Second Quarter 2024 MD&A

increase in its regulatory capital requirements; increased market volatility, political risk, regulatory compliance and costs associated with international investing; geopolitical risk, including deterioration in international trade or consumer confidence due to geopolitical instability resulting from armed conflicts or acts of terrorism or war; environmental concerns, including climate change; changes in the value of investment securities held by the Company; loss of members of the Company's senior management team; potential legal, tax and regulatory investigations and actions; negative publicity; operational risks, including the failure of the Company's computer systems or potential cyber threats; reduction of business or adverse selection of loans with key lenders; the Company's reliance on its subsidiaries; litigation; insufficient insurance coverage; and potential conflicts of interest between the Company and its sole Class A common shareholder, Brookfield.

This is not an exhaustive list of the factors that may affect any of the Company's forward-looking statements. Some of these and other factors are discussed in more detail in the Company's Annual Information Form (the "AIF") dated March 20, 2024. Investors and others should carefully consider these and other factors and not place undue reliance on the forward-looking statements. Further information regarding these and other risk factors is included in the Company's public filings with provincial and territorial securities regulatory authorities (including the Company's AIF) and can be found on the System for Electronic Data Analysis and Retrieval ("SEDAR+") website at www.sedarplus.com.The forward-looking statements contained in this MD&A represent the Company's views only as of the date hereof. Forward-looking statements contained in this MD&A are based on management's current plans, estimates, projections, beliefs and opinions and the assumptions related to these plans, estimates, projections, beliefs and opinions may change, and are presented for the purpose of assisting the Company's security holders in understanding management's current views regarding those future outcomes and may not be appropriate for other purposes. While the Company anticipates that subsequent events and developments may cause the Company's views to change, the Company does not undertake to update any forward-looking statements, except to the extent required by applicable securities laws.

Non-GAAP and other financial measures disclosure

Non-GAAPfinancial measures are used by the Company to analyze performance and supplement its consolidated financial statements, which are prepared in accordance with IFRS. Such non-GAAP financial measures include premiums written; net operating income; operating investment income; interest and dividend income, net of investment expenses; pre-tax equivalent operating investment income; net insurance revenue; and net insurance service results. See the Non-GAAPand other financial measures section at the end of this MD&A for a reconciliation of (i) net insurance revenue to the comparable financial measure of insurance revenue, (ii) net insurance service result to the comparable financial measure of insurance service result, (iii) operating investment income and interest and dividend income, net of investment expenses to the comparable financial measure of total investment income; (iv) net operating income to the comparable financial measure of net income; and (v) pre-tax equivalent operating investment income to the comparable financial measure of total investment income. These non-GAAP financial measures have been restated to reflect the impact of new accounting standards as described below.

Non-GAAPratios used by the Company include investment yield.

Supplementary financial measures used by the Company to analyze performance include loss ratio, expense ratio, combined ratio, financial leverage ratio and contractual service margin ratio. The supplementary financial measures can be calculated using financial measures from the Company's consolidated financial statements.

The Company believes that these non-GAAP financial measures, non-GAAP ratios and supplementary financial measures provide meaningful information regarding its performance and may be useful to investors as they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. These measures and ratios may not have standardized meanings and may not be comparable to similar measures presented by other companies.

Definitions of key non-GAAP and other financial measures and explanations of why these measures are useful to investors and management can be found in the Company's Non-GAAPand other financial measures glossary, in the Non-GAAPand other financial measures section at the end of this MD&A.

Operational metrics

Operational metrics used by the Company include outstanding insured mortgage balances, delinquency ratio on outstanding insured mortgage balances, new reported delinquencies, cures, average reserve per delinquencies and average premium rate. These metrics are used by the Company to analyze performance in regard to the aggregate amount of outstanding insurance, delinquency trends and premium rate trends.

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Business profile

Business background

Sagen is the largest private-sector residential mortgage insurer in Canada and has been providing mortgage default insurance in the country since 1995. The Company has built a broad underwriting and distribution platform across the country that provides customer-focused products and support services to the vast majority of Canada's residential mortgage lenders and originators. Sagen underwrites mortgage insurance for residential properties in all provinces and territories of Canada and has the leading market share and largest in-force book among private-sector mortgage insurers. The Canada Mortgage and Housing Corporation ("CMHC"), a crown corporation, and Canada Guaranty Mortgage Insurance Company, a private mortgage insurer, are the Company's main competitors.

