# Enact Holdings, Inc. (ACT) FY 2023 MD&A Verbatim Item 7 Management's Discussion and Analysis from Enact Holdings, Inc.'s 10-K for fiscal year 2023. SEC filing source: https://www.sec.gov/Archives/edgar/data/1823529/000182352924000036/act-20231231.htm Accession: 0001823529-24-000036 Filing date: 2024-02-29 Report date: 2023-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/ACT/ All MD&A years: /company/ACT/mda/ Previous year: /company/ACT/mda/fy2022/ (FY 2022) Next year: /company/ACT/mda/fy2024/ (FY 2024) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes for the years ended December 31, 2023, 2022 and 2021 included in Item 8 of this Annual Report. This discussion includes forward-looking statements and involves numerous risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. For factors that could cause such differences refer to the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors.” We are not undertaking any obligation to update any forward-looking statements or other statements we may make in the following discussion or elsewhere in this document even though these statements may be affected by events or circumstances occurring after the forward-looking statements or other statements were made. Future results could differ significantly from the historical results presented in this section. References to EHI, the “Company,” “we” or “our” herein are, unless the context otherwise requires, to EHI on a consolidated basis. Overview of Business We are a leading private mortgage insurance company, having served the United States housing finance market since 1981, and operate in all 50 states and the District of Columbia. Our mortgage insurance products provide credit protection to mortgage lenders, covering a portion of the unpaid principal balance of Low Down Payment Loans in the event of a default. We believe we have built a leading platform based on long-tenured customer relationships, underwriting excellence and prudent risk and capital management practices. Our business objective is to leverage our competitive strengths to drive market share, maintain our strong capitalization and strong earnings profile and deliver attractive risk-adjusted returns to our stockholders. We generate revenues by providing mortgage credit protection to our customers in exchange for premiums, which we set based on our evaluation of the underlying risk we insure. Once the premium rate is established and coverage is activated, the premium rate remains unchanged for the first ten years of the policy; thereafter the premium rate resets to a lower rate used for the remaining life of the policy. In general, we can only cancel coverage for a failure to pay premiums or at servicer direction when the borrowers achieve the required amount of home equity. Our premium rate is applied predominantly to the original loan balance to determine either a monthly payment that the lender adds to the borrower’s monthly loan payment or a single upfront payment made by either the borrower or lender at loan closing. The amount of premiums earned from our insurance portfolio and the timing of premium recognition are also affected by persistency rate, which we measure as the percentage of loans that remain on our books based on the annualized cancellations for the period. We also employ a CRT program to transfer a portion of our risk through traditional XOL and quota share reinsurance arrangements and the issuance of ILNs. In exchange, we cede a negotiated amount of our premiums to the reinsurers and ILN investors that participate in our CRT transactions. Our net premiums earned (i.e., materially, the gross premiums charged less premiums ceded as part of our CRT program) represent the largest source of our revenues. Importantly, our CRT program helps to manage risk in our operating model and spread the risk of loss across our counterparties while also providing capital relief. We also invest our premiums in high quality, predominantly fixed income assets with the primary business objectives of preserving capital, generating investment income and maintaining sufficient liquidity to cover our operating expenses and pay future claims. The investment income generated through our investment portfolio is another significant source of our revenues. We generate profits through collection of premiums and investment income less losses, operating expenses, interest expense and taxes. Our mortgage insurance coverage protects lenders against loss in the event of a borrower default by covering a portion of the outstanding principal balance of a loan. In the event of a borrower default, our coverage reduces and, in certain instances eliminates, losses to the 67 insured by transferring the covered portion of the economic loss to us. Borrower defaults are first reported to us as new delinquencies when the borrower fails to make two consecutive monthly mortgage payments. Incurred losses are our estimate of future claims on these new delinquencies as well as any change in the prior estimates for previously existing delinquencies. In addition, incurred losses include estimates of future claims on IBNR delinquencies. Our incurred losses are based on estimates of both the rate at which delinquencies will go to claim (i.e., claim rate) and the ultimate claim amount (i.e., claim severity). Claim frequency and severity estimates are established based on historical experience focusing on certain delinquency and loan attributes that influence the probability and amount of ultimate claim. Our estimates of ultimate claim amounts for each delinquency include loss adjustment expense (“LAE”) that are costs incurred in the settlement of the claim process such as legal fees and costs to record, process and adjust claims. Incurred losses are generally affected by macroeconomic conditions, borrower credit quality, certain loan attributes, underwriting quality and our loss mitigation efforts among other factors detailed below. Key Factors Affecting Our Results Our financial position and results of operations depend to a significant extent on the following factors, as noted below in “—Trends and Conditions.” Mortgage Origination Volume The level of mortgage origination volume is a key driver of our future revenues. The overall mortgage origination market is influenced by macroeconomic factors such as the rate of economic growth, the unemployment rate, interest rates, home affordability, household savings rates, the inventory of unsold homes, demographics of potential homebuyers and credit availability. The mortgage origination market is also influenced by various legislative and regulatory actions and GSE programs and policies that impact the housing and mortgage finance industries. Penetration The penetration rate of private mortgage insurance is mainly influenced by the competitiveness of private mortgage insurance compared to alternative products for Low Down Payment Loans provided by government agencies (principally the FHA and the VA), portfolio lenders that self-insure, reinsurers and capital market transactions designed to mitigate risk. In addition, the private mortgage insurance industry’s penetration rate is driven by the relative percentage of purchase mortgage originations versus refinances. Private mortgage insurance penetration tends to be significantly higher on new mortgages for purchased homes than on the refinance of existing mortgages, because average LTV ratios are typically higher on home purchases and therefore are more likely to require mortgage insurance. Lastly, we believe the penetration rate of private mortgage insurance is influenced by other factors, including lender preference, FHA competitiveness and risk appetite, loan limits, contractual terms including cancellability and loss mitigation practices. Credit and Regulatory Environment The level of private mortgage insurance market penetration (“market penetration”) and eventual market size is affected in part by actions taken by the GSEs and the United States government, including the FHA, the FHFA and Congress, that impact housing or housing finance policy. In the past, these actions have included announced changes, or potential changes, to underwriting standards, FHA pricing, GSE guaranty fees and loan limits, as well as low down payment programs available through the FHA or GSEs. Competition and Market Share Competitors include other private mortgage insurers that are eligible to write business for the GSEs. We compete with other private mortgage insurers based on pricing, underwriting guidelines, customer relationships, service levels, policy terms, loss mitigation practices, perceived financial strength (including 68 comparative credit ratings), reputation, strength of management, product features and technology ease-of-use. We also compete with governmental agencies (principally the FHA and the VA) primarily based on price and underwriting guidelines. Pricing is highly competitive in the mortgage insurance industry, with industry participants competing for market share, customer relationships and overall value. Recent pricing trends have introduced an increasing number of loan, borrower, lender and property attributes, resulting in expanded granularity in pricing regimes and a shift from traditional published rate cards to dynamic pricing engines that better align price and risk. Our proprietary risk-based pricing engine evaluates returns and volatility under both the PMIERs capital framework and our internal economic capital framework, which is sensitive to economic cycles and current housing market conditions. The model assesses the performance of new business under expected and stress scenarios on an individualized loan basis, which is used to determine pricing and inform our risk selection strategy that optimizes economic value by balancing return and volatility. Seasonality Consistent with the seasonality of home sales, purchase mortgage origination volumes typically increase in late spring and peak during summer months, leading to a rise in NIW volume during the second and third quarters of a given year. Refinancing volume, however, does not follow a similar seasonal trend and instead is primarily influenced by interest rates, which can overwhelm typical seasonal trends. Delinquency performance (new delinquency formation and cure behavior) is generally favorable in the first and second quarters of the year. Therefore, we typically experience lower levels of losses resulting from favorable delinquency activity in the first and second quarters, as typically compared to the third and fourth quarters. As a result of delinquencies from COVID-19 and subsequent cure activity, including the impact of forbearance policies on delinquency recognition and performance recent trends may not follow traditional seasonality. The following table presents our NIW, number of cures and new delinquencies for primary policies, excluding our run-off insurance block with reference properties in Mexico, for the periods indicated: [[GREPCENT_TABLE]] [["Seasonality","","","","","","","","","","","","Three months ended"],["(Dollar amounts in millions)","","","","","","","","","","","","Mar 31, 2022","Jun 30, 2022","Sep 30, 2022","Dec 31, 2022","Mar 31, 2023","Jun 30, 2023","Sep 30, 2023","Dec 31, 2023"],["NIW","","","","","","","","","","","","$18,823","$17,448","$15,069","$15,145","$13,154","$15,083","$14,391","$10,453"],["% Change","","","","","","","","","","","","(12.2)%","(7.3)%","(13.6)%","0.5%","(13.1)%","14.7%","(4.6)%","(27.4)%"],["Cure Counts","","","","","","","","","","","","10,860","10,806","9,588","9,024","10,771","9,609","9,778","10,317"],["% Change","","","","","","","","","","","","(9.0)%","(0.5)%","(11.3)%","(5.9)%","19.4%","(10.8)%","1.8%","5.5%"],["New Delinquency Count","","","","","","","","","","","","8,724","7,847","9,121","10,304","9,599","9,205","11,107","11,706"],["% Change","","","","","","","","","","","","5.3%","(10.1)%","16.2%","13.0%","(6.8)%","(4.1)%","20.7%","5.4%"]] [[/GREPCENT_TABLE]] NIW NIW occurs when a lender activates mortgage insurance coverage on a closed mortgage loan. NIW increases our IIF, premiums written and premiums earned. NIW is affected by the overall size of the mortgage origination market, the penetration rate of private mortgage insurance into the overall mortgage origination market and our market share of the private mortgage insurance market. Pricing Our pricing strategy is designed to charge premium rates commensurate with the underlying risk of each loan we insure. Our proprietary platform provides us with a more flexible, granular and analytical approach to selecting and pricing risk. Using our platform, we can quickly change price to modify our risk selection levels, respond to industry pricing trends or adjust to changing economic conditions. We believe that our platform, powered by our proprietary risk model and our understanding of mortgage risk volatility, provides us with a highly sophisticated pricing regime that improves our risk selection and is designed to yield attractive risk adjusted returns through credit cycles. 