000154790312-312020Q3false1,624,9701,113,7795,5552,6620.010.0184,808,51668,358,07484,808,51668,358,074250,000,000250,000,0002,4941,3767,6558,991117258463,4098,8292,4943,9923,6861,359P10YP10Y00015479032020-01-012020-09-30xbrli:shares00015479032020-11-03iso4217:USD00015479032020-09-3000015479032019-12-31iso4217:USDxbrli:shares00015479032020-07-012020-09-3000015479032019-07-012019-09-3000015479032019-01-012019-09-300001547903us-gaap:CommonStockMember2019-12-310001547903us-gaap:AdditionalPaidInCapitalMember2019-12-310001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001547903us-gaap:RetainedEarningsMember2019-12-310001547903us-gaap:CommonStockMember2020-01-012020-03-310001547903us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-3100015479032020-01-012020-03-310001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-310001547903us-gaap:RetainedEarningsMember2020-01-012020-03-310001547903us-gaap:CommonStockMember2020-03-310001547903us-gaap:AdditionalPaidInCapitalMember2020-03-310001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310001547903us-gaap:RetainedEarningsMember2020-03-3100015479032020-03-310001547903us-gaap:CommonStockMember2020-04-012020-06-300001547903us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-3000015479032020-04-012020-06-300001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300001547903us-gaap:RetainedEarningsMember2020-04-012020-06-300001547903us-gaap:CommonStockMember2020-06-300001547903us-gaap:AdditionalPaidInCapitalMember2020-06-300001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001547903us-gaap:RetainedEarningsMember2020-06-3000015479032020-06-300001547903us-gaap:CommonStockMember2020-07-012020-09-300001547903us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300001547903us-gaap:RetainedEarningsMember2020-07-012020-09-300001547903us-gaap:CommonStockMember2020-09-300001547903us-gaap:AdditionalPaidInCapitalMember2020-09-300001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300001547903us-gaap:RetainedEarningsMember2020-09-300001547903us-gaap:CommonStockMember2018-12-310001547903us-gaap:AdditionalPaidInCapitalMember2018-12-310001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001547903us-gaap:RetainedEarningsMember2018-12-3100015479032018-12-310001547903us-gaap:CommonStockMember2019-01-012019-03-310001547903us-gaap:AdditionalPaidInCapitalMember2019-01-012019-03-3100015479032019-01-012019-03-310001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-03-310001547903us-gaap:RetainedEarningsMember2019-01-012019-03-310001547903us-gaap:CommonStockMember2019-03-310001547903us-gaap:AdditionalPaidInCapitalMember2019-03-310001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-310001547903us-gaap:RetainedEarningsMember2019-03-3100015479032019-03-310001547903us-gaap:CommonStockMember2019-04-012019-06-300001547903us-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-3000015479032019-04-012019-06-300001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-04-012019-06-300001547903us-gaap:RetainedEarningsMember2019-04-012019-06-300001547903us-gaap:CommonStockMember2019-06-300001547903us-gaap:AdditionalPaidInCapitalMember2019-06-300001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300001547903us-gaap:RetainedEarningsMember2019-06-3000015479032019-06-300001547903us-gaap:CommonStockMember2019-07-012019-09-300001547903us-gaap:AdditionalPaidInCapitalMember2019-07-012019-09-300001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300001547903us-gaap:RetainedEarningsMember2019-07-012019-09-300001547903us-gaap:CommonStockMember2019-09-300001547903us-gaap:AdditionalPaidInCapitalMember2019-09-300001547903us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-09-300001547903us-gaap:RetainedEarningsMember2019-09-3000015479032019-09-30nmih:state0001547903nmih:ThirdPartyReinsurersMembernmih:QSRTransactionsMember2020-09-300001547903us-gaap:USTreasuryAndGovernmentMember2020-09-300001547903us-gaap:USStatesAndPoliticalSubdivisionsMember2020-09-300001547903us-gaap:CorporateDebtSecuritiesMember2020-09-300001547903us-gaap:AssetBackedSecuritiesMember2020-09-300001547903us-gaap:BondsMember2020-09-300001547903us-gaap:ShortTermInvestmentsMember2020-09-300001547903us-gaap:USTreasuryAndGovernmentMember2019-12-310001547903us-gaap:USStatesAndPoliticalSubdivisionsMember2019-12-310001547903us-gaap:CorporateDebtSecuritiesMember2019-12-310001547903us-gaap:AssetBackedSecuritiesMember2019-12-310001547903us-gaap:BondsMember2019-12-310001547903us-gaap:ShortTermInvestmentsMember2019-12-31xbrli:pure0001547903nmih:FinancialIndustryGroupMember2020-09-300001547903nmih:FinancialIndustryGroupMember2019-12-310001547903nmih:ConsumerIndustryGroupMember2020-09-300001547903nmih:ConsumerIndustryGroupMember2019-12-310001547903nmih:UtilitiesIndustryGroupMember2020-09-300001547903nmih:UtilitiesIndustryGroupMember2019-12-310001547903nmih:CommunicationsIndustryGroupMember2020-09-300001547903nmih:CommunicationsIndustryGroupMember2019-12-310001547903nmih:TechnologyIndustryGroupMember2020-09-300001547903nmih:TechnologyIndustryGroupMember2019-12-310001547903nmih:IndustrialIndustryGroupMember2020-09-300001547903nmih:IndustrialIndustryGroupMember2019-12-310001547903nmih