NMI HOLDINGS, INC. – 10-K – Management report and analysis of the financial situation and operating results

The following analysis of our financial condition and results of operations
should be read in conjunction with our consolidated financial statements and
notes thereto included below in Item 8 of this report and the Risk Factors
included above in Item 1A of this report. In addition, investors should review
the "Cautionary Note Regarding Forward Looking Statements" above.

Overview

We provide private MI through our primary insurance subsidiary, NMIC. NMIC is
wholly-owned, domiciled in Wisconsin and principally regulated by the Wisconsin
OCI. NMIC is approved as an MI provider by the GSEs and is licensed to write
coverage in all 50 states and D.C. Our subsidiary, NMIS, provides outsourced
loan review services to mortgage loan originators and our subsidiary, 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 Such requirements have been repealed and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.

MI protects lenders and investors from default-related losses on a portion of
the unpaid principal balance of a covered mortgage. MI plays a critical role in
the U.S. housing market by mitigating mortgage credit risk and facilitating the
secondary market sale of high-LTV (i.e., above 80%) residential loans to the
GSEs, who are otherwise restricted by their charters from purchasing or
guaranteeing high-LTV mortgages that are not covered by certain credit
protections. Such credit protection and secondary market sales allow lenders to
increase their capacity for mortgage commitments and expand financing access to
existing and prospective homeowners.

NMIH, a Delaware corporation, was incorporated in May 2011, and we began
start-up operations in 2012 and wrote our first MI policy in 2013. Since
formation, we have sought to establish customer relationships with a broad group
of mortgage lenders and build a diversified, high-quality insured portfolio. As
of December 31, 2021, we had issued master policies with 1,732 customers,
including national and regional mortgage banks, money center banks, credit
unions, community banks, builder-owned mortgage lenders, internet-sourced
lenders and other non-bank lenders. As of December 31, 2021, we had
$152.3 billion of primary insurance-in-force (IIF) and $38.7 billion of primary
RIF.

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

Our strategy is to continue to build on our position in the private MI market,
expand our customer base and grow our insured portfolio of high-quality
residential loans by focusing on long-term customer relationships, disciplined
and proactive risk selection and pricing, fair and transparent claim payment
practices, responsive customer service, and financial strength and
profitability.

Our common stock trades on the NASDAQ under the symbol "NMIH." Our headquarters
is located in Emeryville, California. As of December 31, 2021, we had 247
employees. Our corporate website is located at www.nationalmi.com. Our website
and the information contained on or accessible through our website are not
incorporated by reference into this report.

We discuss below our results of operations for the periods presented, as well as
the conditions and trends that have impacted or are expected to impact our
business, including new insurance writings, the composition of our insurance
portfolio and other factors that we expect to impact our results.

COVID-19 developments

On January 30, 2020, the World Health Organization (WHO) declared the outbreak
of COVID-19 a global health emergency and subsequently characterized the
outbreak as a global pandemic on March 11, 2020. In an effort to stem contagion
and control the COVID-19 pandemic, the population at large severely curtailed
day-to-day activity and local, state and federal regulators imposed a broad set
of restrictions on personal and business conduct nationwide. The COVID-19
pandemic, along with the widespread public and regulatory response, caused a
dramatic slowdown in U.S. and global economic activity and a record number of
Americans were furloughed or laid-off in the ensuing downturn.

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The global dislocation caused by COVID-19 was unprecedented. In response to the
COVID-19 outbreak and uncertainty that it introduced, we activated our disaster
continuity program to ensure our employees were safe and able to manage our
business without interruption. We pursued a broad series of capital and
reinsurance transactions to bolster our balance sheet and expand our ability to
serve our customers and their borrowers, and we updated our underwriting
guidelines and policy pricing in consideration of the increased level of
macroeconomic volatility.

The U.S. housing market demonstrated notable resiliency in the face of COVID
stress, with significant purchase demand, record levels of mortgage origination
activity and nationwide house price appreciation emerging shortly after the
onset of the pandemic. More recently, the broad resumption of personal and
business activity nationwide has prompted a sharp economic rebound and provided
hope for a sustainable economic recovery.

While the acute economic impact of COVID-19 has begun to recede, the pandemic
continues to affect communities across the U.S. and poses significant risk
globally. The path and pace of global economic recovery will depend, in large
part, on the course of the virus, which itself remains unknown and subject to
risk. Given this uncertainty, we are not able to fully assess or estimate the
ultimate impact COVID-19 will have on the mortgage insurance market, our
business performance or our financial position including our new business
production, default and claims experience, and investment portfolio results at
this time.

Potential impact on US housing market and mortgage insurance industry

The U.S. housing market demonstrated significant resiliency amidst the broader
economic dislocation caused by the outbreak of COVID-19. Low interest rates
helped to support housing affordability, medical concerns and lifestyle
preferences drove people to move from densely populated urban areas to suburban
communities where social distancing was more easily achieved, and
shelter-in-place directives reinforced the value of homeownership, and the broad
adoption of remote work practices provides individuals with greater flexibility
to move between geographic territories - all of which contributed to an influx
of new home buyers, record levels of purchase demand, and nationwide house price
appreciation.

While the possibility remains that the housing market will soften, we believe
the general strength of the market coming into the COVID-19 pandemic and
demonstrated resiliency thus far through the pandemic will help to mitigate the
risk of a severe pullback. We observe several favorable differences in the
current environment compared to the period leading up to and through the 2008
Financial Crisis - the last period of significant economic volatility in the
U.S. and one noted for its significant housing market dislocation. Such
differences include:

(i)  the generally higher quality borrower base (as measured by weighted average
FICO scores and LTV ratios) and tighter underwriting standards (with, among
other items, full-documentation required to verify borrower income and asset
positions) that prevail in the current market;

(ii)  the lower concentration of higher risk loan structures, such as negative
amortizing, interest-only or short-termed option adjustable-rate mortgages being
originated and outstanding in the current market;

(iii)  the meaningfully higher proportion of loans used for lower risk purposes,
such as the purchase of a primary residence or rate-term refinancing in the
current market, as opposed to cash-out refinancings, investment properties or
second home purchases, which prevailed to a far greater degree in the lead up to
the 2008 Financial Crisis;

(iv)  the availability and immediate application by the government, regulators,
lenders, loan servicers and others of a broad toolkit of resources designed to
aid distressed borrowers, including forbearance, foreclosure moratoriums and
other assistance programs codified under the CARES Act enacted on March 27,
2020; and

(v)  the broader and equally immediate application of significant fiscal and
monetary stimulus by the federal government under the CARES Act, and
subsequently under the Consolidated Appropriations Act enacted on December 27,
2020 (the CAA) and the American Rescue Plan enacted on March 11, 2021, as well
as across a range of other programs designed to assist unemployed individuals
and distressed businesses, and support the smooth functioning of various capital
and risk markets.

We also perceive the house price environment in the period leading up to the
COVID pandemic to be anchored by more balanced market fundamentals than that in
the period leading up to the 2008 Financial Crisis. We believe the 2008
Financial Crisis was directly precipitated by irresponsible behavior in the
housing market that drove home prices to unsustainable heights (a so-called
"bubble"). We see a causal link between the housing market and the 2008
Financial Crisis that we do not see in the COVID-19 pandemic, and we believe
this will further contribute to housing market stability in the current period.

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Purchase mortgage origination volume increased significantly as factors related
to the COVID-19 pandemic have spurred significant incremental demand for
homeownership. Refinancing origination volume also grew dramatically as
historically low mortgage rates created refinancing opportunities for a large
number of existing borrowers.

Growth in total mortgage origination volume increases the addressable market for
the U.S. mortgage insurance industry, while accelerated refinancing activity
increases prepayment speed on outstanding insured mortgages. In this context,
total U.S. mortgage insurance industry new insurance written (NIW) volume
increased to record levels following the onset of the COVID-19 pandemic and the
persistency of existing in-force insured risk across the industry declined
meaningfully.

While we currently observe broad resiliency in the housing and high-LTV mortgage
markets and, for the reasons discussed above, expect this trend to continue in
the near term, the ultimate impact of COVID-19 remains highly uncertain. See
Item 1A "Risk Factors - The COVID-19 pandemic may continue to materially
adversely affect our business, results of operations and financial condition."

Potential impact on NMI’s business performance and financial condition

Operations

Advertising

We had 247 employees at December 31, 2021, including 83 who typically work at
our corporate headquarters in Emeryville, CA and 164 who typically work from
home in locations across the country. In response to the COVID-19 pandemic, we
activated our business continuity program and instituted additional
work-from-home practices for our Emeryville-based staff. We transitioned our
operations seamlessly and have continued to positively engage with customers on
a remote basis. Our IT environment, underwriting capabilities, policy servicing
platform and risk architecture have continued without interruption, and our
internal control environment is unchanged. We achieved this transition without
incurring additional capital expenditures or operating expenses, and we believe
our current operating platform can continue to support our newly distributed
needs for an extended period without further investment beyond that planned in
the ordinary course.

While the broad COVID vaccination effort and relaxation of local restrictions on
indoor business operation may allow for a general resumption of in-office
activity for our headquarters-based employees, the success of our remote work
experience through the pandemic has caused us to offer increased flexibility for
employees who prefer a full-time or part-time distributed engagement. We intend
to continue offering such flexibility following the pandemic and expect that a
significant number of our headquarters-based employees will elect to continue to
engage on a full-time or part-time distributed basis. In January 2022, we
modified the lease for our corporate headquarters to reflect our new real estate
needs. Under terms of the modified lease, we reduced the square footage of our
leased space and secured a reduction in pricing and incremental leasehold
improvement concessions. The modified lease term extends through March 2030.

New commercial production

Our NIW volume increased significantly following the onset of the COVID-19
pandemic driven by the broad resiliency of the housing market, growth in total
mortgage origination volume and increasing size of the U.S. mortgage insurance
market, as well as the continued expansion of our customer franchise. We wrote
$85.6 billion of NIW during the year ended December 31, 2021, up 36% compared to
the year ended December 31, 2020 and 90% compared to the year ended December 31,
2019.

While we currently expect our new business production will remain elevated, the
onset of a new viral wave could prompt a reintroduction of broad-based shelter
in place directives, increased unemployment or other potentially negative
economic and societal outcomes that could cause a moderation or decline in our
volume going forward. Further, increasing interest rates and rising house
prices, which each trace (in part) to the pandemic, may cause certain
prospective homebuyers to defer their purchases and impact mortgage origination
activity, total private mortgage insurance industry production and our NIW
volume in future periods.

We have broadly defined underwriting standards and loan-level eligibility
criteria that are designed to limit our exposure to higher risk loans, and have
used Rate GPS to actively shape the mix of our new business production and
insured portfolio by, among other risk factors, borrower FICO score,
debt-to-income (DTI) ratio and LTV ratio. In the weeks following the outbreak of
COVID-19, we adopted changes to our underwriting guidelines, including changes
to our loan documentation requirements, asset reserve requirements, employment
verification process and income continuance determinations, that further
strengthened the credit risk profile of our NIW volume and IIF. At December 31,
2021, the weighted average FICO score of our RIF was 753 and we had a 3% mix of
below 680 FICO score. Similarly, at December 31, 2021, the weighted average LTV
ratio (at origination) of our insured portfolio was 92.5% and we had a 11% mix
of 97% LTV risk.


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Delinquency trends and claims costs

AT December 31, 2021we had 6,227 loans in default in our insured principal
portfolio, which represented a default rate of 1.22% compared to our total of 512,316
policies in force and identified 7,019 loans registered in a
abstention program, including 4,751 in default.

Our default population increased significantly following the outbreak of the
pandemic as borrowers faced increased challenges related to COVID-19 and chose
to access the forbearance program for federally backed loans codified under the
CARES Act or other similar assistance programs made available by private
lenders. After this significant initial spike our default experience has
steadily improved as an increasing number of impacted borrowers have cured their
delinquencies, and fewer new defaults have emerged.

Our total defaulted loan population peaked in August 2020 and declined
every month since with consistency. From January 31, 2022our default
population was 5,912, representing a default rate of 1.14%.

The table below highlights default and forbearance activity in our main
portfolio on the dates indicated.

                                                            Default and 

Forbearance activity as of

                                             12/31/2020        3/31/2021        6/30/2021         9/30/2021                   12/31/2021
Number of loans in default                     12,209            11,090           8,764             7,670                       6,227
Default rate (1)                               3.06%             2.54%            1.86%             1.56%                       1.22%

Number of loans in forbearance                 19,464            14,805           11,889            9,342                       7,019
Forbearance rate (2)                           4.87%             3.39%            2.52%             1.90%                       1.37%


(1)  Default rate is calculated as the number of loans in default divided by
total polices in force
(2)  Forbearance rate is calculated as the number of loans in forbearance
divided by total polices in force.

While we are encouraged by the decline in our forbearance and default
populations and optimistic that we will see continued improvement as the
economic stress of the COVID pandemic recedes, future viral waves could cause
further social and economic dislocation and contribute to an increase in our
forbearance and default counts in future periods.

We establish reserves for claims and allocated claim expenses when we are
notified that a borrower is in default. The size of the reserve we establish for
each defaulted loan (and by extension our aggregate reserve and claims expense)
reflects our best estimate of the future claim payment to be made under each
individual policy. Our future claims exposure is a function of the number of
delinquent 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.

We generally observe that forbearance 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. The effectiveness of
forbearance programs is enhanced by the availability of various repayment and
loan modification options, which allow borrowers to amortize, or in certain
instances fully defer the payments otherwise due during the forbearance period,
over an extended length of time. In response to the onset of the COVID-19
pandemic, the GSEs introduced new repayment and loan modification options to
further assist borrowers with their transition out of forbearance and back into
performing status. Our reserve setting process considers the beneficial impact
of forbearance, foreclosure moratorium and other assistance programs available
to defaulted borrowers. At December 31, 2021, we generally 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 will 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.