69 IIF IIF at the time of origination is used to determine premiums as the premium rate is expressed as a percentage of IIF. IIF is one of the primary drivers of our future earned premium. Based on the composition of our insurance portfolio, with monthly premium policies comprising a larger proportion of our total portfolio than single premium policies, an increase or decrease in IIF generally has a corresponding impact on premiums earned. Cancellations of our insurance policies as a result of prepayments and other reductions of IIF, such as rescissions of coverage and claims paid, generally have a negative effect on premiums earned. Persistency Rate and Business Mix The percentage of our IIF that remains insured after taking into account annualized cancellations for the period presented is defined as our persistency rate. Because our insurance premiums are earned over the life of a policy, higher or lower persistency rates can have a significant impact on our profitability. The rise of interest rates throughout 2022 and 2023 has significantly increased persistency in the portfolio, but this impact is partially offset by lower NIW. Loan prepayment speeds and the relative mix of business between single premium policies and monthly premium policies also impact our profitability. Assuming all other factors remain constant over the life of the policies, prepayment speeds have an inverse impact on IIF and the expected premium from our monthly policies. Slower prepayment speeds, demonstrated by a higher persistency rate, result in IIF remaining in place, providing increased premium from monthly policies over time as premium payments continue. Earlier than anticipated prepayments, demonstrated by a lower persistency rate, reduce IIF and the premium from our monthly policies. The following table presents the weighted average mortgage interest rate on outstanding primary IIF as of December 31, 2023, excluding our run-off business. Prepayment speeds may be affected by changes in interest rates, among other factors. An increasing interest rate environment generally will reduce refinancing activity and result in lower prepayments. A declining interest rate environment generally will increase refinancing activity and increase prepayments. [[GREPCENT_TABLE]] [["Policy Year","","Weightedaveragerate (1)"],["2008 and prior","","5.74","%"],["2009-2015","","4.34","%"],["2016","","3.94","%"],["2017","","4.30","%"],["2018","","4.82","%"],["2019","","4.25","%"],["2020","","3.27","%"],["2021","","3.11","%"],["2022","","4.89","%"],["2023","","6.68","%"],["Total portfolio","","4.41","%"]] [[/GREPCENT_TABLE]] ______________ (1)Average Annual Mortgage Interest Rate weighted by IIF. In contrast to monthly premium policies, when single premium policies are cancelled by the insured because the loan has been paid off or otherwise, any remaining unearned premiums are earned at cancellation. Although these cancellations reduce IIF, assuming all other factors remain constant, the profitability of our single premium business increases when persistency rates are lower. As of 70 December 31, 2023 and 2022, single premium policies comprised 10% and 12% of primary IIF, respectively. Credit Quality Improved analytics, stronger loan origination quality controls and the regulatory implementation of the QM Rule have resulted in a significant improvement in the credit quality for loans originated in the private mortgage insurance market over time. Additionally, private mortgage insurers and the GSEs have maintained strong credit standards over the past decade, with average FICO scores for NIW persisting at levels significantly above historical averages. As a result, the industry is insuring loans from borrowers who should be better positioned to meet their mortgage obligations. More recently, in response to FTHB demand, there has been modest credit expansion that accommodates LTV over 95% and higher DTI ratios. Even after this expansion, private mortgage insurers and the GSEs have maintained strong credit standards well above historical norms. Net Investment Income Net investment income is determined primarily by the invested assets held and the average yield on our overall investment portfolio. Net Investment Gains (Losses) The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on such factors as market opportunities, our capital profile and overall market cycles that impact the timing of selling securities. Losses Incurred Losses incurred represent current payments and changes in the estimated future payments on claims that result from delinquent loans. We estimate an expense only for delinquent loans as explained in Note 2 to our consolidated financial statements. Incurred losses depend to a significant extent on the following factors: •deterioration of regional or national economic conditions leading to a reduction in borrowers’ income and thus their ability to make mortgage payments; •legislative, regulatory, FHFA or GSE action, or executive orders permitting or mandating forbearance or a moratorium on foreclosures or evictions due to events such as natural disasters or COVID-19; •a drop in housing values that could expose us to greater loss on resale of properties obtained through foreclosure proceedings and an adverse change in the effectiveness of loss mitigation actions that could result in an increase in the frequency of expected claim rates; •a drop in housing values that negatively impacts a borrower’s willingness to continue mortgage payments, potentially leading to higher delinquencies and ultimately claims; •if the foreclosure occurs in a state that imposes judicial process, which generally increases the amount of time it takes for a foreclosure to be completed, which impacts severity of the claim; •the credit characteristics in our in-force portfolio, as loans with higher risk characteristics generally result in more delinquencies and claims; •the size of loans we insure, as loans with relatively higher average loan amounts generally result in higher incurred losses; •the coverage percentage on insured loans, as loans with higher percentages of insurance coverage generally correlate with higher incurred losses; 71 •the level and amount of reinsurance coverage maintained with third parties; and •the distribution of claims over the life of a book. Historically, the first few years after origination have relatively low claims, with claims increasing for several years subsequently and then declining. However, persistency, the condition of the economy, including unemployment and housing prices and other factors can affect this pattern. Credit Risk Transfer We use CRT transactions to transfer a portion of our risk to third parties, through traditional XOL and quota share reinsurance and the issuance of ILNs. Our CRT program reduces the volatility of our in-force portfolio and provides capital relief under PMIERs. When we enter into a CRT transaction, the reinsurer receives a premium and, in exchange, insures an agreed upon portion of incurred losses. These arrangements have the impact of reducing our earned premiums but also provide capital relief under PMIERs in exchange for a negotiated ceded premium rate. Under certain stress scenarios, our incurred losses are also reduced by any incurred losses ceded in accordance with our reinsurance agreements. Operating Expenses Our operating expenses include costs related to the acquisition and ongoing maintenance of our insurance contracts, including sales, underwriting and general operating costs. Acquisition expenses are influenced by the amount of our NIW. Acquisition costs that are related directly to the successful acquisition of new insurance policies, such as underwriting expenses, are deferred and amortized over the life of the underlying insurance policies. These deferred acquisition costs are referred to as “DAC.” The ongoing maintenance expenses of our insurance contracts are generally fixed in nature and include costs such as information technology, finance and legal, among others, including costs allocated from Genworth for certain activities on our behalf. See Note 11 to our consolidated financial statements regarding our related party transactions. Critical Accounting Estimates The accounting estimates (including sensitivities) discussed in this section are those that we consider to be particularly critical to an understanding of our consolidated financial statements because their application places the most significant demands on our ability to judge the effect of inherently uncertain matters on our financial results. The sensitivities included in this section involve matters that are also inherently uncertain and involve the exercise of significant judgment in selecting the factors and amounts used in the sensitivities. Small changes in the amounts used in the sensitivities or the use of different factors could result in materially different outcomes from those reflected in the sensitivities. For all of these accounting estimates, we caution that future events seldom develop as estimated and management’s best estimates often require adjustment. Loss Reserves Loss reserves represents the amount needed to provide for the estimated ultimate cost of settling claims relating to insured events that have occurred on or before the end of the respective reporting period. The estimated liability includes requirements for future payments of: (a) losses that have been reported to the insurer; (b) losses related to insured events that have occurred but that have not been reported to the insurer as of the date the liability is estimated; and (c) LAE. Loss adjustment expenses include costs incurred in the claim settlement process such as legal fees and costs to record, process and adjust claims. Consistent with U.S. GAAP and industry accounting practices, we do not establish loss reserves for future claims on insured loans that are not in default or believed to be in default. Estimates and actuarial assumptions used for establishing loss reserves involve the exercise of significant judgment, and changes in assumptions or deviations of actual experience from assumptions can have material impacts on our loss reserves and net income (loss). Because these assumptions relate to factors that are not known in advance, change over time, are difficult to accurately predict and are 72 inherently uncertain, we cannot determine with precision the ultimate amounts we will pay for actual claims or the timing of those payments. The sources of uncertainty affecting the estimates are numerous and include factors internal and external to us. Internal factors include, but are not limited to, changes in the mix of exposures, loss mitigation activities and claim settlement practices. Significant external influences include changes in home prices, unemployment, government housing policies, state foreclosure timeline, general economic conditions, interest rates, tax policy, credit availability and mortgage products. Small changes in assumptions or small deviations of actual experience from assumptions can have, and in the past have had, material impacts on our reserves, results of operations and financial condition. We establish reserves to recognize the estimated liability for losses and LAE related to defaults on insured mortgage loans. Loss reserves are established by estimating the number of loans in our inventory of delinquent loans that will result in a claim payment, which is referred to as the claim rate, and further estimating the amount of the claim payment, which is referred to as claim severity. The estimates are determined using a factor-based approach, in which assumptions of claim rates for loans in default and the average amount paid for loans that result in a claim are calculated using traditional actuarial techniques. Over time, as the status of the underlying delinquent loans moves toward foreclosure and the likelihood of the associated claim loss increases, the amount of the loss reserves associated with the potential claims may also increase. Management monitors actual experience, and where circumstances warrant, will revise its assumptions. Our liability for loss reserves is reviewed regularly, with changes in our estimates of future claims recorded through net income. Estimation of losses is based on historical claim and cure experience and covered exposures and is inherently judgmental. Future developments may result in losses greater or less than the liability for loss reserves provided. Loss reserves as of December 31, 2023, were $518 million, a decrease of $1 million since December 31, 2022. In considering the potential sensitivity of the factors underlying management’s best estimate of our loss reserve, it is possible that even a relatively small change in the estimated claim and severity rates could have a significant impact on loss reserves and, correspondingly, on results of operations. For example, based on our actual experience during the three-year period immediately preceding December 31, 2023, a change of 5 percentage points, or 15%, in the average claim rate would change the gross loss reserve amount for such quarter by approximately $75 million. Likewise, a change of 4 percentage points, or a change of 4%, in the average severity rate would change the gross loss reserve amount for such quarter by approximately $19 million. Investments Valuation of Fixed Maturity Securities Our portfolio of fixed maturity securities was valued at $5,266 million as of December 31, 2023, an increase of $381 million from December 31, 2022. The methodologies, estimates and assumptions used in valuing our fixed maturity securities evolve over time and are subject to different interpretations, all of which can lead to materially different estimates of fair value. Additionally, because the valuation is based on market conditions at a specific point in time, the period-to-period changes in fair value may vary significantly due to changing interest rates, external macroeconomic and credit market conditions. For example, widening credit spreads will generally result in a decrease, while tightening of credit spreads will generally result in an increase in the fair value of our fixed maturity securities. Also, during periods of increasing interest rates, the market values of lower-yielding assets will decline. See “Item 7A—Quantitative and Qualitative Disclosures About Market Risk” for the impact of hypothetical changes in interest rates on our investments portfolio. Our portfolio of fixed maturity securities comprises primarily investment grade securities, which are carried at fair value. Estimates of fair values for fixed maturity securities are obtained primarily from industry-standard pricing methodologies utilizing market observable inputs. For our less liquid securities, 73 such as our privately placed securities, we utilize independent market data to employ alternative valuation methods commonly used in the financial services industry to estimate fair value. Based on the market observability of the inputs used in estimating the fair value, the pricing level is assigned. See Notes 2, 3 and 4 to our consolidated financial statements for additional information related to the valuation of fixed maturity securities and a description of the fair value measurement estimates and level assignments. Allowance for Credit Losses on Available-For-Sale Securities As of each balance sheet date, we evaluate fixed maturity securities in an unrealized loss position for changes to the allowance for credit losses. Determining the value of the unrealized losses is dependent on the same methodologies and assumptions used in our valuation of fixed maturity securities. We also consider all available information relevant to the collectability of the security, including information about past events, current conditions and reasonable and supportable forecasts, when developing the estimate of cash flows expected to be collected. There is no recorded allowance for credit losses on available-for-sale securities as of December 31, 2023. See Note 2 and 3 to our consolidated financial statements for additional information related to the allowance for credit losses on fixed maturity securities. Revenue Recognition The majority of our insurance contracts have recurring monthly premiums. We recognize recurring premiums over the terms of the related insurance policy on a pro-rata basis. Premiums written on single premium policies and annual premium policies are initially deferred as unearned premium reserve and earned over the policy life. A portion of the revenue from single premium policies is recognized in premiums earned in the current period, and the remaining portion is deferred as unearned premiums and earned over the estimated expiration of risk of the policy. If single premium policies are cancelled and the premium is non-refundable, then the remaining unearned premium related to each cancelled policy is recognized to earned premiums upon notification of the cancellation. For borrower-paid mortgage insurance, coverage ceases at the earlier of prepayment, or when the original principal is amortized to a 78% loan-to-value ratio in accordance with the Homeowners Protection Act of 1998. Variation in cancellation rates and projected losses are inputs into our premium recognition models, causing uncertainty within our estimates. We periodically review our premium earnings recognition models with any adjustments to the estimates reflected as a cumulative adjustment on a retrospective basis in current period net income. These reviews include the consideration of recent and projected loss and policy cancellation experience, and adjustments to the estimated earnings patterns are made, if warranted. Unearned premium was $149 million as of December 31, 2023, a decrease of $53 million compared to December 31, 2022. Changes in market conditions could cause a decline in mortgage originations, mortgage insurance penetration rates, persistency and our market share, all of which could impact new insurance written. For example, a decline in primary new insurance written of $1.0 billion would result in a reduction in earned premiums of approximately $4 million in the first full year. Likewise, if primary persistency rates declined on our existing insurance in-force by 10%, earned premiums would decline by approximately $96 million during the first full year, partially offset by higher policy cancellations in our single premium products. These reductions in earned premiums could be potentially offset by lower reserves due to policies no longer being in-force. 