:EnergyIndustryGroupMember2020-09-300001547903nmih:EnergyIndustryGroupMember2019-12-31nmih:security0001547903us-gaap:FairValueInputsLevel1Memberus-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:FairValueInputsLevel1Memberus-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2020-09-300001547903us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2020-09-300001547903us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2020-09-300001547903us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2020-09-300001547903us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:FairValueMeasurementsRecurringMember2020-09-300001547903us-gaap:FairValueInputsLevel1Memberus-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:FairValueInputsLevel1Memberus-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2019-12-310001547903us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2019-12-310001547903us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2019-12-310001547903us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2019-12-310001547903us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:FairValueMeasurementsRecurringMember2019-12-310001547903us-gaap:WarrantMemberus-gaap:FairValueInputsLevel3Member2019-12-310001547903us-gaap:WarrantMemberus-gaap:FairValueInputsLevel3Member2018-12-310001547903us-gaap:WarrantMemberus-gaap:FairValueInputsLevel3Member2020-01-012020-09-300001547903us-gaap:WarrantMemberus-gaap:FairValueInputsLevel3Member2019-01-012019-09-300001547903us-gaap:WarrantMemberus-gaap:FairValueInputsLevel3Member2020-09-300001547903us-gaap:WarrantMemberus-gaap:FairValueInputsLevel3Member2019-09-300001547903us-gaap:MeasurementInputSharePriceMemberus-gaap:ValuationTechniqueOptionPricingModelMemberus-gaap:FairValueInputsLevel3Member2020-09-300001547903us-gaap:MeasurementInputSharePriceMemberus-gaap:ValuationTechniqueOptionPricingModelMemberus-gaap:FairValueInputsLevel3Member2019-09-300001547903us-gaap:MeasurementInputRiskFreeInterestRateMemberus-gaap:ValuationTechniqueOptionPricingModelMemberus-gaap:FairValueInputsLevel3Member2020-09-300001547903us-gaap:MeasurementInputRiskFreeInterestRateMemberus-gaap:ValuationTechniqueOptionPricingModelMemberus-gaap:FairValueInputsLevel3Member2019-09-300001547903us-gaap:ValuationTechniqueOptionPricingModelMemberus-gaap:MeasurementInputExpectedTermMemberus-gaap:FairValueInputsLevel3Member2020-09-300001547903us-gaap:ValuationTechniqueOptionPricingModelMemberus-gaap:MeasurementInputExpectedTermMemberus-gaap:FairValueInputsLevel3Member2019-09-300001547903us-gaap:ValuationTechniqueOptionPricingModelMemberus-gaap:MeasurementInputOptionVolatilityMemberus-gaap:FairValueInputsLevel3Member2020-09-300001547903us-gaap:ValuationTechniqueOptionPricingModelMemberus-gaap:MeasurementInputOptionVolatilityMemberus-gaap:FairValueInputsLevel3Member2019-09-300001547903us-gaap:MeasurementInputExpectedDividendRateMemberus-gaap:ValuationTechniqueOptionPricingModelMemberus-gaap:FairValueInputsLevel3Member2020-09-300001547903us-gaap:MeasurementInputExpectedDividendRateMemberus-gaap:ValuationTechniqueOptionPricingModelMemberus-gaap:FairValueInputsLevel3Member2019-09-300001547903us-gaap:SeniorNotesMember2020-06-190001547903us-gaap:SeniorNotesMember2020-09-300001547903us-gaap:FairValueInputsLevel2Memberus-gaap:SeniorNotesMember2020-09-300001547903us-gaap:SeniorNotesMember2019-12-310001547903us-gaap:FairValueInputsLevel2Memberus-gaap:SeniorNotesMember2019-12-310001547903nmih:SeniorSecuredTermLoan2018Member2020-06-192020-06-190001547903us-gaap:CorporateMember2020-06-192020-06-190001547903nmih:PriorToMarch12025Memberus-gaap:SeniorNotesMember2020-06-192020-06-190001547903nmih:AfterMarch12025Memberus-gaap:SeniorNotesMember2020-06-192020-06-190001547903nmih:PriorToJune12022Memberus-gaap:SeniorNotesMember2020-06-192020-06-190001547903nmih:SeniorSecuredTermLoan2018Member2020-01-012020-09-300001547903us-gaap:SeniorNotesMember2020-06-192020-06-190001547903nmih:SecuredRevolvingCreditFacility2018Memberus-gaap:RevolvingCreditFacilityMember2020-03-190001547903nmih:SecuredRevolvingCreditFacility2018Memberus-gaap:RevolvingCreditFacilityMember2020-03-192020-03-190001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:RevolvingCreditFacilityMember2020-03-200001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:BaseRateMemberus-gaap:RevolvingCreditFacilityMember2020-03-202020-03-200001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:BaseRateMemberus-gaap:RevolvingCreditFacilityMembersrt:MinimumMember2020-03-202020-03-200001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:BaseRateMemberus-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2020-03-202020-03-200001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:RevolvingCreditFacilityMemberus-gaap:EurodollarMember2020-03-202020-03-200001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:RevolvingCreditFacilityMemberus-gaap:EurodollarMembersrt:MinimumMember2020-03-202020-03-200001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:RevolvingCreditFacilityMemberus-gaap:EurodollarMembersrt:MaximumMember2020-03-202020-03-200001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:RevolvingCreditFacilityMember