Our Master Policies require insureds to file a claim no later than 60-days after
completion of a foreclosure, and in connection with the claim, the insured is
generally entitled to include in the claim amount (i) up to three years of
missed interest payments and (ii) certain advances, each as incurred through the
date the claim is filed. Under our Master Policies, a national foreclosure
moratorium of the type enacted following the onset of the COVID-19 pandemic will
not limit the amount of accrued interest (subject to the three-year limit) or
advances that may be included in the claim amount. Given the duration of the
foreclosure moratorium mandated by the GSEs, certain loans in our default
inventory, including those with defaults unrelated to the COVID-19 pandemic that
had not gone through foreclosure at the onset of the pandemic, have remained in
pre-foreclosure

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default status for an extended period. For loans that
eventually heal, the delayed foreclosure cycle and resulting delay in claims
submission may increase the severity of claims we ultimately pay.

Regulatory capital position

As an approved mortgage insurer and Wisconsin-domiciled carrier, we are required
to satisfy financial and/or capitalization requirements stipulated by each of
the GSEs and the Wisconsin OCI.

The financial requirements stipulated by the GSEs are outlined in the PMIERs.
Under the PMIERs, we 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, 2021, we reported $2,041 million available assets
against $1,186 million risk-based required assets. Our "excess" funding position
was $855 million.

The risk-based required asset amount under PMIERs is determined at an individual
policy-level based on the risk characteristics of each insured loan. Loans with
higher risk factors, such as higher LTVs or lower borrower FICO scores, are
assessed a higher charge. Non-performing loans that have missed two or more
payments are generally assessed a significantly higher charge than performing
loans, regardless of the underlying borrower or loan risk profile; 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
(FEMA) to be a Major Disaster zone eligible for Individual Assistance. In June
2020, the GSEs issued guidance (subsequently amended and restated in each of
September 2020, December 2020 and June 2021) on the risk-based treatment of
loans affected by the COVID-19 pandemic and the reporting of non-performing
loans by aging category. 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 permanent 70% risk-based required asset
haircut for the duration of the forbearance period and subsequent repayment plan
or trial modification period.

Our PMIERs minimum risk-based required asset amount is also adjusted for our
reinsurance transactions (as approved by the GSEs). Under our quota share
reinsurance treaties, we receive credit for the PMIERs risk-based required asset
amount on ceded RIF. As our gross PMIERs risk-based required asset amount on
ceded RIF increases, our PMIERS credit for ceded RIF automatically increases as
well (in an unlimited amount). Under our ILN transactions, we generally receive
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. We have structured our ILN
transactions to be overcollateralized, such that there are more ILN notes
outstanding and cash held in trust than we currently receive credit for under
the PMIERs. To the extent our PMIERs risk-based required asset amount on RIF
ceded under the ILN transactions grows, we receive increased PMIERs credit under
the treaties. The increasing PMIERs credit we receive under the ILN treaties is
further enhanced by their lockout triggers. In the event of certain credit
enhancement or delinquency events, the ILN notes stop amortizing and the cash
held in trust is secured for our benefit (a Lock-Out Event). As the underlying
RIF continues to run-off, this has the effect of increasing the
overcollateralization within, and excess PMIERs capacity provided by, each ILN
structure.

A Lock-Out Event was deemed to have occurred, effective June 25, 2020 for each
of the 2017, 2018 and 2019 ILN Transactions (related to the default experience
of the underlying reference pools for each respective transaction) and at
inception for the 2021-1 and 2021-2 ILN Transactions (related to the initial
build of their target credit enhancement levels), and the amortization of
reinsurance coverage, and distribution of collateral assets and amortization of
insurance-linked notes was suspended for each such ILN Transaction. The
amortization of reinsurance coverage, distribution of collateral assets and
amortization of insurance-linked notes will remain suspended for the duration of
the Lock-Out Event for each such ILN Transaction, and during such period the
overcollateralization within and potential PMIERs capacity provided by each such
ILN Transaction will grow as assets are preserved in the applicable reinsurance
trust account. Effective November 30, 2021, the Lock-Out Event for the 2017 ILN
Transaction was deemed to have cleared and amortization of the associated
reinsurance coverage, and distribution of collateral assets and amortization of
the associated insurance-linked notes resumed.


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At December 31, 2021, we had an aggregate $560 million of overcollateralization
available across our ILN Transactions to absorb an increase in the PMIERs
risk-based required asset amount on ceded RIF. The following table provides
detail on the level of overcollateralization of each of our ILN Transactions at
December 31, 2021:


                                                  2017 ILN        2018 ILN        2019 ILN       2020-1 ILN      2020-2 ILN      2021-1 ILN      2021-2 ILN
($ values in thousands)                          Transaction     Transaction     Transaction     Transaction     Transaction     Transaction     Transaction
Ceded RIF                                      $  1,083,899    $  1,165,012    $  1,315,183    $  2,830,192    $  4,337,381    $  8,025,754    $  7,692,023

First Layer Retained Loss                           121,163         122,569         122,548         169,488         121,177         163,708         146,229
Reinsurance Coverage                                 27,425         158,489         231,877          49,879         155,129         367,238         363,596
Eligible Coverage                              $    148,588    $    281,058    $    354,425    $    219,367    $    276,306    $    530,946    $    509,825
Subordinated Coverage (1)                               13.71%          24.12%          26.95%           7.75%           6.25%           6.62%           6.63%

PMIERs Charge on Ceded RIF                               6.13%           8.01%           7.82%           6.18%           5.57%           6.02%           6.50%
Overcollateralization (2) (3)                  $     27,425    $    158,489    $    231,877    $     49,879    $     34,581    $     47,709    $     10,133

Delinquency Trigger (4)                                   4.0%            4.0%            4.0%            6.0%            4.7%            5.0%            5.0%



(1) Absent a delinquency trigger, the subordinated coverage is capped at 8.00%,
6.25%, 6.75% and 7.45% for the 2020-1, 2020-2, 2021-1 and 2021-2 ILN
Transactions, respectively.
(2)  Overcollateralization for each of the 2017, 2018, 2019 and 2020-1 ILN
Transactions is equal to their current reinsurance coverage as the PMIERs
required asset amount on RIF ceded under each transaction is currently below its
remaining first layer retained loss.
(3) May not be replicated based on the rounded figures presented in the table.
(4) Delinquency triggers for 2017, 2018, and 2019 ILN Transactions are set at a
fixed 4.0% and assessed on a discrete monthly basis; delinquency triggers for
the 2020-1, 2020-2, 2021-1 and 2021-2 ILN Transactions are equal to seventy-five
percent of the subordinated coverage level and assessed on the basis of a
three-month rolling average.

Our PMIERs funding requirement will go up in future periods based on the volume
and risk profile of our new business production, and performance of our in-force
insurance portfolio. We estimate, however, that we will remain in compliance
with our PMIERs asset requirements even if the forbearance-driven default rate
on our in-force portfolio materially exceeds its current level, given our $855
million excess available asset position at December 31, 2021, the nationwide
applicability of the 70% haircut on delinquent policies subject to a forbearance
program accessed in response to a financial hardship related to the COVID-19
pandemic, and the increasing PMIERs relief automatically provided under each of
our quota share treaties and ILN Transactions.

NMIC is also subject to state regulatory minimum capital requirements based on
its RIF. Formulations of this minimum capital vary by state, however, the most
common measure allows for a maximum ratio of RIF to statutory capital (commonly
referred to as RTC) of 25:1. The RTC calculation does not assess a different
charge or impose a different threshold RTC limit based on the underlying risk
characteristics of the insured portfolio. Non-performing loans are generally
treated the same as performing loans under the RTC framework. As such, the
PMIERs generally imposes a stricter financial requirement than the state RTC
standard, and we expect this to remain the case through the duration of and
following the COVID-19 pandemic.

Liquidity

We evaluate our liquidity position at both a holding company (NMIH) and primary
operating subsidiary (NMIC) level. As of December 31, 2021, we had $2.2 billion
of consolidated cash and investments, including $106 million of cash and
investments at NMIH.

On June 8, 2020, NMIH completed the sale of 15.9 million shares of common stock,
including the exercise of a 15% overallotment option, and raised proceeds of
approximately $220 million, net of underwriting discounts, commissions and other
direct offering expenses. See Item 8, "Financial Statements and Supplementary
Data - Notes to Consolidated Financial Statements - Note 15, Common Stock." On
June 19, 2020, NMIH also completed the sale of $400 million aggregate principal
amount of senior secured notes, raising net proceeds of $244 million after
giving effect to offering expenses and the repayment of the $150 million
principal amount outstanding under our 2018 Term Loan. See Item 8, "Financial
Statements and Supplementary Data - Notes to Consolidated Financial Statements -
Note 5, Debt." NMIH contributed approximately $445 million of capital to NMIC
following completion of its respective Notes and common stock offerings.

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On November 29, 2021, we amended our $110 million senior secured revolving
credit facility (the 2020 Revolving Credit Facility and as amended, the 2021
Revolving Credit Facility), increasing the revolving capacity to $250 million
and extending the maturity from February 22, 2023 to November 29, 2025, or if
any existing senior secured notes remain outstanding on February 28, 2025, then
on such date. The 2021 Revolving Credit Facility is undrawn and fully available
to NMIH. Amounts drawn under the 2021 Revolving Credit Facility are available as
directed for NMIH needs or may be down-streamed to support the requirements of
our operating subsidiaries if we so decide. See Item 8, "Financial Statements
and Supplementary Data - Notes to Consolidated Financial Statements - Note 5,
Debt." NMIH also has access to $34.9 million of ordinary course dividend
capacity available from NMIC without the prior approval of the Wisconsin OCI.

On February 10, 2022, the Board of Directors has approved a $125 million share
repurchase program through December 31, 2023, that enables the company to
repurchase its common stock. The authorization provides NMI the flexibility to
repurchase shares from time to time in the open market or in privately
negotiated transactions, based on market and business conditions, stock price
and other factors.

NMIH's principal liquidity demands include funds for the payment of (i) certain
corporate expenses, (ii) certain reimbursable expenses of our insurance
subsidiaries, including NMIC, and (iii) principal and interest as due on our
outstanding debt. NMIH generates cash interest income on its investment
portfolio, receives cash proceeds upon the exercise of outstanding stock
options, and benefits from tax, expense-sharing and debt service agreements with
its subsidiaries. Such agreements have been approved by the Wisconsin OCI and
provide for the reimbursement of substantially all of NMIH's annual cash
expenditures. While such agreements are subject to revocation by the Wisconsin
OCI, we do not expect such action to be taken at this time. The Wisconsin OCI
refreshed its approval of the debt service agreement and provided for the
additional reimbursement by NMIC of interest expense due on our Notes and 2021
Revolving Credit Facility at the time each transaction was completed.

NMIC's principal sources of liquidity include (i) premium receipts on its
insured portfolio and new business production, (ii) interest income on its
investment portfolio and principal repayments on maturities therein, and (iii)
existing cash and cash equivalent holdings. At December 31, 2021, NMIC had
$2.1 billion of cash and investments, including $55 million of cash and
equivalents. NMIC's principal liquidity demands include funds for the payment of
(i) reimbursable holding company expenses, (ii) premiums ceded under our
reinsurance transactions (iii) claims payments, and (iv) taxes as due or
otherwise deferred through the purchase of tax and loss bonds. NMIC's cash
inflow is generally significantly in excess of its cash outflow in any given
period. During the twelve-month period ended December 31, 2021, NMIC generated
$307 million of cash flow from operations and received an additional
$117 million of cash flow from the maturity, sale and redemption of securities
held in its investment portfolio. NMIC is not a party to any contracts
(derivative or otherwise) that require it to post an increasing amount of
collateral to any counterparty and NMIC's principal liquidity demands (other
than claims payments) generally develop along a scheduled path (i.e., are of a
contractually predetermined amount and due at a contractually predetermined
date). NMIC's only use of cash that develops along an unscheduled path is claims
payments. Given the breadth and duration of forbearance programs available to
borrowers, separate foreclosure moratoriums that have been enacted at a local,
state and federal level, and the general duration of the default to foreclosure
to claim cycle, we do not expect NMIC to use a meaningful amount of cash to
settle claims in the near-term.

Premiums paid to NMIC on monthly policies are generally collected and remitted
by loan servicers. There was broad discussion at the onset of the COVID-19
pandemic and concerns about potential liquidity challenges that servicers might
face in the event of widespread borrower utilization of forbearance programs.
These concerns have not materialized thus far and we do not believe that loan
servicer liquidity constraints, should they arise in the future, would have a
material impact on NMIC's premium receipts or liquidity profile. Loan servicers
are contractually obligated to advance mortgage insurance premiums in a timely
manner, even if the underlying borrowers fail to remit their monthly mortgage
payments. In June 2020, the GSEs issued guidance to the PMIERs (subsequently
amended and restated in each of September 2020, December 2020 and June 2021)
that, among other items, required us to notify them of our intent to cancel
coverage on policies for which servicers failed to make timely premium payments
so that the GSEs could pay the premiums directly to us and preserve the mortgage
insurance coverage. Through December 31, 2021, we did not see any notable
changes in servicer payment practices, with servicers generally continuing to
remit monthly premium payments as scheduled, including those for policies
covering loans that are in a forbearance program.

Investment portfolio

At December 31, 2021, we had $2.2 billion of cash and invested assets. Our
investment strategy equally prioritizes capital preservation alongside income
generation, and we have a long-established investment policy that sets
conservative limits for asset types, industry sectors, single issuers and
instrument credit ratings. At December 31, 2021, our investment portfolio was
comprised of 100% fixed income assets with 100% of our holdings rated investment
grade and our portfolio having an average rating of "A+." At December 31, 2021,
our portfolio was in a $7.2 million aggregate unrealized gain position; it was
highly liquid

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and highly diversified with no Level 3 asset positions and no single issuer
concentration greater than 1.3%. We have not recorded any provision for credit
losses in the portfolio during the year ended December 31, 2021as expected
recover the amortized cost basis of all securities held.

Taxes

The CARES Act, CAA and American Rescue Plan include, among other items,
provisions relating to refundable payroll tax credits, deferment of social
security payments, net operating loss carryback periods, alternative minimum tax
credit refunds, modifications to the net interest deduction limitations,
increased limitations on qualified charitable contributions, technical
corrections to tax depreciation methods for qualified improvement property, and
temporary 100% deduction for business meals. We continue to monitor the impact
that the CARES Act, CAA and American Rescue Plan may have on our business,
financial condition and results of operations.