74 Trends and Conditions Macroeconomic environment. During 2023, the United States economy faced uncertainty due to continued but lessening inflationary pressure, the geopolitical environment and persistent concerns around a possible recession. Inflationary pressures have moderated in 2023, with the Bureau of Labor Statistics reporting in December that the Consumer Price Index was down to 3.4% year-over-year. The Federal Reserve has taken an aggressive approach towards addressing inflation through interest rate increases and a reduction of its balance sheet. The Federal Reserve raised rates four times in 2023 following seven interest rate increases in 2022. Mortgage rates continued to rise and reached more than 20-year highs during 2023. Mortgage origination activity remained slow during 2023 in response to elevated mortgage rates and sustained low housing supply. Housing affordability continued to deteriorate due to high interest rates and elevated home prices, only marginally offset by rising median family income according to the National Association of Realtors Housing Affordability Index. National housing prices rose modestly throughout 2023, according to the FHFA Monthly Purchase-Only House Price Index. The unemployment rate was 3.7% as of December 2023 compared to 3.5% in December 2022. As of December 31, 2023, the number of unemployed Americans stands at approximately 6.3 million and the number of long term unemployed over 26 weeks was approximately 1.2 million. Both metrics remain relatively in line with February 2020 levels. Forbearance and loss mitigation programs. For mortgages insured by the federal government, including those purchased by Fannie Mae and Freddie Mac, COVID-19 forbearance allowed borrowers impacted by COVID-19 to temporarily suspend mortgage payments up to 18 months subject to certain limits. However, the Biden Administration ended the national emergency for COVID-19 in April 2023, so the deadline for requesting a COVID-19 related forbearance under the CARES Act ended in August of 2023. The GSEs retired their COVID-19 servicing-related policies including with respect to forbearance in November 2023 and reverted to standard forbearance policies as a loss mitigation option for borrowers that meet general hardship and program guidelines. Further, in March 2023, the GSEs announced new loss mitigation programs that allow for six-month payment deferrals for borrowers facing financial hardship. Servicers were encouraged to start evaluating borrowers for the new mitigation programs as early as July 1, 2023, but no later than October 1, 2023. Even though most foreclosure moratoriums expired at the end of 2021, federal laws and regulations continue to require servicers to discuss loss mitigation options with borrowers before proceeding with foreclosures. These requirements could further extend foreclosure timelines, which could negatively impact the severity of loss on loans that go to claim. Although it is difficult to predict the future level of reported forbearance and how many of the policies in a forbearance plan that remain current on their monthly mortgage payment will go delinquent, servicer-reported forbearances have generally declined. As of December 31, 2023, approximately 1.2%, or 11,536, of our active primary policies were reported in a forbearance plan, of which approximately 31% were reported as delinquent. The full impact of COVID-19 and its ancillary economic effects on our future business results are difficult to predict. Given the maximum length of forbearance plans, the resolution of a delinquency in a plan still may not be known for several quarters or longer. We continue to monitor regulatory and government actions and the resolution of forbearance delinquencies. While the associated risks have moderated and delinquencies related to COVID-19 have declined, it is possible that ancillary economic effects of COVID-19 could have an adverse impact on our future results of operations and financial condition. 75 Regulatory developments. The FHFA and the GSEs are focused on increasing the accessibility and affordability of homeownership, in particular for low- and moderate-income borrowers and underserved minority communities. In June 2022, the FHFA announced the release of Fannie Mae’s and Freddie Mac’s respective Equitable Housing Finance Plans. In April 2023, FHFA announced updates to Fannie Mae and Freddie Mac’s Equitable Housing Finance Plans which build upon the inaugural plans first announced in 2022 and make adjustments based on initial research and findings. The proposals included many initiatives, including language discussing potential changes that could impact the mortgage insurance industry. We will continue to work with the FHFA, the GSEs, and the broader housing finance industry as these proposals develop and to the extent they are implemented. We cannot predict whether or when any new practices or programs will be implemented under the GSEs’ Equitable Housing Finance Plans or other affordability initiatives, and if so in what form, nor can we predict what effect, if any, such practices or programs may have on our business, results of operations or financial condition. Private mortgage insurance market penetration and eventual market size are affected in part by actions that impact housing or housing finance policy taken by the GSEs and the U.S. government, including but not limited to, the Federal Housing Administration and the FHFA. In the past, these actions have included announced changes, or potential changes, to underwriting standards, including changes to the GSEs’ automated underwriting systems, FHA pricing, GSE guaranty fees, loan limits and alternative products. On October 24, 2022, the FHFA announced two initiatives: 1) targeted changes to the GSEs’ guarantee fee pricing by eliminating upfront fees for certain borrowers and affordable mortgage products, while implementing targeted increases to the upfront fees for most cash-out refinance loans; and 2) the validation and approval of both the FICO 10T credit score model and the VantageScore 4.0 credit score model for use by the GSEs as well as changing the requirement that lenders provide credit reports from all three nationwide consumer reporting agencies and instead only requiring credit reports from two of the three nationwide credit reporting agencies. The upfront fees were eliminated for certain first-time home buyers with income at or below area median income and certain other GSE affordable housing products. The fee reductions went into effect in the fourth quarter of 2022, while the new fees on cash-out refinance loans began on February 1, 2023. We have seen a limited impact from these price changes on the private mortgage insurance market. The validation of the new credit scores requires lenders to deliver both credit scores for each loan sold to the GSEs. The FHFA has announced preliminary implementation expectations, but this is expected to be a multiple year process that will require system and process updates along with coordination across stakeholders of the industry. In January 2023, the FHFA announced additional updates to its upfront fee structure and a recalibration and reformatting of their entire pricing matrix. The changes marked the third iteration of the FHFA’s ongoing pricing review since early 2022 and impact purchase and rate-term refinance loans. Pricing grids are now broken out by loan purpose and are recalibrated to new credit score and loan-to-value ratio categories along with associated loan attributes. The new pricing matrix initially included new upfront fees for loans with debt to income ratios greater than 40%, but those fees were rescinded prior to implementation. The remaining changes became effective May 1, 2023. On February 22, 2023, the Department of Housing and Urban Development announced a 30 basis point reduction of the annual insurance premium charged to borrowers with FHA-insured mortgages. This action is designed to reduce the cost of borrowing for lower- and middle-class homebuyers who are eligible for the federal program. The price reduction, which went into effect on March 20, 2023, is expected to have a negative impact on the private mortgage insurance market but will be partially offset by the effects of the recent FHFA pricing changes referenced above. We do not believe this net impact has been or will be material. Competitive environment. The U.S. private mortgage insurance industry is highly competitive. Our market share is influenced by the execution of our go to market strategy, including but not limited to, 76 pricing competitiveness relative to our peers and our selective participation in forward commitment transactions. We continue to manage the quality of new business through pricing and our underwriting guidelines, which are modified from time to time when circumstances warrant. We see the market and underwriting conditions, including the pricing environment, as being within our risk-adjusted return appetite enabling us to write new business at attractive returns. Ultimately, we expect our new insurance written with its strong credit profile and attractive pricing to positively contribute to our future profitability and return on equity. Our portfolio. New insurance written of $53.1 billion in 2023 decreased 20% compared to 2022 primarily due to a smaller private mortgage insurance market in the current year as refinance and purchase originations were impacted by rising interest rates. Our largest customer accounted for 19% of total NIW and 10% of our total revenues for the year ended December 31, 2023. No other customer accounted for 10% or more of total revenues or NIW for the year ended December 31, 2023. This customer also accounted for 18% and 14% of our total NIW during the years ended December 31, 2022 and 2021, respectively. No customer accounted for more than 10% of our total revenues and no other customer accounted for more than 10% of NIW for the years ended December 31, 2022 or 2021. Our primary persistency rate increased to 85% during 2023 compared to 80% during 2022. The increase in persistency was primarily driven by a decline in the percentage of our in-force policies with mortgage rates above current mortgage rates. Elevated persistency has continued to offset the decline in new insurance written, leading to an increase in primary insurance in-force of $14.7 billion or 6% since December 31, 2022. Net earned premiums increased in 2023 compared to 2022 primarily as a result of insurance in-force growth, partially offset by the lapse of older, higher priced policies and a decrease in single premium cancellations. The total number of delinquent loans has declined from the COVID-19 peak in the second quarter of 2020 as forbearance exits continue and new forbearances decline. During this time and consistent with prior years, servicers continued the practice of remitting premiums during the early stages of default, and we refund the post-delinquent premiums to the insured party if the delinquent loan goes to claim. We record a liability and a reduction to net earned premiums for the post-delinquent premiums we expect to refund. The post-delinquent premium liability recorded since the beginning of COVID-19 in the second quarter of 2020 through the fourth quarter of 2023 was not significant to the change in earned premiums for those periods. Loss experience. Our loss ratio for the year ended December 31, 2023, was 3% as compared to (10)% for the year ended December 31, 2022. Both periods were impacted by favorable reserve adjustments. In 2023, we released $241 million of reserves primarily on delinquencies from prior years, related to favorable cure performance on delinquencies from 2022 and earlier, including a portion of those as a result of COVID-19. During the peak of COVID-19, we experienced elevated new delinquencies subject to forbearance plans. Those delinquencies have continued to cure at levels above our reserve expectations. Another component of the reserve release related to delinquencies from 2022, as uncertainty in the economic environment has not negatively impacted cure performance to the extent initially expected. This compares to 2022, where we recorded $314 million of reserve release primarily related to cure performance of 2020 delinquencies. Losses during 2022 were also impacted by $46 million of reserve strengthening related to current accident year delinquencies due to uncertainty in the economic environment. Borrowers who have experienced a financial hardship including, but not limited to, the loss of income due to the closing of a business or the loss of a job, continue to take advantage of available loss mitigation options, including forbearance programs, payment deferral options and other modifications. Loss reserves recorded on these delinquencies have a high degree of estimation due to the level of uncertainty regarding whether delinquencies in forbearance will ultimately cure or result in claim payments, as well as the timing and severity of those payments. 