You got life events, job changes, health issues, divorce and other things that do cause borrowers to pay off their mortgage. I guess, what I would say is our view maybe not as prescriptive, but our view is given that our insured portfolio has loans with mortgage rates kind of at or below the 6% level, and our expectation that mortgage rates remain elevated in the short term, we’d expect persistency to remain elevated in the near term. Whether that’s 84%, 85%, 83%, hard to predict, but elevated relative to kind of historical levels, Mihir.
Mihir Bhatia: Thank you.
Rohit Gupta: Thanks, Mihir.
Operator: One moment for your next question. And your next question comes from the line of Bose George with KBW. Your line is now open.
Unidentified Analyst: Hey. good morning, everyone. This is actually Alex on for Bose. Thank you for taking our questions. I have another question on pricing. I was wondering if you guys would be willing to discuss your thoughts on the durability surrounding the price increases, we’ve seen across the industry over the past year. And then maybe, to drill a little bit deeper, if we were to see the macro-outlook potentially improve, could the industry potentially give some of that pricing power back?
Rohit Gupta: Good morning, Alex and thank you for the question. I would say, the way we think about pricing is difficult to comment at an industry level. Every MI company has their own macroeconomic view, and their own view of returns and credit risk. I think our perspective is that we are still not past the point of economic uncertainty being gone. I think we see the balance in the market kind of the forces I described in my prepared remarks that on one hand, we are talking about consumers still having healthy balance sheets, labor market being strong. On the other hand, we are talking about broader inflation still being there, elevated home prices from the last two, two and a half years and at the same time, higher rates at this point of time.
And given what fed has done in terms of increasing rates, the effect of that on economy on consumer is a little bit lagged. So, we are still kind of expecting some volatility in the market or some uncertainty in the market. And as I said earlier, in my answer, we are increasing our price for that economic uncertainty. Depending on how that uncertainty plays out, we will adjust our pricing. So, if that leads to a scenario, where there is a short mild recession, then obviously, we did the right thing in terms of increasing price for those credit losses. And if you look back at COVID, we kept our prices elevated during the time of the COVID unemployment spike and then as unemployment came down, there was adjustment in price. So, I would just say that those are kind of the broad boundaries on how we think about pricing.
But given kind of we are in a competitive market, I’m not going to describe kind of specific risk attributes or changes that we might make depending on how the market moves.
Unidentified Analyst: Great. Yes, that makes sense. And then maybe, a quick follow-up on Enact Re. Would you be willing to walk us through the benefits of seeding that I think it’s 7.5% of the in-force business? And then is there a minimum capital requirement at enact Re as well?
Dean Mitchell: Yes, Alex. I’ll take the first question as it relates to the benefit of the quota share. Our immediate business objective of Enact Re was really to gain access to the GSE’s CRT market on attractive terms. Longer term, we’ll look for ways to develop the broader platform for future growth. But in the immediate term, it’s all about GSE’s CRT market. And to accomplish that, we believe we needed an A- rating. As you know, the GSE’s CRT capital standards are predicated on ratings, both capital and collateralization requirements. But the 7.5% quota share reinsurance allowed us to scale Enact Re to achieve those A- ratings, and ultimately was an enabler to provide that access to the GSE’s CRT market again, on those attractive terms.
So, I really think if you kind of look backwards, we were looking for ratings. The quote we needed scale for the ratings and ultimately, the quota share transaction provided Enact re, the scale necessary to get an A.M. Best the A- rating. That’s really the basis for the quota share reinsurance transaction, the affiliated quota share reinsurance transaction.
Rohit Gupta: And then from a minimum ratings perspective, let me start, and then Dean can chime in. I think, we don’t think of Enact Re having like a single dimension of ratings framework. We actually think about four different ratings frameworks, and think of that as Bermuda Monetary Authority. As Dean just said, A.M. Best framework. Then, we have PMIERs, because we are seeding affiliate risk into the entity and we also intend to primarily focus on GSE credit risk transfer market. And then our internal view on top of it, which would be management capital either from an economic capital or a solvency capital perspective. So, we combine all those views together and then think about the capital needed. And I think Dean summarized it well that as you think about us launching this entity, we are launching this entity with a significant portion of the capital we contributed, supporting the affiliate quota share at inception with obviously forward funding some of the GSE CRT market.