2020-09-300001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:RevolvingCreditFacilityMembersrt:MinimumMember2020-03-202020-03-200001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2020-03-202020-03-200001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:RevolvingCreditFacilityMember2020-03-202020-06-300001547903us-gaap:RevolvingCreditFacilityMember2020-07-012020-09-300001547903us-gaap:RevolvingCreditFacilityMember2020-01-012020-09-300001547903nmih:SecuredRevolvingCreditFacility2018Member2020-03-190001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:RevolvingCreditFacilityMember2020-01-012020-09-300001547903nmih:TwoThousandSeventeenILNTransactionMembernmih:ThirdPartyReinsurersMembersrt:MaximumMember2020-01-012020-09-300001547903nmih:ThirdPartyReinsurersMembernmih:TwoThousandEighteenILNTransactionMembersrt:MaximumMember2020-01-012020-09-300001547903nmih:TwoThousandSeventeenILNTransactionMembernmih:ThirdPartyReinsurersMember2020-07-012020-09-300001547903nmih:TwoThousandSeventeenILNTransactionMembernmih:ThirdPartyReinsurersMember2020-01-012020-09-300001547903nmih:TwoThousandSeventeenILNTransactionMembernmih:ThirdPartyReinsurersMember2019-07-012019-09-300001547903nmih:TwoThousandSeventeenILNTransactionMembernmih:ThirdPartyReinsurersMember2019-01-012019-09-300001547903nmih:A2017ILNMember2017-05-020001547903nmih:A2017ILNMember2020-09-300001547903nmih:A2018ILNMember2018-07-250001547903nmih:A2018ILNMember2020-09-300001547903nmih:A2019ILNMember2019-07-300001547903nmih:A2019ILNMember2020-09-300001547903nmih:A20201ILNMember2019-07-300001547903nmih:A20201ILNMember2020-09-300001547903nmih:ILNTransactionsMember2020-09-30nmih:quotaShareAgreement0001547903nmih:ThirdPartyReinsurersMembernmih:EligiblePoliciesPoolOneMember2020-01-012020-09-300001547903nmih:ThirdPartyReinsurersMembernmih:EligiblePoliciesPoolTwoMember2020-01-012020-09-300001547903nmih:ThirdPartyReinsurersMembernmih:EligiblePoliciesPoolFourMember2020-01-012020-09-300001547903nmih:ThirdPartyReinsurersMembernmih:EligiblePoliciesPoolFiveMember2020-01-012020-09-300001547903nmih:EligiblePoliciesPoolSixMembernmih:ThirdPartyReinsurersMember2020-01-012020-09-300001547903nmih:ThirdPartyReinsurersMembernmih:TwoThousandSixteenQSRTransactionMember2019-04-012019-04-010001547903nmih:ThirdPartyReinsurersMembernmih:TwoThousandSixteenQSRTransactionMember2019-03-312019-03-310001547903nmih:ThirdPartyReinsurersMember2020-09-300001547903nmih:ThirdPartyReinsurersMember2019-09-300001547903nmih:ThirdPartyReinsurersMember2020-07-012020-09-300001547903nmih:ThirdPartyReinsurersMember2019-07-012019-09-300001547903nmih:ThirdPartyReinsurersMember2020-01-012020-09-300001547903nmih:ThirdPartyReinsurersMember2019-01-012019-09-300001547903nmih:ThirdPartyReinsurersMembernmih:QSRTransactionsMember2020-01-012020-09-300001547903nmih:ThirdPartyReinsurersMembernmih:TwoThousandSixteenQSRTransactionMember2020-01-012020-09-300001547903nmih:ThirdPartyReinsurersMembernmih:TwoThousandEighteenQSRTransactionMember2020-01-012020-09-300001547903nmih:ThirdPartyReinsurersMembernmih:TwoThousandTwentyQSRTransactionMember2020-01-012020-09-300001547903nmih:ThirdPartyReinsurersMembernmih:TwoThousandSixteenQSRTransactionMember2020-09-300001547903nmih:ThirdPartyReinsurersMembernmih:TwoThousandEighteenQSRTransactionMember2020-09-300001547903nmih:ThirdPartyReinsurersMembernmih:TwoThousandTwentyQSRTransactionMember2020-09-30nmih:loannmih:claim0001547903nmih:QSRTransactionsMember2020-01-012020-09-300001547903nmih:FannieMaeMember2020-09-300001547903nmih:FannieMaeMember2020-01-012020-09-300001547903nmih:FannieMaeMembernmih:TwoThousandSixteenQSRTransactionMember2020-01-012020-09-30nmih:policy00015479032012-04-30nmih:vote0001547903us-gaap:CommonStockMembernmih:PublicStockOfferingMember2020-06-082020-06-080001547903us-gaap:CommonStockMemberus-gaap:OverAllotmentOptionMember2020-06-082020-06-080001547903us-gaap:CommonStockMembernmih:PublicStockOfferingAndOverAllotmentOptionMember2020-06-082020-06-080001547903nmih:NMicandReoneCombinedMember2020-07-012020-09-300001547903nmih:NMicandReoneCombinedMember2019-07-012019-09-300001547903nmih:NMicandReoneCombinedMember2020-01-012020-09-300001547903nmih:NMicandReoneCombinedMember2019-01-012019-09-300001547903nmih:NMicandReoneCombinedMember2020-09-300001547903nmih:NMicandReoneCombinedMember2019-12-310001547903nmih:NMICMember2020-06-192020-06-190001547903srt:ScenarioForecastMembernmih:NMicandReoneCombinedMember2020-12-310001547903us-gaap:SubsequentEventMembernmih:OaktownReIVLtdMembersrt:MaximumMember2020-10-292020-10-290001547903us-gaap:SubsequentEventMember2020-10-292020-10-290001547903nmih:OaktownReIVLtdMembernmih:MortgageInsuranceLinkedNotesMemberus-gaap:SubsequentEventMember2020-10-290001547903us-gaap:SubsequentEventMembersrt:MaximumMember2020-10-292020-10-290001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:RevolvingCreditFacilityMemberus-gaap:SubsequentEventMember2020-10-290001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:RevolvingCreditFacilityMemberus-gaap:SubsequentEventMember2020-10-300001547903nmih:SecuredRevolvingCreditFacility2020Memberus-gaap:RevolvingCreditFacilityMemberus-gaap:SubsequentEventMember2020-11-05