77 The severity of loss on loans that do go to claim may be negatively impacted by the extended forbearance and foreclosure timelines, the associated elevated expenses and the higher loan amount of the recent new delinquencies. These negative influences on loss severity could be mitigated, in part, by embedded home price appreciation. For loans insured on or after October 1, 2014, our mortgage insurance policies limit the number of months of unpaid interest and associated expenses that are included in the mortgage insurance claim amount to a maximum of 36 months. New delinquencies in 2023 increased compared to 2022 primarily due to the aging of large, new books of business. Current period primary delinquencies of 41,617 contributed $265 million of loss expense in 2023. We incurred $171 million of losses from 35,996 current period delinquencies in 2022. In determining the loss expense estimate, considerations were given to recent cure and claim experience and the prevailing and prospective economic conditions. Approximately 13% of our primary new delinquencies in 2023 were subject to a forbearance plan as compared to 21% in 2022. Due to the declining number of new delinquencies in forbearance, we no longer differentiate the expected claim rates applied to new delinquencies in forbearance versus those not in forbearance. Capital requirements and ratings. EMICO’s risk-to-capital ratio under the current regulatory framework as established under North Carolina law and enforced by the NCDOI, EMICO’s domestic insurance regulator, was approximately 11.6:1 as of December 31, 2023 and 12.9:1 as of December 31, 2022. EMICO’s risk-to-capital ratio remains below the NCDOI’s maximum risk-to-capital ratio of 25:1. North Carolina’s calculation of risk-to-capital excludes the risk-in-force for delinquent loans given the established loss reserves against all delinquencies. EMICO’s ongoing risk-to-capital ratio will depend principally on the magnitude of future losses incurred by EMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the impact of quota share reinsurance, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business. Under PMIERs, we are subject to operational and financial requirements that private mortgage insurers must meet in order to remain eligible to insure loans that are purchased by the GSEs. Additionally, in September 2020, subsequent to the issuance of our senior notes due in 2025, the GSEs imposed certain restrictions (the “GSE Restrictions”) with respect to capital on our business. In May 2021, in connection with their conditional approval of the then potential partial sale of EHI, the GSEs confirmed the GSE Restrictions would remain in effect until certain conditions (“GSE Conditions”) were met. These conditions were met as of December 31, 2022, and Enact is no longer subject to GSE Restrictions and Conditions. As of December 31, 2023, we had estimated available assets of $5,006 million against $3,119 million net required assets under PMIERs compared to available assets of $5,206 million against $3,156 million net required assets as of December 31, 2022. The sufficiency ratio as of December 31, 2023, was 161% or $1,887 million above the PMIERs requirements, compared to 165% or $2,050 million above the published PMIERs requirements as of December 31, 2022. Our PMIERs required assets benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans as defined under PMIERs. The application of the 0.30 multiplier to all eligible delinquencies provided $73 million of benefit to our December 31, 2023, PMIERs required assets compared to $132 million of benefit as of December 31, 2022. These amounts are gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier. Our PMIERs required assets also benefited from a reinsurance credit of $1,714 million and $1,578 million related to third-party reinsurance as of December 31, 2023, and 2022, respectively. On February 16, 2023, S&P Global Ratings upgraded the long-term financial strength and issuer credit ratings of EMICO from BBB to BBB+. This rating was further upgraded to A- as of January 8, 2024. Moody’s Investors Service also upgraded the insurance financial strength rating of EMICO from Baa1 to A3 on March 1, 2023. On April 25, 2023, Fitch upgraded the insurance financial strength rating of EMICO 78 from BBB+ to A-. These ratings reflect our continued strong performance including our credit profile, market position, profitability, capital adequacy and financial flexibility. On August 1, 2023, A.M. Best initiated public ratings of EMICO and Enact Re. Both entities received A- ratings with stable outlooks. Recent transactions. In May 2023, we contributed $250 million into Enact Re, our wholly owned Bermuda-based subsidiary. Through this contribution, Enact Re was able to participate in the assumption of excess-of-loss reinsurance relating to GSE credit risk transfer and reinsured EMICO’s new and existing insurance in-force under quota share reinsurance agreements. We contributed an additional $250 million in November 2023 which will support an increase to the ceding percentage of our previously announced affiliate quota share agreements from 7.5% to 12.5%, along with assumed new insurance written and new business opportunities, including the continued execution of GSE credit risk transfer. On March 8, 2023, we executed an excess-of-loss reinsurance transaction with a panel of reinsurers, which provides up to $180 million of reinsurance coverage on a portion of current and expected new insurance written for the 2023 book year, effective January 1, 2023. On June 30, 2023, we executed a quota share reinsurance contract with a panel of reinsurers. Following a 3% increase in our ceding percentage during the fourth quarter of 2023, we cede 16.125% of a portion of NIW written from January 1, 2023, through December 31, 2023. On November 15, 2023, we obtained $248 million of fully collateralized excess-of-loss reinsurance coverage from Triangle Re 2023-1 Ltd. on a portfolio of existing mortgage insurance policies written from July 1, 2022 through June 30, 2023. Subsequent to year end, on January 3, 2024, we entered into a quota share reinsurance agreement with a panel of third-party reinsurers. Under the agreement, Enact will cede approximately 21% of a portion of its new insurance written from January 1, 2024, though December 31, 2024. Subsequent to year end, on January 30, 2024, we executed an excess-of-loss reinsurance transaction with a panel of reinsurers, which provides up to $255 million of reinsurance coverage on a portion of current and expected new insurance written for the 2024 book year, effective January 1, 2024. Capital returns. On April 26, 2022, our Board of Directors approved the initiation of a dividend program under which the Company intends to pay a quarterly cash dividend, subject to approval by our Board of Directors each quarter. We paid quarterly dividends of $0.14 per share in March of 2023 and May, September and December of 2022. On May 1, 2023, we announced an increase of our quarterly dividend to $0.16 per share which was paid in June, September and December 2023. In February of 2024, we announced our first quarter dividend of $0.16 per share. Future dividend payments are subject to quarterly review and approval by our Board of Directors and Genworth and will be targeted to be paid in the third month of each subsequent quarter. In April and November 2023, our primary mortgage insurance operating company, EMICO, completed distributions to EHI that supported our ability to pay dividends in 2023. We intend to use these proceeds and future EMICO distributions to fund the quarterly dividend as well as to bolster our financial flexibility and potentially return additional capital to shareholders. In December 2023, we paid a special cash dividend of $113 million, or $0.71 per share. On August 1, 2023, we announced the authorization of a new share repurchase program which allows for the repurchase of up to an additional $100 million of EHI’s common stock. Under the program, share repurchases may be made at our discretion from time to time in open market transactions, privately negotiated transactions, or by other means, including through Rule 10b5-1 trading plans. In conjunction with this authorization, we have entered into an agreement with Genworth Holdings, Inc. to repurchase its EHI shares on a pro rata basis as part of the program. The share repurchase program is not expected to change Genworth’s ownership interest in Enact post-completion. We expect the timing and amount of any 79 future share repurchases will be opportunistic and will depend on a variety of factors, including EHI’s share price, capital availability, business and market conditions, regulatory requirements, and debt covenant restrictions. The program does not obligate EHI to acquire any amount of common stock, it may be suspended or terminated at any time at the Company’s discretion without prior notice, and it does not have a specified expiration date. Returning capital to shareholders, balanced with our growth and risk management priorities, remains a key commitment as we look to drive shareholder value through time. Future return of capital will be shaped by our capital prioritization framework: supporting our existing policyholders, growing our mortgage insurance business, funding attractive new business opportunities and returning capital to shareholders. Our total return of capital will also be based on our view of the prevailing and prospective macroeconomic conditions, regulatory landscape and business performance. Results of Operations and Key Metrics Results of Operations The following table sets forth our consolidated results for the periods indicated: [[GREPCENT_TABLE]] [["","Year ended December 31,","","Increase (decrease)and percentagechange","","Increase (decrease)and percentagechange"],["(Amounts in thousands)","2023","","2022","","2021","","2023 vs. 2022","","2022 vs. 2021"],["Revenues:"],["Premiums","$","957,075","","","$","939,462","","","$","974,949","","","$","17,613","","","2","%","","$","(35,487)","","","(4)","%"],["Net investment income","207,369","","","155,311","","","141,189","","","52,058","","","34","%","","14,122","","","10","%"],["Net investment gains (losses)","(14,022)","","","(2,036)","","","(2,124)","","","(11,986)","","","589","%","","88","","","(4)","%"],["Other income","3,264","","","2,309","","","3,841","","","955","","","41","%","","(1,532)","","","(40)","%"],["Total revenues","1,153,686","","","1,095,046","","","1,117,855","","","58,640","","","5","%","","(22,809)","","","(2)","%"],["Losses and expenses:"],["Losses incurred","27,165","","","(94,221)","","","125,473","","","121,386","","","(129)","%","","(219,694)","","","(175)","%"],["Acquisition and operating expenses, net of deferrals","212,491","","","226,941","","","231,453","","","(14,450)","","","(6)","%","","(4,512)","","","(2)","%"],["Amortization of deferred acquisition costs and intangibles","10,654","","","12,405","","","14,704","","","(1,751)","","","(14)","%","","(2,299)","","","(16)","%"],["Interest expense","51,867","","","51,699","","","51,009","","","168","","","\u2014","%","","690","","","1","%"],["Total losses and expenses","302,177","","","196,824","","","422,639","","","105,353","","","54","%","","(225,815)","","","(53)","%"],["Income before income taxes","851,509","","","898,222","","","695,216","","","(46,713)","","","(5)","%","","203,006","","","29","%"],["Provision for income taxes","185,998","","","194,065","","","148,531","","","(8,067)","","","(4)","%","","45,534","","","31","%"],["Net income","$","665,511","","","$","704,157","","","$","546,685","","","$","(38,646)","","","(5)","%","","$","157,472","","","29","%"],["Loss ratio (1)","3","%","","(10)","%","","13","%"],["Expense ratio (2)","23","%","","25","%","","25","%"],["Earned premium rate (3)","0.37","%","","0.40","%","","0.45","%"]] [[/GREPCENT_TABLE]] _______________ (1)Loss ratio is calculated by dividing losses incurred by net earned premiums. (2)Expense ratio is calculated by dividing acquisition and operating expenses, net of deferrals, plus amortization of DAC and intangibles by net earned premiums. (3)Net earned premium rate is calculated by dividing earned premium by average primary IIF. Detailed discussions of our consolidated results of operations for the year ended December 31, 2021, including the year-over-year comparisons between 2022 and 2021, that are not included in this Annual Report on Form 10-K can be found in Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023. 80 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenues Premiums increased mainly attributable to higher average IIF. This was partially offset by lapse of our in-force portfolio as older, higher priced policies lapsed, lower single premium cancellations and higher ceded premium. Earned premium rate decreased as a result of this lapse of higher priced policies and lower single premium cancellations. Net investment income increased primarily due to higher investment yields due to interest rate increases during 2023 coupled with higher average invested assets. Net investment losses during 2023 were primarily driven by the sale of fixed maturity securities as part of an investment strategy designed to optimize yield on our portfolio over time. Net investment losses in the prior year were largely from net realized losses from the sale of fixed maturity securities. Other income includes underwriting fee revenue, equity method investment income and other revenue. Losses and expenses Losses incurred in 2023 and 2022 were impacted by favorable reserve adjustments. During 2023, we released reserves of $241 million primarily due to better than expected cure experience on delinquencies from 2022 and earlier, including a portion of those related to the emergence of COVID-19. A component of the reserve release also related to delinquencies from 2022, as uncertainty in the economic environment has not negatively impacted cure performance to the extent initially expected. During 2022, we recorded $314 million of reserve releases. Due to uncertainty in the economic environment, we increased the expected claim rate on new delinquencies in 2022 which contributed to reserve strengthening of $46 million on previous quarter delinquencies in 2022. New primary delinquencies were 41,617 in 2023 compared to 35,996 in 2022, resulting in $265 million and $171 million of losses, respectively. The following table shows incurred losses related to current and prior accident years for the years ended December 31: [[GREPCENT_TABLE]] [["(Amounts in thousands)","2023","","2022","","2021"],["Losses and LAE incurred related to current accident year","$","275,418","","","$","219,461","","","$","141,225"],["Losses and LAE incurred related to prior accident years","(248,214)","","","(313,652)","","","(15,822)"],["Total incurred (1)","$","27,204","","","$","(94,191)","","","$","125,403"]] [[/GREPCENT_TABLE]] _______________ (1)Excludes run-off business. Acquisition and operating expenses, net of deferrals, decreased primarily attributable to the impact of our cost reduction initiatives, including the impact from our previously announced renegotiated shared services agreement with Genworth and our voluntary separation program executed in the fourth quarter of 2022. Amortization of DAC and intangibles declined due to lower DAC amortization as a result of higher persistency, driven by rising mortgage rates. The expense ratio decreased due to a decline in expenses and premium growth. Interest expense was relatively flat in the current year and related primarily to our 2025 Senior Notes issued in August 2020. For additional details see Note 7 to our consolidated financial statements. 