Federally regulated lenders are required to purchase transactional mortgage insurance in respect of a residential mortgage loan whenever the loan-to-value ratio exceeds 80%. The Company offers both transactional and portfolio mortgage insurance. The Company's transactional mortgage insurance covers default risk on mortgage loans secured by residential properties to protect lenders from any resulting losses on claims. By offering insurance for transactional mortgages, the Company plays a significant role in providing access to homeownership for Canadian residents. Homebuyers who can only afford to make a smaller down payment can, through the benefits provided by mortgage insurers such as Sagen, obtain mortgages at rates comparable to buyers with more substantial down payments.

The Company also provides portfolio mortgage insurance to lenders for loans with loan-to-value ratios of 80% or less. Portfolio mortgage insurance is beneficial to lenders as it provides the ability to manage capital and funding requirements and mitigate risk. The Company views portfolio mortgage insurance as an extension of its relationship with existing transactional insurance customers. Therefore, the Company carefully manages the level of its portfolio mortgage insurance relative to its overall mortgage insurance business. Premium rates on portfolio mortgage insurance have historically been lower than those on transactional mortgage insurance due to the lower risk profile associated with portfolio loans.

Seasonality

The transactional mortgage insurance business is seasonal. Business volumes vary each quarter, while interest and dividend income, net of investment expenses, and administrative expenses tend to be relatively consistent from quarter to quarter. The variations in business volumes are driven by mortgage origination activity, which typically peak in the spring and summer months. Strong housing demand throughout the second half of 2020 and 2021 impacted the typical seasonal variations in transactional premiums written in 2020 and 2021. In 2022, rising interest rates and strained housing affordability led to a weaker housing market starting in the Spring of 2022, which continued throughout 2023 and into 2024.

Losses on claims vary from quarter to quarter, primarily as the result of prevailing economic conditions, changes in employment levels and characteristics of the outstanding insured mortgage balances, such as size, age, seasonality and geographic mix of delinquencies. Typically, losses on claims increase during the winter months, primarily due to an increase in new delinquencies, and decrease during the spring and summer months. The COVID-19 pandemic and actions taken by lenders and mortgage insurers in respect of mortgage payment deferrals impacted the typical seasonal patterns of mortgage delinquencies in 2020 and 2021. During 2022, the cumulative favourable impact of home price appreciation from 2020 and 2021 in most regions of Canada resulted in relatively low levels of losses on claims and largely muted the typical seasonal pattern, which continued throughout 2023 and into 2024.

The Company's business volumes from portfolio mortgage insurance varies from period to period based on a number of factors including the amount of portfolio mortgages lenders seek to insure, the competitiveness of the Company's pricing, underwriting guidelines and credit enhancement for portfolio insurance, and the Company's risk appetite for such mortgage insurance.

Distribution and marketing

The Company works with lenders, mortgage brokers and real estate agents across Canada to make homeownership more accessible for first- time homebuyers. Mortgage insurance customers consist of originators of residential mortgage loans, such as banks, mortgage loan and trust companies, credit unions and other lenders. These lenders typically determine which mortgage insurer they will use for the placement of mortgage insurance written on loans originated by them. The five largest Canadian chartered banks have historically been the largest residential mortgage originators in Canada.

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Impact of rise in interest rates

Starting in March 2022 and through the end of 2023, the Bank of Canada increased the overnight lending rate ten times, resulting in cumulative increases in the overnight lending rate of 475 basis points. In June 2024 the Bank of Canada cut the overnight lending rate by 25 basis point to 4.75%, and in July 2024 it cut the overnight lending rate again by 25 basis points to 4.50%, as compared to 5.00% at December 31, 2023 and 0.25% at January 31, 2022.

Higher interest rates have resulted in a decline in the fair value of the Company's bonds and other fixed income securities during 2023, with a modest recovery in the first half of 2024, which has resulted in unrealized losses recognized in accumulated other comprehensive income. Conversely, higher interest rates have also resulted in higher interest income due to higher reinvestment interest rates, higher interest income on the Company's floating rate invested assets, and run-off of lower yielding investments.

Adoption of new accounting standards

On January 1, 2023, the Company adopted IFRS 17: Insurance contracts ("IFRS 17") and IFRS 9: Financial instruments ("IFRS 9") for the first time. IFRS 17 and IFRS 9 were applied to the Company's financial statements retrospectively, and comparative information was restated. IFRS 17, which replaced IFRS 4: Insurance contracts ("IFRS 4"), had a material impact on the Company's consolidated financial statements in 2023. Despite this impact, the Company's business model and related risks are not affected by these changes in accounting policies.