Other conditions and trends affecting our business

Customer Development

We have important relationships with customers across all categories and
allocation profiles, including National Accounts and Regional Accounts, and
centralized and decentralized lenders. Our sales and marketing efforts are
broadly focused on expanding our presence with existing customers and activating
new customer relationships. We consider an activation to be the point at which
we have signed a Master Policy, established IT connectivity and generated a
first application or first dollar of NIW from a customer. During the year ended
December 31, 2021, we activated 122 lenders, compared to 101 and 94 for the
years ended December 31, 2020 and December 31, 2019, respectively. We also
continued to expand our business with existing customers, deepening our existing
relationships and capturing what we believe to be an increasing portion of their
annual MI volume. At December 31, 2021, we had issued 1,732 Master Policies and
established 1,316 active customer relationships, compared to 1,570 and 1,195,
respectively, as of December 31, 2020 and 1,476 and 1,095, respectively, as of
December 31, 2019.

New insurance taken out, insurance in force and risk in force

NIW is the aggregate unpaid principal balance of mortgages underpinning new
policies written during a given period. Our NIW is affected by the overall size
of the mortgage origination market and the volume of high-LTV mortgage
originations. Our NIW is also affected by the percentage of such high-LTV
originations covered by private versus government MI or other alternative credit
enhancement structures and our share of the private MI market. NIW, together
with persistency, drives our IIF. IIF is the aggregate unpaid principal balance
of the mortgages we insure, as reported to us by servicers at a given date, and
represents the sum total of NIW from all prior periods less principal payments
on insured mortgages and policy cancellations (including for prepayment,
nonpayment of premiums, coverage rescission and claim payments). RIF is related
to IIF and represents the aggregate amount of coverage we provide on all
outstanding policies at a given date. RIF is calculated as the sum total of the
coverage percentage of each individual policy in our portfolio applied to the
unpaid principal balance of such insured mortgage. RIF is affected by IIF and
the LTV profile of our insured mortgages, with lower LTV loans generally having
a lower coverage percentage and higher LTV loans having a higher coverage
percentage. Gross RIF represents RIF before consideration of reinsurance. Net
RIF is gross RIF net of ceded reinsurance.

Net premiums written and net premiums earned

We set our premium rates on individual policies based on the risk
characteristics of the underlying mortgage loans and borrowers, and in
accordance with our filed rates and applicable rating rules. On June 4, 2018, we
introduced a proprietary risk-based pricing platform, which we refer to as Rate
GPS. Rate GPS considers a broad range of individual variables, including
property type, type of loan product, borrower credit characteristics, and lender
and market factors, and provides us with the ability to set and charge premium
rates commensurate with the underlying risk of each loan that we insure. We
introduced Rate GPS in June 2018 to replace our previous rate card pricing
system. While most of our new business is priced through Rate GPS, we also
continue to offer a rate card pricing option to a limited number of lender
customers who require a rate card for operational reasons. We believe the
introduction and utilization of Rate GPS provides us with a more granular and
analytical approach to evaluating and pricing risk, and that this approach
enhances our ability to continue building a high-quality mortgage insurance
portfolio and delivering attractive risk-adjusted returns.

Premiums are generally fixed for the duration of our coverage of the underlying
loans. Net premiums written are equal to gross premiums written minus ceded
premiums written under our reinsurance arrangements, less premium refunds and
premium write-offs. As a result, net premiums written are generally influenced
by:

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•NIW;

• premium rates and combination of premium payment types, which are either unique,
monthly or annual premiums, as described below;

•cancellation rates of our insurance policies, which are impacted by payments or
prepayments on mortgages, refinancings (which are affected by prevailing
mortgage interest rates as compared to interest rates on loans underpinning our
in force policies), levels of claim payments and home prices; and

•assignment of premiums under third-party reinsurance contracts.

Premiums are paid either by the borrower (BPMI) or the lender (LPMI) in a single
payment at origination (single premium), on a monthly installment basis (monthly
premium) or on an annual installment basis (annual premium). Our net premiums
written will differ from our net premiums earned due to policy payment type. For
single premiums, we receive a single premium payment at origination, which is
earned over the estimated life of the policy. Substantially all of our single
premium policies in force as of December 31, 2021 were non-refundable under most
cancellation scenarios. If non-refundable single premium policies are canceled,
we immediately recognize the remaining unearned premium balances as earned
premium revenue. Monthly premiums are recognized in the month billed and when
the coverage is effective. Annual premiums are earned on a straight-line basis
over the year of coverage. Substantially all of our policies provide for either
single or monthly premiums..

The percentage of IIF that remains on our books after any twelve-month period is
defined as our persistency rate. Because our insurance premiums are earned over
the life of a policy, higher persistency rates can have a significant impact on
our net premiums earned and profitability. Generally, faster speeds of mortgage
prepayment lead to lower persistency. Prepayment speeds and the relative mix of
business between single and monthly premium policies also impact our
profitability. Our premium rates include certain assumptions regarding repayment
or prepayment speeds of the mortgages underlying our policies. Because premiums
are paid at origination on single premium policies and our single premium
policies are generally non-refundable on cancellation, assuming all other
factors remain constant, if single premium loans are prepaid earlier than
expected, our profitability on these loans is likely to increase and, if loans
are repaid slower than expected, our profitability on these loans is likely to
decrease. By contrast, if monthly premium loans are repaid earlier than
anticipated, we do not earn any more premium with respect to those loans and,
unless we replace the repaid monthly premium loan with a new loan at the same
premium rate or higher, our revenue is likely to decline.

Effect of reinsurance on our results

We utilize third-party reinsurance to actively manage our risk, ensure
compliance with PMIERs, state regulatory and other applicable capital
requirements, and support the growth of our business. We currently have both
quota share and excess-of-loss reinsurance agreements in place, which impact our
results of operations and regulatory capital and PMIERs asset positions. Under a
quota share reinsurance agreement, the reinsurer receives a premium in exchange
for covering an agreed-upon portion of incurred losses. Such a quota share
arrangement reduces premiums written and earned and also reduces RIF, providing
capital relief to the ceding insurance company and reducing incurred claims in
accordance with the terms of the reinsurance agreement. In addition, reinsurers
typically pay ceding commissions as part of quota share transactions, which
offset the ceding company's acquisition and underwriting expenses. Certain quota
share agreements include profit commissions that are earned based on loss
performance and serve to reduce ceded premiums. Under an excess-of-loss
agreement, the ceding insurer is typically responsible for losses up to an
agreed-upon threshold and the reinsurer then provides coverage in excess of such
threshold up to a maximum agreed-upon limit. We expect to continue to evaluate
reinsurance opportunities in the normal course of business.

Quota share reinsurance

NMIC is a party to five active quota share reinsurance treaties - the 2016 QSR
Transaction, effective September 1, 2016, the 2018 QSR Transaction, effective
January 1, 2018 and the 2020 QSR Transaction, effective April 1, 2020, the 2021
QSR Transaction, effective January 1, 2021 and the 2022 QSR Transaction,
effective October 1, 2021 - 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 written during a discrete period to
panels of third-party reinsurance providers. Each of the third-party reinsurance
providers has an insurer financial strength rating of A- or better by Standard &
Poor's Rating Service (S&P), A.M. Best Company, Inc. (A.M. Best) or both.

Under the terms of the 2016 QSR Transaction, NMIC cedes premiums written related
to 25% of the risk on eligible primary policies written for all periods through
December 31, 2017 and 100% of the risk under our pool agreement with Fannie Mae,
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.

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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 policies, 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 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 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.

In connection with the 2022 QSR Transaction, NMIC entered into an additional
back-to-back quota share agreement that is scheduled to incept on January 1,
2023 (the 2023 QSR Transaction). Under the terms of the 2023 QSR Transactions,
NMIC will cede premiums earned related to 20% of the risk on eligible policies
written in 2023, 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.

NMIC may elect to 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.

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. The
termination had no effect on the cession of pool risk under the 2016 QSR
Transaction.

Excess of loss reinsurance

NMIC is party to reinsurance agreements with the Oaktown Re Vehicles that
provide it with aggregate excess-of-loss reinsurance coverage on defined
portfolios 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.

The respective reinsurance coverage amounts provided by the Oaktown Re Vehicles
decrease from the inception of each agreement over a ten-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 note-holders as amortization of the outstanding
insurance-linked note principal balances occurs. The outstanding reinsurance
coverage amounts stop amortizing, and the collateral distribution to ILN
Transaction note-holders 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). A Lock-Out Event was
deemed to have occurred, effective June 25, 2020 for each of the 2017, 2018 and
2019 ILN Transactions (related to the default experience of the underlying
reference pools for each respective transaction) and at inception of the 2021-1
and 2021-2 ILN Transactions (related to the initial build of their target credit
enhancement levels), and the amortization of reinsurance coverage, and
distribution of collateral assets and amortization of insurance-linked notes was
suspended for each ILN Transaction. The amortization of reinsurance coverage,
distribution of collateral assets and amortization of insurance-linked notes
will remain suspended for the duration of the Lock-Out Event for each ILN
Transaction, and during such period assets will be preserved in the applicable
reinsurance trust account to collateralize the excess-of-loss reinsurance
coverage provided to NMIC. Effective
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November 30, 2021the lock event for the 2017 ILN transaction was deemed
have cleared and amortized the associated reinsurance coverage, and
allocation of collateral assets and amortization of associated assets
insurance-linked tickets resumed.

The following table presents the date of creation, the production period covered,
initial and current reinsurance coverage amount, and first
layer retained the aggregate loss under each of the ILN transactions. Running
the amounts are presented in December 31, 2021.

                                                                                                                                                             Initial First       Current First
                                                                                                       Initial Reinsurance        Current Reinsurance            Layer           Layer Retained
($ values in thousands)              Inception Date                    Covered Production                    Coverage                   Coverage             Retained Loss          Loss (1)
2017 ILN Transaction                   May 2, 2017                    1/1/2013 - 12/31/2016                  $211,320                   $27,425                $126,793             $121,163
2018 ILN Transaction                  July 25, 2018                   1/1/2017 - 5/31/2018                   264,545                    158,489                 125,312             122,569
2019 ILN Transaction                  July 30, 2019                   6/1/2018 - 6/30/2019                   326,905                    231,877                 123,424             122,548
2020-1 ILN Transaction                July 30, 2020                   7/1/2019 - 3/31/2020                   322,076                     49,879                 169,514             169,488
2020-2 ILN Transaction              October 29, 2020                4/1/2020 - 9/30/2020 (2)                 242,351                    155,129                 121,777             121,177
2021-1 ILN Transaction (5)           April 27, 2021                 10/1/2020 - 3/31/2021 (3)                367,238                    367,238                 163,708             163,708
2021-2 ILN Transaction (5)          October 26, 2021                4/1/2021 - 9/30/2021 (4)                 363,596                    363,596                 146,229             146,229


(1)  NMIC applies claims paid on covered policies against its first layer
aggregate retained loss exposure and cedes reserves for incurred claims and
claims expenses to each applicable ILN Transaction and recognizes a reinsurance
recoverable if such incurred claims and claims 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.
(3)  Approximately 1% of the production covered by the 2021-1 ILN Transaction
has coverage reporting dates between July 1, 2019 and September 30, 2020.
(4)  Approximately 2% of the production covered by the 2021-2 ILN Transaction
has coverage reporting dates between July 1, 2019 and March 31, 2021.
(5)  As of December 31, 2021, the current reinsurance coverage amount on the
2021-1 ILN and 2021-2 ILN Transactions is equal to the initial reinsurance
coverage amount, as the reinsurance coverage provided by the associated Oaktown
Re vehicles will not decrease until a target credit enhancement level is met.

See section 8, “Financial statements and additional data – Notes to the consolidated financial statements”
Financial Statements – Note 6, Reinsurance” for a more in-depth discussion of these
reinsurance agreements with third parties.

Portfolio data

The following table presents primary and pool 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, 2021                    December 31, 2020                    December 31, 2019
                                  IIF                NIW               IIF                NIW               IIF                NIW
                                                                           (In Millions)
Monthly                       $ 133,104          $ 77,019          $  95,336          $ 56,651          $  77,097          $ 41,357
Single                           19,239             8,555             15,916             6,051             17,657             3,784
Primary                         152,343            85,574            111,252            62,702             94,754            45,141

Pool                              1,229                 -              1,855                 -              2,570                 -
Total                         $ 153,572          $ 85,574          $ 113,107          $ 62,702          $  97,324          $ 45,141


For the year ended December 31, 2021, primary NIW increased 36% compared to the
year ended December 31, 2020, driven by growth in our customer franchise and
market presence tied to the increased penetration of existing customer accounts
and new customer account activations. For the year ended December 31, 2020,
primary NIW increased 39% compared to the year ended December 31, 2019, driven
by growth in our monthly and single premium policy production tied to an
increase in the size of the total mortgage insurance market, as well as the
growth of our customer franchise and market presence.

Total IIF increased 36% at December 31, 2021 compared to December 31, 2020,
which in turn grew 16% compared to December 31, 2019, primarily due to the NIW
generated between such measurement dates, partially offset by the run-off of
in-force policies.

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Our persistency rate improved to 64% at December 31, 2021 from 56% at
December 31, 2020, as the pace of refinancing activity slowed and an increasing
amount of business written on loans with historically low mortgage note rates
since the beginning of the pandemic began to factor in the persistency
calculation.

Our retention rate fell to 56% at December 31, 2020 from 77% to
December 31, 2019reflecting the impact of increased refinancing activity
during the year ended December 31, 2020.

The following table shows the net premiums written and earned for the periods
indicated.

Primary and pool premiums written and earned                      For the year ended
                                               December 31,          December 31,          December 31,
                                                   2021                  2020                  2019
                                                                    (In Thousands)
Net premiums written                          $    468,511          $    388,644          $    332,652
Net premiums earned                                444,294               397,172               345,015


For the year ended December 31, 2021, net premiums written and earned increased
21% and 12%, respectively, compared to the year ended December 31, 2020. For the
year ended December 2020, net premiums written and earned increased 17% and 15%,
respectively, compared to the year ended December 31, 2019. The successive
year-on-year growth in net premiums written and earned was primarily driven by
the growth of our IIF and increased monthly policy production, partially offset
by increased cessions under the QSR and ILN Transactions. Net premiums earned
for the year ended December 31, 2020 also benefited from an increase in single
premium policy cancellations tied to the increased pace of refinancing activity
and policy turnover triggered by the record low interest rate environment that
developed following the onset of the COVID-19 pandemic.