81 Provision for income taxes The effective tax rate was 21.8% and 21.6% for the years ended December 31, 2023 and 2022, respectively, consistent with the United States corporate federal income tax rate. Use of Non-GAAP Financial Measures We use a non-U.S. GAAP (“non-GAAP”) financial measure entitled “adjusted operating income.” This non-GAAP financial measure aligns with the way our business performance is evaluated by both management and our Board of Directors. This measure has been established in order to increase transparency for the purposes of evaluating our core operating trends and enabling more meaningful comparisons with our peers. Although “adjusted operating income” is a non-GAAP financial measure, for the reasons discussed above we believe this measure aids in understanding the underlying performance of our operations. Our senior management, including our chief operating decision maker (who is our Chief Executive Officer), use “adjusted operating income” as the primary measure to evaluate the fundamental financial performance of our business and to allocate resources. “Adjusted operating income” is defined as U.S. GAAP net income excluding the effects of (i) net investment gains (losses) and (ii) restructuring costs and infrequent or unusual non-operating items. (i)Net investment gains (losses)—The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities or exposure management. Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these realized gains and losses. We do not view them to be indicative of our fundamental operating activities. Therefore, these items are excluded from our calculation of adjusted operating income. (ii)Restructuring costs and infrequent or unusual non-operating items are also excluded from adjusted operating income if, in our opinion, they are not indicative of overall operating trends. In reporting non-GAAP measures in the future, we may make other adjustments for expenses and gains we do not consider reflective of core operating performance in a particular period. We may disclose other non-GAAP operating measures if we believe that such a presentation would be helpful for investors to evaluate our operating condition by including additional information. Adjusted operating income is not a measure of total profitability, and therefore should not be considered in isolation or viewed as a substitute for U.S. GAAP net income. Our definition of adjusted operating income may not be comparable to similarly named measures reported by other companies, including our peers. Adjustments to reconcile net income to adjusted operating income assume a 21% tax rate (unless otherwise indicated). The following table includes a reconciliation of net income to adjusted operating income for the years ended December 31: [[GREPCENT_TABLE]] [["(Amounts in thousands)","2023","","2022","","2021"],["Net income","$","665,511","","","$","704,157","","","$","546,685"],["Adjustments to net income:"],["Net investment (gains) losses","14,022","","","2,036","","","2,124"],["Costs associated with reorganization","(131)","","","3,461","","","2,744"],["Taxes on adjustments","(2,917)","","","(1,155)","","","(1,022)"],["Adjusted operating income","$","676,485","","","$","708,499","","","$","550,531"]] [[/GREPCENT_TABLE]] 82 We recorded a pre-tax expense of $3.5 million for the year ended December 31, 2022, related to restructuring costs as we evaluated and appropriately sized our organizational needs and expenses. Adjusted operating income decreased in 2023 compared to 2022 due primarily due to the higher losses in 2023, including a larger reserve release in 2022, partially offset by higher revenues and lower operating expenses during 2023. 83 Key Metrics Management reviews the key metrics included within this section when analyzing the performance of our business. The metrics provided in this section are on a direct basis and exclude activity related to our run-off business, which is immaterial to our consolidated results of operations. The following table sets forth selected operating performance measures on a primary basis as of or for the years ended December 31: [[GREPCENT_TABLE]] [["(Dollar amounts in millions)","2023","","2022","","2021"],["New insurance written","$53,081","","$66,485","","$97,004"],["Primary insurance in-force (1)","$262,937","","$248,262","","$226,514"],["Primary risk in-force","$67,529","","$62,791","","$56,881"],["Persistency rate","85","%","","80","%","","62","%"],["Primary policies in-force (count)","974,516","","960,306","","937,350"],["Delinquent loans (count)","20,432","","19,943","","24,820"],["Delinquency rate","2.10","%","","2.08","%","","2.65","%"]] [[/GREPCENT_TABLE]] _______________ (1)Represents the aggregate unpaid principal balance for loans we insure. New insurance written NIW for the year ended December 31, 2023 decreased 20% compared to 2022 primarily due to a smaller private mortgage insurance market as both refinancing and purchase originations were impacted by elevated mortgage rates. We manage the quality of new business through pricing and our underwriting guidelines, which we modify from time to time as circumstances warrant. The following table presents NIW by product for the years ended December 31: [[GREPCENT_TABLE]] [["(Amounts in millions)","2023","","2022","","2021"],["Primary","$","53,081","","","100","%","","$","66,485","","","100","%","","$","97,004","","","100","%"],["Pool","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Total","$","53,081","","","100","%","","$","66,485","","","100","%","","$","97,004","","","100","%"]] [[/GREPCENT_TABLE]] The following table presents primary NIW by underlying type of mortgage for the years ended December 31: [[GREPCENT_TABLE]] [["(Amounts in millions)","2023","","2022","","2021"],["Purchases","$","51,723","","","97","%","","$","63,506","","","96","%","","$","76,915","","","79","%"],["Refinances","1,358","","","3","","","2,979","","","4","","","20,089","","","21"],["Total","$","53,081","","","100","%","","$","66,485","","","100","%","","$","97,004","","","100","%"]] [[/GREPCENT_TABLE]] The following table presents primary NIW by policy payment type for the years ended December 31: [[GREPCENT_TABLE]] [["(Amounts in millions)","2023","","2022","","2021"],["Monthly","$","51,869","","","98","%","","$","61,123","","","92","%","","$","89,115","","","92","%"],["Single","1,114","","","2","","","5,166","","","8","","","7,554","","","8"],["Other","98","","","\u2014","","","196","","","\u2014","","","335","","","\u2014"],["Total","$","53,081","","","100","%","","$","66,485","","","100","%","","$","97,004","","","100","%"]] [[/GREPCENT_TABLE]] We have seen a decline in NIW on single policies as a result of a reduction in the market for single policies driven by higher mortgage rates. 84 The following table presents primary NIW by FICO score for the years ended December 31: [[GREPCENT_TABLE]] [["(Amounts in millions)","2023","","2022","","2021"],["Over 760","$","24,680","","","46","%","","$","30,239","","","45","%","","$","42,391","","","44","%"],["740-759","8,994","","","17","","","11,264","","","17","","","15,067","","","16"],["720-739","7,220","","","14","","","9,377","","","14","","","12,911","","","13"],["700-719","5,214","","","10","","","6,889","","","10","","","11,069","","","11"],["680-699","3,652","","","7","","","4,535","","","7","","","8,457","","","9"],["660-679 (1)","2,086","","","4","","","2,534","","","4","","","4,167","","","4"],["640-659","952","","","2","","","1,206","","","2","","","2,173","","","2"],["620-639","268","","","\u2014","","","424","","","1","","","765","","","1"],["620","15","","","\u2014","","","17","","","\u2014","","","4","","","\u2014"],["Total","$","53,081","","","100","%","","$","66,485","","","100","%","","$","97,004","","","100","%"]] [[/GREPCENT_TABLE]] ______________ (1)Loans with unknown FICO scores are included in the 660-679 category. LTV ratio is calculated by dividing the original loan amount, excluding financed premium, by the property’s acquisition value or fair market value at the time of origination. The following table presents primary NIW by LTV ratio for the years ended December 31: [[GREPCENT_TABLE]] [["(Amounts in millions)","2023","","2022","","2021"],["95.01% and above","$","9,295","","","18","%","","$","9,487","","","14","%","","$","12,064","","","12","%"],["90.01% to 95.00%","19,861","","","37","","","26,008","","","39","","","36,597","","","38"],["85.01% to 90.00%","17,200","","","32","","","20,892","","","32","","","30,717","","","32"],["85.00% and below","6,725","","","13","","","10,098","","","15","","","17,626","","","18"],["Total","$","53,081","","","100","%","","$","66,485","","","100","%","","$","97,004","","","100","%"]] [[/GREPCENT_TABLE]] The following table presents primary NIW by DTI ratio for the years ended December 31: [[GREPCENT_TABLE]] [["(Amounts in millions)","2023","","2022","","2021"],["45.01% and above","$","15,600","","","29","%","","$","16,541","","","25","%","","$","14,979","","","15","%"],["38.01% to 45.00%","18,906","","","36","","","23,996","","","36","","","32,946","","","34"],["38.00% and below","18,575","","","35","","","25,948","","","39","","","49,079","","","51"],["Total","$","53,081","","","100","%","","$","66,485","","","100","%","","$","97,004","","","100","%"]] [[/GREPCENT_TABLE]] We have continued to see a greater concentration of loans with higher DTI ratios. This is in line with market trends as elevated mortgage rates and recent home price appreciation have put pressure on affordability. We believe the levels are in line with our current risk appetite as we consider layered risk across multiple risk attributes, pricing and our portfolio credit mix. Insurance in-force and Risk in-force IIF increased largely from NIW and increased persistency in the current year, partially offset by lapses and cancellations. Primary persistency rate was 85% and 80% for the years ended December 31, 2023 and 2022, respectively. RIF increased primarily as a result of higher IIF. 85 The following table sets forth IIF and RIF as of the dates indicated: [[GREPCENT_TABLE]] [["(Amounts in millions)","December 31, 2023","","December 31, 2022","","December 31, 2021"],["Primary IIF","$","262,937","","","100","%","","$","248,262","","","100","%","","$","226,514","","","100","%"],["Pool IIF","436","","","\u2014","","","505","","","\u2014","","","641","","","\u2014"],["Total IIF","$","263,373","","","100","%","","$","248,767","","","100","%","","$","227,155","","","100","%"],["Primary RIF","$","67,529","","","100","%","","$","62,791","","","100","%","","$","56,881","","","100","%"],["Pool RIF","69","","","\u2014","","","79","","","\u2014","","","105","","","\u2014"],["Total RIF","$","67,598","","","100","%","","$","62,870","","","100","%","","$","56,986","","","100","%"]] [[/GREPCENT_TABLE]] The following table sets forth primary IIF and primary RIF by origination as of the dates indicated: [[GREPCENT_TABLE]] [["(Amounts in millions)","December 31, 2023","","December 31, 2022","","December 31, 2021"],["Purchases IIF","$","231,526","","","88","%","","$","207,827","","","84","%","","$","176,550","","","78","%"],["Refinances IIF","31,411","","","12","","","40,435","","","16","","","49,964","","","22"],["Total IIF","$","262,937","","","100","%","","$","248,262","","","100","%","","$","226,514","","","100","%"],["Purchases RIF","$","60,497","","","90","%","","$","54,165","","","86","%","","$","46,470","","","82","%"],["Refinances RIF","7,032","","","10","","","8,626","","","14","","","10,411","","","18"],["Total RIF","$","67,529","","","100","%","","$","62,791","","","100","%","","$","56,881","","","100","%"]] [[/GREPCENT_TABLE]] The following table sets forth primary IIF and primary RIF by product as of the dates indicated: [[GREPCENT_TABLE]] [["(Amounts in millions)","December 31, 2023","","December 31, 2022","","December 31, 2021"],["Monthly IIF","$","233,651","","","89","%","","$","216,831","","","87","%","","$","194,826","","","86","%"],["Single IIF","27,353","","","10","","","29,275","","","12","","","29,205","","","13"],["Other IIF","1,933","","","1","","","2,156","","","1","","","2,483","","","1"],["Total IIF","$","262,937","","","100","%","","$","248,262","","","100","%","","$","226,514","","","100","%"],["Monthly RIF","$","61,083","","","90","%","","$","55,879","","","89","%","","$","49,614","","","87","%"],["Single RIF","5,957","","","9","","","6,370","","","10","","","6,658","","","12"],["Other RIF","489","","","1","","","542","","","1","","","609","","","1"],["Total RIF","$","67,529","","","100","%","","$","62,791","","","100","%","","$","56,881","","","100","%"]] [[/GREPCENT_TABLE]] 86 The following table sets forth primary IIF by policy year as of the dates indicated: [[GREPCENT_TABLE]] [["(Amounts in millions)","December 31, 2023","","December 31, 2022","","December 31, 2021"],["2008 and prior","$","5,621","","","2","%","","$","6,596","","","3","%","","$","8,196","","","4","%"],["2009 to 2015","3,383","","","1","","","5,025","","","2","","","7,857","","","3"],["2016","4,659","","","2","","","6,296","","","2","","","8,997","","","4"],["2017","5,321","","","2","","","6,495","","","3","","","8,962","","","4"],["2018","5,750","","","2","","","6,839","","","3","","","9,263","","","4"],["2019","13,773","","","5","","","16,352","","","7","","","21,730","","","10"],["2020","44,486","","","17","","","55,358","","","22","","","69,963","","","31"],["2021","70,045","","","27","","","81,724","","","33","","","91,546","","","40"],["2022","59,267","","","23","","","63,577","","","25","","","\u2014","","","\u2014"],["2023","50,632","","","19","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Total","$","262,937","","","100","%","","$","248,262","","","100","%","","$","226,514","","","100","%"]] [[/GREPCENT_TABLE]] The following table sets forth primary RIF by policy year as of the dates indicated: [[GREPCENT_TABLE]] [["(Amounts in millions)","December 31, 2023","","December 31, 2022","","December 31, 2021"],["2008 and prior","$","1,449","","","2","%","","$","1,699","","","3","%","","$","2,112","","","4","%"],["2009 to 2015","881","","","1","","","1,341","","","2","","","2,101","","","3"],["2016","1,248","","","2","","","1,681","","","3","","","2,388","","","4"],["2017","1,403","","","2","","","1,708","","","3","","","2,324","","","4"],["2018","1,476","","","2","","","1,736","","","3","","","2,330","","","4"],["2019","3,544","","","5","","","4,143","","","7","","","5,454","","","10"],["2020","11,697","","","17","","","14,158","","","22","","","17,574","","","31"],["2021","17,846","","","27","","","20,418","","","32","","","22,598","","","40"],["2022","14,907","","","22","","","15,907","","","25","","","\u2014","","","\u2014"],["2023","13,078","","","20","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Total","$","67,529","","","100","%","","$","62,791","","","100","%","","$","56,881","","","100","%"]] [[/GREPCENT_TABLE]] The following table presents the development of primary IIF for the years ended December 31: [[GREPCENT_TABLE]] [["(Amounts in millions)","2023","","2022","","2021"],["Beginning balance","$","248,262","","","$","226,514","","","$","207,947"],["NIW","53,081","","","66,485","","","97,004"],["Cancellations, principal repayments and other reductions (1)","(38,406)","","","(44,737)","","","(78,437)"],["Ending balance","$","262,937","","","$","248,262","","","$","226,514"]] [[/GREPCENT_TABLE]] _____________ (1)Includes the estimated amortization of unpaid principal balance of covered loans. 