UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
FORM 10-Q
(Mark One)
x☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2022
OR
o☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
 
Commission file number 001-36174
Commission file number 001-36174
NMI Holdings, Inc.
(Exact name of registrant as specified in its charter)

DELAWAREDelaware45-4914248
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2100 Powell Street Emeryville, CAEmeryville,CA94608
(Address of principal executive offices)(Zip Code)


(855) 530-6642
(Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.01NMIHNasdaq
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES x NO oYes ☒No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES x NO oYes ☒No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer"filer," "smaller reporting company"company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o
☒
Accelerated filer x
☐
Non-accelerated filer o
☐
Smaller reporting company o☐
(Do not check if a smaller reporting company)
Emerging growth company x


☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o NO xYes ☐No ☒

The number of shares of common stock, $0.01 par value per share, of the registrant outstanding on October 30, 2017 was 60,033,144 May 2, 2022 was 86,079,031 shares.

1



TABLE OF CONTENTS
3
5
Item 1.
5
Item 2.
2428
Item 3.
4154
Item 4.
4255
4356
Item 1.
4356
Item 1A.
4356
Item 6.
4357
4460
Exhibit Index
i




2

CAUTIONARY NOTE REGARDING FORWARD LOOKINGFORWARD-LOOKING STATEMENTS
This report contains forward lookingforward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), and the U.S. Private Securities Litigation Reform Act of 1995. Any statements about our expectations, outlook, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward looking.forward-looking. These statements are often, but not always, made through the use of words or phrases such as "anticipate," "believe," "can," "could," "may," "predict," "assume," "potential," "should," "will," "estimate," "perceive," "plan," "project," "continuing," "ongoing," "expect," "intend" or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. All forward lookingforward-looking statements are necessarily only estimates of future results, and actual results may differ materially from expectations. You are, therefore, cautioned not to place undue reliance on such statements which should be read in conjunction with the other cautionary statements that are included elsewhere in this report. Further, any forward lookingforward-looking statement speaks only as of the date on which it is made and we undertake no obligation to update or revise any forward lookingforward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. We have based these forward lookingforward-looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, operating results, business strategy and financial needs. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward lookingforward-looking statements including, but not limited to:
•uncertainty relating to the coronavirus (COVID-19) pandemic and the measures taken by governmental authorities and other third parties to contain the spread of COVID-19, including their impact on the global economy, the U.S. housing, real estate, housing finance and mortgage insurance markets, and our business, operations and personnel;
•changes in the charters, business practices, policy or priorities of Fannie Mae and Freddie Mac (collectively, the GSEs), includingwhich may include decisions that have the impact of decreasing or discontinuing the use of mortgage insurance as credit enhancement;enhancement generally, or with first time homebuyers or on very high loan-to-value mortgages; or changes in the direction of housing policy objectives of the Federal Housing Finance Agency (FHFA), such as the FHFA's priority to increase the accessibility to and affordability of homeownership for low-and-moderate income borrowers and minority communities;
•our ability to remain an eligible mortgage insurer under the private mortgage insurer eligibility requirements (PMIERs) and other requirements imposed by the GSEs, which they may change at any time;
•retention of our existing certificates of authority in each state and the District of Columbia (D.C.) and our ability to remain a mortgage insurer in good standing in each state and D.C.;
•our future profitability, liquidity and capital resources;
•actions of existing competitors, including governmental agencies likeother private mortgage insurers and government mortgage insurers such as the Federal Housing Administration (FHA), the U.S. Department of Agriculture's Rural Housing Service (USDA) and the U.S. Department of Veterans AdministrationAffairs (VA) (collectively, government MIs), and potential market entry by new competitors or consolidation of existing competitors;
•developments in the world's financial, capital and capitalcredit markets and our access to such markets, including reinsurance;
•adoption of new or changes to existing laws, rules and regulations that impact our business or financial condition directly or the mortgage insurance industry generally or their enforcement and implementation by regulators;regulators, including the implementation of the final rules defining and/or concerning "Qualified Mortgage" and "Qualified Residential Mortgage";
•U.S. federal tax reform and other potential changes in tax law and their impact on us and our operations;
•legislative or regulatory changes to the GSEs' role in the secondary mortgage market or other changes that could affect the residential mortgage industry generally or mortgage insurance industry in particular;
•potential future lawsuits,legal and regulatory claims, investigations, actions, audits or inquiries that could result in adverse judgements, settlements, fines or resolution of current lawsuitsother reliefs that could require significant expenditures or inquiries;have other negative effects on our business;
3

•changes in general economic, market and political conditions and policies (including rising interest rates inflationand inflation) and investment results or other conditions that affect the housing market or the markets for home mortgages or mortgage insurance;
•our ability to successfully execute and implement our capital plans, including our ability to access the capital, credit and reinsurance marketmarkets and to enter into, and receive approval of, reinsurance arrangements on terms and conditions that are acceptable to us, the GSEs and our regulators;
•our ability to implement our business strategy, including our ability to write mortgage insurance on high quality low down payment residential mortgage loans, implement successfully and on a timely basis, complex infrastructure, systems, procedures, and internal controls to support our business and regulatory and reporting requirements of the insurance industry;
•our ability to attract and retain a diverse customer base, including the largest mortgage originators;
•failure of risk management or pricing or investment strategies;
•decrease in the length of time our insurance policies are in force;
•emergence of unexpected claim and coverage issues, including claims exceeding our reserves or amounts we had expected to experience;
•potential adverse impacts arising from recent natural disasters, including, with respect to the affected areas, a decline in new business, adverse effects on home prices, and an increase in notices of default on insured mortgages;


•the inability of our counter-parties, including third party reinsurers, to meet their obligations to us;
our ability to utilize our net operating loss carryforwards, which could be limited or eliminated in various ways, including if we experience an ownership change as defined in Section 382 of the Internal Revenue Code;
•failure to maintain, improve and continue to develop necessary information technology (IT) systems or the failure of technology providers to perform;
•effectiveness and security of our information technology systems and digital products and services, including the risks these systems, products or services may fail to operate as expected or planned, or expose us to cybersecurity or third-party risks; and
•ability to recruit, train and retain key personnel.
For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report on Form 10-Q, including the exhibits hereto. In addition, for additional discussion of those risks and uncertainties that have the potential to affect our business, financial condition, results of operations, cash flows or prospects in a material and adverse manner, you should review the Risk Factors in Part II, Item 1A of this Report and in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2016 (20162021 (2021 10-K), as subsequently updated in other reports we file from time to time with the U.S. Securities and Exchange Commission (SEC).
Unless expressly indicated or the context requires otherwise, the terms "we," "our," "us""us," "Company" and "Company""NMI" in this document refer to NMI Holdings, Inc., a Delaware corporation, and its wholly owned subsidiaries on a consolidated basis.




4

PART I

Item 1. Financial Statements






INDEX TO FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of September 30, 2017March 31, 2022 (Unaudited) and December 31, 20162021
6
Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2017March 31, 2022 and 20162021 (Unaudited)
7
Condensed Consolidated Statements of Changes in Shareholders' Equity for the ninethree months ended September 30, 2017March 31, 2022 and the year ended December 31, 20162021 (Unaudited)
8
Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2022 and 20162021 (Unaudited)
9
Notes to Condensed Consolidated Financial Statements (Unaudited)
10


5
NMI HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

March 31, 2022December 31, 2021
Assets(In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $2,111,869 and $2,078,773 as of March 31, 2022 and December 31, 2021, respectively)$1,993,972 $2,085,931 
Cash and cash equivalents (including restricted cash of $3,057 and $3,165 as of March 31, 2022 and December 31, 2021, respectively)130,906 76,646 
Premiums receivable60,526 60,358 
Accrued investment income12,421 11,900 
Prepaid expenses5,477 3,530 
Deferred policy acquisition costs, net59,727 59,584 
Software and equipment, net32,386 32,047 
Intangible assets and goodwill3,634 3,634 
Prepaid reinsurance premiums2,011 2,393 
Reinsurance recoverable20,080 20,320 
Other assets102,804 94,238 
Total assets$2,423,944 $2,450,581 
Liabilities
Debt$394,969 $394,623 
Unearned premiums138,393 139,237 
Accounts payable and accrued expenses76,923 72,000 
Reserve for insurance claims and claim expenses102,372 103,551 
Reinsurance funds withheld5,343 5,601 
Warrant liability, at fair value1,416 2,363 
Deferred tax liability, net156,966 164,175 
Other liabilities12,520 3,245 
Total liabilities888,902 884,795 
Commitments and contingencies00
Shareholders' equity
Common stock - class A shares, $0.01 par value; 86,274,184 shares issued and 86,038,840 shares outstanding as of March 31, 2022 and 85,792,849 shares issued and outstanding as of December 31, 2021 (250,000,000 shares authorized)863 858 
Additional paid-in capital960,667 955,302 
Treasury Stock, at cost, 235,344 and 0 common shares as of March 31, 2022 and December 31, 2021, respectively(5,000)— 
Accumulated other comprehensive (loss) income, net of tax(97,309)1,485 
Retained earnings675,821 608,141 
Total shareholders' equity1,535,042 1,565,786 
Total liabilities and shareholders' equity$2,423,944 $2,450,581 



 September 30, 2017 December 31, 2016
Assets(In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $687,284 and $630,688 as of September 30, 2017 and December 31, 2016, respectively)$692,729
 $628,969
Cash and cash equivalents20,698
 47,746
Premiums receivable21,056
 13,728
Accrued investment income4,598
 3,421
Prepaid expenses2,651
 1,991
Deferred policy acquisition costs, net36,101
 30,109
Software and equipment, net21,767
 20,402
Intangible assets and goodwill3,634
 3,634
Prepaid reinsurance premiums39,915
 37,921
Deferred tax asset, net38,490
 51,434
Other assets4,973
 542
Total assets$886,612
 $839,897
    
Liabilities   
Term loan$143,969
 $144,353
Unearned premiums161,345
 152,906
Accounts payable and accrued expenses22,028
 25,297
Reserve for insurance claims and claim expenses6,123
 3,001
Reinsurance funds withheld33,105
 30,633
Deferred ceding commission4,971
 4,831
Warrant liability, at fair value4,046
 3,367
Total liabilities375,587
 364,388
Commitments and contingencies

 

    
Shareholders' equity   
Common stock - class A shares, $0.01 par value;
59,928,092 and 59,145,161 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively (250,000,000 shares authorized)		599
 591
Additional paid-in capital583,447
 576,927
Accumulated other comprehensive loss, net of tax(630) (5,287)
Accumulated deficit(72,391) (96,722)
Total shareholders' equity511,025
 475,509
Total liabilities and shareholders' equity$886,612
 $839,897

See accompanying notes to condensed consolidated financial statements.statements (unaudited).
6
NMI HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

For the three months ended March 31,
20222021
Revenues(In Thousands, except for per share data)
Net premiums earned$116,495 $105,879 
Net investment income10,199 8,814 
Net realized investment gains408 — 
Other revenues339 501 
Total revenues127,441 115,194 
Expenses
Insurance claims and claim (benefits) expenses(619)4,962 
Underwriting and operating expenses32,935 34,065 
Service expenses430 591 
Interest expense8,041 7,915 
(Gain) loss from change in fair value of warrant liability(93)205 
Total expenses40,694 47,738 
Income before income taxes86,747 67,456 
Income tax expense19,067 14,565 
Net income$67,680 $52,891 
Earnings per share
Basic$0.79 $0.62 
Diluted$0.77 $0.61 
Weighted average common shares outstanding
Basic85,953 85,317 
Diluted87,310 86,487 
Net income$67,680 $52,891 
Other comprehensive loss, net of tax:
Unrealized losses in accumulated other comprehensive income, net of tax benefit of $26,176 and $11,997 for the quarters ended March 31, 2022 and 2021, respectively(98,471)(45,133)
Reclassification adjustment for realized gains included in net income, net of tax expense $86 for the quarter ended March 31, 2022(323)— 
Other comprehensive loss, net of tax(98,794)(45,133)
Comprehensive (loss) income$(31,114)$7,758 


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

2017 2016
2017
2016
Revenues(In Thousands, except for share data)
Net premiums earned$44,519
 $31,808
 $115,661
 $77,656
Net investment income4,170
 3,544
 11,885
 10,117
Net realized investment gains (losses)69
 66
 198
 (758)
Other revenues195
 102
 461
 172
Total revenues48,953
 35,520
 128,205
 87,187
Expenses       
Insurance claims and claims expenses957
 664
 2,965
 1,592
Underwriting and operating expenses24,645
 24,037
 78,682
 69,943
Total expenses25,602
 24,701
 81,647
 71,535
Other expense       
Loss from change in fair value of warrant liability(502) (797) (679) (187)
Interest expense(3,352) (3,733) (10,146) (11,072)
Total other expense(3,854) (4,530) (10,825) (11,259)
        
Income before income taxes19,497
 6,289
 35,733
 4,393
Income tax expense7,185
 114
 11,917
 114
Net income$12,312
 $6,175
 $23,816
 $4,279

       
Earnings per share       
Basic$0.21
 $0.10
 $0.40
 $0.07
Diluted$0.20
 $0.10
 $0.38
 $0.07

       
Weighted average common shares outstanding       
Basic59,883,629
 59,130,401
 59,680,166
 59,047,758
Diluted63,088,958
 60,284,746
 62,773,333
 59,861,916

       
Net income$12,312
 $6,175
 $23,816
 $4,279
Other comprehensive income (loss), net of tax:       
Net unrealized gain (loss) in accumulated other comprehensive income, net of tax expense of $366 and $0 for the three months ended September 30, 2017 and 2016, respectively, and $2,439 and $0 for the nine months ended September 30, 2017 and 2016768
 (82) 4,786
 17,690
Reclassification adjustment for realized losses (gains) included in net income, net of tax expense of $24 and $0 for the three months ended September 30, 2017 and 2016, respectively, and $69 and $0 for the nine months ended September 30, 2017 and 2016(45) (66) (129) 758
Other comprehensive income (loss), net of tax723

(148)
4,657

18,448
Comprehensive income$13,035

$6,027

$28,473

$22,727
See accompanying notes to condensed consolidated financial statements.statements (unaudited).
7
NMI HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)





Common Stock - Class AAdditional
Paid-in Capital		Treasury Stock, At CostAccumulated Other Comprehensive IncomeRetained EarningsTotal
SharesAmount
(In Thousands)
Balances, December 31, 202185,793 $858 $955,302 $— $1,485 $608,141 $1,565,786 
Common stock: class A shares issued related to warrant exercises51 1 1,143 — — — 1,144 
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes430 4 26 — — — 30 
Repurchase of common stock(235)— — (5,000)(5,000)
Share-based compensation expense— — 4,196 — — — 4,196 
Change in unrealized investment gains/losses, net of tax benefit of $26,262— — — — (98,794)— (98,794)
Net income— — — — — 67,680 67,680 
Balances, March 31, 202286,039 $863 $960,667 $(5,000)$(97,309)$675,821 $1,535,042 



Common Stock - Class AAdditional
Paid-in Capital		Accumulated Other Comprehensive IncomeRetained EarningsTotal
SharesAmount
(In Thousands)
Balances, December 31, 202085,163 $852 $937,872 $53,856 $377,011 $1,369,591 
Common stock: class A shares issued related to warrant exercises24 *557 — — 557 
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes413 4 (624)— — (620)
Share-based compensation expense— — 3,022 — — 3,022 
Change in unrealized investment gains/losses, net of tax benefit of $11,997— — — (45,133)— (45,133)
Net income— — — — 52,891 52,891 
Balances, March 31, 202185,600 $856 $940,827 $8,723 $429,902 $1,380,308 
*    During the months ended March 31, 2021, we issued 23,750 common shares with a par value of $0.01 in connection with the exercise of warrants, which is not identifiable in this schedule due to rounding.









8
 Common Stock - Class AAdditional
Paid-in Capital		Accumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal
 SharesAmount
 (In Thousands)
Balances, January 1, 201658,808
$588
$570,340
$(7,474)$(160,723)$402,731
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes337
3
(227)—
—
(224)
Share-based compensation expense—
—
6,814
—
—
6,814
Change in unrealized investment gains/losses, net of tax expense of $1,178—
—
—
2,187
—
2,187
Net income—
—
—
—
64,001
64,001
Balances, December 31, 201659,145
$591
$576,927
$(5,287)$(96,722)$475,509
Cumulative effect of change in accounting principle—
—
388
—
515
903
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes783
8
(801)—
—
(793)
Share-based compensation expense—
—
6,933
—
—
6,933
Change in unrealized investment gains/losses, net of tax expense of $2,508—
—
—
4,657
—
4,657
Net income—
—
—
—
23,816
23,816
Balances, September 30, 201759,928
$599
$583,447
$(630)$(72,391)$511,025

See accompanying notes to consolidated financial statements.
NMI HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


 For the nine months ended September 30,
 2017 2016
Cash flows from operating activities(In Thousands)
Net income$23,816
 $4,279
Adjustments to reconcile net income to net cash provided by operating activities:   
Net realized investment (gains) losses(198) 758
Loss from change in fair value of warrant liability679
 187
Depreciation and amortization4,871
 4,300
Net amortization of premium on investment securities1,200
 954
Amortization of debt discount and debt issuance costs1,112
 1,416
Share-based compensation expense6,933
 4,987
Deferred income taxes11,340
 —
Changes in operating assets and liabilities:   
Premiums receivable(7,328) (6,235)
Accrued investment income(1,177) (742)
Prepaid expenses(660) (885)
Deferred policy acquisition costs, net(5,992) (11,381)
Other assets(1,150) (2)
Unearned premiums8,439
 54,628
Reserve for insurance claims and claims expenses3,122
 1,454
Reinsurance balances, net618
 (431)
Accounts payable and accrued expenses(3,847) (1,075)
Net cash provided by operating activities41,778
 52,212
Cash flows from investing activities   
Purchase of short-term investments(111,551) (147,639)
Purchase of fixed-maturity investments, available-for-sale(166,640) (103,418)
Proceeds from maturity of short-term investments142,722
 93,916
Proceeds from redemptions, maturities and sale of fixed-maturity investments, available-for-sale75,785
 101,874
Additions to software and equipment(6,869) (8,449)
Net cash used in investing activities(66,553) (63,714)
Cash flows from financing activities   
Proceeds from issuance of common stock related to employee equity plans3,105
 526
Taxes paid related to net share settlement of equity awards(3,883) (694)
Repayments of term loan(1,125) (1,125)
Payments of debt modification costs(370) —
Net cash used in financing activities(2,273) (1,293)
    
Net decrease in cash and cash equivalents(27,048) (12,795)
Cash and cash equivalents, beginning of period47,746
 57,317
Cash and cash equivalents, end of period$20,698
 $44,522
    
Supplemental disclosures of cash flow information   
Interest paid$10,350
 $9,669
Income taxes paid802
 —
For the three months ended March 31,
20222021
Cash flows from operating activities(In Thousands)
Net income$67,680 $52,891 
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment gains(408)— 
(Gain) loss from change in fair value of warrant liability(93)205 
Depreciation and amortization3,093 2,675 
Net amortization of premium on investment securities1,707 1,636 
Amortization of debt discount and debt issuance costs451 443 
Deferred income taxes19,054 14,561 
Share-based compensation expense4,196 3,022 
Changes in operating assets and liabilities:
Premiums receivable(168)(2,427)
Accrued investment income(521)(633)
Prepaid expenses(1,947)(1,707)
Deferred policy acquisition costs, net(143)(69)
Reinsurance recoverable240 (1,078)
Other assets648 148 
Unearned premiums(844)8,590 
Reserve for insurance claims and claim expenses(1,179)5,536 
Reinsurance balances, net79 101 
Accounts payable and accrued expenses(11,535)1,570 
Net cash provided by operating activities80,310 85,464 
Cash flows from investing activities
Purchase of short-term investments(2)— 
Purchase of fixed-maturity investments, available-for-sale(66,513)(109,933)
Proceeds from maturity of short-term investments10,640 — 
Proceeds from redemptions, maturities and sale of fixed-maturity investments, available-for-sale36,479 15,942 
Software and equipment(1,974)(2,456)
Net cash used in investing activities(21,370)(96,447)
Cash flows from financing activities
Proceeds from issuance of common stock related to employee equity plans4,491 3,886 
Proceeds from issuance of common stock related to warrants290 182 
Taxes paid related to net share settlement of equity awards(4,461)(4,505)
Repurchases of common stock(5,000)— 
Net cash used in financing activities(4,680)(437)
Net increase (decrease) in cash, cash equivalents and restricted cash54,260 (11,420)
Cash, cash equivalents and restricted cash, beginning of period76,646 126,937 
Cash, cash equivalents and restricted cash, end of period$130,906 $115,517 
Supplemental disclosures of cash flow information
Income taxes refunded$— $206 
See accompanying notes to condensed consolidated financial statements.statements (unaudited).
9
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