Pool premiums written and earned for the years ended December 31, 2021, 2020 and
2019, were $1.6 million, $2.5 million and $3.0 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.

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Wallet statistics

Unless otherwise noted, the portfolio statistics tables presented below do not
include the effects of our third-party reinsurance arrangements described above.
The table below highlights trends in our primary portfolio as of the dates and
for the periods indicated.

Primary portfolio trends                                              As of and for the year ended
                                                  December 31, 2021         December 31, 2020         December 31, 2019
                                                                         ($ Values In Millions)
New insurance written                            $         85,574          $         62,702          $         45,141
Percentage of monthly premium                                  90  %                     90  %                     92  %
Percentage of single premium                                   10  %                     10  %                      8  %
New risk written                                 $         21,607          $         15,602          $         11,715
Insurance-in-force (1)                                    152,343                   111,252                    94,754
Percentage of monthly premium                                  87  %                     86  %                     81  %
Percentage of single premium                                   13  %                     14  %                     19  %
Risk-in-force (1)                                $         38,661          $         28,164          $         24,173
Policies in force (count) (1)                             512,316                   399,429                   366,039
Average loan size ($ value in thousands) (1)     $            297          $            279          $            259
Coverage percentage (2)                                        25  %                     25  %                     26  %
Loans in default (count) (1)                                6,227                    12,209                     1,448
Default rate (1)                                             1.22  %                   3.06  %                   0.40  %
Risk-in-force on defaulted loans (1)             $            435          $            874          $             84
Average premium yield (3)                                    0.34  %                   0.39  %                   0.42  %
Earnings from cancellations                      $             30          $             48          $             22
Annual persistency (4)                                         64  %                     56  %                     77  %
Quarterly run-off (5)                                         6.7  %                   12.5  %                    7.7  %


(1)  Reported as of the end of the period.
(2)  Calculated as end of period RIF divided by end of period IIF.
(3)   Calculated as net premiums earned divided by average primary IIF for the
period.
(4) Defined as the percentage of IIF that remains on our books after a given
twelve-month period.
(5) Defined as the percentage of IIF that is no longer on our books after a
given three-month period. Figures shown represent fourth quarter values for the
respective years.

The table below presents a summary of the evolution of the total primary ITC for the
dates and periods indicated.

Primary IIF                                                    As of and for the year ended
                                                               December 31,          December 31,
                                                                   2021                  2020               December 31, 2019
                                                                                        (In Millions)
IIF, beginning of period                                      $    111,252          $     94,754          $           68,551
NIW                                                                 85,574                62,702                      45,141
Cancellations, principal repayments and other
reductions                                                         (44,483)              (46,204)                    (18,938)
IIF, end of period                                            $    152,343          $    111,252          $           94,754


We consider a "book" to be a collective pool of policies insured during a
particular period, normally a calendar year. In general, the majority of
underwriting profit, calculated as earned premium revenue minus claims and
underwriting and operating expenses, generated by a particular book year emerges
in the years immediately following origination. This pattern generally occurs
because relatively few of the claims that a book will ultimately experience
typically occur in the first few years following origination, when premium
revenue is highest, while subsequent years are affected by declining premium
revenues, as the number of insured loans decreases (primarily due to loan
prepayments), and by increasing losses.

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

    Primary IIF and RIF                                            As of
                                December 31, 2021            December 31, 2020            December 31, 2019
                                IIF           RIF            IIF           RIF            IIF           RIF
                                                               (In Millions)

    December 31, 2021       $  81,226      $ 20,591      $       -      $      -      $       -      $      -
    2020                       43,795        11,023         58,232        14,510              -             -
    2019                       12,407         3,249         25,038         6,548         42,060        10,916
    2018                        4,929         1,258          9,788         2,494         19,579         4,977
    2017                        4,233         1,062          8,009         2,002         14,961         3,710
    2016 and before             5,753         1,478         10,185         2,610         18,154         4,570
    Total                   $ 152,343      $ 38,661      $ 111,252      $ 28,164      $  94,754      $ 24,173


We utilize certain risk principles that form the basis of how we underwrite and
originate NIW. We have established prudential underwriting standards and
loan-level eligibility matrices which prescribe the maximum LTV, minimum
borrower FICO score, maximum borrower DTI ratio, maximum loan size, property
type, loan type, loan term and occupancy status of loans that we will insure and
memorialized these standards and eligibility matrices in our Underwriting
Guideline Manual that is publicly available on our website. Our underwriting
standards and eligibility criteria are designed to limit the layering of risk in
a single insurance policy. "Layered risk" refers to the accumulation of
borrower, loan and property risk. For example, we have higher credit score and
lower maximum allowed LTV requirements for investor-owned properties, compared
to owner-occupied properties. We monitor the concentrations of various risk
attributes in our insurance portfolio, which may change over time, in part, as a
result of regional conditions or public policy shifts.

The tables below present our primary NIW by FICO, LTV and purchase/refinance mix
for the periods indicated. We calculate the LTV of a loan as the percentage of
the original loan amount to the original purchase value of the property securing
the loan.

 Primary NIW by FICO                            For the year ended
                                        December 31, 2021       December 31, 2020       December 31, 2019
                                                                  (In Millions)
 >= 760                                $           40,408      $           37,437      $           21,931
 740-759                                           15,927                   9,443                   7,541
 720-739                                           12,511                   7,820                   6,643
 700-719                                            8,450                   4,644                   4,783
 680-699                                            5,792                   2,692                   3,021
 <=679                                              2,486                     666                   1,222
 Total                                 $           85,574      $           62,702      $           45,141
 Weighted average FICO                                752                     761                     753


    Primary NIW by LTV                          For the year ended
                                        December 31, 2021      December 31,

2020 December 31, 2019

                                                                 (In 

Millions)

    95.01% and above                   $          8,153       $          

3,732 $3,192

    90.01% to 95.00%                             38,215                 26,000                 21,475
    85.01% to 90.00%                             24,655                 22,356                 15,555
    85.00% and below                             14,551                 10,614                  4,919
    Total                              $         85,574       $         

62,702 $45,141

    Weighted average LTV                           91.4  %                90.9  %                91.8  %


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Primary NIW by purchase/refinance mix                                       

For the year ended

                                                                   December 31, 2021           December 31, 2020           December 31, 2019
                                                                                                 (In Millions)
Purchase                                                         $           70,318          $           41,616          $           37,405
Refinance                                                                    15,256                      21,086                       7,736
Total                                                            $           85,574          $           62,702          $           45,141

The tables below show our total primary IIF and RIF by FICO and LTV, and
Total Primary FRR by loan type on the dates indicated.

Primary IIF by FICO                                                                  As of
                                        December 31, 2021                 December 31, 2020                      December 31, 2019
                                                                            ($ Values In Millions)
>= 760                                 $   76,449                           50  %       $  58,368                52  %       $ 44,793                47  %
740-759                                    26,219                           17             17,442                16            15,728                17
720-739                                    21,356                           14             15,091                14            13,417                14
700-719                                    14,401                           10             10,442                 9            10,284                11
680-699                                     9,654                            6              6,777                 6             6,774                 7
<=679                                       4,264                            3              3,132                 3             3,758                 4
Total                                  $  152,343                          100  %       $ 111,252               100  %       $ 94,754               100  %


Primary RIF by FICO                                                               As of
                                        December 31, 2021              December 31, 2020                   December 31, 2019
                                                                         ($ Values In Millions)
>= 760                                 $   19,125                      50  %       $ 14,634                52  %       $ 11,388                47  %
740-759                                     6,707                      17             4,449                16             4,034                17
720-739                                     5,497                      14             3,868                14             3,465                14
700-719                                     3,771                      10             2,692                 9             2,632                11
680-699                                     2,511                       6             1,748                 6             1,728                 7
<=679                                       1,050                       3               773                 3               926                 4
Total                                  $   38,661                     100  %       $ 28,164               100  %       $ 24,173               100  %


  Primary IIF by LTV                                          As of
                           December 31, 2021             December 31, 2020 

December 31, 2019

                                                      ($ Values In Millions)
  95.01% and above     $           14,058                  9  %    $   9,129             8  %    $  8,640         9  %
  90.01% to 95.00%                 68,537                 45          49,898            45         44,668        47
  85.01% to 90.00%                 46,971                 31          36,972            33         30,163        32
  85.00% and below                 22,777                 15          15,253            14         11,283        12
  Total                $          152,343                100  %    $ 111,252           100  %    $ 94,754       100  %


  Primary RIF by LTV                                          As of
                           December 31, 2021             December 31, 2020            December 31, 2019
                                                      ($ Values In Millions)
  95.01% and above     $            4,230                  11  %    $  2,637            10  %    $  2,390        10  %
  90.01% to 95.00%                 20,210                  52         14,673            52         13,086        54
  85.01% to 90.00%                 11,533                  30          9,067            32          7,376        31
  85.00% and below                  2,688                   7          1,787             6          1,321         5
  Total                $           38,661                 100  %    $ 28,164           100  %    $ 24,173       100  %


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Primary RIF by Loan Type                                                                         As of
                                                                December 31, 2021              December 31, 2020          December 31, 2019

Fixed                                                                             99  %                      99  %                      98  %
Adjustable rate mortgages:
Less than five years                                                               -                          -                          -
Five years and longer                                                              1                          1                          2
Total                                                                            100  %                     100  %                     100  %


The table below presents selected primary portfolio statistics, by book year, as
of December 31, 2021.

                                                                                                                    As of December 31, 2021
                   Original              Remaining           % Remaining of                                                                                                                             Incurred Loss
                  Insurance            Insurance in             Original                                              Number of Policies in         Number of Loans                                    Ratio (Inception        Cumulative Default       Current Default
Book year          Written                 Force                Insurance             Policies Ever in Force                  Force                   in Default             # of Claims Paid            to Date) (1)               Rate (2)               Rate (3)
                                                                                                                     ($ Values in Millions)
2013           $         162          $          6                       4  %                    655                                 46                       1                       1                           0.4  %                   0.3  %                2.2  %
2014                   3,451                   274                       8  %                 14,786                              1,693                      60                      49                           4.3  %                   0.7  %                3.5  %
2015                  12,422                 1,706                      14  %                 52,548                              9,341                     275                     117                           3.3  %                   0.7  %                2.9  %
2016                  21,187                 3,768                      18  %                 83,626                             18,987                     591                     129                           2.8  %                   0.9  %                3.1  %
2017                  21,582                 4,233                      20  %                 85,897                             21,718                     950                     101                           4.3  %                   1.2  %                4.4  %
2018                  27,295                 4,928                      18  %                104,043                             24,448                   1,328                      89                           8.2  %                   1.4  %                5.4  %
2019                  45,141                12,407                      27  %                148,423                             50,313                   1,479                      20                          11.4  %                   1.0  %                2.9  %
2020                  62,702                43,795                      70  %                186,174                            138,203                   1,070                       1                           6.0  %                   0.6  %                0.8  %
2021                  85,574                81,226                      95  %                257,972                            247,567                     473                       -                           2.0  %                   0.2  %                0.2  %
Total          $     279,516          $    152,343                                           934,124                            512,316                   6,227                     507


(1)  Calculated as total claims incurred (paid and reserved) divided by
cumulative premiums earned, net of reinsurance.
(2)  Calculated as the sum of the number of claims paid ever to date and number
of loans in default divided by policies ever in force.
(3)  Calculated as the number of loans in default divided by number of policies
in force.

Geographic Dispersion

The following table shows the distribution by state of our primary RIF as of the
periods indicated. The distribution of our primary RIF as of December 31, 2021
is not necessarily representative of the geographic distribution we expect in
the future.

Top 10 primary RIF by state as of December 31,
2021                                                                                  As of
                                                     December 31, 2021              December 31, 2020          December 31, 2019
California                                                           10.4  %                    11.2  %                    11.8  %
Texas                                                                 9.7                        8.8                        8.2
Florida                                                               8.6                        7.3                        5.7
Virginia                                                              4.7                        5.1                        5.3
Colorado                                                              3.8                        4.1                        3.4
Georgia                                                               3.8                        3.1                        2.7
Maryland                                                              3.7                        3.7                        3.4
Washington                                                            3.7                        3.5                        3.3
Illinois                                                              3.6                        3.8                        3.8
Pennsylvania                                                          3.3                        3.4                        3.6
Total                                                                55.3  %                    54.0  %                    51.2  %


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Insurance claims and claim costs

Insurance claims and incurred claim costs represent estimated future payments
on newly defaulted insured loans and any changes in our loss estimates for
previously existing defaults. Claims incurred are generally affected by a
various factors, including:

•future macroeconomic factors, including national and regional unemployment
rates, which affect the likelihood that borrowers may default on their loans and
probability of claims, and interest rates, which tend to drive increased
persistency as they rise, thereby extending the average life of our insured
portfolio and increasing expected future claims and decrease persistency as they
fall, thereby shortening the average life of our insured portfolio and
moderating future expected claims;

•changes in housing values, as such changes affect loss mitigation opportunities
(available to us and a borrower) on loans in default, as well as borrowers'
behaviors and willingness to default if the values of their homes are below or
perceived to be below the balance of their mortgage;

• Borrowers’ FICO scores, with lower FICO scores tending to have a lower
probability of claims;

• Borrower DTI ratios, with higher DTI ratios tending to have a lower
probability of claims;

• LTV ratios, with higher average LTV ratios tending to increase the likelihood
complaints;

•the size of the loans insured, with larger loan amounts tending to
claims amounts incurred than lower loan amounts;

•the percentage of cover on insured loans, with higher percentages of
insurance coverage tends to result in higher claims amounts than lower claims amounts
insurance coverage percentages;

• other risk characteristics of the borrower, property type and loan level, such as
cash refinances, second homes or investment properties; and

•the level and amount of reinsurance coverage maintained with third parties.