87 The following table sets forth primary IIF by LTV ratio at origination as of the dates indicated: [[GREPCENT_TABLE]] [["(Amounts in millions)","December 31, 2023","","December 31, 2022","","December 31, 2021"],["95.01% and above","$","44,955","","","17","%","","$","39,509","","","16","%","","$","35,455","","","16","%"],["90.01% to 95.00%","109,227","","","41","","","103,618","","","42","","","95,149","","","42"],["85.01% to 90.00%","77,887","","","30","","","72,132","","","29","","","64,549","","","28"],["85.00% and below","30,868","","","12","","","33,003","","","13","","","31,361","","","14"],["Total","$","262,937","","","100","%","","$","248,262","","","100","%","","$","226,514","","","100","%"]] [[/GREPCENT_TABLE]] The following table sets forth primary RIF by LTV ratio at origination as of the dates indicated: [[GREPCENT_TABLE]] [["(Amounts in millions)","December 31, 2023","","December 31, 2022","","December 31, 2021"],["95.01% and above","$","12,878","","","19","%","","$","11,136","","","18","%","","$","9,907","","","17","%"],["90.01% to 95.00%","31,781","","","47","","","30,079","","","48","","","27,608","","","49"],["85.01% to 90.00%","19,163","","","28","","","17,621","","","28","","","15,644","","","27"],["85.00% and below","3,707","","","6","","","3,955","","","6","","","3,722","","","7"],["Total","$","67,529","","","100","%","","$","62,791","","","100","%","","$","56,881","","","100","%"]] [[/GREPCENT_TABLE]] The following table sets forth primary IIF by FICO score at origination as of the dates indicated: [[GREPCENT_TABLE]] [["(Amounts in millions)","December 31, 2023","","December 31, 2022","","December 31, 2021"],["Over 760","$","110,635","","","42","%","","$","102,467","","","41","%","","$","89,982","","","40","%"],["740-759","43,053","","","17","","","40,097","","","16","","","35,874","","","16"],["720-739","37,020","","","14","","","34,916","","","14","","","31,730","","","14"],["700-719","29,766","","","11","","","28,867","","","12","","","27,359","","","12"],["680-699","21,835","","","8","","","21,554","","","9","","","21,270","","","9"],["660-679 (1)","11,357","","","4","","","10,926","","","4","","","10,549","","","5"],["640-659","6,137","","","3","","","6,095","","","3","","","6,124","","","3"],["620-639","2,504","","","1","","","2,630","","","1","","","2,783","","","1"],["620","630","","","\u2014","","","710","","","\u2014","","","843","","","\u2014"],["Total","$","262,937","","","100","%","","$","248,262","","","100","%","","$","226,514","","","100","%"]] [[/GREPCENT_TABLE]] ______________ (1)Loans with unknown FICO scores are included in the 660-679 category. 88 The following table sets forth primary RIF by FICO score at origination as of the dates indicated: [[GREPCENT_TABLE]] [["(Amounts in millions)","December 31, 2023","","December 31, 2022","","December 31, 2021"],["Over 760","$","28,363","","","42","%","","$","25,807","","","41","%","","$","22,489","","","40","%"],["740-759","11,096","","","17","","","10,154","","","16","","","9,009","","","16"],["720-739","9,621","","","14","","","8,931","","","14","","","8,055","","","14"],["700-719","7,623","","","11","","","7,317","","","12","","","6,907","","","12"],["680-699","5,557","","","8","","","5,428","","","9","","","5,334","","","9"],["660-679 (1)","2,908","","","4","","","2,767","","","5","","","2,638","","","5"],["640-659","1,565","","","3","","","1,540","","","2","","","1,530","","","3"],["620-639","635","","","1","","","665","","","1","","","702","","","1"],["620","161","","","\u2014","","","182","","","\u2014","","","217","","","\u2014"],["Total","$","67,529","","","100","%","","$","62,791","","","100","%","","$","56,881","","","100","%"]] [[/GREPCENT_TABLE]] ______________ (1)Loans with unknown FICO scores are included in the 660-679 category. The following table sets forth primary IIF by DTI score at origination as of the dates indicated: [[GREPCENT_TABLE]] [["(Amounts in millions)","December 31, 2023","","December 31, 2022","","December 31, 2021"],["45.01% and above","$","53,440","","","20","%","","$","43,831","","","18","%","","$","34,076","","","15","%"],["38.01% to 45.00%","93,871","","","36","","","87,816","","","35","","","79,147","","","35"],["38.00% and below","115,626","","","44","","","116,615","","","47","","","113,291","","","50"],["Total","$","262,937","","","100","%","","$","248,262","","","100","%","","$","226,514","","","100","%"]] [[/GREPCENT_TABLE]] The following table sets forth primary RIF by DTI score at origination as of the dates indicated: [[GREPCENT_TABLE]] [["(Amounts in millions)","December 31, 2023","","December 31, 2022","","December 31, 2021"],["45.01% and above","$","13,830","","","20","%","","$","11,176","","","18","%","","$","8,631","","","15","%"],["38.01% to 45.00%","24,072","","","36","","","22,268","","","35","","","19,974","","","35"],["38.00% and below","29,627","","","44","","","29,347","","","47","","","28,276","","","50"],["Total","$","67,529","","","100","%","","$","62,791","","","100","%","","$","56,881","","","100","%"]] [[/GREPCENT_TABLE]] Delinquent loans and claims Our delinquency management process begins with notification by the loan servicer of a delinquency on an insured loan. “Delinquency” is defined in our master policies as the borrower’s failure to pay when due an amount equal to the scheduled monthly mortgage payment under the terms of the mortgage. Generally, our master policies require an insured to notify us of a delinquency if the borrower fails to make two consecutive monthly mortgage payments prior to the due date of the next mortgage payment. We generally consider a loan to be delinquent and establish required reserves after the insured notifies us that the borrower has failed to make two scheduled mortgage payments. Borrowers default for a variety of reasons, including a reduction of income, unemployment, divorce, illness/death, inability to manage credit, falling home prices and interest rate levels. Borrowers may cure delinquencies by making all of the delinquent loan payments, agreeing to a loan modification, or by selling the property in full satisfaction of all amounts due under the mortgage. In most cases, delinquencies that are not cured result in a claim under our policy. 89 The following table shows a roll forward of the number of primary loans in default for the years ended December 31: [[GREPCENT_TABLE]] [["(Loan count)","2023","","2022","","2021"],["Number of delinquencies, beginning of period","19,943","","","24,820","","","44,904"],["New defaults","41,617","","","35,996","","","32,624"],["Cures","(40,475)","","","(40,278)","","","(51,626)"],["Claims paid","(615)","","","(574)","","","(1,050)"],["Rescissions and claim denials","(38)","","","(21)","","","(32)"],["Number of delinquencies, end of period","20,432","","","19,943","","","24,820"]] [[/GREPCENT_TABLE]] The following table sets forth changes in our direct primary case loss reserves for the years ended December 31: [[GREPCENT_TABLE]] [["(Amounts in thousands) (1)","2023","","2022","","2021"],["Loss reserves, beginning of period","$","479,343","","","$","606,102","","","$","516,863"],["Claims paid","(23,357)","","","(28,123)","","","(32,816)"],["Increase in reserves","20,723","","","(98,636)","","","122,055"],["Loss reserves, end of period","$","476,709","","","$","479,343","","","$","606,102"]] [[/GREPCENT_TABLE]] ______________ (1)Direct primary case reserves exclude LAE, pool, IBNR and reinsurance reserves. The following tables set forth primary delinquencies, direct primary case reserves and RIF by aged missed payment status as of the dates indicated: [[GREPCENT_TABLE]] [["","December 31, 2023"],["(Dollar amounts in millions)","Delinquencies","","Direct primary casereserves (1)","","Riskin-force","","Reserves as % of risk in-force"],["Payments in default:"],["3 payments or less","10,166","","","$","88","","","$","629","","","14","%"],["4 - 11 payments","6,934","","","205","","","469","","","44","%"],["12 payments or more","3,332","","","184","","","200","","","92","%"],["Total","20,432","","","$","477","","","$","1,298","","","37","%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","December 31, 2022"],["(Dollar amounts in millions)","Delinquencies","","Direct primary casereserves (1)","","Riskin-force","","Reserves as % of risk in-force"],["Payments in default:"],["3 payments or less","8,920","","","$","69","","","$","509","","","14","%"],["4 - 11 payments","6,466","","","166","","","390","","","43","%"],["12 payments or more","4,557","","","244","","","248","","","98","%"],["Total","19,943","","","$","479","","","$","1,147","","","42","%"]] [[/GREPCENT_TABLE]] ______________ (1)Direct primary case reserves exclude LAE, pool, IBNR and reinsurance reserves. 90 [[GREPCENT_TABLE]] [["","December 31, 2021"],["(Dollar amounts in millions)","Delinquencies","","Direct primary casereserves (1)","","Riskin-force","","Reserves as % of risk in-force"],["Payments in default:"],["3 payments or less","6,586","","","$","35","","","$","340","","","10","%"],["4 - 11 payments","7,360","","","111","","","426","","","26","%"],["12 payments or more","10,874","","","460","","","643","","","72","%"],["Total","24,820","","","$","606","","","$","1,409","","","43","%"]] [[/GREPCENT_TABLE]] ______________ (1)Direct primary case reserves exclude LAE, pool, IBNR and reinsurance reserves. The total reserves as a percentage of RIF declined as of December 31, 2023, compared to December 31, 2022 as long-term delinquencies with higher reserves have continued to cure. The number of loans that are delinquent for 12 months or more has decreased to be more in line with pre-COVID-19 levels. Due to continued forbearance options, foreclosure moratoriums and the uncertainty around the lack of progression through the foreclosure process there is still uncertainty around the likelihood and timing of delinquencies going to claim. The ratio of the claim paid to the current risk in-force for a loan is referred to as “claim severity.” The current risk in-force is equal to the unpaid principal amount multiplied by the coverage percentage. The main determinants of claim severity are the age of the mortgage loan, the value of the underlying property, accrued interest on the loan, expenses advanced by the insured and foreclosure expenses. These amounts depend partly upon the time required to complete foreclosure, which varies depending upon state laws. Pre-foreclosure sales, acquisitions and other early workout and claim administration actions help to reduce overall claim severity. Our average primary mortgage insurance claim severity was 97%, 94% and 103% for the years ended December 31, 2023, 2022 and 2021, respectively. The 2023 average claim severity was impacted by low claim volumes and lifetime home price appreciation. These figures do not include the effects of agreements on non-performing loans. Primary insurance delinquency rates differ from region to region in the United States at any one time depending upon economic conditions and cyclical growth patterns. Delinquency rates are shown by region based upon the location of the underlying property, rather than the location of the lender. The table 91 below sets forth our primary delinquency rates for the ten largest states by our primary RIF as of December 31, 2023: [[GREPCENT_TABLE]] [["","Percent of RIF","","Percent of directprimary casereserves","","Delinquencyrate"],["By state:"],["California","13","%","","12","%","","2.22","%"],["Texas","8","","","8","","","2.22","%"],["Florida (1)","8","","","9","","","2.39","%"],["New York (1)","5","","","12","","","3.05","%"],["Illinois (1)","4","","","6","","","2.61","%"],["Arizona","4","","","3","","","1.93","%"],["Michigan","4","","","3","","","1.94","%"],["Georgia","3","","","3","","","2.23","%"],["North Carolina","3","","","2","","","1.56","%"],["Washington","3","","","2","","","1.77","%"],["All other states (2)","45","","","40","","","1.93","%"],["Total","100","%","","100","%","","2.10","%"]] [[/GREPCENT_TABLE]] ______________ (1)Jurisdiction predominantly uses a judicial foreclosure process, which generally increases the amount of time it takes for a foreclosure to be completed. (2)Includes the District of Columbia. 92 The table below sets forth our primary delinquency rates for the ten largest states by our primary RIF as of December 31, 2022: [[GREPCENT_TABLE]] [["","Percent of RIF","","Percent of directprimary casereserves","","Delinquencyrate"],["By state:"],["California","12","%","","10","%","","2.09","%"],["Texas","8","","","7","","","2.12","%"],["Florida (1)","8","","","8","","","2.54","%"],["New York (1)","5","","","13","","","2.95","%"],["Illinois (1)","5","","","6","","","2.54","%"],["Arizona","4","","","2","","","1.78","%"],["Michigan","4","","","3","","","1.79","%"],["North Carolina","3","","","3","","","1.59","%"],["Georgia","3","","","3","","","2.23","%"],["Washington","3","","","3","","","1.92","%"],["All other states (2)","45","","","42","","","1.94","%"],["Total","100","%","","100","%","","2.08","%"]] [[/GREPCENT_TABLE]] ______________ (1)Jurisdiction predominantly uses a judicial foreclosure process, which generally increases the amount of time it takes for a foreclosure to be completed. (2)Includes the District of Columbia. The table below sets forth our primary delinquency rates for the ten largest states by our primary RIF as of December 31, 2021: [[GREPCENT_TABLE]] [["","Percent of RIF","","Percent of directprimary casereserves","","Delinquencyrate"],["By state:"],["California","11","%","","12","%","","3.17","%"],["Texas","8","","","8","","","2.89","%"],["Florida (1)","7","","","9","","","2.97","%"],["New York (1)","5","","","12","","","3.80","%"],["Illinois (1)","5","","","6","","","3.09","%"],["Michigan","4","","","2","","","1.87","%"],["Arizona","4","","","2","","","2.31","%"],["North Carolina","3","","","2","","","2.18","%"],["Pennsylvania (1)","3","","","3","","","2.38","%"],["Washington","3","","","3","","","2.98","%"],["All other states (2)","47","","","41","","","2.46","%"],["Total","100","%","","100","%","","2.65","%"]] [[/GREPCENT_TABLE]] ______________ (1)Jurisdiction predominantly uses a judicial foreclosure process, which generally increases the amount of time it takes for a foreclosure to be completed. (2)Includes the District of Columbia. 