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

FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedSeptember 30, 2020
OR
☐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
NMI Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware 45-4914248
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2100 Powell StreetEmeryville,CA 94608
(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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes ☒ 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," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
The number of shares of common stock, $0.01 par value per share, of the registrant outstanding on November 3, 2020 was 84,813,362 shares.
1

TABLE OF CONTENTS
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 6.

2

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
    This report contains forward 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, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be 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," "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 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 looking statement speaks only as of the date on which it is made and we undertake no obligation to update or revise any forward 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 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 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 combat it, 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 business practices of Fannie Mae and Freddie Mac (collectively, the GSEs), including decisions that have the impact of decreasing or discontinuing the use of mortgage insurance as credit enhancement generally, or with first time homebuyers or on very high loan-to-value mortgages;
•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 other 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 Affairs (VA) (collectively, government MIs), and potential market entry by new competitors or consolidation of existing competitors;
•developments in the world's financial and capital markets and our access to such markets, including reinsurance;
•adoption of new or changes to existing laws and regulations that impact our business or financial condition directly or the mortgage insurance industry generally or their enforcement and implementation by regulators, including any action by the Consumer Financial Protection Bureau to address the planned expiration of the "QM Patch" under the Dodd-Frank Act Ability to Repay/Qualified Mortgage rule;
•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 in particular;
•potential future lawsuits, investigations or inquiries or resolution of current lawsuits or inquiries;
•changes in general economic, market and political conditions and policies, interest rates, 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 markets and to enter into, and receive approval of, reinsurance arrangements on terms and conditions that are acceptable to us, the GSEs and our regulators;
3

•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;
•emergence of unexpected claim and coverage issues, including claims exceeding our reserves or amounts we had expected to experience;
•potential adverse impacts arising from natural disasters, including, with respect to 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;
•failure to maintain, improve and continue to develop necessary information technology (IT) systems or the failure of technology providers to perform; 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, 2019 (2019 10-K), and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, 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" and the "Company" 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, 2020 (Unaudited) and December 31, 2019
Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2020 and 2019 (Unaudited)
Condensed Consolidated Statements of Changes in Shareholders' Equity for the nine months ended September 30, 2020 and 2019 (Unaudited)
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (Unaudited)
Notes to Condensed Consolidated Financial Statements (Unaudited)

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

September 30, 2020December 31, 2019
Assets(In Thousands, except for share data)
Fixed maturities, available-for-sale, at fair value (amortized cost of $1,624,970 and $1,113,779 as of September 30, 2020 and December 31, 2019, respectively)$1,689,815 $1,140,940 
Cash and cash equivalents (including restricted cash of $5,555 and $2,662 as of September 30, 2020 and December 31, 2019, respectively)194,199 41,089 
Premiums receivable48,159 46,085 
Accrued investment income9,766 6,831 
Prepaid expenses4,579 3,512 
Deferred policy acquisition costs, net63,194 59,972 
Software and equipment, net28,131 26,096 
Intangible assets and goodwill3,634 3,634 
Prepaid reinsurance premiums8,014 15,488 
Reinsurance recoverable (1)
17,180 4,939 
Other assets (1)
15,149 16,232 
Total assets$2,081,820 $1,364,818 
Liabilities
Debt$392,987 $145,764 
Unearned premiums116,008 136,642 
Accounts payable and accrued expenses59,316 39,904 
Reserve for insurance claims and claim expenses87,230 23,752 
Reinsurance funds withheld10,364 14,310 
Warrant liability, at fair value3,135 7,641 
Deferred tax liability, net97,451 56,360 
Other liabilities 7,773 10,025 
Total liabilities774,264 434,398 
Commitments and contingencies
Shareholders' equity
Common stock - class A shares, $0.01 par value; 84,808,516 and 68,358,074 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively (250,000,000 shares authorized)848 684 
Additional paid-in capital930,906 707,003 
Accumulated other comprehensive income, net of tax47,059 17,288 
Retained earnings 328,743 205,445 
Total shareholders' equity1,307,556 930,420 
Total liabilities and shareholders' equity$2,081,820 $1,364,818 
(1)    Reinsurance recoverable has been reclassified from "Other assets" in the prior period.

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

For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Revenues(In Thousands, except for per share data)
Net premiums earned$98,802 $92,381 $296,463 $249,499 
Net investment income8,337 7,882 23,511 22,894 
Net realized investment (losses) gains (4)81 635 (219)
Other revenues648 1,244 2,771 1,700 
Total revenues107,783 101,588 323,380 273,874 
Expenses
Insurance claims and claim expenses15,667 2,572 55,698 8,238 
Underwriting and operating expenses(1)
33,969 32,335 96,616 95,325 
Service expenses(1)
557 909 2,381 1,311 
Interest expense7,796 2,979 16,481 9,111 
Loss (gain) from change in fair value of warrant liability437 (1,139)(4,286)6,025 
Total expenses58,426 37,656 166,890 120,010 
Income before income taxes49,357 63,932 156,490 153,864 
Income tax expense 11,178 14,169 33,192 32,102 
Net income $38,179 $49,763 $123,298 $121,762 
Earnings per share
Basic$0.45 $0.73 $1.63 $1.81 
Diluted$0.45 $0.69 $1.55 $1.75 
Weighted average common shares outstanding
Basic84,805 67,849 75,695 67,381 
Diluted85,599 70,137 76,867 69,520 
Net income $38,179 $49,763 $123,298 $121,762 
Other comprehensive income, net of tax:
Unrealized gains in accumulated other comprehensive income, net of tax expense of $2,494 and $1,376 for the three months ended September 30, 2020 and 2019, respectively, and $7,655 and $8,991 for the nine months ended September 30, 2020 and 2019, respectively9,381 5,177 28,799 33,824 
Reclassification adjustment for realized losses (gains) included in net income, net of tax (benefit) expense of ($1) and $17 for the three months ended September 30, 2020 and 2019, respectively, and ($258) and ($46) for the nine months ended September 30, 2020 and 2019, respectively3 (64)972 173 
Other comprehensive income, net of tax9,384 5,113 29,771 33,997 
Comprehensive income $47,563 $54,876 $153,069 $155,759 
(1)    Certain "Underwriting and operating expenses" have been reclassified as "Service expenses" in prior periods.
See accompanying notes to condensed consolidated financial statements (unaudited).
7
NMI HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