Reserves for claims and claim expenses are established for mortgage loans that
are in default. A loan is considered to be in default as of the payment date at
which a borrower has missed the preceding two or more consecutive monthly
payments. We establish reserves for loans that have been reported to us in
default by servicers, referred to as case reserves, and additional loans that we
estimate (based on actuarial review and other factors) to be in default that
have not yet been reported to us by servicers, referred to as IBNR. We also
establish reserves for claim expenses, which represent the estimated cost of the
claim administration process, including legal and other fees and other general
expenses of administering the claim settlement process. Reserves are not
established for future claims on insured loans which are not currently reported
or which we estimate are not currently in default.

Reserves are established by estimating the number of loans in default that will
result in a claim payment, which is referred to as claim frequency, and the
amount of the claim payment expected to be paid on each such loan in default,
which is referred to as claim severity. Claim frequency and severity estimates
are established based on historical observed experience regarding certain loan
factors, such as age of the default, cure rates, size of the loan and estimated
change in property value. Reserves are released the month in which a loan in
default is brought current by the borrower, which is referred to as a cure.
Adjustments to reserve estimates are reflected in the period in which the
adjustment is made. Reserves are also ceded to reinsurers under the QSR
Transactions and ILN Transactions, as applicable under each treaty. We have not
yet ceded any reserves under the ILN Transactions as incurred claims and claims
expenses on each respective reference pool remain within our retained coverage
layer of each transaction. Our pool insurance agreement with Fannie Mae contains
a claim deductible through which Fannie Mae absorbs specified losses before we
are obligated to pay any claims. We have not established any claims or claim
expense reserves for pool exposure to date.

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 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. 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.

Our reserve setting process considers the beneficial impact of forbearance,
foreclosure moratorium and other assistance programs available to defaulted
borrowers. We generally observe that forbearance 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. The effectiveness
of forbearance programs is enhanced by the availability of various repayment and
loan modification

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options that allow borrowers to amortize or, in some cases,
defer payments otherwise due during the forbearance period for an extended period
a length of time.

In response to the COVID-19 pandemic, politicians, regulators, lenders, loan
servicers and others have offered extraordinary assistance to dislocated
borrowers through, among other programs, the forbearance, foreclosure moratorium
and other assistance programs codified under the CARES Act. The FHFA and GSEs
have offered further assistance by introducing new repayment and loan
modification options to assist borrowers with their transition out of
forbearance programs and default status. At December 31, 2021 and 2020, we
generally 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 will 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.

The following table presents a reconciliation of the gross beginning and ending amounts
reserve balances for primary insurance claims and claim expenses.

                                                                          For the year ended
                                                 December 31,
                                                     2021               December 31, 2020           December 31, 2019
                                                                            (In Thousands)
Beginning balance                               $     90,567          $           23,752          $           12,811
Less reinsurance recoverables (1)                    (17,608)                     (4,939)                     (3,001)
Beginning balance, net of reinsurance
recoverables                                          72,959                      18,813                       9,810

Add claims incurred:
Claims and claim expenses incurred:
Current year (2)                                      23,433                      66,943                      14,737
Prior years (3)                                      (11,128)                     (7,696)                     (2,230)
Total claims and claim expenses incurred              12,305                      59,247                      12,507

Less claims paid:
Claims and claim expenses paid:
Current year (2)                                          16                         586                         204
Prior years (3)                                        2,017                       4,515                       3,849
Reinsurance terminations (4)                               -                           -                        (549)
Total claims and claim expenses paid                   2,033                       5,101                       3,504

Reserve at end of period, net of reinsurance
recoverables                                          83,231                      72,959                      18,813
Add reinsurance recoverables (1)                      20,320                      17,608                       4,939
Ending balance                                  $    103,551          $           90,567          $           23,752


(1)  Related to ceded losses recoverable under the QSR Transactions. See Item 8,
"Financial Statements and Supplementary Data - Notes to Consolidated Financial
Statements - Note 6, 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
$18.1 million attributed to net case reserves and $4.7 million attributed to net
IBNR reserves for the year ended December 31, 2021, $60.8 million attributed to
net case reserves and $5.0 million attributed to net IBNR reserves for year
ended December 31, 2020, and $13.2 million attributed to net case reserves and
$1.3 million attributed to net IBNR reserves for year ended December 31, 2019.
(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 $6.3 million attributed to net case
reserves and $5.0 million attributed to net IBNR reserves for the year ended
December 31, 2021, $6.2 million attributed to net case reserves and $1.3 million
attributed to net IBNR reserves for the year ended December 31, 2020, and
$1.5 million attributed to net case reserves and $0.7 million attributed to net
IBNR reserves for year ended December 31, 2019.
(4)  Represents the settlement of reinsurance recoverables in conjunction with
the termination of one reinsurer under the 2016 QSR Transaction on a cut-off
basis. See Item 8, "Financial Statements and Supplementary Data - Notes to
Consolidated Financial Statements - Note 6, 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. 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

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claims development trends in our portfolio. Gross reserves of $74.4 million
related to payment defaults of the previous year December 31, 2021.

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

                                                                               For the year ended
                                                                          December 31, 2021             December 31, 2020             December 31, 2019
Beginning default inventory                                                     12,209                         1,448                           877
Plus: new defaults                                                               5,730                        19,459                         2,429
Less: cures                                                                    (11,626)                       (8,548)                       (1,702)
Less: claims paid                                                                  (82)                         (143)                         (152)
Less: claims denied                                                                 (4)                           (7)                           (4)
Ending default inventory                                                         6,227                        12,209                         1,448


Ending default inventory declined from December 31, 2020 to December 31, 2021 as
an increased number of borrowers initially impacted by the COVID-19 pandemic
cured their delinquencies, and fewer new defaults emerged as the acute economic
stress of the pandemic crisis began to recede. While our default population
declined from December 31, 2020 to December 31, 2021, our default inventory
remains elevated compared to historical experience due to the continued
challenges certain borrowers are facing related to the COVID-19 pandemic and
their decision to access the forbearance program for federally backed loans
codified under the CARES Act or similar programs made available by private
lenders. As of December 31, 2021, 4,751 of our 6,227 defaulted loans were in a
COVID-related forbearance program.

Final default inventory changed from December 31, 2019 for December 31, 2020
mainly due to the outbreak of the COVID-19 pandemic.

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

                                                                         For the year ended
                                                                 December

31, 2021 December 31, 2020 December 31, 2019

                                                                                        ($ Values In Thousands)
Number of claims paid (1)                                                     82                       143                       152
Total amount paid for claims                                    $          

$2,554 $6,434 $5,030
Average amount paid per claim

                                   $             31          $             45          $             33
Severity(2)                                                                   59  %                     80  %                     74  %

(1) The statement includes 15, 9 and 19 claims settled without payment for the years
ended December 31, 20212020 and 2019, respectively.
(2) Severity represents the total amount of claims paid, including claims
fee divided by the related RIF on the loan at the time the application is
perfected, and is calculated taking into account claims settled without payment.

The Company paid 82, 143 and 152 claims for the year ended December 31, 2021,
2020 and 2019, respectively. The number of claims paid during the years ended
December 31, 2020 and 2021 was modest relative to the size of our insured
portfolio and number of defaulted loans we reported in each period, primarily
due to the forbearance program and foreclosure moratorium implemented by the
GSEs in response to the COVID pandemic and codified under the CARES Act. Such
forbearance and foreclosure programs have extended, and may ultimately
interrupt, the timeline over which loans would otherwise progress through the
default cycle to a paid claim. Our claims paid experience for the years ended
December 31, 2020 and 2021, further benefited from the resiliency of the housing
market and broad national house price appreciation. An increase in the value of
the homes collateralizing the mortgages we insure provides defaulted borrowers
with alternative paths and incentives to cure their loan prior to the
development of a claim.

Our claims severity for the year ended December 31, 2021 was 59% compared to 80%
and 74% for the years ended December 31, 2020 and 2019, respectively. Claims
severity for the year ended December 31, 2021 benefited from the same resiliency
of the housing market and broad national house price appreciation as our claims
paid. 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.

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Our claims severity increased for the year ended December 31, 2020,
notwithstanding the resiliency of the housing market and broad national house
price appreciation observed during the period, as we settled an increased
portion of claims using the percent option instead of through third-party sales
during the first half of the year. Third-party marketing and sales activity was
broadly constrained immediately following the outbreak of the COVID-19 pandemic;
claims severity moderated in the second half of 2020 as we were once again able
to pursue alternative settlement options.

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

Average reserve per default:                                                   As of
                                                  December 31,                                      December 31,
                                                      2021               December 31, 2020              2019
                                                                          (In Thousands)
Case (1)                                         $       15.3          $              6.8          $       15.0
IBNR (1)(2)                                               1.3                         0.6                   1.4
Total                                            $       16.6          $              7.4          $       16.4

(1) Defined as the gross provision per insured loan in default.
(2) The amount includes claims settlement costs.

The average reserve per default increased from December 31, 2020 to December 31,
2021 primarily due to the "aging" of early COVID-related defaults. While we have
generally 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 will 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 have increased such reserves over time as
individual defaults remain outstanding or "age." The growth in our average
reserve per default from December 31, 2020 to December 31, 2021, far exceeded
the growth in our aggregate gross reserve position in the intervening period as
the impact of the increase in our average reserve per default was largely offset
by the decline in our total default inventory.

The average reserve per default decreased from December 31, 2019 to December 31,
2020, primarily due to new COVID-19 related defaults. At December 31, 2020, we
generally 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 will 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.


Seasonality

Historically, our business has been subject to modest seasonality in both NIW
production and default experience. Consistent with the seasonality of home
sales, purchase origination volumes typically increase in late spring and peak
during the summer months, leading to a rise in NIW volume during the second and
third quarters of a given year.

The COVID-19 pandemic interrupted this typical seasonal pattern. The COVID
pandemic and resulting shelter-in-place directives spurred record NIW production
during the years ended December 31, 2021 and 2020. Our purchase origination NIW
remained elevated throughout the pandemic given the consistently high demand for
home ownership. Normal seasonal purchase origination and NIW patterns may emerge
again following the pandemic.

Refinancing volume does not follow a set seasonal trend and is instead primarily
influenced by prevailing mortgage note rates. Our refinancing origination volume
declined as rates increased during the year ended December 31, 2021.

GSE supervision

As an approved insurer, NMIC is subject to ongoing compliance with the PMIERs
established by each of the GSEs (italicized terms have the same meaning that
such terms have in the PMIERs, as described below). The PMIERs establish
operational, business, remedial and financial requirements applicable to
approved insurers. The PMIERs financial requirements prescribe a risk-based
methodology whereby the amount of assets required to be held against each
insured loan is determined based on certain loan-level risk characteristics,
such as FICO, vintage (year of origination), performing vs. non-performing
(i.e., current vs. delinquent), LTV ratio and other risk features. In general,
higher quality loans carry lower asset charges.

Under PMIERs, licensed insurers must maintain available assets equal to or
exceed the minimum required assets,

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which is an amount equal to the greater of (i) $400 million or (ii) a total
risk-based required asset amount. The risk-based required asset amount is a
function of the risk profile of an approved insurer's RIF, assessed on a
loan-by-loan basis and considered against certain risk-based factors derived
from tables set out in the PMIERs, which is then adjusted on an aggregate basis
for reinsurance transactions approved by the GSEs, such as with respect to our
ILN Transactions and QSR Transactions. The aggregate gross risk-based required
asset amount for performing, primary insurance is subject to a floor of 5.6% of
performing primary adjusted RIF, and the risk-based required asset amount for
pool insurance considers both factors in the PMIERs tables and the net remaining
stop loss for each pool insurance policy.

By April 15th of each year, NMIC must certify it met all PMIERs requirements as
of December 31st of the prior year. We certified to the GSEs by April 15, 2021
that NMIC was in full compliance with the PMIERs as of December 31, 2020. NMIC
also has an ongoing obligation to immediately notify the GSEs in writing upon
discovery of a failure to meet one or more of the PMIERs requirements. 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.

                                                                             As of
                                                   December 31,          December 31,          December 31,
                                                       2021                  2020                  2019
                                                  ($ values in thousands)
Available assets                                  $  2,041,193          $  1,750,668          $  1,016,387
Risk-based required asset amount                     1,186,272               984,372               773,474


The assets available were $2.0 billion at December 31, 2021compared to $1.8
billion
at December 31, 2020 and $1.0 billion at December 31, 2019. the
$291 million the increase in available assets in 2021 is mainly due to the
positive operating cash flow during the year.

In June 2020, NMIH completed the sale of 15.9 million shares of common stock
raising net proceeds of approximately $220 million and the sale of the
$400 million aggregate principal amount of senior secured notes. NMIH
contributed approximately $445 million of capital to NMIC following completion
of the Notes and equity offerings. The $734 million increase in NMIC's available
assets in 2020 was driven by the NMIH capital contribution and NMIC's positive
cash flow from operations during the year.

The increase in the risk-based required asset amount between the dates presented
was primarily driven by growth of our gross RIF, an increase in the risk ceded
under our third-party reinsurance agreements and development of our default
population.

Competetion

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. Private MI companies compete based on service, customer
relationships, underwriting and other factors, including price, credit risk
tolerance and IT capabilities. We expect the private MI market to remain
competitive, with pressure for industry participants to maintain or grow their
market share.

The private MI industry overall competes more broadly with government MIs who
significantly increased their share in the MI market following the 2008
Financial Crisis. Although there has been broad policy consensus toward the need
for increasing private capital participation and decreasing government exposure
to credit risk in the U.S. housing finance system, it remains difficult to
predict whether the combined market share of government MIs will recede to
pre-2008 levels. A range of factors influence a lender's and borrower's decision
to choose private over government MI, including among others, premium rates and
other charges, loan eligibility requirements, the cancelability of private
coverage, loan size limits and the relative ease of use of private MI products
compared to government MI alternatives

cyber security

We rely on technology to engage with customers, access borrower information and
deliver our products and services. We have established and implemented security
measures, controls and procedures to safeguard our IT systems, and prevent and
detect unauthorized access to such systems or any data processed and/or stored
therein. We periodically engage third parties to evaluate and test the adequacy
of such security measures, controls and procedures. In addition, we have a
business continuity plan that is designed to allow us to continue to operate in
the midst of certain disruptive events, including disruptions to our IT systems,
and

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we have an incident response plan designed to process information
security incidents, including any breach of our IT systems. Despite these
backups, disruptions and breaches of our IT systems are possible and may
have a negative impact on our business.