1. Organization, and Basis of Presentation and Summary of Accounting Principles
NMI Holdings, Inc. (NMIH) is a Delaware corporation, incorporated in May 2011, to provide private mortgage guaranty insurance (which we refer to as mortgage insurance or MI) through its wholly owned insurance subsidiaries, National Mortgage Insurance Corporation (NMIC) and National Mortgage Reinsurance Inc One (Re One). In April 2012, we completed a private placement of our securities, through which we offered and sold an aggregate of 55,000,000 of our Class AOur common stock resulting in net proceeds of approximately $510 million (the Private Placement), and we completed the acquisition of our insurance subsidiaries for $8.5 million in cash, common stock and warrants, plus the assumption of $1.3 million in liabilities. In November 2013, we completed an initial public offering of 2.4 million shares of our common stock, and our common stock began tradingis listed on the NASDAQNasdaq exchange on November 8, 2013, under the ticker symbol "NMIH.""NMIH".
In April 2013, NMIC, our primary insurance subsidiary, issued its first mortgage insurance policy.policy in April 2013. NMIC is licensed to write mortgage insurance in all 50 states and D.C.the District of Columbia (D.C.). Re One historically provided reinsurance coverage to NMIC in accordance with certain statutory risk retention requirements. Such requirements have been repealed and the reinsurance coverage provided by Re One to NMIC has been commuted. Re One remains a wholly owned, licensed insurance subsidiary; however, it does not currently have active insurance exposures. In August 2015, NMIH capitalized a wholly owned subsidiary, NMI Services, Inc. (NMIS), through which we offer outsourced loan review services on a limited basis to mortgage loan originators.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements, which include the results of NMIH and its wholly owned subsidiaries, have been prepared in accordance with the instructions to Form 10-Q as prescribed by the SEC for interim reporting and include other information and disclosures required by accounting principles generally accepted in the U.S. (GAAP). Our accounts are maintained in U.S. dollars. These statements should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2016,2021, included in our 20162021 10-K. All intercompany transactions have been eliminated. Certain reclassifications to previously reported financial information have been made to conform to our current period presentation. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities as of the balance sheet date. Estimates also affect the reported amounts of income and expenses for the reporting period. Actual results could differ from those estimates. The results of operations for the interim period may not be indicative of the results that may be expected for the full year ending December 31, 2017.2022.
Deferred Policy Acquisition CostsCOVID-19 Developments
Costs directly associatedOn January 30, 2020, the World Health Organization 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 spread of the virus, 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 successful acquisition ofwidespread public and regulatory response, caused a dramatic slowdown in U.S. and global economic activity.
The global dislocation caused by COVID-19 was unprecedented and the pandemic had a direct impact on the U.S. housing market, private mortgage insurance policies, consistingindustry, and our business and operating performance for an extended period. More recently, however, the acute economic impact of certain selling expensesCOVID-19 has begun to recede. While the pandemic continues to pose a global risk and affect communities across the U.S., it is no longer the single dominant driver of our performance that it had been in earlier periods. COVID-19 is now one of several mosaic factors, including a range of macroeconomic forces and public policy initiatives that are influencing our market and business.
Although we are optimistic that the nationwide COVID-19 vaccination effort and other policy issuancemedical advances will continue to support a normalization of personal and underwriting expenses,business activity, the path of the virus remains unknown and subject to risk. Given this uncertainty, we are initially deferred and reported as deferred policy acquisition costs (DAC). DAC is reviewed periodicallynot able to determine that it does not exceed recoverable amounts and is adjusted as appropriate for policy cancellations to be consistent with our revenue recognition policy. Wefully assess or estimate the rate of amortization to reflect actual experienceimpact the pandemic may have on the mortgage insurance market, our business performance or our financial position at this time, and anyit remains possible COVID-19 could again trigger more severe and adverse outcomes in future periods.
Significant Accounting Principles
There have been no changes to persistency or loss development. For each book yearour significant accounting principles as described in Item 8, "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 2 - Summary of business, these costsAccounting Principles" of our 2021 10-K, except as noted in "Share Repurchases" and "Recent Accounting Pronouncements - Adopted" below.
Share Repurchases
Common stock repurchases are amortized to expenserecorded at cost and presented as "Treasury Stock" in proportion to estimated gross profits over the estimated lifeconsolidated balance sheet and statement of changes in shareholders' equity. At the policies. Total amortizationdate of DAC, net of a portion of ceding commission related torepurchase, shareholders' equity is reduced by the 2016 QSR Transaction (see Note 5, "Reinsurance"), was $1.7 millionaggregate repurchase price plus commissions and $1.2 million for the three months ended September 30, 2017 and 2016, respectively, and $4.0 million and $3.4 million for the nine months ended September 30, 2017 and 2016, respectively.
Premium Deficiency Reserves
We consider whether a premium deficiency exists 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 related unearned premiums and anticipated investment income. We have determined that no premium deficiency reserves were necessary for the three and nine months ended September 30, 2017 or 2016.
Reinsurance
We account for premiums, losses and lossother expenses that are ceded to reinsurers on bases consistent with those we use to account forarise from the original policies we issue and pursuant to the terms of our reinsurance contracts. We account for premiums ceded or otherwise paid to reinsurers as reductions to premium revenue.repurchase transaction.
We earn profit and ceding commissions in connection with our 2016 QSR Transaction (see Note 5, "Reinsurance").Profit commissions represent a percentage of the profits recognized by reinsurers that are returned to us, based on the level of losses we cede. We recognize any profit commissions we earn as increases to premium revenue. Ceding commissions are calculated as a percentage of ceded written premiums, which are intended to cover our costs to acquire and service the direct policies. We earn the
10
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

ceding commissions in a manner consistent with our recognition of earnings on the underlying insurance policies, over the terms of the policies reinsured. We account for ceding commissions as reductions to underwriting and operating expenses.
We cede a portion of loss reserves, paid losses and loss expenses to our reinsurers, which are accounted for as reinsurance recoverables on the consolidated balance sheets and as reductions to loss expense on the consolidated statements of operations. We remain directly liable for all loss payments in the event we are unable to collect from any reinsurer.
Variable interest entity
In May 2017, NMIC entered into a reinsurance agreement with Oaktown Re Ltd. (Oaktown Re), a Bermuda-domiciled special purpose reinsurer. At inception of the reinsurance agreement, we determined that Oaktown Re was a variable interest entity (VIE), as defined under GAAP (ASC 810), because it did not have sufficient equity at risk to finance its activities. We evaluated the VIE to determine whether NMIC was its primary beneficiary and, if so, whether we were required to consolidate the assets and liabilities of the VIE. The primary beneficiary of a VIE is an enterprise that (1) has the power to direct the activities of the VIE, which most significantly impact its economic performance and (2) has significant economic exposure to the VIE; i.e., the obligation to absorb losses or receive benefits that could potentially be significant. The determination of whether an entity is the primary beneficiary of a VIE is complex and requires management judgment regarding determinative factors, including the expected results of the VIE and how those results are absorbed by beneficial interest holders, as well as which party has the power to direct activities that most significantly impact the performance of the VIE.
We concluded that we are not the primary beneficiary of Oaktown Re and that consolidation is not required, as we do not have significant economic exposure in the entity.
See Note 5, "Reinsurance" for further discussion of the reinsurance arrangement.
Premiums Receivable
Premiums receivable consist of premiums due on our mortgage insurance policies. If a mortgage insurance premium is unpaid for more than 120 days, the receivable is written off against earned premium and the related insurance policy is canceled. We have determined that the receivable write-off was immaterial as of September 30, 2017.
Recent Accounting Pronouncements - Adopted
In May 2014,August 2020, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue fromASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts with Customers (Topic 606)in Entity's Own Equity (Subtopic 815-40). ThisThe update is intended to provide a consistent approach in recognizing revenue. In accordance withsimplifies the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services inaccounting for convertible instruments and contracts on an amount that reflects the consideration to which the entity expects to be entitled in exchangeentity's own equity, including warrants, eliminating certain triggers for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015,derivative accounting. We adopted this ASU 2015-14 deferred the provisions of ASU 2014-09 to be effective for interim and annual periods beginning after December 15, 2017. In addition, this guidance amends the existing requirements for the recognition of a gain or loss on the transfer of non-financial assets that are not in a contract with a customer (ASU 2017-05). In September 2017, ASU 2017-13, added guidance from an SEC Staff Announcement, "Transition Related to Accounting Standards Updates No. 2014-09." The adoption of this update for our loan review services revenue, effective January 1, 2018, will2022 and determined it did not have an immateriala material impact on our consolidated financial statements, and will not affect the Company’s reporting of insurance premiums and investment income. We are still in the process of evaluating the adoption method and the impact on presentation and disclosure.including our warrant liability.
Recent Accounting Pronouncements - Not Yet Adopted
In February 2016,August 2018, the FASB issued ASU 2016-02, Leases (Topic 842)2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (Topic 944). ThisThe update requires that businesses recognize rightsprovides guidance to the existing recognition, measurement, presentation and obligations associated with certain leases as assetsdisclosure requirements for long-duration contracts issued by an insurance entity. The FASB subsequently issued ASU 2019-09 in November 2019 and liabilities onASU 2020-11 in November 2020, which amended the balance sheet.effective date for this standard and provided transition relief to facilitate early application for long duration contracts. The standard also requires additional disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases. For public business entities, this update is effective for annual periods beginning after December 15, 2018 and interim periods therein. Early adoption is permitted in any period. We expect to adopt this guidance on January 1, 2019. In September 2017, ASU 2017-13, added guidance from an SEC Staff Announcement, "Transition Related to Accounting Standards Update No. 2016-02." We anticipate this standard will have an impact on our financial position, primarily due to our office space operating lease, as we will be required to recognize lease assets and lease liabilities on our consolidated balance sheet. We will continue to assess the potential impacts of this standard, including the impact the adoption of this guidance will have on our results of operations or cash flows.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326). This update requires companies to measure all expected credit losses for financial assets held at the reporting date. The accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration also is amended in the standard. The standard
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

willnow take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.2022. We are currently evaluating the impact the adoption of this ASU will have, if any, on theour consolidated financial statements.
In August 2016,March 2020, the FASB issued ASU 2016-15, Statement2020-04, Reference Rate Reform (Topic 848). The update provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting. Reference rate reform refers to the global transition away from referencing the London Interbank Offered Rate (LIBOR) in financial contracts, which is expected to be discontinued during a transition period from 2021 through 2023. The ASU includes optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. This standard may be elected and applied prospectively over time from March 12, 2020 through December 31, 2022 as reference rate reform activities occur. We continue to monitor the impact the discontinuance of Cash Flows (Topic 230). This update is intended to reduce diversity in practice in how certain cash receiptsLIBOR will have on our contracts and cash payments are presented and classified inother transactions; however, the statement of cash flows. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The adoption of, and future elections under, this update, effective January 1, 2018, isASU, are not expected to have any impact on our statement of cash flows.
In August 2016, the FASB issued ASU 2016-16, Income Taxes- Intra-Entity Transfers of Assets Other Than Inventory (Topic 740). This update is intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The adoption of this update, effective January 1, 2018, is not expected to have anya material impact on our consolidated financial statements.statements as the ASU will ease, if warranted, the requirements for accounting for the future effects of the rate reform.
In January 2017,
2. Investments
We hold all investments on an available-for-sale basis and evaluate each position quarterly for impairment. We recognize an impairment on a security through the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This updatestatement of operations if (i) we intend to sell the impaired security; or (ii) it is more likely than not that we will be required to sell the impaired security prior to recovery of its amortized cost basis. If a sale is intended or likely to simplifybe required, we write down the test for goodwill impairment. The standard will take effect for public business entities for fiscal years,amortized cost basis of the security to fair value and interim periods within those fiscal years, after December 15, 2020. Early adoption is permitted for interim or annual goodwillrecognize the full amount of the impairment tests performed on testing dates after January 1, 2017. We have determined that the adoption of this ASU will have no impact onthrough the consolidated financial statements.
In March 2017,statement of operations and comprehensive income as a "Net Realized Investment Loss." To the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20). This update shortensextent we determine that a security impairment is credit-related, an impairment loss is recognized through the amortization periodstatement of operations as a provision for the premium on certain purchased callable debt securitiescredit loss expense. The portion of a security impairment attributed to the earliest call date. The standard will take effect for public business entities for fiscal years beginning after December 15, 2017. Early adoptionother non-credit related factors is permitted, and if an entity early adopts the guidance in an interim period, any adjustments are reflected as of the beginning of the fiscal year that includes that interim period. The adoption of this update, effective January 1, 2018, is not expected to have any impact on our consolidated financial statements.
In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivatives and Hedging (Topic 815). This update is intended to simplify the accounting for certain financial instruments with down round features. This standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted in any interim or annual period. The Company is currently evaluating the impact the adoption of this ASU will have, if any, on the consolidated financial statements.
Immaterial Correction of Prior Period Amounts
During the first quarter of 2017, after filing the 2016 10-K, including the audited financial statements included therein, we discovered that $1.8 million of deferred taxes on vested options associated with employees terminated in previous years had not been reversed. Because our deferred tax asset (DTA) was subject to a valuation allowance prior to December 31, 2016, no expense would have been recognized in periods prior to December 31, 2016. However, at December 31, 2016, when we released the valuation allowance against the DTA, the DTA was overstated by $1.8 million and resulted in a $1.8 million overstatementother comprehensive income, net of our 2016 income tax benefit and net income.taxes.
In order to provide consistency in the consolidated statements and as permitted by Staff Accounting Bulletin (SAB) 108, revisions for these immaterial amounts to previously reported annual amounts are reflected in the Consolidated Balance Sheet financial information herein and will be reflected in the Consolidated Statement of Operations in future filings containing such financial information as permitted by SAB 108. A comparison of the affected amounts as previously reported and as adjusted are presented below.
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NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

As of and for the full year ended December 31, 2016As previously reported As adjusted
 (In thousands)
Income Statement   
Net income$65,841
 $64,001
Income tax (benefit)(54,389) (52,550)
Basic EPS1.11
 1.08
Diluted EPS1.08
 1.05
    
Balance Sheet   
Deferred tax asset, net$53,274
 $51,434
Total assets841,737
 839,897
Accumulated deficit(94,882) (96,722)
Total shareholders' equity477,349
 475,509
Change in Accounting Principle
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), which intends to simplify various aspects of the accounting for and reporting of share-based payments. The new accounting is required to be adopted using a modified retrospective approach, with a cumulative-effect adjustment to opening retained earnings for any outstanding liability awards that qualify for equity classification under the new guidance.
As the guidance is effective for annual and interim reporting periods beginning after December 15, 2016, we adopted the new guidance in the first quarter of 2017. This required us to reflect any adjustments as of January 1, 2017, the beginning of the annual period that includes the interim period of adoption. The primary impact of adoption was the recognition of excess tax benefits in our provision for income taxes in the consolidated statements of operations. Additionally, our consolidated statements of cash flows now present excess tax benefits as an operating activity on a prospective basis. Finally, we have elected to account for forfeitures as they occur, rather than estimate expected forfeitures. The net cumulative effect of this change was recognized as a $0.5 million reduction to the accumulated deficit as of January 1, 2017.
2. Investments
We have designated our investment portfolio as available-for-sale and report it at fair value. The related unrealized gains and losses are, after considering the related tax expense or benefit, recognized through comprehensive income and loss, and on an accumulated basis in shareholders' equity. Net realized investment gains and losses are reported in income based upon specific identification of securities sold.
Fair Values and Gross Unrealized Gains and Losses on Investments
Amortized
Cost		Gross UnrealizedFair
Value
GainsLosses
As of March 31, 2022(In Thousands)
U.S. Treasury securities and obligations of U.S. government agencies$29,443 $47 $(246)$29,244 
Municipal debt securities578,524 183 (36,756)541,951 
Corporate debt securities1,419,017 4,662 (82,991)1,340,688 
Asset-backed securities84,514 74 (2,870)81,718 
Total bonds2,111,498 4,966 (122,863)1,993,601 
Short-term investments371 — — 371 
Total investments$2,111,869 $4,966 $(122,863)$1,993,972 
Amortized
Cost		Gross UnrealizedFair
Value
Amortized
Cost		 Gross Unrealized Fair
Value		GainsLosses
 Gains Losses 
As of September 30, 2017(In Thousands)
As of December 31, 2021As of December 31, 2021(In Thousands)
U.S. Treasury securities and obligations of U.S. government agencies$65,669
 $21
 $(636) $65,054
U.S. Treasury securities and obligations of U.S. government agencies$29,443 $981 $— $30,424 
Municipal debt securities90,155
 929
 (348) 90,736
Municipal debt securities553,793 5,689 (5,404)554,078 
Corporate debt securities404,467
 5,619
 (1,246) 408,840
Corporate debt securities1,388,204 22,990 (17,364)1,393,830 
Asset-backed securities96,279
 1,142
 (101) 97,320
Asset-backed securities96,324 684 (427)96,581 
Total bonds656,570
 7,711
 (2,331) 661,950
Total bonds2,067,764 30,344 (23,195)2,074,913 
Short-term investments30,714
 65
 —
 30,779
Short-term investments11,009 9 — 11,018 
Total investments$687,284
 $7,776
 $(2,331) $692,729
Total investments$2,078,773 $30,353 $(23,195)$2,085,931 
NMI HOLDINGS, INC.We did not own any mortgage-backed securities in our asset-backed securities portfolio at March 31, 2022 or December 31, 2021.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


 Amortized
Cost		 Gross Unrealized Fair
Value
  Gains Losses 
As of December 31, 2016(In Thousands)
U.S. Treasury securities and obligations of U.S. government agencies$64,135
 $6
 $(962) $63,179
Municipal debt securities40,801
 131
 (663) 40,269
Corporate debt securities349,712
 1,722
 (2,356) 349,078
Asset-backed securities114,456
 765
 (560) 114,661
Total bonds569,104
 2,624
 (4,541) 567,187
Short-term investments61,584
 198
 —
 61,782
Total investments$630,688
 $2,822
 $(4,541) $628,969
AsThe following table presents a breakdown of September 30, 2017the fair value of our corporate debt securities by issuer industry group as of March 31, 2022 and December 31, 2016,2021:
March 31, 2022December 31, 2021
Financial36 %38 %
Consumer25 24 
Communications12 11 
Utilities10 10 
Technology9 9 
Industrial8 8 
Total100 %100 %
As of March 31, 2022 and December 31, 2021, approximately $7.0$5.5 million and $5.6 million, respectively, of our cash and investments were held in the form of U.S. Treasury securities on deposit with various state insurance departments to satisfy regulatory requirements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Scheduled Maturities
The amortized cost and fair valuesvalue of available-for-sale securities as of September 30, 2017March 31, 2022 and December 31, 2016,2021, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most asset-backed securities provide for periodic payments throughout their lives, they are listed below in a separate category.
As of September 30, 2017Amortized
Cost		 Fair
Value
As of March 31, 2022As of March 31, 2022Amortized
Cost		Fair
Value
(In Thousands)(In Thousands)
Due in one year or less$108,020
 $108,048
Due in one year or less$80,129 $80,274 
Due after one through five years158,353
 159,502
Due after one through five years730,283 711,670 
Due after five through ten years309,708
 312,697
Due after five through ten years1,180,849 1,087,290 
Due after ten years14,924
 15,162
Due after ten years36,094 33,020 
Asset-backed securities96,279
 97,320
Asset-backed securities84,514 81,718 
Total investments$687,284
 $692,729
Total investments$2,111,869 $1,993,972 
As of December 31, 2016Amortized
Cost		 Fair
Value
As of December 31, 2021As of December 31, 2021Amortized
Cost		Fair
Value
(In Thousands)(In Thousands)
Due in one year or less$94,382
 $94,584
Due in one year or less$81,699 $82,201 
Due after one through five years173,296
 173,251
Due after one through five years630,625 644,447 
Due after five through ten years242,005
 240,060
Due after five through ten years1,215,224 1,207,997 
Due after ten years6,549
 6,413
Due after ten years54,901 54,705 
Asset-backed securities114,456
 114,661
Asset-backed securities96,324 96,581 
Total investments$630,688
 $628,969
Total investments$2,078,773 $2,085,931 
Aging of Unrealized Losses
As of September 30, 2017,March 31, 2022, the investment portfolio had gross unrealized losses of $2.3 million, $1.5$122.9 million, of which has$29.0 million were associated with securities that had been in an unrealized loss position for a period of 12 monthstwelve-months or greater. We did not consider these securities to be other-than-temporarily impaired aslonger. As of September 30, 2017. We based our conclusion that these investments were not other-than-temporarily impaired as of September 30, 2017 onDecember 31, 2021, the following facts: (i) theinvestment portfolio had gross unrealized losses of $23.2 million, of which $6.5 million were primarily caused by interest rate movements since the purchase date; (ii) we do not intend to sell these investments; and (iii) we do not believeassociated with securities that it is more likely than not that we will be required to sell these investments before recoveryhad been in an unrealized loss position for a period of our amortized cost basis, which may not occur until maturity.twelve-months or longer. For those securities in an unrealized loss position, the length of time the securities were in such a position is as follows:
Less Than 12 Months12 Months or GreaterTotal
# of SecuritiesFair ValueUnrealized Losses# of SecuritiesFair ValueUnrealized Losses# of SecuritiesFair ValueUnrealized Losses
As of March 31, 2022(Dollars in Thousands)
U.S. Treasury securities and obligations of U.S. government agencies12 $24,105 $(246)— $— $— 12 $24,105 $(246)
Municipal debt securities214 466,969 (33,508)17 27,711 (3,248)231 494,680 (36,756)
Corporate debt securities188 791,585 (57,405)35 228,605 (25,586)223 1,020,190 (82,991)
Asset-backed securities20 63,494 (2,678)1 1,852 (192)21 65,346 (2,870)
Total434 $1,346,153 $(93,837)53 $258,168 $(29,026)487 $1,604,321 $(122,863)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Less Than 12 Months12 Months or GreaterTotal
# of SecuritiesFair ValueUnrealized Losses# of SecuritiesFair ValueUnrealized Losses# of SecuritiesFair ValueUnrealized Losses
As of December 31, 2021(Dollars in Thousands)
Municipal debt securities151 $314,823 $(4,959)2 $8,138 $(445)153 $322,961 $(5,404)
Corporate debt securities114 653,488 (11,426)20 146,003 (5,938)134 799,491 (17,364)
Asset-backed securities11 57,601 (357)1 1,977 (70)12 59,578 (427)
Total276 $1,025,912 $(16,742)23 $156,118 $(6,453)299 $1,182,030 $(23,195)
Allowance for credit losses
 Less Than 12 Months 12 Months or Greater Total
 # of SecuritiesFair ValueUnrealized Losses # of SecuritiesFair ValueUnrealized Losses # of SecuritiesFair ValueUnrealized Losses
As of September 30, 2017 (Dollars in Thousands)
U.S. Treasury securities and obligations of U.S. government agencies22
$38,425
$(263) 15
$19,621
$(373) 37
$58,046
$(636)
Municipal debt securities9
21,567
(212) 8
10,319
(136) 17
31,886
(348)
Corporate debt securities44
69,602
(317) 14
34,031
(929) 58
103,633
(1,246)
Asset-backed securities15
21,173
(89) 2
4,988
(12) 17
26,161
(101)
Total90
$150,767
$(881) 39
$68,959
$(1,450) 129
$219,726
$(2,331)
As of March 31, 2022 and December 31, 2021, we did not recognize an allowance for credit loss for any security in the investment portfolio and we did not record any provision for credit loss for investment securities during the three months ended March 31, 2022 or 2021.
The increase in the number of securities in and the aggregate size of the unrealized loss position as of March 31, 2022, was primarily driven by interest rate movements following the purchase date of certain securities. We evaluated the securities in an unrealized loss position as of March 31, 2022, assessing their credit ratings as well as any adverse conditions specifically related to the security. Based upon our estimate of the amount and timing of cash flows to be collected over the remaining life of each instrument, we believe the unrealized losses as of March 31, 2022 are not indicative of the ultimate collectability of the current amortized cost of the securities.
 Less Than 12 Months 12 Months or Greater Total
 # of SecuritiesFair ValueUnrealized Losses # of SecuritiesFair ValueUnrealized Losses # of SecuritiesFair ValueUnrealized Losses
As of December 31, 2016 (Dollars in Thousands)
U.S. Treasury securities and obligations of U.S. government agencies33
$51,093
$(962) —
$—
$—
 33
$51,093
$(962)
Municipal debt securities14
28,659
(617) 1
1,704
(46) 15
30,363
(663)
Corporate debt securities77
135,115
(1,955) 8
13,873
(401) 85
148,988
(2,356)
Asset-backed securities30
38,702
(510) 6
2,472
(50) 36
41,174
(560)
Total154
$253,569
$(4,044) 15
$18,049
$(497) 169
$271,618
$(4,541)
Net Investment Income
The following table presents the components of net investment income:
For the three months ended March 31,
20222021
(In Thousands)
Investment income$10,532 $9,225 
Investment expenses(333)(411)
Net investment income$10,199 $8,814 
 For the three months ended September 30, For the nine months ended September 30,
 2017 2016 2017 2016
 (In Thousands)
Investment income$4,363
 $3,727
 $12,455
 $10,672
Investment expenses(193) (183) (570) (555)
Net investment income$4,170
 $3,544
 $11,885
 $10,117

The following table presents the components of net realized investment gains (losses):gains:
For the three months ended March 31,
20222021
(In Thousands)
Gross realized investment gains$409 $— 
Gross realized investment losses(1)— 
Net realized investment gains$408 $— 

14
 For the three months ended September 30, For the nine months ended September 30,
 2017 2016 2017 2016
 (In Thousands)
Gross realized investment gains$69
 $66
 $536
 $683
Gross realized investment losses—
 —
 (338) (1,441)
Net realized investment gains (losses)$69
 $66
 $198
 $(758)
Investment Securities - Other-than-Temporary Impairment (OTTI)
For the quarter ended September 30, 2017, we held no other-than-temporarily impaired securities. There were no credit losses recognized in earnings for which a portion of an OTTI loss was recognized in accumulated other comprehensive income (loss).
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. Fair Value of Financial Instruments
The following describes the valuation techniques used by us to determine the fair value of our financial instruments:
We established a fair value hierarchy by prioritizing the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under this standard are described below:
Level 1 - Fair value measurements based on quoted prices in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments.
Level 2 - Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 - Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions, which require significant management judgment or estimation about the inputs a hypothetical market participant would use to value that asset or liability.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Assets classified as Level 1 and Level 2
To determine the fair value of securities available-for-sale in Level 1 and Level 2 of the fair value hierarchy, independent pricing sources have been utilized. One price is provided per security based on observable market data. To ensure securities are appropriately classified in the fair value hierarchy, we review the pricing techniques and methodologies of the independent pricing sources and believe that their policies adequately consider market activity, either based on specific transactions for the issue valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded. A variety of inputs are utilized by the independent pricing sources including benchmark yields, reported trades, non-binding broker/dealer quotes, issuer spreads, two sided markets, benchmark securities, bids, offers and reference data including data published in market research publications. Inputs may be weighted differently for any security, and not all inputs are used for each security evaluation. Market indicators, industry and economic events are also considered. This information is evaluated using a multidimensional pricing model. Quality controls are performed by the independent pricing sources throughout this process, which include reviewing tolerance reports, trading information and data changes, and directional moves compared to market moves. This model combines all inputs to arrive at a value assigned to each security. We have not made any adjustments to the prices obtained from the independent pricing sources. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the quarter ended September 30, 2017.
Liabilities classified as Level 3
We calculate the fair value of outstanding warrants utilizing levelLevel 3 inputs, including a Black-Scholes option-pricing model, in combination with a binomial model, and we value the pricing protection features within the warrants using a Monte-Carlo simulation model. Variables in the model include the risk-free rate of return, dividend yield, expected life and expected volatility of our stock price.