Common Stock - Class AAdditional
Paid-in Capital		Accumulated Other Comprehensive IncomeRetained EarningsTotal
SharesAmount
(In Thousands)
Balances, December 31, 201968,358 $684 $707,003 $17,288 $205,445 $930,420 
Common stock: class A shares issued related to warrant exercises6 *221 — — 221 
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes510 5 (3,755)— — (3,750)
Share-based compensation expense— — 2,552 — — 2,552 
Change in unrealized investment gains/losses, net of tax benefit of $3,409— — — (12,824)— (12,824)
Net income— — — — 58,271 58,271 
Balances, March 31, 202068,874 $689 $706,021 $4,464 $263,716 $974,890 
Common stock: class A shares issued related to public offering15,870 $159 $219,528 $— $— $219,687 
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes61 *(321)— — (321)
Share-based compensation expense— — 2,722 — — 2,722 
Change in unrealized investment gains/losses, net of tax expense of $8,829— — — 33,211 — 33,211 
Net income— — — — 26,848 26,848 
Balances, June 30, 202084,805 $848 $927,950 $37,675 $290,564 $1,257,037 
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes4 *— — — — 
Share-based compensation expense— — 2,956 — — 2,956 
Change in unrealized investment gains, net of tax expense of $2,494— — — 9,384 — 9,384 
Net income— — — — 38,179 38,179 
Balances, September 30, 202084,809 $848 $930,906 $47,059 $328,743 $1,307,556 

*    During the three months ended March 31, 2020, we issued 6,474 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. During the three months ended June 30, 2020 and September 30, 2020, we issued 61,226 and 3,750 common shares, respectively, with a par value of $0.01 in connection with the exercise of options, and vesting of restricted stock units granted under our stock plans, which are not identifiable in this schedule due to rounding.
8
NMI HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
Common Stock - Class AAdditional
Paid-in Capital		Accumulated Other Comprehensive IncomeRetained Earnings Total
SharesAmount
(In Thousands)
Balances, December 31, 201866,319 $663 $682,181 $(14,832)$33,488 $701,500 
Common stock: class A shares issued related to warrant exercises39 *944 — — 944 
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes1,144 12 (1,471)— — (1,459)
Share-based compensation expense— — 2,981 — — 2,981 
Change in unrealized investment gains/losses, net of tax expense of $3,992— — — 15,016 — 15,016 
Net income— — — — 32,899 32,899 
Balances, March 31, 201967,502 $675 $684,635 $184 $66,387 $751,881 
Common stock: class A shares issued related to warrants128 $1 3,835 — — 3,836 
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes138 1 218 — — 219 
Share-based compensation expense— — 3,475 — — 3,475 
Change in unrealized investment gains/losses, net of tax expense of $3,686— — — 13,868 — 13,868 
Net income— — — — 39,100 39,100 
Balances, June 30, 201967,768 $677 $692,163 $14,052 $105,487 $812,379 
Common stock: class A shares issued related to warrants82 1 2,176 — — 2,177 
Common stock: class A shares issued under stock plans, net of shares withheld for employee taxes77 1 655 — — 656 
Share-based compensation expense— — 3,399 — — 3,399 
Change in unrealized investment gains/losses, net of tax expense of $1,359— — — 5,113 — 5,113 
Net income— — — — 49,763 49,763 
Balances, September 30, 201967,927 $679 $698,393 $19,165 $155,250 $873,487 

*    During the three months ended March 31, 2019, we issued 39,195 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.
See accompanying notes to condensed consolidated financial statements (unaudited).