We maintain a cybersecurity errors and omissions insurance policy to limit our
exposure to loss in the event of an incident. This policy provides coverage for
(i) claims related to, among other things, unauthorized network or computer
access, unintentional disclosure or misuse of personally identifiable
information in our possession, and unintentional failure to disclose a breach,
and (ii) certain costs related to privacy notification, crisis management, cyber
extortion, data recovery, business interruption and reputational harm.

LIBOR Transition

On March 5, 2021, ICE Benchmark Administration Limited ("IBA"), the
administrator for 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. The U.K. Financial Conduct Authority
("FCA"), 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. We have exposure to USD
LIBOR-based financial instruments, such as LIBOR-based securities held in our
investment portfolio and certain ILN Transactions that require LIBOR-based
payments. We are in the process of reviewing our LIBOR-based contracts and
transitioning, as necessary and applicable, to a set of alternative reference
rates. We will continue to monitor, assess and plan for the phase out of LIBOR;
however, we do not expect the impact of such transition to be material to our
operations or financial results.

CEO Transition

On September 9, 2021, we announced that Adam Pollitzer, then the company's
Executive Vice President and Chief Financial Officer, was appointed as the
company's President and Chief Executive Officer, effective January 1, 2022. Mr.
Pollitzer also joined the company's Board of Directors upon assuming his new
role. He succeeded Claudia Merkle, who stepped down as Chief Executive Officer
and as a member of the Board, effective December 31, 2021. We recorded
$3.8 million of severance, restricted stock modification and other expenses
related to this transition during the year ended December 31, 2021.

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Consolidated operating results

Consolidated statements of operations                        For the year 

ended the 31st of December,

                                                                   2021                   2020                 2019
Revenues                                                            ($ in 

thousands, except for per share data)

Net premiums earned                                         $      444,294           $   397,172          $   345,015
Net investment income                                               38,072                31,897               30,856
Net realized investment gains                                          729                   930                   45
Other revenues                                                       1,977                 3,284                2,855
Total revenues                                                     485,072               433,283              378,771
Expenses
Insurance claims and claim expenses                                 12,305                59,247               12,507
Underwriting and operating expenses                                142,303               131,610              126,621

Service expenses                                                     2,509                 2,840                2,248
Interest expense                                                    31,796                24,387               12,085
(Gain) loss from change in fair value of
warrant liability                                                     (566)               (2,907)               8,657
Total expenses                                                     188,347               215,177              162,118

Income before income taxes                                         296,725               218,106              216,653
Income tax expense                                                  65,595                46,540               44,696
Net income                                                  $      231,130           $   171,566          $   171,957

Earnings per share - Basic                                  $         2.70           $      2.20          $      2.54
Earnings per share - Diluted                                $         2.65           $      2.13          $      2.47

Loss ratio (1)                                                         2.8   %              14.9  %               3.6  %
Expense ratio (2)                                                     32.0   %              33.1  %              36.7  %
Combined ratio (3)                                                    34.8   %              48.1  %              40.3  %


          Non-GAAP financial measures (4)        2021           2020        

2019

Adjusted profit before tax $303,238 $221,506 $227,618

          Adjusted net income                   236,837        173,642      

182,437

          Adjusted diluted EPS                     2.73           2.19           2.62


(1)  Loss ratio is calculated by dividing insurance claims and claim expenses by
net premiums earned.
(2)  Expense ratio is calculated by dividing underwriting and operating expenses
by net premiums earned.
(3)  Combined ratio may not foot due to rounding.
(4)  See "Explanation and Reconciliation of Our Use of Non-GAAP Financial
Measures," below.

Revenue

Net premiums earned were $444.3 million, $397.2 million and $345.0 million for
the years ended December 31, 2021, 2020 and 2019, respectively. The sequential
increase in net premiums earned during each successive year was primarily driven
by the growth of our IIF, partially offset by an increase in cessions made under
our QSR and ILN Transactions. Net premiums earned for the year ended December
31, 2020 also benefited from an increase in single premium policy cancellations
tied to the increased pace of refinancing activity and policy turnover triggered
by the record low interest rate environment that developed following the onset
of the COVID-19 pandemic.

Net investment income was $38.1 million, $31.9 million and $30.9 million for the
years ended December 31, 2021, 2020 and 2019, respectively. The sequential
increase in net investment income during each successive year was primarily
driven by growth in the size of our total investment portfolio, partially offset
by a decline in book yield tied to the prevailing interest rate and credit
spread environment.

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Other revenues were $2.0 million, $3.3 million and $2.9 million for the years
ended December 31, 2021, 2020 and 2019, respectively. Other revenues represent
underwriting fee revenue generated by our subsidiary, NMIS, which provides
outsourced loan review services to mortgage loan originators. The year-on-year
changes in other revenues reflect fluctuations 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.

  Expenses

We recognize insurance claims and claim expenses in connection with the loss
experience of our insured portfolio and incur other underwriting and operating
expenses, including employee compensation and benefits, policy acquisition
costs, and technology, professional services and facilities expenses, in
connection with the development and operation of our business. We also incur
service expenses in connection with NMIS' outsourced loan review activities.

Insurance claims and claim expenses were $12.3 million, $59.2 million and $12.5
million for the years ended December 31, 2021, 2020 and 2019, respectively.
Insurance claims and claim expenses decreased $46.9 million for the year ended
December 31, 2021 compared to the year ended December 31, 2020, primarily
reflecting a significant decrease in the number of new defaults emerging on
loans impacted by the COVID-19 pandemic. Insurance claims and claim expenses for
the year ended December 31, 2021 also benefited from cure activity and a release
of a portion of the reserves we established for anticipated claims payments in
prior periods. Insurance claims and claim expenses increased $46.7 million for
the year ended December 31, 2020 compared to the year ended December 31, 2019,
primarily due to the outbreak of the COVID-19 pandemic and resulting increase in
our default population.

Underwriting and operating expenses were $142.3 million, $131.6 million and
$126.6 million for the years ended December 31, 2021, 2020 and 2019,
respectively. Underwriting and operating expenses increased $10.7 million for
the year ended December 31, 2021 compared to the year ended December 31, 2020,
primarily due to an increase in certain payroll costs incurred in connection
with the CEO transition we announced on September 9, 2021, as well as
incremental depreciation and amortization incurred in connection with the
completion and on-lining of certain development initiatives, an increase in the
recognition of previously deferred policy acquisition costs (DAC) taken in
connection with in-force portfolio run-off, and growth in other (non-CEO
transition) payroll and related amounts. Underwriting and operating expenses
increased $5.0 million for the year ended December 31, 2020 compared to the year
ended December 31, 2019, primarily due to an increase in the recognition of
previously deferred policy acquisition costs taken in connection with in-force
portfolio run-off and an increase in issuance expenses incurred in connection
with capital market reinsurance transaction activity, partially offset by
reductions in travel and entertainment, and office administration expenses as a
result of the COVID-19 pandemic.

Underwriting and operating expenses included capital market reinsurance
transaction costs of $4.0 million, $4.6 million and $2.4 million for the years
ended December 31, 2021, 2020 and 2019, respectively. Underwriting and operating
expenses for the year ended December 31 2021 also included $3.8 million of
CEO-transition related expenses.

Service expenses were $2.5 million, $2.8 million and $2.2 million for the years
ended December 31, 2021, 2020 and 2019, respectively. Service expenses represent
third-party costs incurred by NMIS in connection with the services it provides.
The year-on-year changes in service expenses reflect fluctuations 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 $31.8 million, $24.4 million and $12.1 million for the
years ended December 31, 2021, 2020 and 2019, respectively. Interest expense
increased in connection with the $400 million Notes offering and retirement of
the $150 million 2018 Term Loan completed in June 2020. Interest expense for the
year ended December 31, 2021 reflects a full year of carrying costs on the
Notes. Interest expense for the year ended December 31, 2020 reflects a partial
year of carrying cost on the Notes and $2.6 million of costs related to the
extinguishment of the 2018 Term Loan. See Item 8, "Financial Statements and
Supplementary Data - Notes to Consolidated Financial Statements - Note 5, Debt."

Income tax expense was $65.6 million, $46.5 million and $44.7 million for the
years ended December 31, 2021, 2020 and 2019. Income tax expense increased for
the year ended December 31, 2021 compared to the year ended December 31, 2020,
primarily due to the growth in our pre-tax income, as well as an increase in our
effective income tax rate. Income tax expense increased for the year ended
December 31, 2020 compared to the year ended December 31, 2019, primarily due to
an increase in our effective income tax rate. As a U.S. taxpayer, we were
subject to a U.S. federal corporate income tax rate of 21%. Our effective income
tax rate on pre-tax income was 22.1%, 21.3% and 20.6% for the years ended
December 31, 2021, 2020 and 2019, respectively. Our effective tax rate increased
during each successive year primarily due to a decline in the tax benefit
realized from excess share-based compensation for vested restricted stock units
(RSUs) and exercised stock options. For further
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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 revenue

Net income was $231.1 million, $171.6 million and $172.0 million for the years
ended December 31, 2021, 2020 and 2019, respectively. Adjusted net income was
$236.8 million, $173.6 million and $182.4 million, for the same periods,
respectively. The increase in net income and adjusted net income for the year
ended December 31, 2021 compared to the year ended December 31, 2020 was
primarily driven by growth in our total revenues and a decline in insurance
claims and claim expenses, partially offset by an increase in our interest
expenses, underwriting and operating expenses, and income tax expenses. Net
income and adjusted net income declined for the year ended December 31, 2020
compared to the year ended December 31, 2019 primarily due to an increase in
insurance claims and claim expenses incurred in connection with significant
COVID-related default experience, partially offset by an increase in total
revenues.

Diluted earnings per share (EPS) was $2.65, $2.13 and $2.47 for the years ended
December 31, 2021, 2020 and 2019, respectively. Adjusted diluted EPS was $2.73,
$2.19 and $2.62 for the same periods, respectively. Diluted and adjusted diluted
EPS increased for the year ended December 31, 2021 compared to the year ended
December 31, 2020 due to growth in net income and adjusted net income,
respectively, partially offset by an increase in weighted average diluted shares
outstanding. Diluted and adjusted EPS decreased for the year ended December 31,
2020 compared to the year ended December 31, 2019, primarily due to an increase
in weighted average diluted shares outstanding, as well as a decline in net
income and adjusted net income. Weighted average diluted shares outstanding
increased in connection with the issuance of 15.9 million shares of common stock
we completed in June 2020. Weighted average diluted shares outstanding for the
years ended December 31, 2021 and 2020, reflect the inclusion of a full and
partial year weighting for the offering, respectively.

The non-GAAP financial measures 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 year ended December 31,
                                                                2021                  2020               2019
As reported
Income before income tax                                 $    296,725      
      $ 218,106          $ 216,653
Income tax expense                                             65,595                46,540             44,696
Net income                                               $    231,130             $ 171,566          $ 171,957

Adjustments
Net realized investment gains                                    (729)                 (930)               (45)

(Gain) loss from change in fair value of warrant liability (566)

          (2,907)             8,657
Capital market transaction costs                                3,979                 7,237              2,353
Other infrequent, unusual or non-operating items (1)            3,829                     -                  -
Adjusted income before tax                                    303,238               221,506            227,618

Income tax expense on adjustments (2)                             806                 1,324                485

Adjusted net income                                      $    236,837             $ 173,642          $ 182,437

Weighted average diluted shares outstanding                    86,885                79,263             69,721
Adjusted diluted effect of non-vested shares                        -                     -                  -
Adjusted weighted average diluted shares outstanding           86,885                79,263             69,721
Adjusted diluted EPS                                     $       2.73             $    2.19          $    2.62


(1)  Represents severance, restricted stock modification and other expenses
incurred in connection with the CEO transition announced on September 9, 2021.
See "CEO Transition" above.
(2)  Marginal tax impact of non-GAAP adjustments is calculated based on our
statutory U.S. federal corporate income tax rate of 21%, except for those items
that are not eligible for an income tax deduction. Such non-deductible items
include gains or losses from the change in the fair value of our warrant
liability and certain costs incurred in connection with the CEO transition,
which are limited under Section 162(m) of the Internal Revenue Code.
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Explanation and reconciliation of our use of non-GAAP financial measures

We believe the use of the non-GAAP measures of adjusted income before tax,
adjusted net income and adjusted diluted EPS enhances the comparability of our
fundamental financial performance between periods, and provides relevant
information to investors. These non-GAAP financial measures align with the way
the company's business performance is evaluated by management. These measures
are not prepared in accordance with GAAP and should not be viewed as
alternatives to GAAP measures of performance. These measures have been presented
to increase transparency and enhance the comparability of our fundamental
operating trends across periods. Other companies may calculate these measures
differently; 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. Adjustments to components of pre-tax income are tax effected
using the applicable federal statutory tax rate for the respective periods.

Adjusted diluted EPS is defined as adjusted net income divided by adjusted
weighted average diluted shares outstanding. Adjusted weighted average diluted
shares outstanding is defined as weighted average diluted shares outstanding,
adjusted for changes in the dilutive effect of non-vested shares that would
otherwise have occurred had GAAP net income been calculated in accordance with
adjusted net income. There will be no adjustment to weighted average diluted
shares outstanding in the years that non-vested shares are anti-dilutive under
GAAP.

Although adjusted income before tax, adjusted net income and adjusted diluted
EPS exclude certain items that have occurred in the past and are expected to
occur in the future, the excluded items: (1) are not viewed as part of the
operating performance of our primary activities; or (2) are impacted by market,
economic or regulatory factors and are not necessarily indicative of operating
trends, or both. These adjustments, and the reasons for their treatment, are
described below.

•Change in fair value of warrant liability. Outstanding warrants at the end of
each reporting period are revalued, and any change in fair value is reported in
the statement of operations in the period in which the change occurred. 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. 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.