93 The table below sets forth our primary delinquency rates for the ten largest MSAs or MDs by our primary RIF as of December 31, 2023: [[GREPCENT_TABLE]] [["","Percent of RIF","","Percent of direct primary case reserves","","Delinquencyrate"],["By MSA or MD:"],["Phoenix, AZ MSA","3","%","","2","%","","2.01","%"],["Chicago-Naperville, IL MD","3","","","4","","","2.88","%"],["Atlanta, GA MSA","3","","","3","","","2.40","%"],["New York, NY MD","2","","","7","","","3.60","%"],["Washington-Arlington, DC MD","2","","","2","","","2.01","%"],["Houston, TX MSA","2","","","3","","","2.67","%"],["Los Angeles-Long Beach, CA MD","2","","","2","","","2.39","%"],["Dallas, TX MD","2","","","2","","","1.92","%"],["Riverside-San Bernardino, CA MSA","2","","","3","","","2.83","%"],["Denver-Aurora-Lakewood, CO MSA","2","","","1","","","1.12","%"],["All Other MSAs/MDs","77","","","71","","","2.01","%"],["Total","100","%","","100","%","","2.10","%"]] [[/GREPCENT_TABLE]] The table below sets forth our primary delinquency rates for the ten largest MSAs or MDs by our primary RIF as of December 31, 2022: [[GREPCENT_TABLE]] [["","Percent of RIF","","Percent of direct primary case reserves","","Delinquency rate"],["By MSA or MD:"],["Chicago-Naperville, IL MD","3","%","","5","%","","2.84","%"],["Phoenix, AZ MSA","3","","","2","","","1.83","%"],["New York, NY MD","3","","","8","","","3.75","%"],["Atlanta, GA MSA","2","","","3","","","2.42","%"],["Washington-Arlington, DC MD","2","","","2","","","1.85","%"],["Houston, TX MSA","2","","","3","","","2.60","%"],["Riverside-San Bernardino, CA MSA","2","","","2","","","2.89","%"],["Los Angeles-Long Beach, CA MD","2","","","2","","","2.18","%"],["Dallas, TX MD","2","","","1","","","1.86","%"],["Denver-Aurora-Lakewood, CO MSA","2","","","1","","","1.12","%"],["All Other MSAs/MDs","77","","","71","","","2.00","%"],["Total","100","%","","100","%","","2.08","%"]] [[/GREPCENT_TABLE]] 94 The table below sets forth our primary delinquency rates for the ten largest MSAs or MDs by our primary RIF as of December 31, 2021: [[GREPCENT_TABLE]] [["","Percent of RIF","","Percent of direct primary case reserves","","Delinquency rate"],["By MSA or MD:"],["Chicago-Naperville, IL MD","3","%","","4","%","","3.68","%"],["Phoenix, AZ MSA","3","","","2","","","2.36","%"],["New York, NY MD","3","","","8","","","5.32","%"],["Atlanta, GA MSA","2","","","3","","","3.28","%"],["Washington-Arlington, DC MD","2","","","2","","","2.96","%"],["Houston, TX MSA","2","","","3","","","3.61","%"],["Riverside-San Bernardino, CA MSA","2","","","2","","","3.42","%"],["Los Angeles-Long Beach, CA MD","2","","","3","","","3.95","%"],["Dallas, TX MD","2","","","2","","","2.31","%"],["Nassau County, NY MD","2","","","4","","","5.55","%"],["All Other MSAs/MDs","77","","","67","","","2.44","%"],["Total","100","%","","100","%","","2.65","%"]] [[/GREPCENT_TABLE]] The number of delinquencies often does not correlate directly with the number of claims received because delinquencies may cure. The rate at which delinquencies cure is influenced by borrowers’ financial resources and circumstances and regional economic differences. Whether a delinquency leads to a claim correlates highly with the borrower’s equity at the time of delinquency, as it influences the borrower’s willingness to continue to make payments, the borrower’s or the insured’s ability to sell the home for an amount sufficient to satisfy all amounts due under the mortgage loan, and the borrower’s financial ability to continue making payments. When we receive notice of a delinquency, we use our proprietary model to determine whether a delinquent loan is a candidate for a modification. When our model identifies such a candidate, our loan workout specialists prioritize cases for loss mitigation based upon the likelihood that the loan will result in a claim. Loss mitigation actions include loan modification, extension of credit to bring a loan current, foreclosure forbearance, pre-foreclosure sale and deed-in-lieu. These loss mitigation efforts often are an effective way to reduce our claim exposure and ultimate payouts. 95 The following table sets forth the dispersion of primary RIF and loss reserves by policy year and delinquency rates as of December 31, 2023: [[GREPCENT_TABLE]] [["","Percentof RIF","","Percent of directprimary casereserves","","Delinquencyrate","","Cumulativedelinquencyrate (1)"],["Policy year:"],["2008 and prior","2","%","","18","%","","8.61","%","","5.56","%"],["2009-2015","1","","","4","","","4.55","%","","0.63","%"],["2016","2","","","4","","","3.20","%","","0.67","%"],["2017","2","","","5","","","3.59","%","","0.87","%"],["2018","2","","","6","","","4.42","%","","1.02","%"],["2019","5","","","8","","","2.77","%","","0.85","%"],["2020","17","","","15","","","1.70","%","","0.90","%"],["2021","27","","","21","","","1.65","%","","1.29","%"],["2022","22","","","16","","","1.57","%","","1.46","%"],["2023","20","","","3","","","0.47","%","","0.46","%"],["Total portfolio","100","%","","100","%","","2.10","%","","4.19","%"]] [[/GREPCENT_TABLE]] ______________ (1)Calculated as the sum of the number of policies where claims were ever paid to date and number of policies for loans currently in default divided by policies ever in-force. The following table sets forth the dispersion of primary RIF and loss reserves by policy year and delinquency rates as of December 31, 2022: [[GREPCENT_TABLE]] [["","Percentof RIF","","Percent of directprimary casereserves","","Delinquencyrate","","Cumulativedelinquencyrate (1)"],["Policy year:"],["2008 and prior","3","%","","26","%","","9.61","%","","5.57","%"],["2009-2014","1","","","4","","","5.01","%","","0.69","%"],["2015","1","","","3","","","3.61","%","","0.71","%"],["2016","3","","","6","","","3.17","%","","0.81","%"],["2017","3","","","7","","","3.78","%","","1.01","%"],["2018","3","","","9","","","4.63","%","","1.18","%"],["2019","7","","","11","","","2.71","%","","0.93","%"],["2020","22","","","17","","","1.47","%","","0.92","%"],["2021","32","","","14","","","1.20","%","","1.06","%"],["2022","25","","","3","","","0.54","%","","0.52","%"],["Total portfolio","100","%","","100","%","","2.08","%","","4.26","%"]] [[/GREPCENT_TABLE]] ______________ (1)Calculated as the sum of the number of policies where claims were ever paid to date and number of policies for loans currently in default divided by policies ever in-force. 96 The following table sets forth the dispersion of primary RIF and loss reserves by policy year and delinquency rates as of December 31, 2021: [[GREPCENT_TABLE]] [["","Percentof RIF","","Percent of directprimary casereserves","","Delinquencyrate","","Cumulativedelinquencyrate (1)"],["Policy year:"],["2008 and prior","3","%","","24","%","","10.54","%","","5.59","%"],["2009-2013","1","","","2","","","5.54","%","","0.74","%"],["2014","1","","","3","","","5.51","%","","0.99","%"],["2015","2","","","5","","","4.24","%","","1.04","%"],["2016","4","","","8","","","3.69","%","","1.16","%"],["2017","4","","","10","","","4.78","%","","1.56","%"],["2018","4","","","13","","","5.93","%","","1.88","%"],["2019","10","","","19","","","3.89","%","","1.68","%"],["2020","31","","","14","","","1.50","%","","1.14","%"],["2021","40","","","2","","","0.37","%","","0.36","%"],["Total portfolio","100","%","","100","%","","2.65","%","","4.42","%"]] [[/GREPCENT_TABLE]] ______________ (1)Calculated as the sum of the number of policies where claims were ever paid to date and number of policies for loans currently in default divided by policies ever in-force. Loss reserves in policy years 2008 and prior are outsized compared to their representation of RIF. The size of these policy years at origination, particularly 2005 through 2008, combined with the significant decline in home prices led to significant losses in policy years prior to 2009. Although uncertainty remains with respect to the ultimate losses we will experience on these policy years, they have become a smaller percentage of our total mortgage insurance portfolio. Loss reserves have shifted to newer book years in line with changes in RIF. As of December 31, 2023, our 2016 and newer policy years represented approximately 97% of our primary RIF and 78% of our total direct primary case reserves. Investment Portfolio Our investment portfolio is affected by factors described below, each of which in turn may be affected by current macroeconomic conditions as noted above in “—Trends and Conditions.” The investment portfolios of our insurance subsidiaries are directed by the Enact Investment Committee, a management-level committee, with Genworth serving as the investment manager. The investment portfolio of EHI is directed by a separate management-level EHI Investment Committee with a third-party investment manager. These parties, with oversight from our Board of Directors and our senior management team, are responsible for the execution of our investment strategy. Our investment portfolio is an important component of our consolidated financial results and represents our primary source of claims paying resources. Our investment portfolio primarily consists of a diverse mix of highly rated fixed maturity securities and is designed to achieve the following objectives: •Meet policyholder obligations through maintenance of sufficient liquidity; •Preserve capital; •Generate investment income; •Maximize statutory capital; and •Increase shareholder value, among other objectives. 97 To achieve our portfolio objectives, our investment strategy focuses primarily on: •Our business outlook, including current and expected future investment conditions; •Investments selection based on fundamental, research-driven strategies; •Diversification across a mix of fixed income, low-volatility investments while actively pursuing strategies to enhance yield; •Regular evaluation and optimization of our asset class mix; •Continuous monitoring of investment quality, duration and liquidity; •Regulatory capital requirements; and •Restriction of investments correlated to the residential mortgage market. Fixed Maturity Securities Available-for-Sale The following table presents the fair value of our fixed maturity securities available-for-sale as of the dates indicated: [[GREPCENT_TABLE]] [["","December 31, 2023","","December 31, 2022","","December 31, 2021"],["(Amounts in thousands)","Fair value","","% oftotal","","Fair value","","% oftotal","","Fair value","","% oftotal"],["U.S. government, agencies and GSEs","$","195,129","","","3.7","%","","$","44,769","","","0.9","%","","$","58,408","","","1.1","%"],["State and political subdivisions","438,214","","","8.3","","","419,856","","","8.6","","","538,453","","","10.2"],["Non-U.S. government","11,467","","","0.2","","","9,349","","","0.2","","","22,416","","","0.4"],["U.S. corporate","2,723,730","","","51.8","","","2,646,863","","","54.2","","","2,945,303","","","55.9"],["Non-U.S. corporate","689,663","","","13.1","","","652,844","","","13.4","","","666,594","","","12.7"],["Residential mortgage-backed","10,755","","","0.2","","","11,043","","","0.2","","","\u2014","","","\u2014"],["Other asset-backed","1,197,183","","","22.7","","","1,100,036","","","22.5","","","1,035,165","","","19.7"],["Total available-for-sale fixed maturity securities","$","5,266,141","","","100.0","%","","$","4,884,760","","","100.0","%","","$","5,266,339","","","100.0","%"]] [[/GREPCENT_TABLE]] Our investment portfolio did not include any direct residential real estate or whole mortgage loans as of December 31, 2023, December 31, 2022 or December 31, 2021. We have no derivative financial instruments in our investment portfolio. As of December 31, 2023, 2022 and 2021, 98%, 98% and 97% of our investment portfolio was rated investment grade, respectively. The following table presents the security ratings of our fixed maturity securities as of the dates indicated: [[GREPCENT_TABLE]] [["","December 31, 2023","","December 31, 2022","","December 31, 2021"],["AAA","10","%","","10","%","","9","%"],["AA","20","","","16","","","17"],["A","33","","","34","","","34"],["BBB","35","","","38","","","37"],["BB & below","2","","","2","","","3"],["Total","100","%","","100","%","","100","%"]] [[/GREPCENT_TABLE]] 98 The table below presents the effective duration and investment yield on our investments available-for-sale, excluding cash and cash equivalents: [[GREPCENT_TABLE]] [["","December 31, 2023","","December 31, 2022","","December 31, 2021"],["Duration (in years)","3.5","","3.6","","3.9"],["Pre-tax yield (% of average investment portfolio assets)","3.6","%","","3.1","%","","2.7","%"]] [[/GREPCENT_TABLE]] We manage credit risk by analyzing issuers, transaction structures and any associated collateral. We also manage credit risk through country, industry, sector and issuer diversification and prudent asset allocation practices. We primarily mitigate interest rate risk by employing a buy and hold investment philosophy that seeks to match fixed income maturities with expected liability cash flows in modestly adverse economic scenarios. Liquidity and Capital Resources Cash Flows The following table summarizes our consolidated cash flows for the years ended December 31: [[GREPCENT_TABLE]] [["(Amounts in thousands)","2023","","2022","","2021"],["Net cash provided by (used in):"],["Operating activities","$","632,038","","","$","560,510","","","$","572,110"],["Investing activities","(229,404)","","","(220,255)","","","(398,782)"],["Financing activities","(300,726)","","","(252,308)","","","(200,294)"],["Net increase (decrease) in cash and cash equivalents","$","101,908","","","$","87,947","","","$","(26,966)"]] [[/GREPCENT_TABLE]] Our most significant source of operating cash flows is from premiums received from our insurance policies, while our most significant uses of operating cash flows are generally for claims paid on our insured policies and our operating expenses. Net cash from operating activities increased largely due higher net investment income and lower expenses. Cash flows from operations were also impacted by changes in unearned premiums, net investment losses and stock-based compensation expense. Investing activities are primarily related to purchases, sales and maturities of our investment portfolio. We had cash outflows from investing activities as a result of continued fixed maturity security purchases driven by premium growth and lower losses paid. Financing activities in 2023 included dividends paid of $213 million and share repurchases of $88 million. The amount and timing of future dividends is discussed within “—Trends and Conditions” as well as below. During 2022, our cash flows from financing activities included dividends paid of $251 million and share repurchases of $2 million. Capital Resources and Financing Activities We issued our 2025 Senior Notes in 2020 with interest payable semi-annually in arrears on February 15 and August 15 of each year. The 2025 Senior Notes mature on August 15, 2025. We may redeem the 2025 Senior Notes, in whole or in part, at any time prior to February 15, 2025 at our option, by paying a make-whole premium, plus accrued and unpaid interest, if any. At any time on or after February 15, 2025, we may redeem the 2025 Senior Notes, in whole or in part, at our option, at 100% of the principal amount, plus accrued and unpaid interest. The 2025 Senior Notes contain customary events of default, which subject to certain notice and cure conditions, can result in the acceleration of the principal and accrued interest on the outstanding 2025 Senior Notes if we breach the terms of the indenture. 