9
NMI HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the nine months ended September 30,
20202019
Cash flows from operating activities(In Thousands)
Net income $123,298 $121,762 
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment (gains) losses(635)219 
(Gain) loss from change in fair value of warrant liability(4,286)6,025 
Depreciation and amortization7,378 6,661 
Net amortization of premium on investment securities2,116 943 
Amortization of debt discount and debt issuance costs3,600 754 
Deferred income taxes33,178 31,991 
Share-based compensation expense8,230 9,855 
Changes in operating assets and liabilities:
Premiums receivable(2,074)(9,723)
Accrued investment income(2,935)(1,191)
Prepaid expenses(1,067)(1,472)
Deferred policy acquisition costs, net(3,222)(9,802)
Other assets (81)(8,428)
Unearned premiums(20,634)(13,747)
Reserve for insurance claims and claim expenses63,478 7,694 
Reinsurance recoverable(12,241)(1,308)
Reinsurance balances, net 2,857 529 
Accounts payable and accrued expenses18,017 (1,195)
Net cash provided by operating activities214,977 139,567 
Cash flows from investing activities
Purchase of short-term investments(41,872)(190,122)
Purchase of fixed-maturity investments, available-for-sale(902,524)(186,793)
Proceeds from maturity of short-term investments85,689 200,105 
Proceeds from redemptions, maturities and sale of fixed-maturity investments, available-for-sale346,931 66,996 
Software and equipment(9,102)(7,449)
Net cash (used in) investing activities(520,878)(117,263)
Cash flows from financing activities
Proceeds from issuance of common stock related to public offering, net of issuance costs219,687 — 
Proceeds from issuance of common stock related to employee equity plans3,407 13,733 
Taxes paid related to net share settlement of equity awards(7,465)(14,317)
Proceeds from senior secured notes400,000 — 
Repayments of term loan(147,750)(1,125)
Payments of debt issuance costs(8,868)— 
Net cash provided by (used in) financing activities459,011 (1,709)
Net increase in cash, cash equivalents and restricted cash153,110 20,595 
Cash, cash equivalents and restricted cash, beginning of period41,089 25,294 
Cash, cash equivalents and restricted cash, end of period$194,199 $45,889 
Supplemental disclosures of cash flow information
Interest paid$4,286 $8,060 
Income taxes refunded$76 $119 
(1)    Reinsurance recoverable have been reclassified from "Reinsurance balance, net" in the prior period.
See accompanying notes to condensed consolidated financial statements (unaudited).
10
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Organization, Basis of Presentation and Summary of Accounting Principles
NMI Holdings, Inc. (NMIH) is a Delaware corporation, incorporated in May 2011, to provide private mortgage guaranty insurance (which we refer to as mortgage insurance or MI) through its wholly-owned insurance subsidiaries, National Mortgage Insurance Corporation (NMIC) and National Mortgage Reinsurance Inc One (Re One). Our common stock is listed on the NASDAQ exchange under the ticker symbol "NMIH."
In April 2013, NMIC, our primary insurance subsidiary, issued its first mortgage insurance policy. NMIC is licensed to write mortgage insurance in all 50 states and D.C. In August 2015, NMIH capitalized a wholly-owned subsidiary, NMI Services, Inc. (NMIS), through which we offer outsourced loan review services to mortgage loan originators.
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, 2019, included in our 2019 10-K. All intercompany transactions have been eliminated. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities as of the balance sheet date. Estimates also affect the reported amounts of income and expenses for the reporting period. Actual results could differ from those estimates. Certain reclassifications to previously reported financial information have been made to conform to current period presentation. 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, 2020.
COVID-19 Developments
On January 30, 2020, the World Health Organization (WHO) declared the outbreak of COVID-19 a global health emergency and characterized the outbreak as a global pandemic on March 11, 2020. In an effort to stem contagion and control the COVID-19 pandemic, the population at large has severely curtailed day-to-day activity and local, state and federal regulators have imposed a broad set of restrictions on personal and business conduct nationwide. The COVID-19 pandemic, along with the widespread public and regulatory response, has caused a dramatic slowdown in U.S. and global economic activity and a record number of Americans have been furloughed or laid-off.
The global dislocation caused by COVID-19 is unprecedented and, while there is broad hope for medical advances that might relieve the crisis and provide for a near-term return to normalized activity, it is not known how long the dislocation will persist and if or when any such medical advances may be developed or made available. In response to the COVID-19 outbreak and continuing uncertainties, we activated our business continuity program to ensure our employees are safe and able to continue serving our customers and their borrowers without interruption. We have also sought to broadly assess the impact that the COVID-19 outbreak has had and may continue to have on the U.S economy and housing market, and the implications for the mortgage insurance market, and our business performance and financial position, including our new business production, default and claims experience, and investment portfolio results. Given the uncertainty that remains, we cannot fully assess or estimate the ultimate impact of COVID-19.
Significant Accounting Principles
There have been no changes to our significant accounting principles as described in Item 8, "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 2 - Summary of Accounting Principles" of our 2019 10-K, other than as noted in "Investments," "Premium Receivables," "Reinsurance" and "Recent Accounting Pronouncements - Adopted" below.
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 statement of operations if (i) we intend to sell the impaired security; or (ii) it is more likely than not that we will be required to sell the impaired security prior to recovery of its amortized cost basis. If a sale is intended or likely to be required, we write down the amortized cost basis of the security to fair value and recognize the full amount of the impairment through the statement of operations as a "Realized Investment Loss."
11
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For securities in an unrealized loss position where a sale is not intended or likely to be required, we further assess if the decline in fair value below amortized cost is driven by a credit related impairment, considering several items including, but not limited to:
•the severity of the decline in fair value;
•the financial condition of the issuer;
•the failure of the issuer to make scheduled interest or principal payments;
•recent rating downgrades of the applicable security or issuer by one or more nationally recognized statistical ratings organization; and
•other adverse conditions related to or impacting the security or issuer.
To the extent we determine that a security impairment is credit-related, an impairment loss is recognized through the statement of operations as a provision for credit loss expense, and presented as a "Realized Investment Loss." We recognize an allowance for credit losses for the difference between the amortized cost and present value of future expected cash flows, limited by the amount the fair value of the security is below its amortized cost. Subsequent changes (favorable and unfavorable) in credit losses are recognized through the statement of operations as a provision for or a reversal of credit loss expense, and presented as a "Realized Investment Gain or Loss." The portion of a security impairment attributed to other non-credit related factors is recognized in other comprehensive income, net of taxes.
We have elected to present accrued interest receivable separately from available for sale securities on our consolidated balance sheet. Accrued interest receivable was $9.8 million as of September 30, 2020 and is included in "Accrued Investment Income." We have elected not to measure an allowance for credit losses for accrued interest receivable on available for sale securities. Accrued interest for available for sale securities is written off against interest income when the receivable has aged 90 days past due. We did not write off any accrued interest receivable during the three or nine months ended September 30, 2020.
Premiums 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 did not establish an allowance for credit loss at September 30, 2020.
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 have established a reserve for premium write-offs based on historical experience; such reserve was deemed to be immaterial at September 30, 2020.
Reinsurance
We account for premiums, claims and claim expenses that are ceded to reinsurers on a basis consistent with that which we use to account for 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 a reduction to premium revenue.
NMIC has entered into quota share reinsurance treaties effective September 1, 2016 (the 2016 QSR Transaction), January 1, 2018 (the 2018 QSR Transaction) and April 1, 2020 (the 2020 QSR Transaction), which we refer to collectively as the QSR Transactions. We earn profit and ceding commissions in connection with the QSR Transactions. Profit commissions represent a percentage of the profits recognized by reinsurers that are returned to us, based on the level of claims and claim expenses that 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 under the 2016 QSR Transaction and as a percentage of ceded earned premiums under the 2018 and 2020 QSR Transactions, and are intended to cover our costs of acquiring and servicing direct policies. We recognize any ceding commissions we earn 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 earned as a reduction to underwriting and operating expenses.
12
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Under the QSR Transactions, we cede a portion of claims and claim expense reserves to our reinsurers, and account for such ceded reserves as "Reinsurance Recoverables" on the consolidated balance sheets and such ceded claims as reductions to claims expenses on the consolidated statements of operations. As of September 30, 2020, we had $17.2 million of reinsurance recoverables under the QSR Transactions. We remain directly liable for all claim payments if we are unable to collect the recoverables due from our reinsurers and, as such, we actively monitor and manage our counterparty credit exposure to our reinsurance providers. We establish an allowance for expected credit loss against our reinsurance recoverables if we do not expect to recover amounts due from one or more of our reinsurance counterparties, and report our reinsurance recoverables net of such allowance, if any. We actively monitor the counterparty credit profiles of our reinsurers and each is required to partially collateralize its obligations under the terms of our QSR Transactions. As of September 30, 2020, we did not recognize any allowance for credit loss with respect to our reinsurance recoverables.
Variable Interest Entities
    NMIC is a party to reinsurance agreements with Oaktown Re Ltd., Oaktown Re II Ltd., Oaktown Re III Ltd. and Oaktown Re IV Ltd. (special purpose reinsurance entities collectively referred to as the Oaktown Re Vehicles) effective May 2, 2017, July 25, 2018, July 30, 2019 and July 30, 2020, respectively. At inception of the respective reinsurance agreements, we determined that each of the Oaktown Re Vehicles were variable interest entities (VIEs), as defined under GAAP Accounting Standards Codification (ASC) 810, because they did not have sufficient equity at risk to finance their respective activities. We evaluated the VIEs at inception to determine whether NMIC was the primary beneficiary under each deal and, if so, whether we were required to consolidate the assets and liabilities of each 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 each VIE and as such, we do not consolidate them in our consolidated financial statements.