15
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following tables present the level within the fair value hierarchy at which the Company’sour financial instruments were measured:
Fair Value Measurements Using
Fair Value Measurements Using  Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Fair Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		 Significant Other
Observable Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)		 Fair Value
As of September 30, 2017(In Thousands)
As of March 31, 2022As of March 31, 2022(In Thousands)
U.S. Treasury securities and obligations of U.S. government agencies$60,214
 $4,840
 $—
 $65,054
U.S. Treasury securities and obligations of U.S. government agencies$29,244 $— $— $29,244 
Municipal debt securities—
 90,736
 —
 90,736
Municipal debt securities— 541,951 — 541,951 
Corporate debt securities—
 408,840
 —
 408,840
Corporate debt securities— 1,340,688 — 1,340,688 
Asset-backed securities—
 97,320
 —
 97,320
Asset-backed securities— 81,718 — 81,718 
Cash, cash equivalents and short-term investments51,477
 —
 —
 51,477
Cash, cash equivalents and short-term investments131,277 — — 131,277 
Total assets$111,691
 $601,736
 $—
 $713,427
Total assets$160,521 $1,964,357 $— $2,124,878 
       
Warrant liability—
 —
 4,046
 4,046
Warrant liability— — 1,416 1,416 
Total liabilities$—
 $—
 $4,046
 $4,046
Total liabilities$— $— $1,416 $1,416 
Fair Value Measurements Using
Fair Value Measurements Using  Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Fair Value
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		 Significant Other
Observable Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)		 Fair Value
As of December 31, 2016(In Thousands)
As of December 31, 2021As of December 31, 2021(In Thousands)
U.S. Treasury securities and obligations of U.S. government agencies$50,719
 $12,460
 $—
 $63,179
U.S. Treasury securities and obligations of U.S. government agencies$30,424 $— $— $30,424 
Municipal debt securities—
 40,269
 —
 40,269
Municipal debt securities— 554,078 — 554,078 
Corporate debt securities—
 349,078
 —
 349,078
Corporate debt securities— 1,393,830 — 1,393,830 
Asset-backed securities—
 114,661
 —
 114,661
Asset-backed securities— 96,581 — 96,581 
Cash, cash equivalents and short-term investments109,528
 —
 —
 109,528
Cash, cash equivalents and short-term investments87,664 — — 87,664 
Total assets$160,247
 $516,468
 $—
 $676,715
Total assets$118,088 $2,044,489 $— $2,162,577 
       
Warrant liability—
 —
 3,367
 3,367
Warrant liability— — 2,363 2,363 
Total liabilities$—
 $—
 $3,367
 $3,367
Total liabilities$— $— $2,363 $2,363 
There were no transfers between Level 12 and Level 23 of the fair value hierarchy during the ninethree months ended September 30, 2017 andMarch 31, 2022, or the year-endyear ended December 31, 2016.2021.
The following is a roll-forward of Level 3 liabilities measured at fair value:
16
 For the nine months ended September 30,
Warrant Liability2017 2016
 (In Thousands)
Balance, January 1$3,367
 $1,467
Change in fair value of warrant liability included in earnings679
 187
Balance, September 30$4,046
 $1,654
We revalue the warrant liability quarterly using a Black-Scholes option-pricing model, in combination with a binomial model, and we value the pricing protection features within the warrants using a Monte-Carlo simulation model. As of September 30, 2017, the assumptions used in the option-pricing model were as follows: a common stock price as of September 30, 2017 of
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table provides a roll-forward of Level 3 liabilities measured at fair value:
$12.40, risk free interest rate
For the three months ended March 31,
Warrant Liability20222021
(In Thousands)
Balance, January 1$2,363 $4,409 
Change in fair value of warrant liability included in earnings(93)205 
Issuance of common stock on warrant exercise(854)(375)
Balance, March 31$1,416 $4,239 
The following table outlines the key inputs and assumptions used to calculate the fair value of 1.66%, expected lifethe warrant liability in the Black-Scholes option-pricing model as of 3.25 years, expected volatility of 30.6% and a dividend yield of 0%. the dates indicated:
As of March 31,
20222021
Common stock price$20.62 $23.64 
Risk free interest rate0.17 %0.08 %
Expected life0.06 years1.06 years
Expected volatility40.2 %89.4 %
Dividend yield0 %0 %
The changechanges in fair value is primarily attributable to an increaseof the warrant liability for the three months ended March 31, 2022 and 2021 were driven by the exercise of outstanding warrants, as well as changes in the price of our common stock and other Black-Scholes model inputs during the respective periods.
Financial Instruments not Measured at Fair Value
On June 19, 2020, we issued $400.0 million aggregate principal amount of senior secured notes that mature on June 1, 2025 (the Notes) and used a portion of the proceeds from the Notes offering to repay the outstanding amount due under our $150 million term loan (2018 Term Loan). At March 31, 2022, the Notes were carried at a cost of $395.0 million, net of unamortized debt issuance costs of $5.0 million, and had a fair value of $421.0 million as assessed under our Level 2 hierarchy. At December 31, 2016 to September 30, 2017.2021, the Notes were carried at a cost of $394.6 million, net of unamortized debt issuance costs of $5.4 million, and had a fair value of $454.6 million.
4. Term LoanDebt
On November 10, 2015,Senior Secured Notes
At March 31, 2022, we entered into a credit agreement (the Credit Agreement) to obtain a three-yearhad $400.0 million aggregate principal amount of senior secured term loannotes outstanding. The Notes were issued pursuant to an indenture dated June 19, 2020 (the Term Loan) for $150 million. On February 10, 2017,Indenture) and bear interest at a rate of 7.375%, payable semi-annually on June 1 and December 1.

The Notes mature on June 1, 2025. At any time, or from time to time, prior to March 1, 2025, we entered into an amendmentmay elect to redeem the Credit Agreement, to extend the maturity dateNotes in whole or in part at a price based on 100% of the Term Loan by one yearaggregate principal amount of any Notes redeemed plus the "Applicable Premium," plus accrued and reduceunpaid interest thereon. Applicable Premium is defined as the interest rate. Based on our analysis, we concluded the amendment to the Credit Agreement should be treated as a modification. Asgreater of September 30, 2017, the Term Loan bears interest at the Eurodollar Rate, as defined in the Credit Agreement and subject to a 1.00% floor, plus an annual margin rate of 6.75% (an all-in rate of 7.99% as of September 30, 2017), payable monthly or quarterly based on our interest rate election. Quarterly principal payments of $375 thousand are also required. The outstanding balance(1) 1.0% of the Term Loan asprincipal amount of September 30, 2017 was $147 million.
Debt issuance costs totaling $4.8 million, including $370 thousand related to the modification and a 1% original issue discount, are being amortized toNotes, or (2) the excess of the present value of the principal value of the Notes plus all future interest expense, using the effective interest method,payments over the contractual lifeprincipal amount. At any time on or after March 1, 2025, we may elect to redeem the Notes in whole or in part at a price equal to 100% of the Term Loan. Effective interest rate for the Term Loan includes interest, amortization of issuance cost and the discount. For the nine months ended September 30, 2017, we recorded $10.1 million of interest expense, including amortizationaggregate principal amount of the issuanceNotes to be redeemed plus accrued and modification costsunpaid interest thereon. From time to time prior to June 1, 2022, we may also elect to use proceeds raised from one or more equity offerings to redeem up to 40% of the aggregate principal amount of the Notes at a price equal to 107.375% of the aggregate principal amount thereof plus accrued and original issue discount.
We areunpaid interest thereon, subject to certain quarterly covenants under the Credit Agreement. These covenants include, but are not limited to the following: a maximum debt-to-total capitalization ratio (as defined therein) of 35%, maximum risk-to-capital (RTC) ratio of 22.0:1.0, minimum liquidity (as defined therein), compliance with the PMIERs financial requirements (subject to any GSE-approved waivers), and minimum shareholders' equity requirements. This description is not intended to be complete in all respects and is qualified in its entirety by the terms of the Credit Agreement, including its covenants and events of default. We were in compliance with all covenants as of September 30, 2017.
Future principal payments due under the Term Loan as of September 30, 2017 are as follows:exceptions.
17
As of September 30, 2017 Principal
  (In thousands)
2017 $375
2018 1,500
2019 145,125
Total $147,000
   

NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Interest expense for the Notes includes interest and the amortization of capitalized debt issuance costs. In connection with the Notes offering, we recorded capitalized debt issuance costs of $7.4 million. Such amounts will be amortized over the contractual life of the Notes using the effective interest method. At March 31, 2022 and December 31, 2021, approximately $5.0 million and $5.4 million, respectively, of unamortized debt issuance costs remained.

At March 31, 2022 and December 31, 2021, $9.8 million and $2.5 million, respectively, of accrued and unpaid interest on the Notes was included in "Accounts Payable and Accrued Expenses" on the consolidated balance sheet.
2021 Revolving Credit Facility
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), expanding the lender group, increasing the revolving capacity to $250 million, and extending the maturity from February 22, 2023 to the earlier of (x) November 29, 2025, or (y) if any existing senior secured notes remain outstanding on such date, February 28, 2025. 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, and accrue 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. As of March 31, 2022, no amount was drawn under the 2021 Revolving Credit Facility.
Under the 2021 Revolving Credit Facility, we are required to pay a quarterly commitment fee on the average daily undrawn amount of 0.175% to 0.525%, based on the applicable corporate credit rating at the time. As of March 31, 2022, the applicable commitment fee was 0.35%. For the three months ended March 31, 2022, we recorded $0.2 million of commitment fees in interest expense.
We incurred debt issuance costs of $1.1 million in connection with the 2021 Revolving Credit Facility, and had $0.6 million of unamortized debt issuance costs associated with the 2020 Revolving Credit Facility remaining at the time of its amendment and replacement. Combined unamortized debt issuance will be amortized through interest expense on a straight-line basis over the contractual life of the 2021 Revolving Credit Facility. At March 31, 2022, remaining unamortized deferred debt issuance costs were $1.5 million.
We are subject to certain covenants under the 2021 Revolving Credit Facility, including, but not limited to, the following: a maximum debt-to-total capitalization ratio of 35%, compliance with the private mortgage insurer eligibility requirements (PMIERs) financial requirements (subject to any GSE approved waivers), and minimum consolidated net worth and statutory capital requirements (respectively, as defined therein). We were in compliance with all covenants at March 31, 2022.
5. Reinsurance
We have enteredenter into two third-party reinsurance transactions to actively manage our risk, ensure compliance with PMIERs, compliancestate regulatory and other applicable capital requirements, (respectively, as defined therein), and support the growth of our business. The GSEs and the Wisconsin Office of the Commissioner of Insurance (Wisconsin OCI) has approved bothand the GSEs have indicated their non-objection to all such transactions (subject to certain conditions and their periodicongoing review, of the transactions, including levels of approved capital credit).

18
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The effect of our reinsurance agreements on premiums written and earned is as follows:
For the three months ended
March 31, 2022March 31, 2021
(In Thousands)
Net premiums written
Direct$138,872 $136,232 
Ceded (1)
(22,838)(20,417)
Net premiums written$116,034 $115,815 
Net premiums earned
Direct$139,716 $127,643 
Ceded (1)
(23,221)(21,764)
Net premiums earned$116,495 $105,879 
 For the three months endedFor the nine months ended
 September 30, 2017 September 30, 2016September 30, 2017 September 30, 2016
 (In Thousands)
Net premiums written      
Direct$56,217
 $46,535
$142,134
 $133,526
Ceded (1)
(8,501) (37,336)(20,029) (37,336)
Net premiums written$47,716
 $9,199
$122,105
 $96,190
       
Net premiums earned      
Direct$52,024
 $33,052
$133,696
 $78,900
Ceded (1)
(7,505) (1,244)(18,035) (1,244)
Net premiums earned$44,519
 $31,808
$115,661
 $77,656
(1)    Net of profit commissioncommission.
Excess-of-loss reinsurance
In May 2017, NMIC entered intois a party to reinsurance agreementagreements with Oaktown Re thatLtd., Oaktown Re II Ltd., Oaktown Re III Ltd., Oaktown Re IV Ltd., Oaktown Re V Ltd., Oaktown Re VI Ltd., and Oaktown Re VII Ltd. (special purpose reinsurance entities collectively referred to as the Oaktown Re Vehicles) effective May 2, 2017, July 25, 2018, July 30, 2019, July 30, 2020, October 29, 2020, April 27, 2021, and October 26, 2021, respectively. Each agreement provides for up to $211.3 million ofNMIC with aggregate excess-of-loss reinsurance coverage at inception for new delinquencies on an existinga defined portfolio of mortgage insurance policies written from 2013 through December 31, 2016. For the coverage period,policies. Under each agreement, NMIC will retain theretains a first layer of $126.8 million of aggregate lossesloss exposure on covered policies and the respective Oaktown Re willVehicle then provideprovides second layer coverageloss protection up to the outstandinga defined reinsurance coverage amount. NMIC will then retainretains losses in excess of the outstandingrespective reinsurance coverage amount. The outstanding reinsurance coverage amount decreases from $211.3 million at inception over a ten-year period as the underlying covered mortgages amortize and was $185 million as of September 30, 2017. The outstanding reinsurance coverage amount will stop amortizing if certain credit enhancement or delinquency thresholds are triggered.amounts.
Oaktown Re financed the coverage by issuing mortgage insurance-linked notes in an aggregate amount of $211.3 million to unaffiliated investors (the Notes). The Notes mature on April 26, 2027. All of the proceeds paid to Oaktown Re from the sale of the Notes were deposited into a reinsurance trust to collateralize and fund the obligations of Oaktown Re to NMIC under the reinsurance agreement. At all times, funds in the reinsurance trust account are required to be invested in high credit quality money market funds.  We refer collectively to NMIC’s reinsurance agreement with Oaktown Re and the issuance of the Notes by Oaktown Re as the 2017 ILN Transaction. Under the terms of the 2017 ILN Transaction, NMIC makes risk premium payments to the Oaktown Re Vehicles for the applicable outstanding reinsurance coverage amount and pays Oaktown Rean additional amount for anticipated operating expenses (capped at $250 thousand per year, except with respect to Oaktown Re Ltd., for which the cap is $300 thousand per year). ForNMIC ceded aggregate premiums to the Oaktown Re Vehicles of $10.9 million and $9.4 million during the three and nine months ended September 30, 2017,March 31, 2022 and 2021, respectively. The increase in premiums ceded year-on-year is due to the inception of the excess-of-loss reinsurance agreements that NMIC entered in with Oaktown Re VI Ltd. and Oaktown VII Ltd.
NMIC applies claims paid risk premiums of $1.9 million and $3.3 million, respectively.on covered policies against its first layer aggregate retained loss exposure under each excess-of-loss agreement. NMIC did not cede any incurred losses on covered policies to the Oaktown Re.Re Vehicles during the three months ended March 31, 2022 and 2021, as the aggregate first layer risk retention for each applicable agreement was not exhausted during such periods.
Under the terms of each excess-of-loss reinsurance agreement, the Oaktown Re Vehicles are required to fully collateralize their outstanding reinsurance coverage amount to NMIC with funds deposited into segregated reinsurance trusts. Such trust funds are required to be invested in short-term U.S. Treasury money market funds at all times. Each Oaktown Re Vehicle financed its respective collateral requirement through the issuance of mortgage insurance-linked notes to unaffiliated investors. Such insurance-linked notes mature ten years from the inception date of each reinsurance agreement (except the notes issued by Oaktown Re VI Ltd. and Oaktown Re VII Ltd., which have a 12.5-year maturity). We refer to NMIC's reinsurance agreements with and the insurance-linked note issuances by Oaktown Re Vehicles individually as the 2017 ILN Transaction, 2018 ILN Transaction, 2019 ILN Transaction, 2020-1 ILN Transaction, 2020-2 ILN Transaction, 2021-1 ILN Transaction, and 2021-2 ILN Transaction, and collectively as the ILN Transactions.
The respective reinsurance coverage amounts provided by the Oaktown Re Vehicles decrease over a ten-year period as the underlying insured mortgages are amortized or repaid, and/or the mortgage insurance coverage is canceled (except the coverage provided by Oaktown Re VI Ltd. and Oaktown Re VII Ltd., which decreases over a 12.5-year period). 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. 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). As of March 31, 2022, the 2018 and 2019 ILN Transactions were deemed to be in Lock Out
19
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
due to the default experience of the underlying reference pools for each respective transaction and the 2021-2 ILN Transaction was deemed to be in Lock Out in connection with the initial build of its target credit enhancement level.As such, 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 issued in connection with the 2018, 2019 and 2021-2 ILN Transactions will remain suspended for the duration of the Lock-Out Event for each respective 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.
NMIC holds an optional termination right if certain events occur,rights under each ILN Transaction, including, among others, an optional call feature which provides NMIC the discretion to terminate the transaction on or after a prescribed date, and a clean-up call if the outstanding reinsurance coverage amount amortizes to 10% or less of the reinsurance coverage amount at inception or if NMIC reasonably determines that changes to GSE or rating agency asset requirements would cause a material and adverse effect on the capital treatment adopted by NMIC.afforded to NMIC under a given agreement. In addition, there are certain events that will result intrigger mandatory termination of thean agreement, including NMIC’sNMIC's failure to pay premiums or consent to reductions in thea trust account to make principal payments to noteholders,note-holders, among others.
At the timeEffective March 25, 2022, NMIC exercised its optional clean-up call to terminate the 2017 ILN Transaction was entered intoTransaction. In connection with the termination of the transaction, NMIC’s excess of loss reinsurance agreement with Oaktown Re we evaluatedLtd. was commuted and the applicabilityinsurance-linked notes issued by Oaktown Re Ltd. were redeemed in full with a distribution of remaining collateral assets.

The following table presents the inception date, covered production period, initial and current reinsurance coverage amount, and initial and current first layer retained aggregate loss under each outstanding ILN Transaction. Current amounts are presented as of March 31, 2022.
($ values in thousands)
Inception DateCovered ProductionInitial Reinsurance CoverageCurrent Reinsurance CoverageInitial First Layer Retained Loss
Current First Layer Retained Loss (1)
2018 ILN TransactionJuly 25, 20181/1/2017 - 5/31/2018264,545158,489125,312122,403
2019 ILN TransactionJuly 30, 20196/1/2018 - 6/30/2019326,905231,877123,424122,524
2020-1 ILN Transaction (5)
July 30, 20207/1/2019 - 3/31/2020322,07635,409169,514169,463
2020-2 ILN TransactionOctober 29, 2020
4/1/2020 - 9/30/2020 (2)
242,351140,063121,777121,177
2021-1 ILN TransactionApril 27, 2021
10/1/2020 - 3/31/2021 (3)
367,238359,787163,708163,708
2021-2 ILN Transaction (6)
October 26, 2021
4/1/2021 - 9/30/2021 (4)
363,596363,596146,229146,229
(1)    NMIC applies claims paid on covered policies against its first layer aggregate retained loss exposure and cedes reserves for incurred claims and claim expenses to each applicable ILN Transaction and recognizes a reinsurance recoverable if such incurred claims and claim expenses exceed its current first layer retained loss.
(2)     Approximately 1% of the accounting guidance that addresses VIEs. As a resultproduction covered by the 2020-2 ILN Transaction has coverage reporting dates between July 1, 2019 and March 31, 2020.
(3)    Approximately 1% of the evaluationproduction covered by the 2021-1 ILN Transaction has coverage reporting dates between July 1, 2019 and September 30, 2020.
(4)    Approximately 2% of the 2017production covered by the 2021-2 ILN Transaction we concluded thathas coverage reporting dates between July 1, 2019 and March 31, 2021.
(5)    Effective April 25, 2022, NMIC exercised its optional clean-up call to terminate the 2020-1 ILN Transaction. In connection with the termination of the transaction, NMIC’s excess of loss reinsurance agreement with Oaktown Re is a VIE. However, given that NMIC does not have significant economic exposure inIV Ltd. was commuted and the insurance-linked notes issued by Oaktown Re we do not consolidateIV Ltd. were redeemed in full with a distribution of remaining collateral assets.
(6)    As of March 31, 2022, the current reinsurance coverage amount on the 2021-2 ILN Transactions is equal to the initial reinsurance coverage amount, as the reinsurance coverage provided by Oaktown Re VII Ltd. will not begin to amortize until a target credit enhancement level is reached.
Under the terms of our ILN Transactions, we are required to maintain a certain level of restricted funds in premium deposit accounts with Bank of New York Mellon until the respective notes have been redeemed in full. "Cash and cash equivalents" on our consolidated financial statements.balance sheet includes restricted amounts of $3.1 million and $3.2 million as of March 31, 2022 and December 31, 2021, respectively. The restricted balances required under these transactions will decline over time as the outstanding principal balance of the respective insurance-linked notes are amortized.
20
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Quota share reinsurance
InNMIC 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, 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 entered intocedes a quota-share reinsurance transaction withproportional share of its risk on eligible policies written during a paneldiscrete period to panels of third-party reinsurers (2016 QSR Transaction).reinsurance providers. Each of the third-party reinsurersreinsurance providers has an insurer financial strength rating of A- or better by Standard and Poor’s& Poor's Rating ServicesService (S&P), A.M. Best Company, Inc. (A.M. Best) or both.
Under the terms of the 2016 QSR Transaction, effective September 1, 2016, NMIC cededcedes premiums written related to:
•to 25% of existingthe risk written on eligible primary policies as of Augustwritten for all periods through December 31, 2016;
2017 and 100% of existingthe risk under our pool agreement with Fannie Mae;Mae. The 2016 QSR Transaction is scheduled to terminate on December 31, 2027, except with respect to the ceded pool risk, which is scheduled to terminate on August 31, 2023. NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2020, or at the end of any calendar quarter thereafter, which would result in NMIC recapturing the related risk.
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. The 2018 QSR Transaction is scheduled to terminate on December 31, 2029. NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2022, or at the end of any calendar quarter thereafter, which would result in NMIC recapturing the related risk.
Under the terms of the 2020 QSR Transaction, NMIC cedes premiums earned related to 21% of the risk on eligible policies written from SeptemberApril 1, 2016 through2020 to December 31, 2017.2020. The 2020 QSR Transaction is scheduled to terminate on December 31, 2030. NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2023, or at the end of any calendar quarter thereafter, which would result in NMIC recapturing the related risk.
Under the terms of the 2021 QSR Transaction, NMIC cedes premiums earned related to 22.5% of the risk on eligible policies written from January 1, 2021 to October 30, 2021. The 2021 QSR Transaction is scheduled to terminate on December 31, 2031. NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2024, or at the end of any calendar quarter thereafter, which would result in NMIC recapturing the related risk.

Under the terms of the 2022 QSR Transaction, NMIC cedes premiums earned related to 20% of the risk on eligible policies written primarily between October 30, 2021 and December 31, 2022. The 2022 QSR Transaction is scheduled to terminate on December 31, 2032. NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2025 or semi-annually thereafter, which would result in NMIC recapturing the related risk.

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.

NMIC may terminate any or all of the QSR Transactions without penalty if, due to a change in PMIERs requirements, it is no longer able to take full PMIERs asset credit for the risk-in-force (RIF) ceded under the respective agreements. Additionally, under the terms of the QSR Transactions, NMIC may elect to selectively terminate its engagement with individual reinsurers on a run-off basis (i.e., reinsurers continue providing coverage on all risk ceded prior to the termination date, with no new cessions going forward) or cut-off basis (i.e., the reinsurance arrangement is completely terminated with NMIC recapturing all previously ceded risk) under certain circumstances. Such selective termination rights arise when, among other reasons, a reinsurer experiences a deterioration in its capital position below a prescribed threshold and/or a reinsurer breaches (and fails to cure) its collateral posting obligations under the relevant agreement.