•Capital markets transaction costs. 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. Items that are the result of
unforeseen or uncommon events, and are not expected to recur with frequency in
the future. Identification and exclusion of these items provides clarity about
the impact special or rare occurrences may have on our current financial
performance. Infrequent, unusual or non-operating adjustments for the year ended
2021, include severance, restricted stock modification and other expenses
incurred in connection with the CEO transition we announced on September 9,
2021. Past adjustments under this category include the effects of the release of
the valuation allowance recorded against our net federal and certain state net
deferred tax assets in 2016 and the re-measurement of our net deferred tax
assets in connection with tax reform in 2017. 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.
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                                                               December 31,
Consolidated balance sheets                                        2021               December 31, 2020
                                                                            (In Thousands)
Total investment portfolio                                    $  2,085,931          $        1,804,286
Cash and cash equivalents                                           76,646                     126,937
Premiums receivable                                                 60,358                      49,779
Deferred policy acquisition costs, net                              59,584                      62,225
Software and equipment, net                                         32,047                      29,665
Prepaid reinsurance premiums                                         2,393                       6,190

Reinsurance recoverable                                             20,320                      17,608
Other assets                                                       113,302                      69,976
Total assets                                                  $  2,450,581          $        2,166,666
Debt                                                          $    394,623          $          393,301
Unearned premiums                                                  139,237                     118,817
Accounts payable and accrued expenses                               72,000                      61,716
Reserve for insurance claims and claim expenses                    103,551                      90,567
Reinsurance funds withheld                                           5,601                       8,653
Warrant liability                                                    2,363                       4,409

Deferred tax liability, net                                        164,175                     112,586
Other liabilities                                                    3,245                       7,026
Total liabilities                                                  884,795                     797,075
Total shareholders' equity                                       1,565,786                   1,369,591
Total liabilities and shareholders' equity                    $  2,450,581  

$2,166,666


Total cash and investments were $2.2 billion as of December 31, 2021, compared
to $1.9 billion as of December 31, 2020. Cash and investments at December 31,
2021 included $106.0 million held by NMIH. The increase in total cash and
investments reflects cash generated from operations, partially offset by a
decrease in the unrealized gain position of our fixed income portfolio tied to
the prevailing interest rate and credit spread environment.

Premium receivable was $60.4 million as of December 31, 2021, compared to $49.8
million as of December 31, 2020. 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 $59.6 million as of December 31,
2021, compared to $62.2 million as of December 31, 2020. The decrease was
primarily driven by the recognition of previously deferred policy acquisition
costs taken in connection with in-force portfolio run-off, and was largely
offset by the deferral of certain costs associated with the origination of new
policies between the respective balance sheet dates.

Prepaid reinsurance premiums were $2.4 million as of December 31, 2021, compared
to $6.2 million as of December 31, 2020. Prepaid reinsurance premiums, which
represent the unearned premiums on single premium policies ceded under the 2016
QSR Transaction, decreased due to the continued amortization of previously ceded
unearned premiums.

Reinsurance recoverable was $20.3 million as of December 31, 2021, compared to
$17.6 million as of December 31, 2020. The increase was driven by an increase in
ceded losses recoverable associated with our QSR transactions.

Other assets were $113.3 million as of December 31, 2021, compared to $70.0
million as of December 31, 2020. The increase was primarily driven by the
purchase of $42.9 million of tax and loss bonds during the year ended
December 31, 2021. At December 31, 2021, we held $89.2 million of tax and loss
bonds, compared to $46.4 million as of December 31, 2020. See Item 8, "Financial
Statements and Supplementary Data - Notes to Consolidated Financial Statements -
Note 11, Income Taxes."

Unearned premiums were $139.2 million as of December 31, 2021, compared to
$118.8 million as of December 31, 2020. The increase was driven by single
premium policy originations during the year ended December 31, 2021, partially
offset by the cancellation of other single premium policies and the amortization
of existing unearned premiums through earnings in accordance with the expiration
of risk on related single premium policies.

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Accounts payable and accrued expenses were $72.0 million as of December 31,
2021, compared to $61.7 million as of December 31, 2020. The increase was
primarily driven by an increase in reinsurance premiums payable, and accrued
payroll and bonuses, and the timing of other contractual payments due, partially
offset by the settlement of trade payables in our investment portfolio.

Reserve for insurance claims and claim expenses was $103.6 million as of
December 31, 2021, compared to $90.6 million as of December 31, 2020. Reserve
for insurance claims and claim expenses increased at December 31, 2021, despite
a decline in the total size of our default population because of an increase in
the average case reserve held against previously defaulted loans and the
establishment of initial reserves on newly defaulted loans during the year.
While we have generally established lower reserves per default for loans that we
consider to be impaired in connection with the COVID-19 pandemic, we have
increased the initial reserves held for such loans as they have aged in default
status. The increase in the reserves for insurance claims and claim expenses at
December 31, 2021 was partially offset by cure activity and a release of a
portion of the reserves we established for anticipated claims payments in prior
periods. See "- Insurance Claims and Claim Expenses," above for further details.

Reinsurance funds withheld, which represents our ceded reinsurance premiums
written, less our profit and ceding commission receivables related to the 2016
QSR Transaction was $5.6 million as of December 31, 2021, compared to $8.7
million as of December 31, 2020. 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. See, Item 8, "Financial Statements and Supplementary Data -
Notes to Consolidated Financial Statements - Note 6, Reinsurance."

Warrant liability was $2.4 million at December 31, 2021, compared to $4.4
million at December 31, 2020. The decrease was driven by the exercise of
outstanding warrants, and changes in the price of our common stock and other
Black-Scholes model inputs between the respective measurement dates. For further
information regarding the valuation of our warrant liability and its impact on
our results of operations and financial position, see Item 8, "Financial
Statements and Supplementary Data - Notes to Consolidated Financial Statements -
Note 4, Fair Value of Financial Instruments."

Net deferred tax liability was $164.2 million at December 31, 2021, compared to
$112.6 million at December 31, 2020. The increase was primarily due to an
increase in the claimed deductibility of our statutory contingency reserve,
partially offset by the change in unrealized gains recorded in other
comprehensive income. 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."

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

Consolidated cash flows                                       For the years 

ended the 31st of December,

                                                       2021                    2020                 2019
Net cash provided by (used in) provided by:                            (In 

Thousands)

Operating activities                            $    325,719              $   252,598          $   208,150
Investing activities                                (374,180)                (629,554)            (194,355)
Financing activities                                  (1,830)                 462,804                2,000
Net (decrease) increase in cash and cash
equivalents                                     $    (50,291)             $ 

85,848 $15,795


Net cash provided by operating activities was $325.7 million, $252.6 million and
$208.2 million for the years ended December 31, 2021, 2020 and 2019,
respectively. The sequential increase in cash provided by operating activities
during each successive year was primarily driven by growth in premiums written,
partially offset by an increase in cash interest expenses and the purchase of
tax and loss bonds from year-to-year. Net cash provided by operating activities
for the year ended December 31, 2021 further benefited from a decline in claims
paid.

Cash used in investing activities for the years ended December 31, 2021, 2020
and 2019 reflects the purchase of fixed and short-term maturities with cash
provided by operating activities and, as available, financing activities, and
the reinvestment of coupon payments, maturities and sale proceeds within our
investment portfolio. Cash used in investing activities for the year ended
December 31, 2020, reflects, in part, the investment of net cash proceeds from
the common stock and Notes offerings we completed in June 2020.

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Cash used in financing activities was $1.8 million for the year ended
December 31, 2021, while cash provided by financing activities was $462.8
million and $2.0 million for the years ended December 31, 2020 and 2019,
respectively. Cash used in financing activities during the year ended
December 31, 2021 primarily relates to 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. Cash provided by financing
activities for the year ended December 31, 2020 primarily reflects $219.7
million net cash proceeds raised in connection with our 2020 equity offering and
$244.4 million net cash proceeds raised in connection with our 2020 Notes
offering. Cash provided by financing activities for the year ended December 31,
2019 primarily relates to proceeds from the issuance of common stock generated
in connection with the exercise of employee stock options.

Cash and capital resources

NMIH serves as the holding company for our insurance subsidiaries and does not
have any significant operations of its own. NMIH's principal liquidity demands
include funds for (i) payment of certain corporate expenses; (ii) payment of
certain reimbursable expenses of its insurance subsidiaries; (iii) payment of
the interest related to the Notes and 2021 Revolving Credit Facility; (iv) tax
payments to the Internal Revenue Service; (v) capital support for its
subsidiaries; and (vi) payment of dividends, if any, on its common stock. 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 surplus or
recent net profits (subject to certain limitations).

As of December 31, 2021, NMIH had $106.0 million of cash and investments. NMIH's
principal source of net cash is investment income. NMIH also has access to
$250 million of undrawn revolving credit capacity under 2021 Revolving Credit
Facility. See Item 8, "Financial Statements and Supplementary Data - Notes to
Consolidated Financial Statements - Note 5, Debt". NMIC also has the capacity,
under Wisconsin law, to pay $34.9 million of aggregate ordinary course dividends
to NMIH during the twelve-month period ending December 31, 2022.

On February 10, 2022, the Board of Directors has approved a $125 million share
repurchase program through December 31, 2023, that enables the company to
repurchase its common stock. The authorization provides NMI the flexibility to
repurchase shares from time to time in the open market or in privately
negotiated transactions, based on market and business conditions, stock price
and other factors.

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. Borrowings under the 2021
Revolving Credit Facility may be used for general corporate purposes, including
to support the growth of our new business production and operations.

Under the 2021 Revolving Credit Facility, NMIH is required to pay a quarterly
commitment fee on the average daily undrawn amount of 0.175% to 0.525%, based on
the applicable corporate credit rating at the time. As of December 31, 2021, the
applicable commitment fee was 0.35%.

We are subject to certain covenants under the 2021 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. 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,

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(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. We were in compliance with all covenants at December
31, 2021.

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. Dividends in larger amounts, or "extraordinary" dividends, are
subject to the Wisconsin OCI's prior approval. Under Wisconsin insurance laws,
an extraordinary dividend is defined as any payment or distribution that,
together with other dividends and distributions made within the preceding twelve
months, exceeds the lesser of (i) 10% of the insurer's statutory policyholders'
surplus as of the preceding December 31 or (ii) adjusted statutory net income
for the twelve-month period ending the preceding December 31. NMIC has the
capacity to pay $34.9 million of aggregate ordinary course dividends to NMIH
during the twelve-month period ending December 31, 2022.

Effective October 1, 2021, the reinsurance agreement between NMIC and Re One was
commuted and all risk ceded under the treaty was transferred back to NMIC.
Following the commutation, Re One has no risk in force or further obligation on
future claims. In December 2021, Re One distributed $26.0 million to NMIH in the
form of a $1.6 million ordinary dividend and a $24.4 million extraordinary
dividend.

As an approved insurer under PMIERs, NMIC would generally be subject to prior
GSE approval of its ability to pay dividends to NMIH if it failed to meet the
financial requirements prescribed by PMIERs. In response to the COVID-19
pandemic, the GSEs issued temporary PMIERs guidance, effective for the period
from June 30, 2020 to June 30, 2021, that requires approved insurers to secure
approval from the GSEs, even if the approved insurer otherwise satisfies the
financial requirements prescribed by PMIERs, prior to taking any of the
following actions: (i) pay dividends, make payments of principal or increase
payments of interest beyond those commitments made prior to the guidance
effective date associated with surplus notes issued by the approved insurer,
make any other payments, unless related to expenses incurred in the normal
course of business or to commitments made prior to the guidance effective date,
or pledge or transfer asset(s) to any affiliate or investor, or (ii) enter into
any new arrangements or alter any existing arrangements under tax sharing and
intercompany expense-sharing agreements other than renewals and extensions of
agreements in effect prior to the guidance effective date. On June 30, 2021, the
GSEs updated the temporary PMIERs guidance to permit approved insurers to pay
dividends or undertake other actions described in (i) and (ii) above without
securing prior approval if certain prescribed financial requirements are met
during the period from July 1, 2021 to December 31, 2021.

NMIH may require liquidity to fund the capital needs of its insurance
subsidiaries. NMIC's capital needs depend on many factors including its ability
to successfully write new business, establish premium rates at levels sufficient
to cover claims and operating costs, access the reinsurance markets and meet
minimum required asset thresholds under the PMIERs and minimum state capital
requirements (respectively, as defined therein).

As an approved mortgage insurer and Wisconsin-domiciled carrier, NMIC is
required to satisfy financial and/or capitalization requirements stipulated by
each of the GSEs and the Wisconsin OCI. The financial requirements stipulated by
the GSEs are outlined in the PMIERs. 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, 2021, NMIC
reported $2,041 million available assets against $1,186 million risk-based
required assets for an $855 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. Loans with
higher risk factors, such as higher LTVs or lower borrower FICO scores, are
assessed a higher charge. Non-performing loans that have missed two or more
payments are generally assessed a significantly higher charge than performing
loans, regardless of the underlying borrower or loan risk profile; however,
special consideration is given under PMIERs to loans that are delinquent on
homes located in an area declared by FEMA to be a Major Disaster zone eligible
for Individual Assistance. In June 2020, the GSEs issued guidance (amended and
restated in each of September 2020, December 2020 and June 2021) 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
permanent 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). Under NMIC's quota share
reinsurance treaties, it receives credit for the PMIERs risk-based required
asset amount on ceded RIF. As its gross PMIERs risk-based required asset amount
on ceded RIF increases, the PMIERS credit for ceded RIF automatically increases
as well (in an unlimited amount). Under NMIC's ILN 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.

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NMIC is also subject to state regulatory minimum capital requirements based on
its RIF. Formulations of this minimum capital vary by state, however, the most
common measure allows for a maximum ratio of RIF to statutory capital (commonly
referred to as RTC) of 25:1. The RTC calculation does not assess a different
charge or impose a different threshold RTC limit based on the underlying risk
characteristics of the insured portfolio. Non-performing loans are treated the
same as performing loans under the RTC framework. As such, the PMIERs generally
imposes a stricter financial requirement than the state RTC standard.

As of December 31, 2021, NMIC's performing primary RIF, net of reinsurance, was
approximately $22.3 billion. NMIC ceded 100% of its pool RIF pursuant to the
2016 QSR Transaction. Based on NMIC's total statutory capital of $1.9 billion
(including contingency reserves) as of December 31, 2021, NMIC's RTC ratio was
11.6:1. Re One had no risk in force remaining at December 31, 2021 and, as such,
did not report a RTC ratio.