Recent Accounting Pronouncements - Adopted
In June 2016, the Financial Accounting Standard Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326) and subsequently issued amendments to the initial guidance: ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses (Topic 815), Derivatives and Hedging, and Topic 825, Financial Instruments, ASU 2019-05, Financial Instruments-Credit Losses: Targeted Transition Relief, and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses. These updates will require companies to measure and establish reserves for lifetime expected credit losses on many financial assets held at a given reporting date. Under the guidance, the methodology for measuring lifetime credit losses shifts from an incurred loss model, whereby losses are only recognized once probable and estimable, to a current expected credit loss (CECL) model, whereby losses are recognized upfront based on a future economic forecast. Credit losses relating to available-for-sale fixed maturity securities are recorded through an allowance for credit losses, rather than a write-down of the asset as was required, with the amount of the allowance limited to the amount by which fair value is less than amortized cost. The length of time an available-for sale fixed maturity security has been held in an unrealized loss position will no longer impact its credit loss determination. We adopted these updates on January 1, 2020. Adoption of the updated standards did not have a material impact on our consolidated financial statements, and had no impact on our accounting for insurance claims and claim expenses as these items are not in scope of the guidance.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). This update modifies the fair value measurement disclosure requirements of ASC 820. We adopted this ASU on January 1, 2020 and determined it did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40). This update applies to cloud computing arrangements structured as service contracts, and provides companies with guidance on the criteria for capitalizing implementation, set-up and other up-front costs incurred in association with these arrangements. We adopted this ASU on January 1, 2020 and applied it on a prospective basis for eligible costs incurred after the effective date. The adoption of this ASU did not have a material impact on our consolidated financial statements.
Recent Accounting Pronouncements - Not Yet Adopted
In August 2018, the FASB issued ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts. This update provides guidance to the existing recognition, measurement, presentation and disclosure requirements for
13
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
long-duration contracts issued by an insurance entity. The FASB subsequently issued ASU 2019-09 in November 2019, which amended the effective date for this standard. The standard will now take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. We are currently evaluating the impact the adoption of this ASU will have, if any, on our consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This update eliminates certain exceptions for recognizing deferred taxes for investments, performing intra-period allocations and calculating income taxes in interim periods. The ASU also includes guidance to reduce complexity in certain income tax areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We will adopt these updates on January 1, 2021 and do not expect them to have material impacts on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This 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 in 2021. 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. The standard is effective immediately through December 31, 2022 for all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. We are currently evaluating the impact the adoption of this ASU would have, if any, to our contract modifications that are affected by the discontinuation of LIBOR.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity's Own Equity (Subtopic 815-40). This update simplifies the accounting for convertible instruments and contracts on an entity's own equity, including warrants, eliminating certain triggers for derivative accounting. The standard will take effect for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. We are currently evaluating the impact the adoption of this ASU will have, if any, on our consolidated financial statements, including our warrant liability.

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 statement of operations if (i) we intend to sell the impaired security; or (ii) it is more likely than not that we will be required to sell the impaired security prior to recovery of its amortized cost basis. If a sale is intended or likely to be required, we write down the amortized cost basis of the security to fair value and recognize the full amount of the impairment through the statement of operations as a "Realized Investment Loss." To the extent we determine that a security impairment is credit-related, an impairment loss is recognized through the statement of operations as a provision for credit loss expense. The portion of a security impairment attributed to other non-credit related factors is recognized in other comprehensive income, net of taxes.
Fair Values and Gross Unrealized Gains and Losses on Investments
Amortized
Cost		Gross UnrealizedFair
Value
GainsLosses
As of September 30, 2020(In Thousands)
U.S. Treasury securities and obligations of U.S. government agencies$31,204 $2,393 $— $33,597 
Municipal debt securities318,436 11,139 (24)329,551 
Corporate debt securities1,144,217 49,583 (703)1,193,097 
Asset-backed securities130,757 2,486 (29)133,214 
Total bonds1,624,614 65,601 (756)1,689,459 
Short-term investments356 — — 356 
Total investments$1,624,970 $65,601 $(756)$1,689,815 
14
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Amortized
Cost		Gross UnrealizedFair
Value
GainsLosses
As of December 31, 2019(In Thousands)
U.S. Treasury securities and obligations of U.S. government agencies$48,203 $784 $(58)$48,929 
Municipal debt securities189,530 1,721 (1,035)190,216 
Corporate debt securities661,719 23,373 (211)684,881 
Asset-backed securities170,153 2,603 (114)172,642 
Total bonds1,069,605 28,481 (1,418)1,096,668 
Short-term investments44,174 98 — 44,272 
Total investments$1,113,779 $28,579 $(1,418)$1,140,940 
We did not own any mortgage-backed securities in our asset-backed securities portfolio at September 30, 2020 or December 31, 2019. We periodically recognize unsettled trades payable or receivable in connection with our investing activity. Unsettled trades payable represent funds due for investments purchased at period end. Unsettled trades receivable represent funds due for investments sold at period end.
The following table presents a breakdown of the fair value of our corporate debt securities by issuer industry group as of September 30, 2020 and December 31, 2019:
September 30, 2020December 31, 2019
Financial36 %38 %
Consumer24 26 
Utilities11 9 
Communications11 10 
Technology 10 7 
Industrial8 8 
Energy— 2 
Total100 %100 %
As of September 30, 2020 and December 31, 2019, approximately $5.7 million and $5.5 million, respectively, of our cash and investments were held in the form of U.S. Treasury securities on deposit with various state insurance departments to satisfy regulatory requirements.
Scheduled Maturities
The amortized cost and fair value of available-for-sale securities as of September 30, 2020 and December 31, 2019, 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, 2020Amortized
Cost		Fair
Value
(In Thousands)
Due in one year or less$79,742 $80,330 
Due after one through five years479,455 504,960 
Due after five through ten years912,664 947,919 
Due after ten years22,352 23,392 
Asset-backed securities130,757 133,214 
Total investments$1,624,970 $1,689,815 