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 earned or written with respect to the recaptured risk. With the termination, ceded premiums written under the 2016 QSR Transaction decreased from 25% to 20.5% on eligible policies. The termination has no effect on the cession of pool risk under the 2016 QSR Transaction.
21
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table shows the amounts related to the 2016 QSR Transaction:Transactions:
For the three months endedFor the nine months endedFor the three months ended
September 30, 2017September 30, 2016September 30, 2017 September 30, 2016March 31, 2022March 31, 2021
(In Thousands)(In Thousands)
Ceded risk-in-force$2,682,982
$1,778,235
$2,682,982
 $1,778,235
Ceded risk-in-force$8,504,853 $6,330,409 
Ceded premiums written(14,389)(38,977)(36,715) (38,977)
Ceded premiums earned(13,393)(2,885)(34,721) (2,885)Ceded premiums earned(29,005)(25,747)
Ceded claims and claims expenses277
90
887
 90
Ceding commission written2,878
7,795
7,343
 7,795
Ceded claims and claim expensesCeded claims and claim expenses(159)1,180 
Ceding commission earned2,581
551
6,921
 551
Ceding commission earned5,886 5,162 
Profit commission7,758
1,641
19,945
 1,641
Profit commission16,723 13,380 
Ceded premiums written under the 2016 QSR Transaction are recorded on the balance sheet as prepaid reinsurance premiums and amortized to ceded premiums earned in a manner consistent with the recognition of incomerevenue on direct premiums. Under all other QSR Transactions, premiums are ceded on an earned basis as defined in the agreement. NMIC receives a 20% ceding commission for premiums ceded pursuant to this transaction.under the QSR Transactions. NMIC also receives a profit commission under each of the QSR Transactions, provided that the loss ratioratios on the loans covered under the agreement2016, 2018, 2020, 2021 and 2022 QSR Transactions, generally remainsremain below 60%, 61%, 50% and 57.5% and 62%, respectively, as measured annually. Ceded claims and claimsclaim expenses under each of the QSR Transactions reduce NMIC'sthe respective profit commission received by NMIC on a dollar-for-dollar basis.
In accordance with the terms of the 2016 QSR Transaction, rather than making a cash payment or transferring investments for ceded premiums written, NMIC established a funds withheld liability, which also includes amounts due to NMIC for ceding and profit commissions. Any loss recoveries and any potential profit commission to NMIC will be realized from this account until exhausted. NMIC's reinsurance recoverable balance is further supported by trust accounts established and maintained by each reinsurer in accordance with the PMIERs funding requirements for risk ceded to non-affiliates. The reinsurance recoverable on loss reserves related to ourthe 2016 QSR Transaction was $1.2$4.6 million as of September 30, 2017.March 31, 2022.
In accordance with the terms of the 2018, 2020, 2021 and 2022 QSR Transactions, cash payments for ceded premiums earned are settled on a quarterly basis, offset by amounts due to NMIC for ceding and profit commissions. Any loss recoveries and any potential profit commission to NMIC are also recognized quarterly. NMIC's reinsurance recoverable balance is supported by trust accounts established and maintained by each reinsurer in accordance with the PMIERs funding requirements for risk ceded to non-affiliates. The agreementaggregate reinsurance recoverable on loss reserves related to the 2018, 2020, 2021 and 2022 QSR Transactions was $15.5 million as of March 31, 2022.
We remain directly liable for all claim payments if we are unable to collect reinsurance recoverable due from our reinsurers and, as such, we actively monitor and manage our counterparty credit exposure to our reinsurance providers. We establish an allowance for expected credit loss against our reinsurance recoverable if we do not expect to recover amounts due from one or more of our reinsurance counterparties, and report our reinsurance recoverable net of such allowance, if any. We actively monitor the counterparty credit profiles of our reinsurers and each is scheduledrequired to terminatepartially collateralize its obligations under the terms of our QSR Transactions. The allowance for credit loss established on our reinsurance recoverable was deemed immaterial at March 31, 2022 and December 31, 2027, except with respect to the ceded pool risk, which is scheduled to terminate on August 31, 2023. However, NMIC has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of December 31, 2020, or at the end of any calendar quarter thereafter, which would result in NMIC reassuming the related risk.2021.
6. Reserves for Insurance Claims and ClaimsClaim Expenses
We establishhold gross reserves in an amount equal to recognize the estimated liability for insurance claims and claim expenses related to defaults on insured mortgage loans. Our method, consistent with industry practice,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 only for loans that have been reported to us as having been in default for at least 60 days. Ourby servicers, referred to as case reserves, also include amounts for estimated claims incurred onand additional loans that have beenwe estimate (based on actuarial review and other factors) to be in default for at least 60 days that have not yet been reported to us by the servicers, often referred to as IBNR.incurred but not reported (IBNR) reserves.We also establish reserves for claim expenses, which represent the estimated cost of the claim administration process, including legal and other fees, as well as other general expenses of administering the claim settlement process. As of September 30, 2017,March 31, 2022, we had 5,238 primary loans in default and held gross reserves for insurance claims and claimsclaim expenses of $6.1 million for 350 primary loans in default.$102.4 million. During the first ninethree months of 2017,ended March 31, 2022, we paid 1619 claims totaling $731 thousand, including two claims totaling $11 thousand$0.4 million, all of which were covered under the 2016 QSR Transaction.Transactions representing $0.1 million of ceded claims and claim expenses.
In 2013, we entered into a pool insurance transaction with Fannie Mae. The pool transaction includes a deductible, which represents the amount of claims to be absorbed by Fannie Mae before we are obligated to pay any claims. We only establish reserves for pool risk if we expect claims to exceed the deductible under the pool agreement, which represents the amount of claims absorbed by Fannie Mae before we are obligated to pay any claims.this deductible. At September 30, 2017, 46March 31, 2022, 70 loans in the pool were past due by 60 days or more. These 46 loansin default.
22
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

representThese 70 loans represented approximately $3.0$5.3 million of risk-in-force (RIF).RIF. Due to the size of the remaining deductible, our expectation that a limited number of $10.0 million, the low level of notices of default (NODs) reported on loans in the pool through September 30, 2017default will progress to a claim and the expected severity on such claim submissions (all loans in the pool havehad loan-to-value (LTV) ratios (LTVs) under 80%) at origination), we havedid not establishedestablish any poolcase or IBNR reserves for claims or IBNR for the three and nine months endedSeptember 30, 2017 and 2016.pool risk at March 31, 2022. In connection with the settlement of pool claims, we applied $368 thousand$1.0 million to the pool deductible through September 30, 2017.March 31, 2022. At March 31, 2022, the remaining pool deductible was $9.4 million. We have not paid any pool claims to date. 100% of our pool RIF is reinsured under the 2016 QSR Transaction.
We had 5,238loans in default in our primary insured portfolio as of March 31, 2022, which represented a0.99% default rate against 526,976 total policies in-force. We had 11,090 loans in default in our primary insured portfolio as of March 31, 2021, which represented a 2.54% default rate against 436,652 total policies in-force. Although our default count declined from March 31, 2021 to March 31, 2022, the population remains elevated compared to our 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 Coronavirus Aid, Relief and Economic Security (CARES) Act or similar programs made available by private lenders.
The size of the reserve we establish for each defaulted loan (and by extension our aggregate reserve for claims and claim expenses) reflects our best estimate of the future claim payment to be made for each individual loan in default. Our future claims exposure is a function of the number of defaulted loans that progress to claim payment (which we refer to as frequency) and the amount to be paid to settle such claims (which we refer to as severity). Our estimates of claims frequency and severity are not formulaic, rather they are broadly synthesized based on historical observed experience for similarly situated loans and assumptions about future macroeconomic factors. 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, outright defer payments otherwise due during the forbearance period over an extended length of time. In response to the COVID-19 pandemic, the FHFA and GSEs introduced new repayment and loan modification options to further assist borrowers with their transition out of forbearance programs and default status.
Our reserve setting process considers the beneficial impact of forbearance, foreclosure moratorium and other assistance programs available to defaulted borrowers. At March 31, 2022 and 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.
23
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table provides a reconciliation of the beginning and ending gross reserve balances for primary insurance claims and claimsclaim (benefits) expenses:
For the three months ended March 31,
20222021
(In Thousands)
Beginning balance$103,551 $90,567 
Less reinsurance recoverables (1)
(20,320)(17,608)
Beginning balance, net of reinsurance recoverables83,231 72,959 
Add claims incurred:
Claims and claim (benefits) expenses incurred:
Current year (2)
10,080 10,557 
Prior years (3)
(10,699)(5,595)
Total claims and claim (benefits) expenses incurred(619)4,962 
Less claims paid:
Claims and claim expenses paid:
Current year (2)
— 12 
Prior years (3)
320 492 
Total claims and claim expenses paid320 504 
Reserve at end of period, net of reinsurance recoverables82,292 77,417 
Add reinsurance recoverables (1)
20,080 18,686 
Ending balance$102,372 $96,103 
 For the nine months ended September 30,
 2017 2016
 (In Thousands)
Beginning balance$3,001
 $679
Less reinsurance recoverables (1)
(297) —
Beginning balance, net of reinsurance recoverables2,704
 679
    
Add claims incurred:   
Claims and claim expenses incurred:   
Current year (2)
3,546
 1,803
Prior years (3)
(581) (214)
Total claims and claims expenses incurred2,965
 1,589
    
Less claims paid:   
Claims and claim expenses paid:   
Current year (2)
—
 —
Prior years (3)
720
 225
Total claims and claim expenses paid720
 225
    
Reserve at end of period, net of reinsurance recoverables4,949
 2,043
Add reinsurance recoverables (1)
1,174
 90
Ending balance$6,123
 $2,133
(1)Related to ceded losses recoverable onunder the 2016 QSR Transaction, included in "Other Assets" on the Condensed Consolidated Balance Sheets.Transactions. See Note 5, "Reinsurance"Reinsurance" for additional information.
(2)Related to insured loans with their most recent defaults occurring in the current year. For example, if a loan had defaulted in a prior year and subsequently cured and later re-defaulted in the current year, thatthe default would be included in the current year. Amounts are presented net of reinsurance and included $5.2 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the three months ended March 31, 2022 and $5.3 million attributed to net case reserves and $5.3 million attributed to net IBNR reserves for the three months ended March 31, 2021.
(3)Related to insured loans with defaults occurring in prior years, which have been continuously in default since that time.before the start of the current year. Amounts are presented net of reinsurance and included $5.8 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the three months ended March 31, 2022 and $0.6 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the three months ended March 31, 2021.

The "claims incurred" section of the table above shows claims and claim (benefits) expenses incurred on NODs fordefaults occurring in current and prior years, including IBNR reserves. The amountreserves and is presented net of claims incurred relating to current year NODs represents the estimated amount to be ultimately paid on such loans in default.  We recognized $581 thousand and $214 thousand of favorable prior year development during the nine months ended September 30, 2017 and 2016, respectively, due to NOD cures and ongoing analysis of recent loss development trends.reinsurance. We may increase or decrease our originalclaim estimates and reserves as we learn additional information about individual defaults and claimsdefaulted loans, and continue to observe and analyze loss development trends in our portfolio. ReservesGross reserves of $1.7$89.7 million related to prior year defaults remained as of September 30, 2017.March 31, 2022.
7. Earnings per Share

(EPS)
Basic earnings per shareEPS is based on the weighted average number of shares of common stock outstanding, while diluted earnings per shareoutstanding. Diluted EPS is based on the weighted average number of shares of common stock outstanding and common stock equivalents that would be issuable upon the vesting of service based and performance and service-based restricted stock units (RSUs), and the exercise of vested and unvested stock options other share-based compensation arrangements, and the dilutive effect of
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

outstanding warrants. The number of shares issuable for RSUs subject to performance and service based vesting requirements are only included in diluted shares if the relevant performance measurement period has commenced and results during such period meet the necessary performance criteria.
The following table reconciles the net income and the weighted average shares of common stock outstanding used in the computations of basic and diluted earnings per shareEPS of common stock:

24
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For the three months ended September 30, For the nine months ended September 30,For the three months ended March 31,
2017 2016 2017 201620222021

(In Thousands, except for per share data)(In Thousands, except for per share data)
Net income$12,312
 $6,175
 $23,816
 $4,279
Net income$67,680 $52,891 
       
Basic weighted average shares outstandingBasic weighted average shares outstanding85,953 85,317 
Basic earnings per share$0.21
 $0.10
 $0.40
 $0.07
Basic earnings per share$0.79 $0.62 
       
Net incomeNet income$67,680 $52,891 
Gain from change in fair value of warrant liabilityGain from change in fair value of warrant liability(93)— 
Diluted net incomeDiluted net income$67,587 $52,891 
Basic weighted average shares outstanding59,883,629
 59,130,401
 59,680,166
 59,047,758
Basic weighted average shares outstanding85,953 85,317 
Dilutive effect of non-vested shares and warrants3,205,329
 1,154,345
 3,093,167
 814,158
Dilutive weighted average shares outstanding63,088,958
 60,284,746
 62,773,333
 59,861,916
Dilutive effect of issuable sharesDilutive effect of issuable shares1,357 1,170 
Diluted weighted average shares outstandingDiluted weighted average shares outstanding87,310 86,487 
       
Diluted earnings per share$0.20

$0.10
 $0.38
 $0.07
Diluted earnings per share$0.77 $0.61 
Anti-dilutive sharesAnti-dilutive shares8 314 

For the three and nine months ended September 30, 2017, 830,043 and 832,460, respectively, and for the three and nine months ended September 30, 2016, 4,012,046 and 4,326,168, respectively,8. Warrants
We issued 992 thousand warrants in connection with a private placement of our common stock equivalents issued under share-based compensation arrangements were not included in the calculationApril 2012, of diluted earnings per share because they were anti-dilutive. The warrants were not dilutive in 2016.
8. Warrants
We issued 992,000 warrants in connection with our Private Placement.which 133 thousand remained outstanding available for exercise at March 31, 2022. Each warrant gives the holder thereof the right to purchase one1 share of common stock at an exercise price equal to $10.00. The warrants were issued with an aggregate fair value of $5.1 million.

During the three months ended March 31, 2022, 66 thousand warrants were exercised resulting in the issuance of 51 thousand shares of common stock. Upon exercise, we reclassified approximately $0.9 million of these warrants, the amounts will be treated aswarrant fair value from warrant liability to additional paid-in capital. NoDuring the three months ended March 31, 2021, 27 thousand warrants were exercised duringresulting in the nine months ended September 30, 2017 and 2016. We account for these warrantsissuance of 24 thousand shares of common stock. Upon exercise, we reclassified approximately $0.4 million of warrant fair value from warrant liability to purchase our common shares in accordance with ASC 470-20, Debt with Conversion and Other Options and ASC 815-40, Derivatives and Hedging - Contracts in Entity's Own Equity.additional paid-in capital.
9. Income Taxes
We are a U.S. taxpayer and are subject to a statutory U.S. federal corporate income tax rate of 35%21%. NMIH files a consolidated U.S. federal and various state income tax returns on behalf of itself and its subsidiaries. Our provision for income taxes for the interim reporting periods are based on an estimated annual effective tax rate for the year ending December 31, 2017. Our effective tax rate on our pre-tax income was 36.9%22.0% and 33.3%21.6% for the three and nine months ended September 30, 2017, respectively, compared to 1.8%March 31, 2022 and 2.6%2021, respectively. Our provision for the comparable 2016 periods. The increase in theincome taxes for interim reporting periods is established based on our estimated annual effective tax expenserate for the three and nine months ended September 30, 2017, against the comparable 2016 periods is attributable to the elimination ofa given year. Our effective tax benefits during the comparable 2016rate may fluctuate between interim periods due to the recognitionimpact of discrete items not included in our estimated annual effective tax rate, including the tax effects associated with the vesting of RSUs and exercise of options, and the change in fair value of our warrant liability. Such items are treated on a full valuation allowancediscrete basis in the reporting period in which had been recordedthey occur.
As a mortgage guaranty insurance company, we are eligible to reflect the amount of the deferred taxes that may not be realized. We currently pay no regular federal incomeclaim a tax duededuction for our statutory contingency reserve balance, subject to certain limitations outlined under IRC Section 832(e), and only to the forecasted utilization of federal net operatingextent we acquire tax and loss carryforwards,bonds in an amount equal to the tax benefit derived from the claimed deduction, which were $122.9 million as of December 31, 2016. Theis our intent. As a result, our interim provision for income taxes include current year alternative minimumfor the three months ended March 31, 2022 represents a change in our net deferred tax liability. As of March 31, 2022 and December 31, 2021, we held $89.2 million of tax and changes to deferred tax assets. See Note 1, "Organization and Basis of Presentation - Immaterial Correction of Prior Period Amounts" for further details.loss bonds in "Other assets" on our consolidated balance sheet.


25
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

10. Stockholders' Equity
10. On February 10, 2022, our Board of Directors approved a $125 million share repurchase program effective through December 31, 2023. The authorization provides us the flexibility to repurchase stock from time to time in the open market or in privately negotiated transactions, based on market and business conditions, stock price and other factors. During the three months ended March 31, 2022, we repurchased 235,344 shares pursuant to a trading plan under Rule 10b-18 of the Exchange Act at an average price of $21.23 per share, excluding associated costs.
11. Leases
We have 2 operating lease agreements related to our corporate headquarters and a data center facility for which we recognized operating right-of-use (ROU) assets and lease liabilities of $11.3 million and $12.2 million in "Other assets" and "Other liabilities," respectively, on our consolidated balance sheet as of March 31, 2022. As of December 31, 2021, we recognized operating ROU assets and lease liabilities of $2.6 million and $2.9 million, respectively. As of March 31, 2022 and December 31, 2021, we did not have any finance leases.
In January 2022, we modified the lease for our corporate headquarters, securing a reduction in pricing and incremental leasehold improvement concessions, reducing the square footage of leased space and extending the remaining term through March 2030. In February 2022, we renewed the lease of our data center facility, extending its term through January 2024. Upon the respective modification and extension, the ROU asset and liability associated with each lease was remeasured, using our current estimated incremental borrowing rate, resulting in an aggregate increase to ROU assets and lease liabilities of $9.7 million during the three months ended March 31, 2022.

The following table provides a summary of our ROU asset and lease liability assumptions as of March 31, 2022:
Weighted-average remaining lease term7.8 years
Weighted-average discount rate6.50 %
Cash paid on our operating leases for the three months ended March 31, 2022 and 2021, was $29 thousand and $0.6 million, respectively. Lease expenses incurred for the three months ended March 31, 2022 and 2021, were $0.5 million and $0.6 million, respectively.
Future payments due under our existing operating leases as of March 31, 2022 are as follows:
($ In Thousands)
Remaining in 2022$131 
20232,096 
20242,080 
20252,128 
20262,190 
20272,256 
20282,322 
20292,392 
2030603 
Total undiscounted lease payments16,198 
Less effects of discounting(3,977)
Present value of lease payments$12,221 
Lease expense is recorded in underwriting and operating expenses on the consolidated statements of operations and comprehensive income. Our existing leases have terms ranging from two to eight years. The lease for our corporate headquarters includes an option to renew for an additional five years at prevailing market rates at the time of renewal. This renewal option is not included in the calculation of future lease payments due under the existing lease as presented above as it is not reasonably certain to be exercised.

26
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
12. Premium Receivable

Premiums receivable consists of premiums due on our mortgage insurance policies. If a mortgage insurance premium is unpaid for more than 120 days, the associated receivable is written off against earned premium and the related insurance policy is canceled. We recognize an allowance for credit losses for premiums receivable based on credit losses expected to arise over the life of the receivable. Due to the nature of our insurance policies (a necessary precondition for access to mortgage credit for covered borrowers) and the short duration of the related receivables, we do not typically experience credit losses against our premium receivables and the allowance for credit loss established on premium receivable was deemed immaterial at March 31, 2022 and December 31, 2021.

Premiums receivable may be written off prior to 120 days in the ordinary course of business for non-credit events including, but not limited to, the modification or refinancing of an underlying insured loan. We established a $1.8 million and $2.3 million reserve for premium write-offs at March 31, 2022 and December 31, 2021, respectively.
13. Regulatory Information
Statutory InformationRequirements
Our insurance subsidiaries, NMIC and Re One, file financial statements in conformity with statutory accounting principles (SAP) prescribed or permitted by the Wisconsin OCI, NMIC's principal regulator. Prescribed SAP includes state laws, regulations and general administrative rules, as well as a variety of publications of the National Association of Insurance Commissioners.Commissioners (NAIC). The Wisconsin OCI recognizes only statutory accounting practices prescribed or permitted by the state of Wisconsin for determining and reporting the financial condition and results of operations of an insurance company and for determining its solvency under Wisconsin insurance laws.
NMIC and Re One'sOne generated combined statutory net loss,income of $18.6 million and $6.4 million for the three months ended March 31, 2022 and 2021, respectively.
The Wisconsin OCI has imposed a prescribed accounting practice for the treatment of statutory contingency reserves that differs from the treatment promulgated by the NAIC. Under Wisconsin OCI's prescribed practice mortgage guaranty insurers are required to reflect changes in their contingency reserves through statutory income. Such approach contrasts with the NAIC's treatment, which records changes to contingency reserves directly to unassigned funds. As a Wisconsin-domiciled insurer, NMIC's statutory net income reflects an expense associated with the change in its contingency reserve. While such treatment impacts NMIC's statutory net income, it does not have an effect on NMIC's statutory capital position.
The following table presents NMIC's statutory surplus, contingency reserve, statutory capital and RTC ratios wererisk-to-capital (RTC) ratio as follows:of March 31, 2022 and December 31, 2021.
March 31, 2022December 31, 2021
(In Thousands)
Statutory surplus$873,259 $893,848 
Contingency reserve1,106,497 1,036,639 
Statutory capital (1)
$1,979,756 $1,930,487 
Risk-to-capital12.4:111.6:1
As of and for the nine months and year endedSeptember 30, 2017 December 31, 2016
 (In Thousands)
Statutory net loss$(29,394) $(26,653)
Statutory surplus379,160
 413,809
Contingency reserve157,326
 90,479
Risk-to-Capital11.5:1
 11.6:1
(1) Represents the total of the statutory surplus and contingency reserve.

Re One had $5.6 million of statutory capital at March 31, 2022 and December 31, 2021. Effective October 1, 2021, the reinsurance agreement between NMIC and Re One was commuted and all ceded risk was transferred back to NMIC.Following the commutation, Re One has no risk in force or further obligation on future claims.

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 such as NMIH. Delaware corporation law provides that dividends are only payable out of a corporation's capital surplus or, subject to certain limitations, recent net profits (subject to certain limitations). profits.
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NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NMIC and Re One are subject to restrictions oncertain rules and regulations prescribed by jurisdictions in which they are authorized to operate and the GSEs that may restrict their ability to pay dividends without prior approvalto NMIH.NMIC has the capacity to pay $34.9 million of aggregate ordinary dividends to NMIH during the twelve-month period ending December 31, 2022 and on April 1, 2022, NMIC paid a $34.9 million ordinary course dividend to NMIH.
14. Subsequent Event
Excess-of-loss reinsurance (XOL) Agreement

On May 2, 2022, NMIC entered into a reinsurance agreement with a broad panel of highly rated reinsurers that provides for $289.7 million of aggregate excess-of-loss reinsurance coverage at inception for new delinquencies on an existing portfolio of mortgage insurance policies primarily written between October 1, 2021, and March 31, 2022 (2022-1 XOL Transaction). For the reinsurance coverage period, NMIC will retain the first layer of $133.4 million of aggregate losses and reinsurers then provide second layer coverage up to $289.7 million, subject to retained participation limits. NMIC will then retain losses in excess of the Wisconsin OCI. Certain other statesoutstanding reinsurance coverage amount.