99 On June 30, 2022, we entered into a credit agreement with a syndicate of lenders that provides for a five-year, unsecured revolving credit facility (the “Facility”) in the initial aggregate principal amount of $200 million. We may use borrowings under the Facility for working capital needs and general corporate purposes, including the execution of dividends to our shareholders and capital contributions to our insurance subsidiaries. The Facility contains several covenants, including financial covenants relating to minimum net worth, capital and liquidity levels, maximum debt to capitalization level and PMIERs compliance. We are in compliance with all covenants of the Facility and the Facility remained undrawn through December 31, 2023. We continually evaluate opportunities based upon market conditions to further increase our financial flexibility including through raising additional capital, restructuring or refinancing some or all of our outstanding debt or pursuing other options such as reinsurance or credit risk transfer transactions. There can be no guarantee that any such opportunities will be available on favorable terms or at all. Restrictions on the Payment of Dividends The ability of our regulated insurance operating subsidiaries to pay dividends and distributions to us is restricted by certain provisions of North Carolina insurance laws. Our insurance subsidiaries may pay dividends only from unassigned surplus; payments made from sources other than unassigned surplus, such as paid-in and contributed surplus, are categorized as distributions. Notice of all dividends must be submitted to the Commissioner of the NCDOI (the “Commissioner”) within 5 business days after declaration of the dividend, and at least 30 days before payment thereof. No dividend may be paid until 30 days after the Commissioner has received notice of the declaration thereof and (i) has not within that period disapproved the payment or (ii) has approved the payment within the 30-day period. Any distribution, regardless of amount, requires that same 30-day notice to the Commissioner, but also requires the Commissioner’s affirmative approval before being paid. Based on our estimated statutory results and in accordance with applicable dividend restrictions, our insurance subsidiaries have the capacity to pay dividends of $336 million from unassigned surplus as of December 31, 2023, with 30-day advance notice to the Commissioner of the intent to pay. In addition to dividends and distributions, alternative mechanisms, such as share repurchases, subject to any requisite regulatory approvals, may be utilized from time to time to upstream surplus. Another consideration in the development of the dividend strategies for our regulated insurance operating subsidiaries is our expected level of compliance with PMIERs. Prior to the satisfaction of the GSE Conditions, the GSE Restrictions also required EMICO to maintain 120% of PMIERs Minimum Required Assets through 2022, and 125% thereafter. Beginning in 2023, we are no longer subject to the GSE Restrictions and Conditions. In addition, under PMIERs, EMICO is subject to other operational and financial requirements that approved insurers must meet in order to remain eligible to insure loans purchased by the GSEs. In addition, we review multiple other considerations in parallel to determine a prospective dividend strategy for our regulated insurance operating subsidiaries. Given the regulatory focus on the reasonableness of an insurer’s surplus in relation to its outstanding liabilities and the adequacy of its surplus relative to its financial needs for any dividend, our insurance subsidiaries consider the minimum amount of policyholder surplus after giving effect to any contemplated future dividends. Regulatory minimum policyholder surplus is not codified in North Carolina law and limitations may vary based on prevailing business conditions including, but not limited to, the prevailing and future macroeconomic conditions. We estimate regulators would require a minimum policyholder surplus of approximately $300 million to meet their threshold standard. Given (i) we are subject to statutory accounting requirements that establish a contingency reserve of at least 50% of net earned premiums annually for ten years, after which time it is released into policyholder surplus and (ii) that no material 10-year contingency reserve releases are scheduled before 2024, we expect modest growth in policyholder surplus through 2024. As a result, minimum policyholder surplus could be a limitation on the future dividends of our regulated operating subsidiaries. 100 As mentioned above, another consideration in the development of the dividend strategies for our regulated insurance operating subsidiaries is our expected level of compliance with PMIERs. Under PMIERs, EMICO is subject to operational and financial requirements that approved insurers must meet in order to remain eligible to insure loans purchased by the GSEs. Our regulated insurance operating subsidiaries are also subject to statutory RTC requirements that affect the dividend strategies of our regulated operating subsidiaries. EMICO’s domiciliary regulator, the NCDOI, requires the maintenance of a statutory RTC ratio not to exceed 25:1. See “—Risk-to-Capital Ratio” for additional RTC trend analysis. We consider potential future dividends compared to the prior year statutory net income in the evaluation of dividend strategies for our regulated operating subsidiaries. We also consider the dividend payout ratio, or the ratio of potential future dividends compared to the estimated U.S. GAAP net income, in the evaluation of our dividend strategies. In either case, we do not have prescribed target or maximum thresholds, but we do evaluate the reasonableness of a potential dividend relative to the actual or estimated income generated in the proceeding or preceding calendar year after giving consideration to prevailing business conditions including, but not limited to the prevailing and future macroeconomic conditions. In addition, the dividend strategies of our regulated operating subsidiaries are made in consultation with Genworth. During 2023, EMICO completed distributions of approximately $158 million and $185 million in April and November, respectively, that supported our ability to pay cash dividends. We intend to use future EMICO distributions to fund the quarterly dividend as well as to bolster our financial flexibility at EHI and return additional capital to shareholders. The credit agreement entered into in connection with the Facility contains customary restrictions on EHI’s ability to pay cash dividends. Under the credit agreement, EHI is permitted to make cash distributions (1) so long as no Default or Event of Default (as each are defined in the credit agreement) has occurred and is continuing and EHI is in pro forma compliance with its financial covenants as described below at the time of and after giving effect to such payment, (2) within 60 days of declaration of any cash dividend so long as the payment was permitted under the credit agreement at the time of such declaration and (3) other customary exceptions as more fully set forth in the credit agreement. The credit agreement requires EHI to maintain the following financial covenants: a minimum consolidated net worth equal to the sum of (i) 72.5% of EHI’s consolidated net worth as of June 30, 2022 (“the Closing Date”), (ii) 50% of EHI’s positive consolidated net income for each fiscal quarter after the Closing Date and (iii) 50% of any increase in EHI’s consolidated net worth after the Closing Date resulting from equity issuances or capital contributions; in respect of EMICO, a minimum total adjusted capital amount equal to 72.5% of EMICO’s total adjusted capital as of the Closing Date; a maximum debt-to-total capitalization ratio of 0.35 to 1.00; a minimum liquidity level of $25,000,000; and compliance with all applicable financial requirements under the Private Mortgage Insurer Eligibility Requirements published by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association. For purposes of determining EHI’s compliance with the foregoing financial covenants, the consolidated net worth metric, total adjusted capital metric, debt-to-capitalization ratio and liquidity metric (including, in each case, any component thereof) are each calculated as set forth in the credit agreement. In addition to the restrictions described above, all dividends from EHI are subject to Genworth consent and EHI Board of Directors approval. Risk-to-Capital Ratio We compute our RTC ratio on a separate company statutory basis, as well as for our combined insurance operations. The RTC ratio is net RIF divided by policyholders’ surplus plus statutory contingency reserve. Our net RIF represents RIF, net of reinsurance ceded, and excludes risk on policies that are currently delinquent and for which loss reserves have been established. Statutory capital consists primarily of statutory policyholders’ surplus (which increases as a result of statutory net income and 101 decreases as a result of statutory net loss and dividends paid), plus the statutory contingency reserve. The statutory contingency reserve is reported as a liability on the statutory balance sheet. Certain states have insurance laws or regulations that require a mortgage insurer to maintain a minimum amount of statutory capital (including the statutory contingency reserve) relative to its level of RIF in order for the mortgage insurer to continue to write new business. While formulations of minimum capital vary in certain states, the most common measure applied allows for a maximum permitted RTC ratio of 25:1. The following table presents the calculation of our RTC ratio for our combined insurance subsidiaries as of the dates indicated: [[GREPCENT_TABLE]] [["(Dollar amounts in millions)","December 31, 2023","","December 31, 2022","","December 31, 2021"],["Statutory policyholders\u2019 surplus","$","1,085","","","$","1,136","","","$","1,397"],["Contingency reserves","3,960","","","3,551","","","3,042"],["Combined statutory capital","$","5,045","","","$","4,687","","","$","4,439"],["Adjusted RIF (1)","$","58,277","","","$","60,061","","","$","54,201"],["Combined risk-to-capital ratio","11.6","","","12.8","","","12.2"]] [[/GREPCENT_TABLE]] ______________ (1)Adjusted RIF for purposes of calculating combined statutory RTC differs from RIF presented elsewhere herein. In accordance with NCDOI requirements, adjusted RIF excludes delinquent policies. The following table presents the calculation of our RTC ratio for our principal insurance company, EMICO, as of the dates indicated: [[GREPCENT_TABLE]] [["(Dollar amounts in millions)","December 31, 2023","","December 31, 2022","","December 31, 2021"],["Statutory policyholders\u2019 surplus","$","1,026","","","$","1,084","","","$","1,346"],["Contingency reserves","3,953","","","3,548","","","3,041"],["Combined statutory capital","$","4,979","","","$","4,632","","","$","4,387"],["Adjusted RIF (1)","$","57,788","","","$","59,663","","","$","54,033"],["EMICO risk-to-capital ratio","11.6","","","12.9","","","12.3"]] [[/GREPCENT_TABLE]] ______________ (1)Adjusted RIF for purposes of calculating EMICO statutory RTC differs from RIF presented elsewhere herein. In accordance with NCDOI requirements, adjusted RIF excludes delinquent policies. Liquidity As of December 31, 2023, we maintained liquidity in the form of cash and cash equivalents of $616 million compared to $514 million as of December 31, 2022, and we also held significant levels of investment-grade fixed maturity securities that can be monetized should our cash and cash equivalents be insufficient to meet our obligations. On June 30, 2022, we entered into a five-year, unsecured revolving credit facility with a syndicate of lenders in the initial aggregate principal amount of $200 million. The Facility matures in June 2027, but under certain conditions EHI may need to repay any outstanding amounts and terminate the Facility earlier than the maturity date. The Facility may be used for working capital needs and general corporate purposes, including the execution of dividends to our shareholders and capital contributions to our insurance subsidiaries. The Facility has remained undrawn through December 31, 2023. The principal sources of liquidity in our business currently include insurance premiums, net investment income and cash flows from investment sales and maturities. We believe that the operating cash flows generated by our mortgage insurance subsidiary will provide the funds necessary to satisfy our claim payments, operating expenses and taxes in both the short-term and long-term. However, our 102 subsidiaries are subject to regulatory and other capital restrictions with respect to the payment of dividends. We currently have no material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years, other than the 2025 Senior Notes and the Facility. Financial Strength Ratings Ratings with respect to the financial strength of operating subsidiaries are an important factor in establishing the competitive position of insurance companies. Ratings are important to maintaining public confidence in us and our ability to market our products. Rating organizations review the financial performance and condition of most insurers and provide opinions regarding financial strength, operating performance and ability to meet obligations to policyholders. The financial strength ratings of our operating companies are not designed to be, and do not serve as, measures of protection or valuation offered to our stockholders. We cannot predict with any certainty the impact to us from any future disruptions in the credit markets or downgrades by one or more of the rating agencies of the financial strength ratings of our insurance company subsidiaries and/or the credit ratings of our holding company as a result of the impact of the COVID-19 pandemic, the ensuing economic uncertainty or otherwise. We also cannot predict the impact on our ratings or future ratings of actions taken with respect to Genworth. The following EMICO financial strength ratings have been independently assigned by third-party rating organizations and represent our current ratings, which are subject to change. [[GREPCENT_TABLE]] [["Name of Agency","Rating","Outlook","Change","Date of Rating"],["Moody\u2019s Investor Service, Inc.","A3","Stable","Upgrade","March 1, 2023"],["Fitch Ratings, Inc.","A-","Stable","Upgrade","April 25, 2023"],["S&P Global Ratings","A-","Stable","Upgrade","January 8, 2024"],["A.M. Best","A-","Stable","Initial","August 1, 2023"]] [[/GREPCENT_TABLE]] Contractual Obligations and Commitments We enter into agreements and other relationships with third parties in the ordinary course of our operations. However, we do not believe that our cash flow requirements can be assessed based upon this analysis of these obligations, as the funding of these future cash obligations will be from future cash flows from premiums and investment income. Future cash outflows, whether they are contractual obligations or not, also will vary based upon our future needs. Although some outflows are fixed, others depend on future events. An example of obligations that are fixed include future lease payments. An example of obligations that will vary include insurance liabilities that depend on losses incurred. Refer to Note 7 and Note 12 of our audited consolidated financial statements for discussion of borrowings and commitments in contingencies, respectively. We continue to hold reserves as of December 31, 2023, related to delinquencies from borrower forbearance programs due to COVID-19. We have seen COVID-19-related delinquencies cure above expectations, but reserves recorded related to borrower forbearance have a high degree of estimation. Therefore, it is possible we could have higher contractual obligations related to these loss reserves if they do not perform as we expect. Refer to Note 5 in our audited consolidated financial statements for discussion of our loss reserves. Refer to Note 2 in our audited consolidated financial statements for the years ended December 31, 2023, 2022 and 2021, for a discussion of recently adopted and not yet adopted accounting standards. 103