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Sagen MI Canada Inc.Q2 2024 MD&A

Overview

Second quarter financial highlights

Table 1: Selected financial information

Note: Amounts may not total due to rounding. 1 Non-GAAP financial measure. 2 Includes realized and unrealized gains and losses from derivatives and foreign exchange, excluding realized income and expense from the interest rate hedging program. 3 This estimate is based on the amounts reported by lenders to the Company which represents the vast majority of outstanding insured mortgage balances. 4 Supplementary financial measure. 5 Company estimate as at June 30, 2024. The Company calculated its mortgage insurer capital adequacy test ("MICAT") ratio in accordance with OSFI's Mortgage Insurer Capital Adequacy Test Guideline dated January 1, 2023 for the 2023 reporting period and the 2024 MICAT Guideline dated January 1, 2024 for the 2024 reporting period. The OSFI supervisory MICAT target ratio and minimum MICAT ratio under the Protection of Residential Mortgage or Hypothecary Insurance Act ("PRMHIA") is 150% and the Company's internal target ratio under the MICAT is 157%. See the Non-GAAP and other financial measures section at the end of this MD&A for additional information.

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would take into account the size, nature, complexity, and risk profile of each FRFI, balancing sound risk management against the need for FRFIs to compete effectively and take reasonable risks.

It is expected that OSFI will continue to review its expectations relating to real estate secured lending through 2024.

OSFI Guideline B-15: Climate Risk Management ("Guideline B-15")

On March 7, 2023, OSFI published Guideline B-15, which sets out OSFI's expectations related to the management of climate-related risk by FRFIs and align its disclosure expectations with the International Sustainability Standards Board's ("ISSB") final IFRS S2 Climate-related Disclosures standard ("IFRS S2"). In addition to these updates, OSFI also released new Climate Risk Returns that will be used to collect climate- related data on emissions and exposures from FRFIs. The Company's mortgage insurance policy does not cover direct damages from climate risks. The economic transition risk is the most significant climate related risk and the Company is in the process of more formally integrating climate related risks into its strategic planning and public reporting process.

Reinforcing residential mortgage risk management practices

On March 11, 2024, OSFI released a regulatory notice that applies to all FRFIs which was effective immediately. The notice responds to the heightened risk environment for real estate secured lending by reinforcing expectations on sound residential mortgage account and portfolio management practices. The notice provides that institutions should apply the notice alongside Guideline B-20, particularly income verification and higher risk mortgage products, such as variable-rate mortgages with fixed payments, and IFRS 9 as relating to significant increases in credit risk and lifetime loss provisions. The notice further provides that institutions should:

• Proactively identify and address vulnerable accounts, portfolio segments and concentrations;
• Ensure forward-looking credit risk measurement, modeling, and stress testing to estimate potential losses; and
• Apply timely recognition of expected and unexpected losses due to account vulnerabilities or adverse shifts in the risk environment.

Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances

On July 5, 2023, the Financial Consumer Agency of Canada ("FCAC") published its Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances, which sets out its expectations for FRFIs to contribute to the protection of consumers of financial products and services by providing tailored support to consumers with an existing residential mortgage loan on such consumer's principal residence who are experiencing severe financial stress as a result of exceptional circumstances, and are at risk of mortgage default. These exceptional circumstances include the current combined effects of high household indebtedness, the rapid increase in interest rates and the increased cost of living.

The FCAC expects FRFIs to pay particular attention to providing support to:

• Consumers whose payments on variable rate mortgages fluctuate with interest rates (variable payments) and whose payments have thus increased materially;
• Consumers whose payments on variable rate mortgages are fixed and have had a materially larger portion (or all) of their payment covering the increased interest costs or for those who may be facing negative amortization; and
• Consumers with fixed rate mortgages reaching near-term maturity, who may be facing a material increase in payments.

OSFI guideline for assurance on capital, leverage and liquidity returns

On November 7, 2022, OSFI released a new guideline setting out their assurance expectations for capital, leverage and liquidity regulatory returns. This guideline seeks to inform external auditors and institutions on the work to be performed on their regulatory returns in an effort to enhance and align OSFI's assurance expectations across all FRFIs. OSFI expects senior management to review and attest on the accuracy and completeness of the MICAT cover schedule on a quarterly basis, beginning in fiscal year 2024. In addition, OSFI expects internal auditors to evaluate and opine on the effectiveness of the processes and internal controls over the MICAT, including related systems, effective beginning fiscal year 2023, at least once every three years. Lastly, on an annual basis beginning with year-end reporting for fiscal 2025, OSFI expects external auditors to evaluate and opine on MICAT-related calculations to ensure they have been prepared in accordance with the appropriate regulatory framework and are free of material misstatements.

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