Warrants
As of March 31, 2022, we had 133 thousand unexercised warrants. They were issued on April 24, 2012 with a contractual term of ten years expiring on April 24, 2022. On April 24, 2022, 90 thousand warrants expired unexercised, resulting in which NMIC is licensed also have statutes or regulations that restrict its ability to pay dividends. Since inception, NMIC has not paid any dividends to NMIH.

a gain of approximately $0.9 million.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this report and our audited financial statements, notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 20162021 10-K, for a more complete understanding of our financial position and results of operations. In addition, investors should review the "Cautionary Note Regarding Forward-Looking Statements" above and the "Risk Factors" detailed in Part II, Item 1A of this report and in Part I, Item 1A of our 20162021 10-K, as subsequently updated in other reports we file with the SEC, for a discussion of those risks and uncertainties that have the potential to affect our business, financial condition, results of operations, cash flows or prospects in a material and adverse manner. Our results of operations for interim periods are not necessarily indicative of results to be expected for a full fiscal year or for any other period.
Overview
We provide private MI through our insurance subsidiaries. Our primary insurance subsidiary, NMIC. NMIC is a 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 MI coverage in all 50 states and D.C. Both of our insurance subsidiaries, NMIC and Re One, are domiciled in Wisconsin and directly regulated by our primary regulator, the Wisconsin OCI. Re One solely provides statutorily required reinsurance to NMIC on insured loans with coverage levels in excess of 25%. Our subsidiary, NMIS, provides outsourced loan review services on a limited basis to mortgage loan originators. Our stock trades onoriginators 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 NASDAQ under the symbol "NMIH."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 LTVhigh-loan-to-value (LTV) (i.e., above 80%) residential loans to the GSEs, who are otherwise restricted by their charters from purchasing or guaranteeing low down paymenthigh-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 primarily first-time, homeowners.
We were formedNMIH, 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 September 30, 2017,March 31, 2022, we had issued master policy relationshipspolicies with 1,2401,776 customers, including national and regional mortgage banks, money center banks, credit unions, community banks, builder-owned mortgage lenders, internet-sourced lenders and internet-sourcedother non-bank lenders. As of September 30, 2017,March 31, 2022, we had $46.6$158.9 billion of totalprimary insurance-in-force (IIF), including primary IIF of $43.3 billion, and $10.7$40.5 billion of gross RIF, including primary RIFrisk-in-force (RIF).
We believe that our success in acquiring a large and diverse group of $10.6 billion.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,
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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 claimsclaim payment practices, responsive customer service, and financial strength and profitability.
We discuss below our results of operations forOur common stock trades on the periods presented andNasdaq under the conditions and trends that have impacted or are expected to impact our business.symbol "NMIH." Our headquarters areis located in Emeryville, California and ourCalifornia. As of March 31, 2022, we had246 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 spread of the virus, 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.
The global dislocation caused by COVID-19 was unprecedented and the pandemic had a direct impact on the U.S. housing market, private mortgage insurance industry, and our business and operating performance for an extended period. More recently, however, the acute economic impact of COVID-19 has begun to recede. While the pandemic continues to pose a global risk and affect communities across the U.S., it is no longer the single dominant driver of our performance that it had been in earlier periods. COVID-19 is now one of several mosaic factors, including a range of macroeconomic forces and public policy initiatives that are influencing our market and business.
Although we are optimistic that the nationwide COVID-19 vaccination effort and other medical advances will continue to support a normalization of personal and business activity, the path of the virus remains unknown and subject to risk. Given this uncertainty, we are not able to fully assess or estimate the impact the pandemic may have on the mortgage insurance market, our business performance or our financial position at this time, and it remains possible COVID-19 could again trigger more severe and adverse outcomes in future periods.
New Insurance Written, Insurance In ForceInsurance-In-Force and Risk In ForceRisk-In-Force
New insurance written (NIW)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 low down paymenthigh-LTV mortgage originations,originations. Our NIW is also affected by the percentage of such low down paymenthigh-LTV originations covered by private versus publicgovernment 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 claims payment)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 without anybefore consideration of the impact of reinsurance. Net RIF representsis gross RIF net of ceded risk and is therefore affected by our reinsurance agreements.reinsurance.



Net Premiums Written and Net Premiums Earned
Our objective is to achieve a mid-teens return on PMIERs required assets and weWe 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. See " - GSE Oversight," belowOn 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
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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 discussion of the PMIERs financial requirements.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 overfor the estimated lifeduration of our coverage of the underlying loans. Net premiums written are equal to gross premiums written minus ceded premiums written under our reinsurance arrangements.arrangements, less premium refunds and premium write-offs. As a result, net premiums written are generally influenced by:
•NIW;
•premium rates and the mix of premium payment type, which are either single, 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)rates as compared to interest rates on loans underpinning our in force policies), levels of claimsclaim payments and home prices; and
•cession of premiums under third-party reinsurance arrangements.
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 initially recorded as unearned premium and earned over the estimated life of the policy. A majoritySubstantially all of our single premium policies in force as of September 30, 2017March 31, 2022 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 12-monthtwelve-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 substantially all of 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 profitabilityrevenue is likely to decline.
Effect of reinsurance on our results
We utilize third-party reinsurance to actively manage our risk, ensure compliance with PMIERs, compliancestate 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 net premiums written and earned and also reduces net 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’scompany'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. In general, there are no ceding commissions under excess-of-loss reinsurance agreements. We expect to continue to evaluate reinsurance opportunities in the normal course of business.
In September 2016,
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Quota share reinsurance
NMIC entered intois a party to five active quota share reinsurance treaties – the 2016 QSR Transaction. Transaction, effective September 1, 2016, the 2018 QSR Transaction, effective January 1, 2018, 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 (1) cededcedes 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 relating tounder our pool agreement with Fannie MaeMae, in exchange for reimbursement of ceded claims and (2)claim expenses on covered policies, a 20% ceding commission, and a profit commission of up to 60% that varies directly and inversely with ceded or will cedeclaims.
Under the terms of the 2018 QSR Transaction, NMIC cedes premiums earned related to 25% of the risk relatingon 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 primary insurancepolicies 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 September 1, 2016October 30, 2021 and December 31, 2017,2022, in exchange for reimbursement of ceded claims and claims expenses on covered policies, a 20% ceding commission, and a profit commission of up to 60%62% that varies directly and inversely with ceded claims.
In May 2017,connection with the 2022 QSR Transaction, NMIC secured $211.3entered 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 claim expenses on covered policies, a 20% ceding commission, and a profit commission of up to 62% that varies directly and inversely with ceded claims.
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 at inception for an existing portfolioon defined portfolios of MImortgage insurance policies. Under each agreement, NMIC retains a first layer of aggregate loss exposure on covered policies written from 2013 through December 31, 2016, throughand the respective Oaktown Re Vehicle then provides second layer loss protection up to a mortgage insurance-linked notes offering by


Oaktown Re. Thedefined reinsurance coverage amount under the termsamount. NMIC then retains losses in excess of the 2017 ILN Transaction decreases from $211.3 million at inceptionrespective reinsurance coverage amounts.
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The respective reinsurance coverage amounts provided by the Oaktown Re Vehicles decrease over a ten-year period as the underlying coveredinsured mortgages amortize and was $185 million as of September 30, 2017. Forare amortized or repaid, and/or the mortgage insurance coverage is canceled (except the coverage period, NMIC will retain the first layer of $126.8 million of aggregate lossesprovided by Oaktown Re VI Ltd. and Oaktown Re VII Ltd., which decreases over a 12.5-year period). 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. 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). As of March 31, 2022, the 2018 and 2019 ILN Transactions were deemed to be in Lock Out due to the default experience of the underlying reference pools for each respective transaction and the 2021-2 ILN Transaction was deemed to be in Lock Out in connection with the initial build of its target credit enhancement level.As such, 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 issued in connection with the 2018, 2019 and 2021-2 ILN Transactions will then provideremain suspended for the duration of the Lock-Out Event for each respective 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.
NMIC holds optional termination rights under each ILN Transaction, including, among others, an optional call feature which provides NMIC the discretion to terminate the transaction on or after a second layer of coverage up toprescribed date, and a clean-up call if the outstanding reinsurance coverage amount.amount amortizes to 10% or less of the reinsurance coverage amount at inception or if NMIC retains lossesreasonably determines that changes to GSE or rating agency asset requirements would cause a material and adverse effect on the capital treatment afforded to NMIC under a given agreement. In addition, there are certain events that trigger mandatory termination of an agreement, including NMIC's failure to pay premiums or consent to reductions in a trust account to make principal payments to note-holders, among others.
Effective March 25, 2022, NMIC exercised its optional clean-up call to terminate the 2017 ILN Transaction.In connection with the termination of the transaction, NMIC’s excess of loss reinsurance agreement with Oaktown Re Ltd. was commuted and the outstandinginsurance-linked notes issued by Oaktown Re Ltd. were redeemed in full with a distribution of remaining collateral assets.

The following table presents the inception date, covered production period, current reinsurance coverage amount.amount, current first layer retained aggregate loss and detail on the level of overcollateralization under each outstanding ILN Transaction. Current amounts are presented as of March 31, 2022.
($ values in thousands)2018 ILN Transaction2019 ILN Transaction
2020-1 ILN Transaction(4)
2020-2 ILN Transaction2021-1 ILN Transaction2021-2 ILN Transaction
Inception dateJuly 25, 2018July 30, 2019July 30, 2020October 29, 2020April 27, 2021October 26, 2021
Covered production1/1/2017 - 5/31/20186/1/2018 - 6/30/20197/1/2019 - 3/31/2020
4/1/2020 - 9/30/2020 (1)
10/1/2020 - 3/31/2021 (2)
4/1/2021 - 9/30/2021 (3)
Current ceded RIF$1,049,140 $1,171,775 $2,437,684 $4,100,877 $7,731,544 $7,504,161 
Current first layer retained loss122,403 122,524 169,463 121,177 163,708 146,229 
Current reinsurance coverage158,489 231,877 35,409 140,063 359,787 363,596 
Eligible coverage$280,892 $354,401 $204,872 $261,240 $523,495 $509,825 
Subordinated coverage (5)
26.77 %30.24 %8.00 %6.25 %6.75 %6.79 %
PMIERs charge on ceded RIF8.22 %7.99 %5.95 %5.54 %6.06 %6.53 %
Overcollateralization (6) (7)
$158,489 $231,877 $35,409 $33,855 $54,997 $20,148 
Delinquency Trigger (8)
4.0%4.0%6.0 %4.7 %5.1 %5.1 %
(1)     Approximately 1% of the production covered by the 2020-2 ILN Transaction has coverage reporting dates between July 1, 2019 and March 31, 2020.
(2)    Approximately 1% of the production covered by the 2021-1 ILN Transaction has coverage reporting dates between July 1, 2019 and September 30, 2020.
(3)    Approximately 2% of the production covered by the 2021-2 ILN Transaction has coverage reporting dates between July 1, 2019 and March 31, 2021.
(4)    Effective April 25, 2022, NMIC exercised its optional clean-up call to terminate the 2020-1 ILN Transaction. In connection with the termination of the transaction, NMIC's excess of loss reinsurance agreement with Oaktown Re IV Ltd. was commuted and the insurance-linked notes issued by Oaktown Re IV Ltd. were redeemed in full with a distribution of remaining collateral assets.
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(5)     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.
(6)    Overcollateralization for each of the 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.
(7)    May not be replicated based on the rounded figures presented in the table.
(8)    Delinquency triggers for the 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.

See Item 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 5, Reinsurance" for further discussion of these third-party reinsurance arrangements.
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 NIWAs of and for the three months ended
March 31, 2022March 31, 2021
IIFNIWIIFNIW
(In Millions)
Monthly$139,156 $13,094 $106,920 $23,764 
Single19,721 1,071 16,857 2,633 
Primary158,877 14,165 123,777 26,397 
Pool1,162 — 1,642 — 
Total$160,039 $14,165 $125,419 $26,397 
Primary and pool IIF and NIWAs of and for the three months ended For the nine months ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 IIF NIW IIF NIW NIW
   (In Millions)
Monthly$28,707
 $4,833
 $16,038
 $4,162
 $11,824
 $10,354
Single14,552
 1,282
 12,190
 1,695
 2,887
 5,595
Primary43,259
 6,115
 28,228
 5,857
 14,711
 15,949
            
Pool3,330
 —
 3,826
 $—
 —
 —
Total$46,589
 $6,115
 $32,054
 $5,857
 $14,711
 $15,949
ForNIW for the three months ended September 30, 2017, primary NIW increased 4%,March 31, 2022 was $14.2 billion compared to $26.4 billion for the same period in 2016, primarily because of the growth within and an expansion of our customer base. Primarythree months ended March 31, 2021. NIW decreased 8% for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016,year-on-year primarily due to a reductiondecline in our single policy production, driven primarily by actions we initiated to reduce the concentrationsize of single policies in our product mix, partially offset by growth in our monthly policy volume. For the three and nine months ended September 30, 2017, monthly premium NIWtotal mortgage insurance market.

Total IIF increased 16% and 14%, respectively,28% at March 31, 2022 compared to the same periods a year ago, drivenMarch 31, 2021, primarily bydue to the growth of our customer base.
For the nine months ended September 30, 2017, 80% of our NIW related to monthly premium policies. As of September 30, 2017, monthly premium policies accounted for 66% of our primary IIF, as compared to 60% at December 31, 2016 and 57% at September 30, 2016. We expect the break-down of monthly premium policies and single premium policies (which we refer to as "mix") in our primary IIF to continue to trend toward our current NIW mix over time. Our total IIF increased 45% as of September 30, 2017 compared to September 30, 2016, primarily because of our NIW generated between such measurement dates, partially offset by the run-off of in-force policies. Our persistency rate improved to 71.5% at March 31, 2022 from 51.9% at March 31, 2021, reflecting a slowdown in the pace of refinancing activity during the intervening twelve month period tied to an increase in interest and higher persistency of our policies in force.mortgage note rates.
The following table presents net premiums written and earned for the periods indicated.indicated:
Primary and pool premiums written and earnedFor the three months ended
March 31, 2022March 31, 2021
(In Thousands)
Net premiums written$116,034 $115,815 
Net premiums earned116,495 105,879 
Primary and pool premiums written and earnedFor the three months endedFor the nine months ended
 September 30, 2017 September 30, 2016September 30, 2017September 30, 2016
 (In Thousands)
Net premiums written (1)
$47,716
 $9,199
$122,105
$96,190
Net premiums earned (1)
44,519
 31,808
115,661
77,656
(1) Net premiums written and earned are reported net of reinsurance.
For the three and nine months ended September 30, 2017, net premiums written increased 419% and 27%, respectively, and net premiums earned increased 40% and 49%, respectively,10% during the three months ended March 31, 2022 compared to the same periods in 2016. The increases in net premiums written arethree months ended March 31, 2021, primarily due to the growth of our monthly policy production and IIF, and the initial cession of premiums written on IIF at the inception of the 2016 QSR Transaction, partially offset by thea decrease in the contribution from single premium NIW.policy cancellations and an increase in cessions under the ILN Transactions. The increasesaccelerated rate of growth in net premiums earned are primarilycompared to net premiums written is due to growtha decrease in our monthly policy productionthe volume and IIF, partially offset by cessions under the 2016 QSR Transaction and 2017 ILN Transaction and, compared to the same periods in 2016, reductions inmix of our single premium policy production and earningsfrom period to period.


from cancellations. Pool premiums written and earned for the three and nine months ended September 30, 2017March 31, 2022 and 2021, were $0.9$0.3 million and $2.9$0.5 million, respectively, before the effects ofgiving effect to the 2016 QSR Transaction.Transaction, under which all of our written and earned pool premiums are ceded. A portion of our ceded pool premiums written and earned are recouped through profit commission.
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Portfolio Statistics
Unless otherwise noted, the portfolio statistics tables presented below do not include the effects of our third-party reinsurance arrangements described above. The table below highlights trends in our primary portfolio as of the datedates and for the periods indicated.
Primary portfolio trendsAs of and for the three months ended
March 31, 2022December 31, 2021September 30, 2021June 30, 2021March 31, 2021
($ Values In Millions, except as noted below)
New insurance written$14,165 $18,342 $18,084 $22,751 $26,397 
Percentage of monthly premium92 %93 %93 %85 %90 %
Percentage of single premium8 %7 %7 %15 %10 %
New risk written$3,721 $4,786 $4,640 $5,650 $6,531 
Insurance-in-force (1)
158,877 152,343 143,618 136,598 123,777 
Percentage of monthly premium88 %87 %87 %86 %86 %
Percentage of single premium12 %13 %13 %14 %14 %
Risk-in-force (1)
$40,522 $38,661 $36,253 $34,366 $31,206 
Policies in force (count) (1)
526,976 512,316 490,714 471,794 436,652 
Average loan size ($ value in thousands) (1)
$301 $297 $293 $290 $283 
Coverage percentage (2)
25.5 %25.4 %25.2 %25.2 %25.2 %
Loans in default (count) (1)
5,238 6,227 7,670 8,764 11,090 
Default rate (1)
0.99 %1.22 %1.56 %1.86 %2.54 %
Risk-in-force on defaulted loans (1)
$362 $435 $546 $625 $785 
Net premium yield (3)
0.30 %0.31 %0.32 %0.34 %0.36 %
Earnings from cancellations$2.9 $5.1 $7.7 $7.0 $9.9 
Annual persistency (4)
71.5 %63.8 %58.1 %53.9 %51.9 %
Quarterly run-off (5)
5.0 %6.7 %8.1 %8.0 %12.5 %
Primary portfolio trendsAs of and for the three months ended
 September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016
 ($ Values In Millions)
New insurance written$6,115
 $5,037
 $3,559
 $5,240
 $5,857
New risk written1,496
 1,242
 868
 1,244
 1,415
Insurance in force (1)
43,259
 38,629
 34,779
 32,168
 28,228
Risk in force (1)
10,572
 9,417
 8,444
 7,790
 6,847
Policies in force (count) (1)
180,089
 161,195
 145,632
 134,662
 119,002
Average loan size (1)
$0.240
 $0.240
 $0.239
 $0.239
 $0.237
Weighted-average coverage (2)
24.4% 24.4% 24.3% 24.2% 24.3%
Loans in default (count)350
 249
 207
 179
 115
Percentage of loans in default0.2% 0.2% 0.1% 0.1% 0.1%
Risk in force on defaulted loans$19
 $14
 $12
 $10
 $6
Average premium yield (3)
0.43% 0.41% 0.40% 0.44% 0.48%
Earnings from cancellations$4.3
 $3.8
 $2.5
 $5.1
 $5.8
Annual persistency85.1% 83.1% 81.3% 80.7% 81.8%
Quarterly run-off (4)
3.8% 3.4% 2.9% 4.6% 5.3%
(1)    Reported as of the end of the period.

(2)    Calculated as end of period RIF divided by end of period IIF.
(1)
(3)    Calculated as net premiums earned divided by average primary IIF for the period, annualized.
(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.
Reported as of the end of the period.
(2)
Calculated as end of period RIF divided by IIF.
(3)
Calculated as net primary and pool premiums earned, net of reinsurance, divided by average gross primary IIF for the period, annualized.
(4)
Defined as the percentage of IIF that is no longer on our books after any three-month period.
The table below presents a summary of the change in total primary IIF duringfor the dates and periods indicated.
Primary IIFAs of and for the three months ended
March 31, 2022March 31, 2021
(In Millions)
IIF, beginning of period$152,343 $111,252 
NIW14,165 26,397 
Cancellations, principal repayments and other reductions(7,631)(13,872)
IIF, end of period$158,877 $123,777 
34
Primary IIFFor the three months ended For the nine months ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 (In Millions)
IIF, beginning of period$38,629
 $23,624
 $32,168
 $14,824
NIW6,115
 5,857
 14,711
 15,949
Cancellations and other reductions(1,485) (1,253) (3,620) (2,545)
IIF, end of period$43,259
 $28,228
 $43,259
 $28,228



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.
The table below presents a summary of our primary IIF and RIF by book year as of the dates indicated.
Primary IIF and RIFAs of September 30, 2017 As of September 30, 2016
 IIF RIF IIF RIF
 (In Millions)
September 30, 2017$14,315
 $3,508
 $—
 $—
201618,684
 4,520
 15,433
 3,719
20158,742
 2,167
 10,679
 2,610
20141,479
 368
 2,062
 505
201339
 9
 54
 13
Total$43,259
 $10,572
 $28,228
 $6,847
Primary IIF and RIFAs of March 31, 2022As of March 31, 2021
IIFRIFIIFRIF
(In Millions)
March 31, 2022$14,076 $3,699 $— $— 
202178,955 20,058 26,296 6,508 
202041,311 10,431 53,650 13,397 
201911,102 2,910 20,402 5,342 
20184,411 1,127 8,074 2,057 
2017 and before9,022 2,297 15,355 3,902 
Total$158,877 $40,522 $123,777 $31,206 
We utilize certain risk principles that form the basis of how we underwrite and originate primary NIW. We manage our portfolio credit risk by using several loanhave established prudential underwriting standards and loan-level eligibility matrices which prescribe the maximum LTV, minimum borrower creditFICO score, maximum borrower debt-to-incomeDTI ratio, maximum loan size, property type, loan type, loan term and occupancy status of loans that we will insure. Our loaninsure and memorialized these standards and eligibility matrices as well as all of our detailed underwriting guidelines, are contained in our Underwriting Guideline Manual that is publicly available on our website. Our underwriting standards and eligibility criteria and underwriting guidelines are designed to mitigatelimit the layeredlayering of risk inherent 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.
35

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 FICOFor the three months ended
March 31, 2022March 31, 2021
(In Millions)
>= 760$6,372 $12,914 
740-7592,388 5,312 
720-7391,937 3,963 
700-7191,639 2,358 
680-6991,244 1,360 
<=679585 490 
Total$14,165 $26,397 
Weighted average FICO748 755 
Primary NIW by FICOFor the three months ended For the nine months ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 ($ In Millions)
>= 760$2,806
 $2,975
 $6,865
 $8,418
740-759934
 934
 2,277
 2,606
720-739807
 725
 1,889
 1,870
700-719697
 588
 1,662
 1,540
680-699456
 387
 1,088
 940
<=679415
 248
 930
 575
Total$6,115
 $5,857
 $14,711
 $15,949
Weighted average FICO747
 753
 748
 754
Primary NIW by LTVFor the three months ended
March 31, 2022March 31, 2021
(In Millions)
95.01% and above$1,366 $2,451 
90.01% to 95.00%7,055 11,051 
85.01% to 90.00%3,868 7,848 
85.00% and below1,876 5,047 
Total$14,165 $26,397 
Weighted average LTV92.1 %91.0 %

Primary NIW by purchase/refinance mixFor the three months ended
March 31, 2022March 31, 2021
(In Millions)
Purchase$13,398 $17,909 
Refinance
767 8,488 
Total$14,165 $26,397 


36
Primary NIW by LTVFor the three months endedFor the nine months ended
 September 30, 2017 September 30, 2016September 30, 2017 September 30, 2016
 ($ In Millions)
95.01% and above$722
 $347
$1,470
 $918
90.01% to 95.00%2,714
 2,557
6,623
 7,005
85.01% to 90.00%1,765
 1,844
4,372
 4,996
85.00% and below914
 1,109
2,246
 3,030
Total$6,115
 $5,857
$14,711
 $15,949
Weighted average LTV92.3% 91.7%92.2% 91.6%

