC and Re One generated combined statutory net income of $ 30.5 million and $ 67.3 million for the three and six months ended June 30, 2025, respectively, compared to $ 36.0 million and $ 70.7 million for the three and six months ended June 30, 2024, respectively. The Wisconsin OCI has imposed a prescribed accounting practice for the treatment of statutory contingency reserves that differs from the treatment promulgated by the NAIC. Under Wisconsin OCI's prescribed practice mortgage guaranty insurers are required to reflect changes in their contingency reserves through statutory income. Such approach contrasts with the NAIC's treatment, which records changes to contingency reserves directly to unassigned funds. As a Wisconsin-domiciled insurer, NMIC's statutory net income reflects an expense associated with the change in its contingency reserve. While such treatment impacts NMIC's statutory net income, it does not have an effect on NMIC's statutory capital position. The following table presents NMIC's statutory surplus, contingency reserve, statutory capital and risk-to-capital (RTC) ratio as of June 30, 2025 and December 31, 2024. June 30, 2025 December 31, 2024 (In Thousands) Statutory surplus $ 951,592 $ 984,362 Contingency reserve 2,076,510 1,905,990 Statutory capital (1) $ 3,028,102 $ 2,890,352 Risk-to-capital 13.1 :1 12.7 :1 (1) Represents the total of the statutory surplus and contingency reserve. Re One had $ 2.1 million of statutory capital at June 30, 2025 and December 31, 2024. NMIH is not subject to any limitations on its ability to pay dividends except those generally applicable to corporations that are incorporated in Delaware. Delaware law provides that dividends are only payable out of a corporation's capital surplus or, subject to certain limitations, recent net profits. NMIC and Re One are subject to certain rules and regulations prescribed by jurisdictions in which they are authorized to operate and the GSEs that may restrict their ability to pay dividends to NMIH. NMIC has the capacity to pay $ 98.4 million of aggregate ordinary dividends to NMIH during the twelve-month period ending December 31, 2025, and, on June 2, 2025, NMIC paid a $ 98.4 million ordinary course dividend to NMIH. 27