15
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
As of December 31, 2019Amortized
Cost		Fair
Value
(In Thousands)
Due in one year or less$138,776 $139,113 
Due after one through five years406,986 417,208 
Due after five through ten years380,737 394,180 
Due after ten years17,127 17,797 
Asset-backed securities170,153 172,642 
Total investments$1,113,779 $1,140,940 
Aging of Unrealized Losses
As of September 30, 2020, the investment portfolio had gross unrealized losses of $0.8 million, of which $28 thousand had been in an unrealized loss position for a period of 12 months or longer. For those securities in an unrealized loss position, the length of time 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 September 30, 2020(Dollars in Thousands)
Municipal debt securities9 $15,706 $(24)— $— $— 9 $15,706 $(24)
Corporate debt securities20 101,088 (702)1 33 (1)21 101,121 (703)
Asset-backed securities2 7,311 (2)1 2,724 (27)3 10,035 (29)
Total 31 $124,105 $(728)2 $2,757 $(28)33 $126,862 $(756)

Less Than 12 Months12 Months or GreaterTotal
# of SecuritiesFair ValueUnrealized Losses# of SecuritiesFair ValueUnrealized Losses# of SecuritiesFair ValueUnrealized Losses
As of December 31, 2019(Dollars in Thousands)
U.S. Treasury securities and obligations of U.S. government agencies4 $12,001 $(58)— $— $— 4 $12,001 $(58)
Municipal debt securities26 92,844 (1,034)1 999 (1)27 93,843 (1,035)
Corporate debt securities10 30,481 (140)14 23,976 (71)24 54,457 (211)
Asset-backed securities9 19,236 (102)1 2,988 (12)10 22,224 (114)
Total49 $154,562 $(1,334)16 $27,963 $(84)65 $182,525 $(1,418)
Allowance for credit losses
As of September 30, 2020, 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 and nine months ended September 30, 2020. Based on current facts and circumstances, we believe the unrealized losses as of September 30, 2020 are not indicative of the ultimate collectability of the current amortized cost of the securities.
During the nine months ended September 30, 2019, we recognized $0.4 million other-than-temporarily impaired (OTTI) losses in connection with the planned sale of a security that was disposed of in April 2019.
16
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Net Investment Income
The following table presents the components of net investment income:
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
(In Thousands)
Investment income$8,624 $8,003 $24,293 $23,240 
Investment expenses(287)(121)(782)(346)
Net investment income$8,337 $7,882 $23,511 $22,894 
The following table presents the components of net realized investment gains (losses):
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
(In Thousands)
Gross realized investment gains$— $81 $5,126 $297 
Gross realized investment losses(4)— (4,491)(516)
Net realized investment (losses) gains $(4)$81 $635 $(219)

3. Fair Value of Financial Instruments
The following describes the valuation techniques used by us to determine the fair value of our financial instruments:
We established a fair value hierarchy by prioritizing the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under this standard are described below:
Level 1 - Fair value measurements based on quoted prices in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments.
Level 2 - Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 - Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions, which require significant management judgment or estimation about the inputs a hypothetical market participant would use to value that asset or liability.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Assets classified as Level 1 and Level 2
To determine the fair value of securities available-for-sale in Level 1 and Level 2 of the fair value hierarchy, independent pricing sources have been utilized. One price is provided per security based on observable market data. To ensure securities are appropriately classified in the fair value hierarchy, we review the pricing techniques and methodologies of the independent pricing sources and believe that their policies adequately consider market activity, either based on specific transactions for the issue valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded. A variety of inputs are utilized by the independent pricing sources including benchmark yields, reported trades, non-binding broker/dealer quotes, issuer spreads, two sided markets, benchmark securities, bids, offers and reference data including data
17
NMI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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.
Liabilities classified as Level 3
We calculate the fair value of outstanding warrants utilizing Level 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.
The following tables present the level within the fair value hierarchy at which our financial instruments were measured:
Fair Value Measurements Using
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Fair Value
As of September 30, 2020(In Thousands)
U.S. Treasury securities and obligations of U.S. government agencies$33,597 $— $— $33,597 
Municipal debt securities— 329,551 — 329,551 
Corporate debt securities— 1,193,097 — 1,193,097 
Asset-backed securities— 133,214 — 133,214 
Cash, cash equivalents and short-term investments194,555 — — 194,555 
Total assets$228,152 $1,655,862 $— $1,884,014 
Warrant liability— — 3,135 3,135 
Total liabilities$— $— $3,135 $3,135 

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)