Primary NIW by purchase/refinance mixFor the three months ended For the nine months ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 (In Millions)
Purchase$5,387
 $4,400
 $12,889
 $11,518
Refinance728
 1,457
 1,822
 4,431
Total$6,115
 $5,857
 $14,711
 $15,949
The tables below present our total primary IIF and RIF by FICO and LTV, and total primary RIF by loan type as of the dates indicated.
Primary IIF by FICOAs of
March 31, 2022March 31, 2021
($ Values In Millions)
>= 760$79,141 50 %$63,919 52 %
740-75927,406 17 20,537 16 
720-73922,176 14 17,167 14 
700-71915,236 10 11,536 9 
680-69910,347 6 7,329 6 
<=6794,571 3 3,289 3 
Total$158,877 100 %$123,777 100 %
Primary RIF by FICOAs of
March 31, 2022March 31, 2021
($ Values In Millions)
>= 760$19,883 49 %$15,920 51 %
740-7597,054 17 5,214 17 
720-7395,735 14 4,378 14 
700-7194,010 10 2,981 9 
680-6992,706 7 1,896 6 
<=6791,134 3 817 3 
Total$40,522 100 %$31,206 100 %
Primary IIF by LTVAs of
March 31, 2022March 31, 2021
($ Values In Millions)
95.01% and above$14,918 9 %$10,616 9 %
90.01% to 95.00%72,381 46 54,832 44 
85.01% to 90.00%48,406 30 40,057 32 
85.00% and below23,172 15 18,272 15 
Total$158,877 100 %$123,777 100 %
Primary RIF by LTVAs of
March 31, 2022March 31, 2021
($ Values In Millions)
95.01% and above$4,527 11 %$3,106 10 %
90.01% to 95.00%21,358 53 16,139 52 
85.01% to 90.00%11,895 29 9,818 31 
85.00% and below2,742 7 2,143 7 
Total$40,522 100 %$31,206 100 %
37

Primary IIF by FICOAs of
 September 30, 2017 September 30, 2016
 ($ Values In Millions)
>= 760$21,329
 49% $14,258
 50%
740-7596,983
 16
 4,612
 16
720-7395,547
 13
 3,648
 13
700-7194,505
 10
 2,813
 10
680-6992,942
 7
 1,863
 7
<=6791,953
 5
 1,034
 4
Total$43,259
 100% $28,228
 100%
Primary RIF by Loan TypeAs of
March 31, 2022March 31, 2021
Fixed99 %99 %
Adjustable rate mortgages:
Less than five years— — 
Five years and longer1 1 
Total100 %100 %
Primary RIF by FICOAs of
 September 30, 2017 September 30, 2016
 ($ Values In Millions)
>= 760$5,251
 50% $3,470
 51%
740-7591,713
 16
 1,130
 17
720-7391,349
 13
 887
 13
700-7191,092
 10
 680
 10
680-699707
 7
 443
 6
<=679460
 4
 237
 3
Total$10,572
 100% $6,847
 100%


Primary IIF by LTVAs of
 September 30, 2017 September 30, 2016
 ($ Values In Millions)
95.01% and above$3,038
 7% $1,363
 5%
90.01% to 95.00%19,562
 45
 12,644
 45
85.01% to 90.00%13,437
 31
 9,157
 32
85.00% and below7,222
 17
 5,064
 18
Total$43,259
 100% $28,228
 100%
Primary RIF by LTVAs of
 September 30, 2017 September 30, 2016
 ($ Values In Millions)
95.01% and above$822
 8% $380
 6%
90.01% to 95.00%5,722
 54
 3,725
 54
85.01% to 90.00%3,205
 30
 2,174
 32
85.00% and below823
 8
 568
 8
Total$10,572
 100% $6,847
 100%
Primary RIF by Loan TypeAs of
 September 30, 2017 September 30, 2016
    
Fixed98% 98%
Adjustable rate mortgages:   
Less than five years—
 —
Five years and longer2
 2
Total100% 100%
The table below showspresents selected primary portfolio statistics, by book year, as of September 30, 2017.March 31, 2022.
As of March 31, 2022
Book YearOriginal Insurance WrittenRemaining Insurance in Force% Remaining of Original InsurancePolicies Ever in ForceNumber of Policies in ForceNumber of Loans in Default# of Claims Paid
Incurred Loss Ratio (Inception to Date) (1)
Cumulative Default Rate (2)
Current Default Rate (3)
($ Values in Millions)
2013$162 $6 3 %655 40 1 1 0.5 %0.3 %2.5 %
20143,451 253 7 %14,786 1,568 39 49 4.2 %0.6 %2.5 %
201512,422 1,555 13 %52,548 8,564 218 119 3.3 %0.6 %2.5 %
201621,187 3,409 16 %83,626 17,318 487 134 3.0 %0.7 %2.8 %
201721,582 3,799 18 %85,897 19,700 783 106 4.3 %1.0 %4.0 %
201827,295 4,411 16 %104,043 22,121 1,032 93 7.6 %1.1 %4.7 %
201945,141 11,102 25 %148,423 45,603 1,118 23 10.1 %0.8 %2.5 %
202062,702 41,311 66 %186,174 131,277 902 1 5.1 %0.5 %0.7 %
202185,574 78,955 92 %257,972 242,014 658 — 2.8 %0.3 %0.3 %
202214,165 14,076 99 %38,974 38,771 — — — %— %— %
Total$293,681 $158,877 973,098 526,976 5,238 526 
(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.
38
 As of September 30, 2017
Book yearOriginal Insurance Written Remaining Insurance in Force % Remaining of Original Insurance Policies Ever in Force Number of Policies in Force Number of Loans in Default # of Claims Paid 
Incurred Loss Ratio (Inception to Date) (1)
 
Cumulative default rate (2)
 ($ Values in Millions)
2013$162
 $39
 24% 655
 201
 —
 1
 0.2% 0.2%
20143,451
 1,479
 43% 14,786
 7,451
 54
 9
 3.8% 0.4%
201512,422
 8,742
 70% 52,548
 39,727
 164
 14
 2.9% 0.3%
201621,187
 18,684
 88% 83,626
 76,095
 119
 3
 1.6% 0.1%
201714,711
 14,315
 97% 57,800
 56,615
 13
 —
 0.5% —
Total$51,933
 $43,259
 
 209,415
 180,089
 350
 27
 
 


(1)
The ratio of total claims incurred (paid and reserved) divided by cumulative premiums earned, net of reinsurance.
(2)
The sum of the number of claims paid ever to date and number of loans in default as of the end of the period divided by policies ever in force.
Geographic Dispersion
The following table shows the distribution by state of our primary RIF as of the periodsdates indicated. As of September 30, 2017, our RIF continues to be relatively more concentrated in California, primarily as a result of the location and timing of the acquisition of new customers. The distribution of riskour primary RIF as of September 30, 2017March 31, 2022 is not necessarily representative of the geographic distribution we expect in the future.

Top 10 primary RIF by stateAs of
March 31, 2022March 31, 2021
California10.8 %10.8 %
Texas9.5 9.5 
Florida8.4 7.9 
Virginia4.5 5.0 
Georgia3.9 3.3 
Illinois3.8 3.7 
Colorado3.7 4.1 
Washington3.7 3.5 
Maryland3.6 3.8 
Pennsylvania3.3 3.3 
Total55.2 %54.9 %


Top 10 primary RIF by stateAs of
 September 30, 2017 September 30, 2016
California13.6% 13.2%
Texas7.6
 6.8
Virginia5.6
 6.6
Arizona4.4
 3.8
Florida4.3
 4.7
Colorado3.8
 4.0
Michigan3.7
 3.9
Pennsylvania3.6
 3.6
Utah3.6
 3.6
Maryland3.6
 3.6
Total53.8% 53.8%
Insurance Claims and ClaimsClaim Expenses
Insurance claims and claimsclaim expenses incurred represent estimated future payments on newly defaulted insured loans and any change in our claim estimates for previously existing defaults. Claims incurred isare generally affected by a variety of factors, including the state of the economy,macroeconomic environment, national and regional unemployment trends, changes in housing values, loanborrower risk characteristics, LTV ratios and borrowerother loan level risk characteristics,attributes, the size and type of loans insured, and the percentage of coverage on insured loans.loans, and the level of reinsurance coverage maintained against insured exposures.
Reserves for claims and allocated claimsclaim expenses are established for mortgage loans that are in default. A loan defaults,is considered to be in default as of the payment date at which we refera 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, whenand additional loans that we are notified that a borrower has missed two or more mortgage payments (i.e., an NOD). We also make estimates of IBNR defaults, which are defaultsestimate (based on actuarial review and other factors) to be in default that have been incurred but have not yet been reported to us by loan servicers, based upon historical reporting trends, and establish IBNR reserves for those estimates.referred to as IBNR. We also establish reserves for unallocated claimsclaim expenses, not associated with a specific claim. The claims expenses consist ofwhich represent the estimated cost of the claim administration process, including legal and other fees as well asand other general expenses of administering the claimsclaim 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 valuation.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 our 2016the QSR Transaction.Transactions and ILN Transactions, as applicable under each treaty. We willhave not cedeyet ceded any reserves to the reinsurer under the 2017 ILN Transaction unless losses exceedTransactions as incurred claims and claim expenses on each respective reference pool remain within our retained coverage layer. Reserves are not established for future claims on insured loans which are not currently in default.
We expect our insurance claims and claims expenses to be relatively low in the near-term. Based on our experience and industry data, we believe that claims incidence for mortgage insurance is generally highest in the third through sixth years after loan origination. Aslayer of September 30, 2017, over 95% of our primary IIF was related to business written since January 1, 2015. Additionally, oureach 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 poolclaims or claim expense reserves for claims or IBNRpool exposure to date. Although the claims experience on new primary insurance written by us to date has been favorable, we expect incurred claims to increase as a greater amount of our existing insured portfolio reaches its anticipated period of highest claim frequency. We estimate that the loss ratio over the life of our existing insured portfolio will be between 20% and 25% of earned premiums, and we price to that expectation.
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 future macroeconomic factors such as housing prices, interest rates, unemployment rates and employment. To date, our claims experience is developing at a slower pace than historical trends indicate,other events, such as a result of high quality underwriting, a strong macroeconomic environment and a favorable housing market. For additional discussion of our reserves, see, Item 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 6, Reserves for Insurance Claims and Claims Expenses."
We insure mortgages for homes in areas that have been impacted by recent natural disasters including hurricanes Harveyor global pandemics, and Irmaany federal, state or local governmental response thereto.
39

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 firesavailability of various repayment and loan modification options which allow borrowers to amortize or, in Northern California. We do not provide coveragecertain instances, outright defer payments otherwise due during the forbearance period over an extended 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 Coronavirus Aid, Relief, and Economic Security Act (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 March 31, 2022 and 2021, we generally established lower reserves for property or casualty claims related to physical damage of a home underpinning an insured mortgage. We anticipatedefaults that we consider to be connected to the COVID-19 pandemic, given our expectation that forbearance, repayment and modification, and other assistance programs will experience an increase in NODs on insured loans in the


impacted areas. Our ultimate claims exposure will depend on the number of NODs received, proximate cause of each defaultaid affected borrowers and cure rate of the NOD population. In the event of natural disasters,drive higher cure rates are influenced by the adequacy of homeowners and flood insurance carried on a related property, and a borrower's accesssuch defaults than we would otherwise expect to aidexperience on similarly situated loans that did not benefit from government entities and private organizations, in addition to other factors which generally impact cure rates in unaffected areas.broad-based assistance programs.
The following table provides a reconciliation of the beginning and ending gross reserve balances for primary insurance claims and claims expenses.claim (benefits) expenses:
For the three months ended
March 31, 2022March 31, 2021
(In Thousands)
Beginning balance$103,551 $90,567 
Less reinsurance recoverables (1)
(20,320)(17,608)
Beginning balance, net of reinsurance recoverables83,231 72,959 
Add claims incurred:
Claims and claim (benefits) expenses incurred:
Current year (2)
10,080 10,557 
Prior years (3)
(10,699)(5,595)
Total claims and claim (benefits) expenses incurred(619)4,962 
Less claims paid:
Claims and claim expenses paid:
Current year (2)
— 12 
Prior years (3)
320 492 
Total claims and claim expenses paid320 504 
Reserve at end of period, net of reinsurance recoverables82,292 77,417 
Add reinsurance recoverables (1)
20,080 18,686 
Ending balance$102,372 $96,103 
 For the three months ended For the nine months ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 (In Thousands)
Beginning balance$5,048
 $1,475
 $3,001
 $679
Less reinsurance recoverables (1)
(899) —
 (297) —
Beginning balance, net of reinsurance recoverables4,149
 1,475
 2,704
 679
        
Add claims incurred:       
Claims and claim expenses incurred:       
Current year (2)
1,215
 690
 3,546
 1,803
Prior years (3)
(258) (29) (581) (214)
Total claims and claims expenses incurred957
 661
 2,965
 1,589
        
Less claims paid:       
Claims and claim expenses paid:       
Current year (2)
—
 —
 —
 —
Prior years (3)
157
 93
 720
 225
Total claims and claim expenses paid157
 93
 720
 225
        
Reserve at end of period, net of reinsurance recoverables4,949
 2,043
 4,949
 2,043
Add reinsurance recoverables (1)
1,174
 90
 1,174
 90
Ending balance$6,123
 $2,133
 $6,123
 $2,133
(1)Related to ceded losses recoverable onunder the 2016 QSR Transaction, included in "Other Assets" on the Condensed Consolidated Balance Sheets.Transactions.. See Item 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 5, Reinsurance"Reinsurance" for additional information.
(2)Related to insured loans with their most recent defaults occurring in the current year. For example, if a loan had defaulted in a prior year and subsequently cured and later re-defaulted in the current year, that default would be included in the current year. Amounts are presented net of reinsurance and included $5.2 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the three months ended March 31, 2022 and $5.3 million attributed to net case reserves and $5.3 million attributed to net IBNR reserves for the three months ended March 31, 2021.
(3)Related to insured loans with defaults occurring in prior years, which have been continuously in default since that time.before the start of the current year. Amounts are presented net of reinsurance and included $5.8 million attributed to net case reserves and $4.7 million attributed to net IBNR reserves for the three months ended March 31, 2022 and $0.6 million attributed to net case reserves and $5.0 million attributed to net IBNR reserves for the three months ended March 31, 2021.
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The "claims incurred" section of the table above shows claims and claim (benefits) expenses incurred on NODs fordefaults occurring in current and prior years, including IBNR reserves. The amountreserves and is presented net of claims incurred relating to current year NODs represents the estimated amount to be ultimately paid on such loans in default. The decreases during the periods presented in reserves held for prior year defaults represent favorable development and are generally the result of ongoing analysis of recent loss development trends.reinsurance. We may increase or decrease our originalclaim estimates and reserves as we learn additional information about individual defaults and claimsdefaulted loans, and continue to observe and analyze loss development trends in our portfolio.


Gross reserves of $89.7 million related to prior year defaults remained as of March 31, 2022.
The following table provides a reconciliation of the beginning and ending count of loans in default for the periods indicated.default:
For the three months ended
March 31, 2022March 31, 2021
Beginning default inventory6,227 12,209 
Plus: new defaults1,163 1,767 
Less: cures(2,132)(2,868)
Less: claims paid(19)(16)
Less: rescission and claims denied(1)(2)
Ending default inventory5,238 11,090 
 For the three months ended For the nine months ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Beginning default inventory249
 79
 179
 36
Plus: new defaults208
 69
 479
 158
Less: cures(103) (30) (292) (73)
Less: claims paid(4) (3) (16) (6)
Ending default inventory350
 115
 350
 115
The increase in the endingEnding default inventory at September 30, 2017declined from March 31, 2021 to March 31, 2022 as an increased number of borrowers initially impacted by the COVID-19 pandemic cured their delinquencies, and fewer new defaults emerged as the acute economic stress of the pandemic crisis began to recede. While our default population declined from March 31, 2021 to March 31, 2022, our default inventory remains elevated compared to September 30, 2016 was primarilyhistorical experience due to an increase in the numbercontinued challenges certain borrowers are facing related to the COVID-19 pandemic and their decision to access the forbearance program for federally backed loans codified under the CARES Act or similar programs made available by private lenders. As of policies in force and expected loss developmentMarch 31, 2022, 3,463 of our portfolio.     5,238 defaulted loans were in a COVID-19 related forbearance program.
The following table provides details of our claims paid, before giving effect to claims paidceded under the 2016 QSR Transaction,Transactions and ILN Transactions, for the threeperiods indicated:
For the three months ended
March 31, 2022March 31, 2021
($ In Thousands)
Number of claims paid (1)
19 16 
Total amount paid for claims$402 $606 
Average amount paid per claim
$21 $38 
Severity (2)
39 %61 %
(1)    Count includes six and nineoneclaims settled without payment during the three months ended September 30, 2017March 31, 2022 and September 30, 2016.2021, respectively.
 For the three months ended For the nine months ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
 ($ Values In Thousands)
Number of claims paid4
 3
 16
 6
Total amount paid for claims$160
 $93
 $731
 $225
Average amount paid per claim$40
 $31
 $46
 $32
Severity(1)
73% 53% 83% 62%
(1) (2)Severity represents the total amount of claims paid including claim expenses divided by the related RIF on the loan at the time the claim is perfected.perfected, and is calculated including claims settled without payment.


The increase inCompany paid 19 and 16 claims during the three months ended March 31, 2022 and 2021, respectively. The number of claims paid 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-19 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 three and nine months ended September 30, 2017March 31, 2022 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 three months ended March 31, 2022 was 39% compared to 61% for three months ended March 31, 2021. Claims severity for the three months ended March 31, 2022 and 2021 benefited from the same periods ended September 30, 2016 is due to anresiliency of the housing market and broad national house price appreciation as our claims paid. An increase in our default inventory. We expect the severity of claims we receive to be between 85% and 95%value of the coverage amount. We believehomes 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 theseverity is below long-term expectations due of our settled claims.
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The following table provides detail on our average reserve per default, before giving effect to home price appreciation in recent periods.reserves ceded under the QSR Transactions, as of the dates indicated:

Average reserve per default:As of March 31, 2022As of March 31, 2021
(In Thousands)
Case (1)
$18.0 $7.9 
IBNR (1)(2)
1.5 0.8 
Total$19.5 $8.7 
Average reserve per default:As of September 30, 2017 As of September 30, 2016
 (In Thousands)
Case (1)
$16
 $17
IBNR1
 1
Total$17
 $18
(1)Defined as the gross reserve per insured loan in default.

(2)    Amount includes claims adjustment expenses.
Average reserve per default increased from March 31, 2021 to March 31, 2022 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 March 31, 2021 to March 31, 2022, 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.
GSE Oversight
As anApproved Insurer approved insurer, NMIC is subject to ongoing compliance with the PMIERs.PMIERs established by each of the GSEs (Italicizeditalicized terms have the same meaning that such terms have in the PMIERs, as described below.)below). The PMIERs establish operational, business, remedial and financial requirements applicable toApproved Insurers 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. An asset charge is calculated for each insured loan based on its risk profile. In general, higher quality loans carry lower asset charges.
Under the PMIERs, financial requirements, Approved Insurers approved insurers must maintainavailable assets that equal or exceedminimum required assets, which is an amount equal to the greater of (i) $400 million or (ii) a total risk-based required asset amount. Therisk-based required asset amount is a function of the risk profile of anApproved Insurers net approved insurer's RIF, calculated by applyingassessed on a loan-


by-loanloan-by-loan basis and considered against certain risk-based factors derived from tables set out in the PMIERs, to the net RIF, and other transactional adjustmentswhich is then adjusted on an aggregate basis for reinsurance transactions approved by the GSEs, such as with respect to our 2017 ILN TransactionTransactions and 2016 QSR Transaction.Transactions. The aggregate gross risk-based required asset amountfor performing, primary insurance is subject to a floor of 5.6% of total, performing primary adjusted RIF, and the risk-based required asset amountfor pool insurance considers both the factors in the PMIERs tables and thenet remaining stop lossfor each pool insurance policy. The PMIERs financial requirements also increase the amount of available assets that must be held by an Approved Insurer for LPMI policies originated on or after January 1, 2016.
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, 20172022 that NMIC fully compliedwas in full compliance with the PMIERs as of December 31, 2016.2021. NMIC also has an ongoing obligation to immediately notify the GSEs in writing upon discovery of itsa failure to meet one or more of the PMIERs requirements. We continuously monitor ourNMIC's compliance with the PMIERs.
The following table provides a comparison of the PMIERs financial requirementsavailable assets and risk-based required asset amount as reported by NMIC as of the dates indicated.indicated:
As of
March 31, 2022March 31, 2021
(In Thousands)
Available assets$2,127,030 $1,809,589 
Risk-based required assets1,341,217 1,261,015 
 As of 
 September 30, 2017  September 30, 2016 
 (In Thousands) 
Available assets$495,182
  $488,635
 
Risk-based required assets356,207
  320,609
 

Available assets were $2.1 billion at March 31, 2022, compared to $1.8 billion at March 31, 2021.The$317 million increase in available assets as of September 30, 2017 compared to September 30, 2016 is between the dates presented was primarily driven by theNMIC's positive cash flow from operations and amortization of unearned premium reserves. during the intervening period.
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The increase in therisk-based required asset amount is between the dates presented was primarily due to the growth of our gross RIF, partially offset by an increase in the cession of risk relating toceded under our third-party reinsurance agreements.
Capital Position of Our Insurance Subsidiaries and Financial Strength Ratings
In addition to GSE-imposed asset requirements, NMIC is also subject to state regulatory minimum capital requirements based on its RIF. While formulations of this minimum capital may vary by jurisdiction, the most common measure allows for a maximum permitted RTC ratio of 25:1.
As of September 30, 2017, NMIC's primary RIF, net of reinsurance, was approximately $6.2 billion. NMIC ceded 100% of its pool RIF pursuant to the 2016 QSR Transaction. Based on NMIC's total statutory surplus of $502.6 million (including contingency reserves) as of September 30, 2017, NMIC's RTC ratio was 12.3:1. Re One had total statutory capital of $33.9 million as of September 30, 2017, with a RTC ratio of 0.7:1. We continuously monitor our compliance with state capital requirements.
In August 2017, Moody's Investors Service (Moody's) re-affirmed its "Ba1" financial strength rating for NMIC and its B2 rating of NMIH's $150 million Term Loan. Moody's outlook for both ratings changed from " stable" to " positive." In July 2017, S&P re-affirmed its "BBB-" financial strength and long-term counter-party credit ratings on NMIC and its"BB-" long-term counter-party credit rating on NMIH. S&P's outlook for both companies is "positive."
Competition
The MI industry is highly competitive and currently consists of six private mortgage insurers, including NMIC, as well as governmental agencies likegovernment MIs such as the FHA, and theUSDA or VA. Private MI companies compete based on service, customer relationships, underwriting and other factors, including price.price, credit risk tolerance and IT capabilities. We expect the private MI market to remain competitive, with pressure for industry participants to growmaintain or maintaingrow their market share.
The private MI industry overall competes more broadly with government entitiesMIs who significantly increased their presenceshare in the MI market following the financial crisis.2008 Financial Crisis. Although there has been broad policy consensus toward the need for increasing private capital to play a larger roleparticipation and decreasing government exposure to credit risk to be reduced in the U.S. housing finance system, it remains difficult to predict whether the combined market share of governmental agencies such as the FHA and VAgovernment MIs will recede to historicalpre-2008 levels. A range of factors influence a lender's and borrower's decision to choose private MI over governmental insurance options,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 governmentalgovernment MI alternatives.


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, 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.