NMIC's principal sources of liquidity include (i) premium receipts on its
insured portfolio and new business production, (ii) interest income on its
investment portfolio and principal repayments on maturities therein, and (iii)
existing cash and cash equivalent holdings. At December 31, 2021, NMIC had
$2.1 billion of cash and investments, including $55 million of cash and
equivalents. NMIC's principal liquidity demands include funds for the payment of
(i) reimbursable holding company expenses, (ii) premiums ceded under our
reinsurance transactions (iii) claims payments, and (iv) taxes as due or
otherwise deferred through the purchase of tax and loss bonds. NMIC's cash
inflow is generally significantly in excess of its cash outflow in any given
period. During the twelve-month period ended December 31, 2021, NMIC generated
$307 million of cash flow from operations and received an additional
$117 million of cash flow on the maturity, sale and redemption of securities
held in its investment portfolio. NMIC is not a party to any contracts
(derivative or otherwise) that require it to post an increasing amount of
collateral to any counterparty and NMIC's principal liquidity demands (other
than claims payments) generally develop along a scheduled path (i.e., are of a
contractually predetermined amount and due at a contractually predetermined
date). NMIC's only use of cash that develops along an unscheduled path is claims
payments. Given the breadth and duration of forbearance programs available to
borrowers, separate foreclosure moratoriums that have been enacted at a local,
state and federal level, and the general duration of the default to foreclosure
to claim cycle, 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 "Baa2" by Moody's and "BBB" by S&P. In June
2020, Moody's affirmed its financial strength rating of NMIC and its "Ba2"
rating of NMIH's 2021 Revolving Credit Facility, and assigned a "Ba2" rating to
the Notes. Moody's ratings outlook is stable. In June 2020, S&P assigned a "BB"
rating to NMIH's senior secured Notes. In April 2021, S&P upgraded its outlook
from negative to positive for the financial strength rating of NMIC's and NMIH's
long-term counter-party credit profile.

Consolidated investment portfolio

The primary objectives of our investment activity are to preserve capital and
generate investment income, while maintaining sufficient liquidity to cover our
operating needs. We aim to achieve diversification by type, quality, maturity,
and industry. We have adopted an investment policy that defines, among other
things, eligible and ineligible investments; concentration limits for asset
types, industry sectors, single issuers, and certain credit ratings; and
benchmarks for asset duration.

Our investment portfolio is comprised entirely of fixed maturity instruments. As
of December 31, 2021, the fair value of our investment portfolio was $2.1
billion and we held an additional $76.6 million of cash and equivalents. Pre-tax
book yield on the investment portfolio for the year ended December 31, 2021 was
2.0%. Book yield is calculated as period-to-date net investment income divided
by the average amortized cost of the investment portfolio. The yield on our
investment portfolio is likely to change over time based on movements in
interest rates, credit spreads, the duration or mix of our holdings and other
factors.

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The following tables provide a breakdown of our investment portfolio and cash
and cash equivalents by type of investment and credit rating:
Percentage of portfolio fair value

                          December 31, 2021          December 31, 2020
Corporate debt securities                                                   64  %                      63  %
Municipal debt securities                                                   26  %                      22
Asset-backed securities                                                      5  %                       7
Cash, cash equivalents, and short-term investments                           4  %                       6
U.S. treasury securities and obligations of U.S. government
agencies                                                                     1  %                       2
Total                                                                      100  %                     100  %


Investment portfolio ratings at fair value (1)                December 31, 2021          December 31, 2020
AAA                                                                          9  %                      12  %
AA (2)                                                                      28  %                      27
A (2)                                                                       46  %                      43
BBB (2)                                                                     17  %                      18

Total                                                                      100  %                     100  %


(1)  Excluding certain operating cash accounts.
(2)  Includes +/- ratings.

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.

Investment security – Provision for credit losses

From December 31, 2021 and 2020, we did not recognize a provision for credit
loss for any security in the investment portfolio and we have not recorded any
provision for credit losses for investment securities during the years ended
December 31, 2021 or 2020.

As of December 31, 2021, the investment portfolio had gross unrealized losses of
$23.2 million, of which $6.5 million had been in an unrealized loss position for
a period of twelve months or longer. As of December 31, 2020, the investment
portfolio had gross unrealized losses of $512 thousand, of which $8 thousand had
been in an unrealized loss position for a period of twelve months or longer. The
increase in the aggregate size of the unrealized loss position as of December
31, 2021, was primarily driven by interest rate movements following the purchase
date of certain securities. Based on current facts and circumstances, we believe
the unrealized losses as of December 31, 2021 are not indicative of the ultimate
collectability of the current amortized cost of the securities.


Taxes

We are a U.S. taxpayer and are subject to a statutory U.S. federal corporate
income tax rate of 21%. Our holding company files a consolidated U.S. federal
and various state income tax returns on behalf of itself and its subsidiaries.

Our effective income tax rate on pre-tax income was 22.1%, 21.3% and 20.6% for
the years ended December 31, 2021, 2020 and 2019, respectively. Our effective
income tax rate may vary from the statutory tax rate in a given period due to
the inclusions and exclusions of income and deductions for tax purposes.
Inclusions of tax deductions may include tax benefits from excess share based
compensation for vested RSUs and exercised stock options; and exclusions from
income may include the fair value fluctuation of our warrant liability.

At December 31, 2021, we had federal net operating loss carryforwards of
$1.8 million, which expire in varying amounts in 2030 and 2031, and state net
operating loss carryforwards of $132.4 million, which expire in varying amounts
from 2031 to 2042. Our ability to utilize our remaining federal net operating
loss carryforwards is restricted by Section 382 of the Internal Revenue Code
(IRC), which imposes annual limitations if there is an "ownership change." As a
result of the acquisition of our insurance subsidiaries in 2012, $7.3 million of
federal NOLs were subject to annual limitations of $0.8 million through 2016,
and $0.3 million thereafter. Our remaining federal net operating loss
carryforwards balance is a result of this limitation.

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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 Section 832(e) of the IRC, and only to the extent we
acquire tax and loss bonds in an amount equal to the tax benefit derived from
the claimed deduction. As of December 31, 2021, we held $89.2 million of tax and
loss bonds, which are reported as prepaid federal income tax and included in
"Other assets" in our consolidated balance sheet.

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 continue to evaluate the realizability of
our state net deferred tax asset position, and our examination of results
through December 31, 2021 and review of future expectations support the
continued application of a valuation allowance against such state net deferred
tax assets.

NMIH and its subsidiaries entered into a tax sharing agreement effective August
23, 2012, which was subsequently amended on September 1, 2016. Under original
and amended agreements, each of the parties agreed to file consolidated federal
income tax returns for all tax years beginning in and subsequent to 2012, with
NMIH as the direct tax filer. The tax liability of each subsidiary that is party
to the agreement is limited to the amount of the liability it would incur if it
filed separate returns.

Critical accounting estimates

Our discussion and analysis of our financial condition and results of operations
are based on our consolidated financial statements, which have been prepared in
conformity with GAAP. In preparing our consolidated financial statements,
management has made estimates and assumptions, and applied judgments that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. 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.

Recognition of insurance premium income

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. Monthly premiums are recognized as revenue in
the month billed and when coverage is effective. Annual premiums are initially
deferred and earned on a straight-line basis over the year of coverage. 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 during which the cover
is provided.

Provision for insurance claims and claim costs

We establish reserves for claims based on our best estimate of the ultimate
claim costs for defaulted loans using the general principles contained in ASC
944, Financial Services - Insurance (ASC 944). 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. Claim expense reserves
are either allocated (i.e., associated with a specific claim) or unallocated
(i.e., not associated with a specific claim).

The establishment of claims and claim expense reserves is subject to inherent
uncertainty and requires significant judgment by management. Reserves are
established by estimating the number of loans in default that will result in a
claim payment, which is referred to as claim frequency, and the amount of claim
payment expected to be paid on each such loan in default, which is referred to
as claim severity. Claim frequency and severity estimates are established based
on historical observed experience regarding certain loan factors, such as age of
the default, size of the loan and LTV ratios, and are strongly influenced by
assumptions about the path of certain economic factors, such as house price
appreciation, trends in unemployment and mortgage rates. We consider the
appropriateness of such inputs at each fiscal quarter and conduct an actuarial
review annually to evaluate and, if necessary, update these assumptions.

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At December 31, 2021, we generally 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 will 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. It is possible that a relatively small
change in our estimates for claim frequency or claim severity could have a
material impact on our reserve position and our consolidated results of
operations, even in a stable macroeconomic environment. At December 31, 2021,
assuming all other estimates remain constant, a one percentage point
increase/decrease in our average claim severity factor would cause approximately
a +/- $1.1 million change in our reserve position, and a one percentage point
increase/decrease in our average claim frequency factor cause approximately a
+/- $2.1 million change in our reserve position.

Investments

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. Net
investment income is recognized when earned, and includes interest and dividend
income together with amortization of market premiums and discounts using the
effective yield method, and is net of investment management fees and other
investment related expenses. For asset-backed securities and any other holdings
for which there is a prepayment risk, prepayment assumptions are evaluated and
revised as necessary. Any adjustments required due to changes in effective
yields and prepayment assumptions are recognized on a prospective basis.

We recognize an impairment on a security through the consolidated statement of
operations and comprehensive income 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 write down the amortized cost basis of
the security to fair value and recognize the full amount of the impairment
through the statement of operations as a "Realized Investment Loss."

For securities in an unrealized loss position where a sale is not intended or
likely to be required, we further assess if the decline in fair value below
amortized cost is driven by a credit related impairment, considering several
items including, but not limited to:

•the severity of the decline in fair value;

•the financial situation of the issuer;

• failure of the issuer to make scheduled interest or principal payments;

•recent downgrades in the rating of the security or issuer concerned by one or more
nationally recognized statistical rating organization; and

•other adverse conditions relating to or affecting the security or the issuer.

To the extent we determine that a security impairment is credit-related, an
impairment loss is recognized through the statement of operations as a provision
for credit loss expense, and presented as a "Realized Investment Loss." We
recognize an allowance for credit losses for the difference between the
amortized cost and present value of future expected cash flows, limited by the
amount the fair value of the security is below its amortized cost. Subsequent
changes (favorable and unfavorable) in credit losses are recognized through the
statement of operations as a provision for or a reversal of credit loss expense,
and presented as a "Realized Investment Gain or Loss." The portion of a security
impairment attributed to other non-credit related factors is recognized in other
comprehensive income, net of taxes.

Deferred policy acquisition costs

Costs directly associated with the successful acquisition of mortgage insurance
policies, consisting of certain selling expenses and other policy issuance and
underwriting expenses, are initially deferred and reported as DAC. DAC is
reviewed periodically to determine that it does not exceed recoverable amounts.
DAC is amortized to expense in proportion to estimated gross profits over the
life of the associated policies. We revise the rate of amortization to reflect
actual experience and changes to
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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 years ended December 31, 2021 and 2020, we recognized an additional
$11.1 million and $8.6 million, respectively, 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 deficit 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.

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Item 7A. Quantitative and qualitative information on market risk

We own and manage a large investment portfolio of various holdings, types and
maturities. NMIH's principal source of operating cash is investment income. The
assets within the investment portfolio are exposed to the same factors that
affect overall financial market performance.

We manage market risk through a defined investment policy implemented by our
treasury function under the supervision of the risk committee of our board of directors. Important
the drivers of our market risk exposure that we monitor and manage include but are
not limited to:

•Changes to the level of interest rates. Increasing interest rates may reduce
the value of certain fixed-rate bonds held in the investment portfolio. Higher
rates may cause variable rate assets to generate additional income. Decreasing
rates will have the reverse impact. Significant changes in interest rates can
also affect persistency and claim rates of our insurance portfolio, and as a
result we may determine that our investment portfolio needs to be restructured
to better align it with future liabilities and claim payments. Such
restructuring may cause investments to be liquidated when market conditions are
adverse. Additionally, the changes in Eurodollar based interest rates affect the
interest expense related to the Company's debt.

•Changes in the term structure of interest rates. Rate up or down
generally change by different amounts along the yield curve. These changes can
have unforeseen impacts on the value of certain assets.

•Market volatility/changes in the real or perceived credit quality of
investments. Deterioration in the quality of investments, identified through
changes to our own or third-party (e.g., rating agency) assessments, will reduce
the value and potentially the liquidity of investments.

•Concentration Risk. If the investment portfolio is highly concentrated in one
asset, or in multiple assets whose values are highly correlated, the value of
the total portfolio may be greatly affected by the change in value of just one
asset or a group of highly correlated assets.

•Risk of prepayment. Bonds may have call clauses that allow debtors to repay
before the deadline when it is to their advantage. This usually happens when
rates fall below the debt interest rate.

The carrying value of our investment portfolio as of December 31, 2021 and 2020
was $2.1 billion and $1.8 billion, respectively, of which 100% was invested in
fixed maturity securities. The primary market risk to our investment portfolio
is interest rate risk associated with investments in fixed maturity securities.
We mitigate the market risk associated with our fixed maturity securities
portfolio by matching the duration of our fixed maturity securities with the
expected duration of the liabilities that those securities are intended to
support.

As of December 31, 2021, the duration of our fixed income portfolio, including
cash and cash equivalents, was 4.98 years, which means that an instantaneous
parallel shift (movement up or down) in the yield curve of 100 basis points
would result in a change of 4.98% in fair value of our fixed income
portfolio. Excluding cash, our fixed income portfolio duration was 5.00 years,
which means that an instantaneous parallel shift (movement up or down) in the
yield curve of 100 basis points would result in a change of 5.00% in fair value
of our fixed income portfolio.

We are also subject to market risk related to the ILN Transactions. The risk
premium amounts under the ILN Transactions are calculated by multiplying the
outstanding reinsurance coverage amount at the beginning of any payment period
by a coupon rate, which is the sum of one-month LIBOR and a risk margin, and
then subtracting actual investment income earned on the trust balance during
that payment period. An increase in one-month LIBOR rates would generally
increase the risk premium payments, while an increase to money market rates,
which directly affect investment income earned on the trust balance, would
generally decrease them. Although we expect the two rates to move in tandem, to
the extent they do not, it could increase or decrease the risk premium payments
that otherwise would be due.

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