43

Consolidated Results of Operations
Consolidated statements of operationsThree months ended
March 31, 2022March 31, 2021
Revenues($ in thousands, except for per share data)
Net premiums earned$116,495 $105,879 
Net investment income10,199 8,814 
Net realized investment gains408 — 
Other revenues339 501 
Total revenues127,441 115,194 
Expenses
Insurance claims and claim (benefits) expenses(619)4,962 
Underwriting and operating expenses32,935 34,065 
Service expenses430 591 
Interest expense8,041 7,915 
(Gain) loss from change in fair value of warrant liability(93)205 
Total expenses40,694 47,738 
Income before income taxes86,747 67,456 
Income tax expense19,067 14,565 
Net income$67,680 $52,891 
Earnings per share - Basic$0.79 $0.62 
Earnings per share - Diluted$0.77 $0.61 
Loss ratio(1)
(0.5)%4.7 %
Expense ratio(2)
28.3 %32.2 %
Combined ratio (3)
27.7 %36.9 %
Consolidated statements of operationsThree months ended Nine months ended
 September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Revenues(In Thousands)
Net premiums earned$44,519
 $31,808
 $115,661
 $77,656
Net investment income4,170
 3,544
 11,885
 10,117
Net realized investment gains (losses)69
 66
 198
 (758)
Other revenues195
 102
 461
 172
Total revenues48,953
 35,520
 128,205
 87,187
Expenses       
Insurance claims and claims expenses957
 664
 2,965
 1,592
Underwriting and operating expenses24,645
 24,037
 78,682
 69,943
Total expenses25,602
 24,701
 81,647
 71,535
Other expense       
Loss from change in fair value of warrant liability(502) (797) (679) (187)
Interest expense(3,352) (3,733) (10,146) (11,072)
Income before income taxes19,497
 6,289
 35,733
 4,393
Income tax expense7,185
 114
 11,917
 114
Net income$12,312
 $6,175
 $23,816
 $4,279
        
Loss ratio(1)
2.1% 2.1% 2.6% 2.1%
Expense ratio(2)
55.4% 75.6% 68.0% 90.1%
Combined ratio57.5% 77.7% 70.6% 92.2%
Three months ended
Non-GAAP financial measures (4)
March 31, 2022March 31, 2021
($ in thousands, except for per share data)
Adjusted income before tax$86,506 $68,039 
Adjusted net income67,470 53,395 
Adjusted diluted EPS0.770.62
(1)Loss ratio is calculated by dividing the provision for insurance claims and claimsclaim expenses by net premiums earned.
(2)Expense ratio is calculated by dividing other 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.
Revenues
ForNet premiums earned were $116.5 million for the three and nine months ended September 30, 2017,March 31, 2022 compared to $105.9 million for the three months ended March 31, 2021. The increase in net premiums earned increased $12.7 million or 40% and $38.0 million or 49%, respectively, compared towas primarily driven by the corresponding three and nine months ended September 30, 2016. The increase in both periods is primarily due to the continued growth inof our monthly policy production and IIF, partially offset by a decline in the effects ofcontribution from single premium policy cancellations and an increase in cessions under the 2016 QSR Transaction and 2017 ILN Transaction and reductions in our single policy production and earnings from early policy cancellations.Transactions.
ForNet investment income was $10.2 million for the three and nine months ended September 30, 2017,March 31, 2022 compared to $8.8 million for the three months ended March 31, 2021. The increase in net investment income increased $0.6 million and $1.8 million, respectively, compared to the three and nine months ended September 30, 2016, due to an increasein each respective period was primarily driven by growth in the size of and improved yields on our total investment portfolio.
44

Other revenues were $339 thousand for the three months ended March 31, 2022 compared to $501 thousand for the three months ended March 31, 2021. Other revenues represent underwriting fee revenue generated by our subsidiary, NMIS, which provides outsourced loan review services to mortgage loan originators. The decline in other revenues relates to a decrease 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 claimsclaim 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 claimsclaim expenses increased $0.3 million and $1.4were a benefit of $0.6 million for the three and nine months ended September 30, 2017, respectively,March 31, 2022 compared to insurance claims and claim expenses of $5.0 million for the three and nine months ended September 30, 2016, asMarch 31, 2021. Insurance claims and claim expenses during the three months ended March 31, 2022 benefited from cure activity and release of a resultportion of the reserves we established for anticipated claims payments in prior period, and a decrease in the number of new defaults emerging on loans impacted by the COVID-19 pandemic.
Underwriting and operating expenses were $32.9 million for the three months ended March 31, 2022 compared to $34.1 million for the three months ended March 31, 2021. The decrease in underwriting and operating expenses for the three months ended March 31, 2022 was primarily due to a decrease in the amortization of deferred policy acquisition costs (DAC) offset by an increase in our NODs,depreciation and amortization incurred in connection with the completion and implementation of certain software and equipment initiatives, as well as an increase in travel and entertainment expenses tied to the easing of COVID-19 related restrictions. Underwriting and operating expenses included capital market reinsurance transaction costs of $0.3 million and $0.4 million for the three months ended March 31, 2022 and 2021, respectively.
Service expenses were $430 thousand for the three months ended March 31, 2022 compared to $591 thousand for the three months ended March 31, 2021. Service expenses represent third-party costs incurred by NMIS in connection with the services it provides. The year-on-year decline in service expenses was driven by a decrease 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 $8.0 million for the three months ended March 31, 2022 compared to $7.9 million for the three months ended March 31, 2021. Interest expense primarily reflects the carrying costs on the $400 million Notes offering completed in June 2020. The increase in interest expense period-to-period was due to an increase in the number of policies in force year-over-year and expected loss development of our portfolio. The increase in claims and claims expenses for the three and nine months ended September 30, 2017 was offset by the partial release of reserves related to prior year defaults.
Underwriting and operating expenses increased $0.6 million or 3%, and $8.7 million or 12% for the three and nine months ended September 30, 2017, respectively, compared to the three and nine months ended September 30, 2016. Employee compensation accounts for the majority of our operating expenses. We increased the size of our workforce from 273 employees as of September 30, 2016 to 298 employees as of September 30, 2017 to support the growth of our business, particularly our sales and operating functions. Underwriting and operating expenses for the nine months ended September 30, 2017 also reflect $4.8 million of operating expenses related to the 2017 ILN Transaction and amendment of the Credit Agreement.
We incurred interest expense related to the Term Loan of $3.4 million and $10.1 million for the three and nine months ended September 30, 2017, respectively, compared to interest expense of $3.7 million and $11.1 million for the three and nine months ended September 30, 2016, respectively. Interest expense declined in connectioncommitment fees associated with the amendment of our2021 Revolving Credit AgreementFacility which we completedhad extended its borrowing capacity from $110 million to $250 million in February 2017, which among other items, reduced the interest rate payable on the Term Loan.November 2021. See Item 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4, Term Loan.Debt."
Income Tax
We aretax expense was $19.1 million for the three months ended March 31, 2022 compared to $14.6 million for the three months ended March 31, 2021. The year-on-year increase in income tax expense was primarily driven by growth in our pre-tax income. Our effective tax rate on pre-tax income was 22.0% for the three months ended March 31, 2022, compared to 21.6% for the three ended March 31, 2021. As a U.S. taxpayer, andwe are subject to a statutory U.S. federal corporate income tax rate of 35%21%. Our holding company files a consolidated U.S. federal and various state income tax returns on behalf of itself and its subsidiaries.
Our provision for income taxes for the interim reporting periods areis established based on anour estimated annual effective tax rate for a given year and reflects the year ending December 31, 2017. We currently pay no regular federal incomeimpact of discrete tax due toeffects in the forecasted utilization of federal net operating loss carryforwards,period in which were $122.9 million as of December 31, 2016. The interim provision for income taxes include current year alternative minimum tax and changes to deferred tax assets.they occur. Our effective tax rate on our pre-tax income was 36.9% for the three months ended September 30, 2017, compared to 1.8% for the comparable 2016 period. Our effective tax rate on our pre-tax income was 33.3% for the nine months ended September 30, 2017, compared to our effective tax rate on our pre-tax income of 2.6% for the comparable 2016 period. The difference between our statutory tax rate and our effective tax rates for the three and nine months ended September 30, 2017 is due to aMarch 31, 2022 and 2021 reflect the discrete tax benefit associated with excess tax benefits for restricted stock units that were recognized during the periods as a resulteffects of the adoptionvesting of ASU 2016-09RSUs and exercise of options, and the change in the prior quarter.fair value of our warrant liability in each period. See Item 1, "Financial Statements - Notes to Consolidated Financial Statements - Note 1, Organization and Basis of Presentation - Change in Accounting Principle." We expect our effective tax rate to return to approximately the statutory tax rate for the year ending December 31, 2017. From inception through September 30, 2016, we had evaluated the realizability of our net deferred tax assets on a quarterly basis and concluded that it was more-likely-than-not that our net deferred tax assets may not be realized and recognized a full valuation allowance against net deferred tax assets.



Consolidated balance sheetsSeptember 30, 2017 
December 31, 2016 (1)
 (In Thousands)
Total investment portfolio$692,729
 $628,969
Cash and cash equivalents20,698
 47,746
Premiums receivable21,056
 13,728
Deferred policy acquisition costs, net36,101
 30,109
Software and equipment, net21,767
 20,402
Prepaid reinsurance premiums39,915
 37,921
Deferred tax asset, net38,490
 51,434
Other assets15,856
 9,588
Total assets$886,612
 $839,897
Term loan$143,969
 $144,353
Unearned premiums161,345
 152,906
Accounts payable and accrued expenses22,028
 25,297
Reserve for insurance claims and claims expenses6,123
 3,001
Reinsurance funds withheld33,105
 30,633
Deferred ceding commission4,971
 4,831
Warrant liability4,046
 3,367
Total liabilities375,587
 364,388
Total shareholders' equity511,025
 475,509
Total liabilities and shareholders' equity$886,612
 $839,897
(1) The 2016 prior period balance sheet has been revised. See Item 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 1, Organization9, Income Taxes."
Net Income
Net income was $67.7 million for the three months ended March 31, 2022 compared to $52.9 million for the three months ended March 31, 2021. Adjusted net income was $67.5 million for the three months ended March 31, 2022 compared to $53.4 million for the three months ended March 31, 2021. The increases in net income and Basisadjusted net income were primarily driven by growth in our total revenues and decrease in insurance claims and claim expenses, partially offset by an increase in our income tax expense.
Diluted EPS was $0.77 for the three months ended March 31, 2022 compared to $0.61 for the three months ended March 31, 2021. Adjusted diluted EPS was $0.77 for the three months ended March 31, 2022 compared to $0.62 for the three
45

months ended March 31, 2021. Diluted and adjusted diluted EPS increased due to growth in net income and adjusted net income, partially offset by an increase in weighted average diluted shares outstanding.
The non-GAAP financial measures adjusted income before tax, adjusted net income and adjusted diluted EPS are presented to enhance the comparability of Presentation. Immaterial Correctionfinancial results between periods.
Non-GAAP Financial Measure ReconciliationsFor the three months ended March 31,
20222021
As reported($ in thousands, except for per share data)
Income before income taxes$86,747 $67,456 
Income tax expense19,067 14,565 
Net income$67,680 $52,891 
Adjustments
Net realized investment gains(408)— 
(Gain) loss from change in fair value warrant liability(93)205 
Capital market transaction costs260 378 
Other infrequent, unusual or non-operating items— — 
Adjusted income before tax86,506 68,039 
Income tax (benefit) expense on adjustments(31)79 
Adjusted net income$67,470 $53,395 
Weighted average diluted shares outstanding87,310 86,487 
Adjusted diluted EPS$0.77 $0.62 
Explanation and Reconciliation of Prior Period Amounts" 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 further details.the respective periods.
AsAdjusted diluted EPS is defined as adjusted net income divided by adjusted weighted average diluted shares outstanding. Adjusted weighted average diluted shares outstanding is defined as weighted average diluted shares outstanding, adjusted for changes in the dilutive effect of non-vested shares that would otherwise have occurred had GAAP net income been calculated in accordance with adjusted net income. There will be no adjustment to weighted average diluted shares outstanding in the years that non-vested shares are anti-dilutive under GAAP.
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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. Past adjustments under this category include infrequent, unusual or non-operating adjustments related to severance, restricted stock modification and other expenses incurred in connection with the CEO transition announced in September 30, 2017, we had approximately $713.4 million2021 and 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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Consolidated balance sheetsMarch 31, 2022December 31, 2021
(In Thousands)
Total investment portfolio$1,993,972 $2,085,931 
Cash and cash equivalents130,906 76,646 
Premiums receivable60,526 60,358 
Deferred policy acquisition costs, net59,727 59,584 
Software and equipment, net32,386 32,047 
Prepaid reinsurance premiums2,011 2,393 
Reinsurance recoverable20,080 20,320 
Other assets124,336 113,302 
Total assets$2,423,944 $2,450,581 
Debt$394,969 $394,623 
Unearned premiums138,393 139,237 
Accounts payable and accrued expenses76,923 72,000 
Reserve for insurance claims and claim expenses102,372 103,551 
Reinsurance funds withheld5,343 5,601 
Warrant liability1,416 2,363 
Deferred tax liability, net156,966 164,175 
Other liabilities12,520 3,245 
Total liabilities888,902 884,795 
Total shareholders' equity1,535,042 1,565,786 
Total liabilities and shareholders' equity$2,423,944 $2,450,581 

Total cash and investments including $61.7were $2.1 billion as of March 31, 2022, compared to $2.2 billion as of December 31, 2021. Cash and investments at March 31, 2022 included $106.2 million held atby NMIH. The decrease in total cash and investments reflects an increase in the unrealized loss positions of our fixed income portfolio tied to the prevailing interest rate and credit spread environment and share repurchases during the three months ended March 31, 2022, partially offset by an increase in cash and investments from year-end 2016 primarily relates to cash generated from operations.
Premiums receivable was $60.5 million as of March 31, 2022, compared to $60.4 million as December 31, 2021. 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 $36.1$59.7 million as of September 30, 2017,March 31, 2022, compared to $30.1$59.6 million atas of December 31, 2016.2021. The increase was primarily driven by the defermentdeferral of certain costs associated with polices written during the nine months ended September 30, 2017, partiallyorigination of new policies between the respective balance sheet dates, largely offset by the recognition of previously deferred policy acquisition costs.
Prepaid reinsurance premiums were $2.0 million as of March 31, 2022, compared to $2.4 million as of December 31, 2021. 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 $20.1 million as of March 31, 2022, compared to $20.3 million as of December 31, 2021. The decrease was driven by a decrease in ceded losses recoverable associated with our QSR Transactions.
Other assets increased to $124.3 million as of March 31, 2022, compared to $113.3 million as of December 31, 2021. The increase was primarily driven by the recognition of incremental ROU assets in connection with the modification of the operating lease for our corporate headquarters in January 2022. Other assets included $89.2 million of tax and loss bonds held by the Company at both March 31, 2022 and December 31, 2021. See Item 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 9, Income Taxes."
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Unearned premiums were $138.4 million as of March 31, 2022, compared to $139.2 million as of December 31, 2021. The decrease was driven by the amortization of previously deferred acquisition costs and the capitalization of ceding commissions associated with the 2016 QSR Transaction during the period.
Unearned premiums increased $8.4 million to $161.3 million as of September 30, 2017, primarily due to single premium policy origination during the period, offset by the amortization through earnings of existing unearned premiums through earnings in accordance with the expiration of risk on the related single premium policies and the cancellationcancellations of other single premium policies.    
Other assets balance increased $6.3 million to $15.9 million as of September 30, 2017, primarily due to $3.3 million of pending proceeds frompolicies, partially offset by single premium policy originations during the sale of short-term investments in September and a $1.2 million increase in accrued investment income as a result of an increase in the size of our investment portfolio.three months ended March 31, 2022.
Accounts payable and accrued expenses decreased to $22.0were $76.9 million as of September 30, 2017, from $25.3March 31, 2022, compared to $72.0 million atas of December 31, 2016.2021. The balance consistsincrease was primarily driven by accrued and unpaid interest on the Notes which is payable semi-annually in June and December and unsettled trades payable, partially offset by payments of payroll and bonuses, premium taxes and other contractual payables.
Reserve for insurance claims and claim expenses was $102.4 million as of March 31, 2022, compared to $103.6 million as of December 31, 2021. The decrease was primarily driven by a release of a portion of the reserves we established for anticipated claims payments in prior periods, cure activity, and a decline in the total size of our default population. The decrease was partially offset by the increase in the average reserve per default. While we have generally established lower reserves per default for loans that we consider to be paid withinimpaired in connection with the next 12 monthsCOVID-19 pandemic, we have increased the initial reserves held for such loans as they have aged in default status. See "- Insurance Claims and decreased as a result of lower operating accruals and lower accrued interest due to a lower interest rate on the Term Loan.Claim Expenses," abovefor further details.
Reinsurance funds withheld, was $33.1 million as of September 30, 2017, representing the net ofwhich represents our ceded reinsurance premiums written, less our profit and ceding commission receivables related to the 2016 QSR Transaction. The increase in reinsurance funds withheldTransaction was $5.3 million as of $2.5March 31, 2022, compared to $5.6 million fromas of December 31, 2016, was a result of increased2021. The decrease relates to the continued decline in ceded premiums written.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 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 5, Reinsurance."

Warrant liability was $1.4 million at March 31, 2022, compared to $2.4 million at December 31, 2021. 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 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 3, Fair Value of Financial Instruments."

Net deferred tax liability was $157.0 million at March 31, 2022, compared to $164.2 million at December 31, 2021. The decrease was primarily due to the increase in unrealized losses recorded in other comprehensive income, partially offset by an increase in the claimed deductibility of our statutory contingency reserve. For further information regarding income taxes and their impact on our results of operations and financial position, see Item 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 9, Income Taxes."
Other liabilities increased to $12.5 million as of March 31, 2022, compared to $3.2 million as of December 31, 2021. The increase was primarily driven by the recognition of an incremental lease liability in connection with the modification of the operating lease for our corporate headquarters in January 2022.
The following table summarizes our consolidated cash flows from operating, investing and financing activities:
Consolidated cash flowsFor the nine months ended September 30,Consolidated cash flowsFor the three months ended March 31,
2017 201620222021
Net cash (used in) provided by:(In Thousands)
Net cash provided by (used in):Net cash provided by (used in):(In Thousands)
Operating activities$41,778
 $52,212
Operating activities$80,310 $85,464 
Investing activities(66,553) (63,714)Investing activities(21,370)(96,447)
Financing activities(2,273) (1,293)Financing activities(4,680)(437)
Net decrease in cash and cash equivalents$(27,048) $(12,795)
Net increase (decrease) in cash and cash equivalentsNet increase (decrease) in cash and cash equivalents$54,260 $(11,420)
Net cash provided by operating activities was $41.8$80.3 million for the ninethree months ended September 30, 2017,March 31, 2022, compared to $52.2$85.5 million infor the same period in 2016.three months ended March 31, 2021. The decrease in cash generated fromprovided by operating activities year-on-year was primarily causeddriven by increased operating expenses in connection withthe payment of certain employee compensation and benefits costs, and higher claims paid due to an increase in our default inventorypartially offset by growth in net premiums written.written and a decline in claims paid during the three months ended March 31, 2022.
Cash used in investing activities for the periods presented was driven bythree months ended March 31, 2022 and 2021 reflects the purchase of fixed and short-term maturities during those periods.with cash provided by operating activities, and the reinvestment of coupon payments, maturities and sale proceeds within our investment portfolio.
The $1 million increase in cash
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Cash used in financing activities was $4.7 million for the ninethree months ended September 30, 2017March 31, 2022, compared to $0.4 million for the same periodthree months ended September 30, 2016, wasMarch 31, 2021. Cash used in financing activities during the three months ended March 31, 2022 primarily due to an increase in taxes paid relatedrelates to the net share settlementrepurchase of employee equity awards.common stock.

Holding Company
Liquidity 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:for (i) payment of certain corporate expenses; (ii) payment of certain reimbursable expenses of its insurance subsidiaries; (iii) payment of principal andthe interest related to the Term Loan;Notes and 2021 Revolving Credit Facility; (iv) tax payments to the Internal Revenue Service; (v) capital support for its subsidiaries; (vi) repurchase of its common stock; and (vi)(vii) 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 such as NMIH, that are incorporated in Delaware. Delaware corporation law provides that dividends are only payable out of a corporation's surplus or recent net profits (subject to certain limitations).
As of September 30, 2017,March 31, 2022, NMIH had $61.7$106.2 million of cash and investments. NMIH's principal sourcesources of operatingnet cash isare dividends from its subsidiaries and investment income andincome. NMIC 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. NMIH also has access to $250 million of undrawn revolving credit capacity under the 2021 Revolving Credit Facility. See Item 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4, Debt.
On February 10, 2022, our Board of Directors approved a $125 million share repurchase program through December 31, 2023, that enables the company to repurchase its common stock. The authorization provides NMIH the flexibility to repurchase stock from time to time in the future could include dividends from NMIC, if availableopen market or in privately negotiated transactions, based on market and permittedbusiness conditions, stock price and other factors. During the three months ended March 31, 2022, NMIH repurchased 235,344 shares of common stock pursuant to a trading plan under law and byRule 10b-18 of the GSEs.Exchange Act, at a total cost of $5.0 million, including associated costs.
NMIH has entered into tax and expense-sharing agreements with its subsidiaries which have been approved by the Wisconsin OCI, butwith such approval may be changedapprovals subject to change or revokedrevocation at any time. WithAmong such agreements, the Wisconsin OCI's approval, NMIH began allocatingOCI has approved the allocation of interest expense on its Term Loanthe Notes and the 2021 Revolving Credit Facility to NMIC into the first quarter of 2017, consistent with the benefitsextent proceeds from such offering and facility are distributed to NMIC received when NMIH down-streamed the loan proceedsor used to repay, redeem or otherwise defease amounts raised by NMIC under prior credit arrangements that have previously been distributed to NMIC.
NMIC's abilityThe 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 dividendsa quarterly commitment fee on the average daily undrawn amount of 0.175% to NMIH is0.525%, based on the applicable corporate credit rating at the time. As of March 31, 2022, the applicable commitment fee was 0.35%.
We are subject to insurance department notice or approval.certain covenants under the 2021 Revolving Credit Facility, including: a maximum debt-to-total capitalization ratio of 35%, a requirement to maintain compliance with the private mortgage insurer eligibility requirements (PMIERs) financial requirements (subject to any GSE approved waivers), and minimum consolidated net worth and statutory capital requirements (respectively, as defined therein). We were in compliance with all covenants at March 31, 2022.
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.(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 12twelve months, exceeds the lesser of (i) 10% of the insurer’sinsurer's statutory policyholders' surplus as of the preceding December 31 or (ii) adjusted statutory net income for the 12-monthtwelve-month period ending the preceding December 31.31. On April 1, 2022, NMIC has never paid any dividendsa $34.9 million ordinary course dividend to NMIH. NMIC reported a statutory net loss for
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NMIH may require liquidity to fund the twelve months ended December 31, 2016 and currently cannot pay any dividends to NMIH without the prior approvalcapital needs of the Wisconsin OCI. Certain other states in which NMIC is licensed also have statutes or regulations that restrict its ability to pay dividends.
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. NMIC's capital needs also depend on its decisionrequirements (respectively, as defined therein).
As an approved mortgage insurer and Wisconsin-domiciled carrier, NMIC is required to access the reinsurance markets. NMIH may require liquidity to fund the capital needs of its insurance subsidiaries.


In November 2015, NMIH entered into the Credit Agreement for the Term Loan. On February 10, 2017, NMIH amended the Credit Agreement, (Amendment No. 1) to reduce the interest rate and extend the maturity datesatisfy financial and/or capitalization requirements stipulated by each of the Term Loan from November 10, 2018 to November 10, 2019.GSEs and the Wisconsin OCI. The amended Term Loan bears interest atfinancial requirements stipulated by the Eurodollar Rate, as definedGSEs are outlined in the Credit Agreement andPMIERs. Under the PMIERs, NMIC must maintain available assets that are equal to or exceed a minimum risk-based required asset amount, subject to a 1.00%minimum floor plusof $400 million. At March 31, 2022, NMIC reported $2,127 million available assets against $1,341 million risk-based required assets, for a $786 million "excess" funding position.
The risk-based required asset amount under PMIERs is determined at an annual margin rate of 6.75%, payable monthly or quarterlyindividual policy-level based on our interest rate election. The Credit Agreement contains various restrictive covenantsthe 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 (which was subsequently amended and restated) on the risk-based treatment of loans affected by the COVID-19 pandemic. Under the guidance, non-performing loans that are subject to a forbearance program granted in response to a financial hardship related to COVID-19 will benefit from a permanent 70% risk-based required financial ratiosasset haircut for the duration of the forbearance period and tests (which were not modifiedsubsequent 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 Amendment No. 1) that we arethe GSEs). Under NMIC's quota share reinsurance treaties, it receives credit for the PMIERs risk-based required to meet or maintain. These covenants include, but are not limitedasset 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 following:extent such requirement is within the subordinated coverage (excess of loss detachment threshold) afforded by the transaction.
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 debt-to-total capitalization ratio (as defined therein) of 35%, maximumRIF 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 March 31, 2022, NMIC's performing primary RIF, net of reinsurance, was approximately $24.5 billion. NMIC ceded 100% of its pool RIF pursuant to the 2016 QSR Transaction.Based on NMIC's total statutory capital of $2.0 billion (including contingency reserves) as of March 31, 2022, NMIC's RTC ratio was 12.4:1. Re One has no risk in force remaining and no longer reports a RTC ratio.
NMIC's principal sources of 22.0:1.0, minimum liquidity (as defined therein)include (i) premium receipts on its insured portfolio and new business production, (ii) interest income on its investment portfolio and principal repayments on maturities therein, and (iii) existing cash and cash equivalent holdings. At March 31, 2022, NMIC had $2.0 billion of $27.4cash and investments, including $92 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 September 30, 2017, compliance withtax and loss bonds. NMIC's cash inflow is generally significantly in excess of its cash outflow in any given period. During the PMIERs financial requirements (subjecttwelve-month period ended March 31, 2022, NMIC generated $302 million of cash flow from operations and received an additional $137 million of cash flow on the maturity, sale and redemption of securities held in its investment portfolio. NMIC is not a party to any GSE-approved waivers)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 minimum shareholders' equity requirements. In October 2017, NMIH further amendeddue at a contractually predetermined date). NMIC's only use of cash that develops along an unscheduled path is claims payments. Given the Credit Agreementbreadth and duration of forbearance programs available to removeborrowers, separate foreclosure moratoriums that have been enacted at a covenant that required NMIH to maintain liquidity (as defined therein) in an aggregate amount no less than all remaining interest payments due underlocal, state and federal level, and the Term Loan, while retaining the requirement to maintain minimum liquidity (as defined therein) in an amount no less than all remaining principle amortization payments due under the Term Loan, estimated to be $3 million asgeneral duration of the datedefault to foreclosure to claim cycle, we do not expect NMIC to use a meaningful amount of this report (not includingcash to settle claims in the amount due atnear-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 maturity date).Notes.
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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
OurThe primary objectives with respect toof our investment portfolioactivity are to preserve capital and generate investment income, while maintaining sufficient liquidity to cover our operating needs. We aim to achieve diversification as toby type, quality, maturity, industry, and issuer that maximizes the after-tax return on investments.industry. We have adopted an investment policy that defines, among other things, eligible and ineligible investments,investments; concentration limits for asset types, industry sectors, single issuers, and certain credit ratings,ratings; and benchmarks for asset duration.
Substantially all of ourOur investment portfolio is held incomprised entirely of fixed maturity instruments. As of September 30, 2017,March 31, 2022, the fair value of our investment portfolio was $692.7 million. We also had$2.0 billion and we held an additional $20.7$130.9 million of cash and equivalents as of September 30, 2017.equivalents. Pre-tax book yield on the investment portfolio for the ninethree months ended September 30, 2017March 31, 2022 was 2.3%1.9%. The bookBook yield is calculated as period-to-date net investment income divided by the average amortized cost of the investment portfolio. YieldThe yield on theour investment portfolio is likely to change over time based on movements in interest rates, credit spreads, the duration or mix of our investment portfolioholdings and other factors.
The following tables present a breakdown of our investment portfolio and cash and cash equivalents by investment type and credit rating:
Percentage of portfolio's fair valueSeptember 30, 2017 December 31, 2016
1.Corporate debt securities57% 52%
2.U.S. treasury securities and obligations of U.S. government agencies9
 9
3.Asset-backed securities14
 17
4.Cash, cash equivalents, and short-term investments7
 16
5.Municipal debt securities13
 6
 Total100% 100%
Percentage of portfolio's fair valueMarch 31, 2022December 31, 2021
Corporate debt securities63 %64 %
Municipal debt securities26 26 
Cash, cash equivalents, and short-term investments6 4 
Asset-backed securities4 5 
U.S. treasury securities and obligations of U.S. government agencies1 1 
Total100 %100 %
The ratings
Investment portfolio ratings at fair value (1)
March 31, 2022December 31, 2021
AAA11 %9 %
AA(2)
28 28 
A(2)
44 46 
BBB(2)
17 17 
Total100 %100 %
(1)    Excluding certain operating cash accounts.
(2)    Includes +/– ratings.

All of our investment portfolio were:
Investment portfolio ratings at fair valueSeptember 30, 2017 December 31, 2016
AAA19% 24%
AA(1)
21
 19
A(1)
45
 44
BBB(1)
15
 13
Total100% 100%
(1) Include +/– ratings.
The ratings aboveinvestments are providedrated by one or more of: Moody's, S&P and Fitch Ratings.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 Securities - Allowance for credit losses

Other Items
Off-Balance Sheet Arrangements and Contractual Obligations
We had no material off-balance sheet arrangementsdid not recognize an allowance for credit loss for any security in the investment portfolio as of September 30, 2017. In connection withMarch 31, 2022 or December 31, 2021, and we did not record any provision for credit loss for investment securities during the 2017 ILN Transaction, we have certain future contractual commitments to Oaktown Re,three months ended March 31, 2022 or 2021.
As of March 31, 2022, the investment portfolio had gross unrealized losses of $122.9 million, of which $29.0 million had been in an unrealized loss position for a special purpose VIE that is not consolidatedperiod of twelve-months or longer. As of December 31, 2021, the investment portfolio had gross unrealized losses of $23.2 million, of which $6.5 million had been in our financial results. See Item 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 1, Organization and Basisan unrealized loss position for a period of Presentation - Variable interest entity" and "Note 5, Reinsurance."
There are no material changes outside the ordinary course of businesstwelve months or longer. The increase in the contractual obligations specifiedaggregate size of the unrealized loss position as of March 31, 2022, was primarily driven by interest rate movements following the purchase date of certain securities. We evaluated the securities in an unrealized loss position as of March 31, 2022, assessing their credit ratings as well as any adverse conditions specifically related to the security. Based upon our 2016 10-K.estimate of the amount and timing of cash flows to be collected over the remaining life of each instrument, we believe the unrealized losses as of March 31, 2022 are not indicative of the ultimate collectability of the current amortized cost of the securities.
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Critical Accounting Estimates
We use accounting principles and methods that conform to GAAP. Where GAAP specifically excludes mortgage insurance we follow general industry practices. We are required to apply significant judgment and make material estimates in the preparation of our financial statements and with regard to various accounting, reporting and disclosure matters. Assumptions and estimates are required to apply these principles where actual measurement is not possible or practical. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
We believe that the assumptions and estimates associated with revenue recognition, fair value measurements, our investment portfolio, deferred policy acquisition costs, premium deficiency reserves, income taxes,and reserves for insurance claims and claimsclaim expenses warrants and share-based compensation have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting estimates. There have not been noany material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our 20162021 10-K.

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Item 3. Quantitative and Qualitative Disclosures About 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 via a defined investment policy implemented by our treasury function with oversight from our Board of Director'sBoard's Risk Committee. Important drivers of our market risk exposure monitored and managed by us 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 to the term structure of interest rates. Rising or falling rates typically change by different amounts along the yield curve. These changes may 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.(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.
•Prepayment Risk. Bonds may have call provisions that permit debtors to repay prior to maturity when it is to their advantage. This typically occurs when rates fall below the interest rate of the debt.
The carrying value of our investment portfolio as of September 30, 2017March 31, 2022 and December 31, 20162021 was $693 million$2.0 billion and $629 million,$2.1 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 September 30, 2017,March 31, 2022, the duration of our fixed income portfolio, including cash and cash equivalents, was 3.954.72 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 3.95%4.72% in fair value of our fixed income portfolio. Excluding cash, our fixed income portfolio duration was 4.134.81 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 4.13%4.81% in fair value of our fixed income portfolio.
We are also subject to market risk related to our Term Loanthe Notes and 2017the ILN Transaction.Transactions. As discussed in Item 1, "Financial Statements - Notes to Condensed Consolidated Financial Statements - Note 4, Term Loan,Debt" the Term Loan bearsNotes bear interest at a variable rate and, as a result, increases in market interest rates would generally result in increased interest expense on our outstanding principal.
The risk premium amounts under the 2017 ILN TransactionTransactions 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 1-monthone-month LIBOR and a risk margin, and then subtracting actual investment income earned on the trust balance during that payment period. An increase in 1-monthone-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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Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our PrincipalChief Executive Officer and PrincipalChief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, including our PrincipalChief Executive Officer and PrincipalChief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of September 30, 2017,March 31, 2022, pursuant to Rule 13a-15(e) under the Exchange Act. Management applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature, can provide only reasonable assurance regarding management's control objectives. Management does not expect that our disclosure controls and procedures will prevent or detect all errors and fraud. A control system, irrespective of how well it is designed and operated, can only provide reasonable assurance and cannot guarantee that it will succeed in its stated objectives.
Based upon that evaluation, our PrincipalChief Executive Officer and PrincipalChief Financial Officer concluded that, as of September 30, 2017,March 31, 2022, our disclosure controls and procedures were not effective due to provide reasonable assurance that the existence of a material weaknessinformation required to be disclosed by us in the design and operating effectiveness of an internal control related to reconciliation support used to validate our deferred tax inventory. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected in a timely basis. As described in Item 1, "Financial Statements - Notes to Consolidated Financial Statements - Note 1, Organization and Basis of Presentation - Immaterial Correction of Prior Period Amounts," above, we detected a $1.8 million error in the deferred tax balance that was immaterial to the 2016 financial statements. Notwithstanding the material weakness identified, our management has concluded that the consolidated financial statements included in this Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows at and for the periods presented. In addition, there were no material errors in our financial results or balances identified as a result of this control deficiency, and accordingly, amendment of our 2016 Form 10-K is not required.
We enhanced existing controls and designed and implemented new controls applicable to our deferred tax accounting, including those related to stock compensation, to ensure that our DTA is accurately calculated and appropriately reflected in our financial statements and reports we file withor submit under the SEC. We believe these actions are sufficient to remediateExchange Act is recorded, processed, summarized, and reported within the identified material weaknesstime periods specified in the SEC's rules and strengthen our internal control over financial reporting; however, there can be no guarantee that such remediation will be sufficient. We will continue to monitor the effectiveness of our controls and will make any further changes management determines appropriate.forms.
Internal Control Over Financial Reporting
Other than noted above, there wereThere was no changeschange in our internal control over financial reporting that occurred during the period covered by this report that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting.



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PART II
Item 1. Legal Proceedings
Certain lawsuits and claims arising in the ordinary course of business may be filed or pending against us or our affiliates from time to time. In accordance with applicable accounting guidance, we establish accruals for all lawsuits, claims and expected settlements when we believe it is probable that a loss has been incurred and the amount of the loss is reasonably estimable. When a loss contingency is not both probable and estimable, we do not establish an accrual. Any such loss estimates are inherently uncertain, based on currently available information and are subject to management’smanagement's judgment and various assumptions. Due to the inherent subjectivity of these estimates and unpredictability of outcomes of legal proceedings, any amounts accrued may not represent the ultimate resolution of such matters.
To the extent we believe any potential loss relating to such lawsuits and claims may have a material impact on our liquidity, consolidated financial position, results of operations, and/or our business as a whole and is reasonably possible but not probable, we will disclose information relating to any such potential loss, whether in excess of any established accruals or where there is no established accrual. We will also disclose information relating to any material potential loss that is probable but not reasonably estimable. Where reasonably practicable, we will provide an estimate of loss or range of potential loss. No disclosures are generally made for any loss contingencies that are deemed to be remote.
Based upon information available to us and our review of lawsuits and claims filed or pending against us to date, we have not recognized a material accrual liability for these matters, nor do we currently expect it is reasonably possible that these matters will result in a material liability to the Company. However, the outcome of litigation and other legal and regulatory matters is inherently uncertain, and it is possible that one or more of such matters currently pending or threatened could have an unanticipated material adverse effect on our liquidity, consolidated financial position, results of operations, and/or our business as a whole, in the future.
Item 1A. Risk Factors
Risk factors that affect our business and financial results are discussed in Part I, Item 1A of our 20162021 10-K. As of the date of this report, we are not aware of any material changes in our risk factors from the risk factors disclosed in our 20162021 10-K. You should carefully consider the risks and uncertainties described herein and in our 20162021 10-K, which have the potential to affect our business, financial condition, results of operations, cash flows or prospects in a material and adverse manner. The risks described herein and in our 20162021 10-K are not the only risks we face, as there are additional risks and uncertainties not currently known to us or that we currently deem to be immaterial which may in the future adversely affect our business, financial condition and/or operating results.

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Item 6. Exhibits
An index to exhibits has been filed as part of this report and is incorporated herein by reference.



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NMI HOLDINGS, INC.
November 1, 2017


By: /s/ Adam Pollitzer
     Name: Adam Pollitzer
     Title: Chief Financial Officer and Duly Authorized Signatory



EXHIBIT INDEX
Exhibit NumberDescription
2.1
Stock Purchase Agreement, dated November 30, 2011, between NMI Holdings, Inc. and MAC Financial Ltd. (incorporated herein by reference to Exhibit 2.1 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
2.2
Amendment to Stock Purchase Agreement, dated April 6, 2012, between NMI Holdings, Inc. and MAC Financial Ltd. (incorporated herein by reference to Exhibit 2.2 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
3.1
Second Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
3.2
Third Amended and Restated By-Laws (incorporated herein by reference to Exhibit 3.1 to our Form 8-K, filed on December 9, 2014)
4.1
Specimen Class A common stock certificate (incorporated herein by reference to Exhibit 4.1 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
4.2
Registration Rights Agreement between NMI Holdings, Inc. and FBR Capital Markets & Co., dated April 24, 2012 (incorporated herein by reference to Exhibit 4.2 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
4.3
Registration Rights Agreement by and between MAC Financial Ltd. and NMI Holdings, Inc., dated April 24, 2012 (incorporated herein by reference to Exhibit 4.3 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
4.4
Registration Rights Agreement between FBR & Co., FBR Capital Markets LT, Inc., FBR Capital Markets & Co., FBR Capital Markets PT, Inc. and NMI Holdings, Inc., dated April 24, 2012 (incorporated herein by reference to Exhibit 4.4 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
4.5
Warrant No. 1 to Purchase Common StockIndenture, dated as of June 19, 2020, among NMI Holdings, Inc. issued to FBR Capital Markets & Co., dated June 13, 2013NMI Services, Inc. as the Initial Guarantor, and the Bank of New York Mellon Trust Company, N.A. as Trustee and Notes Collateral Agent (incorporated(incorporated herein by reference to Exhibit 4.5 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
4.6
Form of Warrant to Purchase Common Stock of NMI Holdings, Inc. issued to former stockholders of MAC Financial Ltd. (incorporated herein by reference to Exhibit 4.6 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
10.1 ~
NMI Holdings Inc. 2012 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.1 to our Form S-1 Registration Statement (registration No. 333-191635), filed on October 9, 2013)
10.2 ~
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Restricted Stock Unit Award Agreement for Chief Executive Officer and Chief Financial Officer (incorporated herein by reference to Exhibit 10.2 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
10.3 ~
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Restricted Stock Unit Award Agreement for Management (incorporated herein by reference to Exhibit 10.3 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
10.4 ~
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Restricted Stock Unit Award Agreement for Directors (incorporated herein by reference to Exhibit 10.4 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
10.5 ~
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Chief Executive Officer and Chief Financial Officer (incorporated herein by reference to Exhibit 10.5 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
10.6 ~
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Management (incorporated herein by reference to Exhibit 10.6 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
10.7 ~
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Directors (incorporated herein by reference to Exhibit 10.7 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
10.8 ~
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Chief Executive Officer and Chief Financial Officer (incorporated herein by reference to Exhibit 10.8 to our Form 10-K, filed on February 17, 2017)
10.9 ~
Form of NMI Holdings, Inc. 2012 Stock Incentive Plan Nonqualified Stock Option Award Agreement for Employees  (incorporated herein by reference to Exhibit 10.9 to our Form 10-K, filed on February 17, 2017)
10.10 ~
Amended and Restated Employment Agreement by and between NMI Holdings, Inc. and Bradley M. Shuster, dated December 23, 2015 (incorporated herein by reference to Exhibit 10.14.1 to our Form 8-K, filed on December 29, 2015)

i


10.11 ~
Offer Letter by and between NMI Holdings, Inc. and Glenn Farrell, effective December 4, 2014 (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on December 9, 2014)June 19, 2020)
10.1210.1 ~
Offer Letter by and between NMI Holdings, Inc. and William Leatherberry, dated July 11, 2014 (incorporated herein by reference to Exhibit 10.10 to our Form 10-Q, filed on April 28, 2016)
10.1310.2 ~
Offer Letter by and between NMI Holdings, Inc. and Adam Pollitzer, dated February 1, 2017 September 9, 2021(incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on February 3, 2017)September 9, 2021)
10.1410.3 ~
Offer letter by and between NMI Holdings, Inc. and Ravi Mallela, dated December 20, 2021 (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on December 21, 2021)
10.4 ~
Form of Indemnification Agreement between NMI Holdings, Inc. and its directors and certain executive officers (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on November 25, 2014)
10.1510.5 +
Commitment Letter dated July 12, 2013 for Bulk Fannie Mae-Paid Loss-on-Sale Mortgage Insurance on the Portfolio of approximately $5.46 billion Purchased by Fannie Mae and Identified by Fannie Mae as Deal No. 2013 MIRT 01 and by the Company as Policy No. P-0001-01 (incorporated herein by reference to Exhibit 10.14 to our Form S-1 Registration Statement (Registration No. 333-191635), filed on October 9, 2013)
10.1610.6
Credit Agreement, dated November 10, 2015,May 24, 2018, between NMI Holdings, Inc., the lenderslender party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 4.1 to our Form 8-K, filed on November 10, 2015)May 25, 2018)
10.1710.7
Extension Amendment, No. 1, dated February 10, 2017,as of March 20, 2020, to the Company's Credit Agreement, dated November 10, 2015, between NMI Holdings, Inc.,as of May 24, 2018, by and among the Company, the lender parties thereto and JPMorgan Chase Bank, N.A., as administrative agent(incorporated herein by reference to Exhibit 10.1 to our Form 8-K filed on March 20, 2020)
10.8
Joinder Agreement, dated as of March 20, 2020, to the Company's Credit Agreement, dated as of May 24, 2018, by and among the Company, JPMorgan Chase Bank, N.A. as administrative agent, and Citibank, N.A. (incorporated herein by reference to Exhibit 10.2 to our Form 8-K, filed on March 20, 2020)
10.9
Amendment No. 1, dated as of May 6, 2020, to the Company's Credit Agreement, dated as of May 24, 2018, by and among the Company, the lender parties thereto and JPMorgan Chase Bank, N.A. as administrative agent (incorporated herein by reference to Exhibit 10.1 to our Form 8-K filed on May 6, 2020)
10.10
Joinder Agreement, dated as of October 29, 2020, to the Company’s Credit Agreement, dated as of May 24, 2018, by and among the Company, JPMorgan Chase Bank, N.A. as administrative agent, and Citibank, N.A. (incorporated herein by reference to Exhibit 10.20 to our Form 10-Q filed on November 5, 2020).
57

10.11
Amended and Restated Credit Agreement, dated as of November 29, 2021, by and among the Company, the lender parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 10.1 to our Form 8-K filed on February 10, 2017)November 30, 2021)
10.1810.12 ~
Amendment No. 2, dated October 25, 2017, to the Credit Agreement dated November 10, 2015, between NMI Holdings, Inc., the lender parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on October 26, 2017)
10.19 ~
NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan (incorporated herein by reference to Appendix A to our 2017 Annual Proxy Statement, filed on March 30, 2017)
10.2010.13 ~


Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Chief Executive Officer (incorporated herein by reference to Exhibit 10.19 to our Form 10-Q filed on August 1, 2017)
10.2110.14 ~
Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Executive Officers (incorporated herein by reference to Exhibit 10.20 to our Form 10-Q filed on August 1, 2017)
10.2210.15 ~
Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Employees (incorporated herein by reference to Exhibit 10.21 to our Form 10-Q filed on August 1, 2017)
10.2310.16 ~

Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Independent Directors (incorporated herein by reference to Exhibit 10.22 to our Form 10-Q filed on August 1, 2017)
10.2410.17 ~
Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Nonqualified Stock Option Award Agreement for Chief Executive Officer (incorporated herein by reference to Exhibit 10.23 to our Form 10-Q filed on August 1, 2017)
10.2510.18 ~

Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Nonqualified Stock Option Award Agreement for Executive Officers and Employees (incorporated herein by reference to Exhibit 10.24 to our Form 10-Q filed on August 1, 2017)
10.2610.19 ~
Form of NMI Holdings, Inc. 2014 Omnibus Incentive Plan Phantom Unit Award Agreement for Independent Directors (incorporated herein by reference to Exhibit 10.21 to our Form 10-Q, filed on August 5, 2015)
10.27 ~

Form of NMI Holdings, Inc. 2014 Omnibus Incentive Plan Performance Based Restricted Stock Unit Award Agreement for Chief Executive Officer (incorporated herein by reference to Exhibit 10.26 to our Form 10-K, filed on February 17, 2017)
10.2810.20 ~
NMI Holdings, Inc. Severance Benefit Plan (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on February 17, 2016)
10.2910.21 ~
NMI Holdings, Inc. Amended and Restated Change in Control Severance Benefit Plan(incorporated (incorporated herein by reference to Exhibit 10.110.30 to our Form 8-K,10-Q, filed on February 23, 2017)October 30, 2018)
10.3010.22 ~
NMI Holdings, Inc. Clawback Policy (incorporated herein by reference to Exhibit 10.2 to our Form 8-K, filed on February 23, 2017)
10.3110.23 ~
Separation AgreementEmployment Letter by and between NMI Holdings, Inc. and Glenn FarrellBradley M. Shuster, effective July 31, 2017as of January 1, 2019 (incorporated herein by reference to Exhibit 10.1 to our Form 8-K, filed on August 1, 2017)December 28, 2018)
21.110.24 ~
Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Independent Directors (incorporated herein by reference to Exhibit 10.33 to our Form 10-Q, filed on May 2, 2019)
10.25 ~
Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement for Employees (incorporated herein by reference to Exhibit 10.34 to our Form 10-Q, filed on May 2, 2019)
10.26 ~
Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Nonqualified Stock Option Agreement for Employees (incorporated herein by reference to Exhibit 10.35 to our Form 10-Q, filed on May 2, 2019)
10.27 ~
Form of NMI Holdings, Inc. Amended and Restated 2014 Omnibus Incentive Plan Restricted Stock Unit Award Agreement (Performance Based) (incorporated herein by reference to Exhibit 10.38 to our Form 10-Q, filed on May 7, 2020)
21.1
Subsidiaries of NMI Holdings, Inc. (incorporated herein by reference to Exhibit 21.1 to our Form 10-Q, filed on October 30, 2015)
31.122.1
Guaranteed Securities by Subsidiary Guarantor (incorporated herein by reference to Exhibit 22.1 to our Form 10-K, filed on February 16, 2022)
31.1
Principal Executive Officer's Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Principal Financial Officer's Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

ii


32.1 #
32.1 #
Certifications of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 *
The following financial information from NMI Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017March 31, 2022 formatted in XBRL (eXtensible Business Reporting Language):
(i) Condensed Consolidated Balance Sheets as of September 30, 2017March 31, 2022 and December 31, 2016
2021;
58

(ii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2017March 31, 2022 and 2016
2021;
(iii) Condensed Consolidated Statements of Changes in Shareholders' Equity for the ninethree months ended September 30, 2017March 31, 2022 and the year ended December 31, 2016
2021;
(iv) Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021; and
(v) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
~Indicates a management contract or compensatory plan or contract.
+Confidential treatment granted as to certain portions, which portions have been filed separately with the SEC.
#
In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibit 32 hereto are deemed to accompany this Form 10-Q and will not be deemed "filed" for purposes of Section 18 of the Exchange Act or deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act except to the extent that the registrant specifically incorporates it by reference.

59

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NMI HOLDINGS, INC.
Date: May 4, 2022
By: /s/ Ravi Mallela                 
*In accordance with Rule 406T of Regulation S-T, the information furnished in these exhibits will not be deemed "filed" for purposes of Section 18 of the Exchange Act.  Such exhibits will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act except to the extent that the registrant specifically incorporates it by reference.Name: Ravi Mallela
Title: Chief Financial Officer and Duly Authorized Signatory




iii
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