It would have been virtually impossible with all the lenders out there having to change their system and regulatory approval. So, this ability around the engine to make these, I would say, more micro changes it’s created pricing power for the mortgage insurance industry and more so than people really realize. And I think that’s the ability — we’ve always had the discipline. We just didn’t have the ability to affect that kind — how mechanism worked with the rate cards. And I think the engine has been a real breakthrough for the industry and gives us a lot more of that flexibility that other industries enjoy in terms of pricing credit risk.
Operator: [Operator Instructions] Your next question comes from the line of Eric Hagen from BTIG. Your line is open.
Eric Hagen: Maybe kind of a bigger picture question here, I mean if loss rates across the industry stay this low into early 2024, mid-’24. How do you see that potentially changing the competitive dynamic like in the industry itself as we look into next year? Like the fact that everyone seems to be generating excess returns with loss rates being this low, I mean, how do you see that affecting pricing, competition maybe even your own policy towards capital return as we look to next year?
Mark Casale: Yes. It’s a good question. I would say — I wouldn’t think it would impact pricing, Eric, because remember, we’re pricing for that normalized 2% to 3% credit. And part of how it — part of the results are impacted by the economy of which we have no control over, right? So if losses are better, that will then generate more excess capital and then there’s choices, right? Again, there’s choices to return that to shareholders via dividends or repurchases or to invest outside of the core business. And I think that will be the real result. I wouldn’t be surprised if again, just given the dynamics, if losses are lower, again, none of us really — these are actuarial-based models. So we don’t price quarter-to-quarter and say, hey, losses are lower, let’s go lower the pricing on new production.
And again, just given the competitive dynamics around pricing if you lower price, to again, bring in more business, it’s easily matched. So again, there is no — there’s a great — that’s where when we talk about kind of the pushes and the pulls around pricing. And then just given the information that we all have, everyone can kind of see where the market is going. So, it would be a short-lived gain and you really would just be — you would really just be giving away economics as opposed to saying, hey, we’re going to price for a normalized unit economics 12% to 15% returns, the result of a lower provision as excess cash. How do we deploy that? And I think taking a step back, again, not quarter-to-quarter or even next year, Eric, my view is the winners and losers in MI and not in that — it’s not a binary and we could all be winners is really how the different companies deploy that excess capital, right?
And you can’t judge that quarter by quarter. It’s really going to be over the next three to five years. And I think some that choose to return it all and shrink will have less choices, others — we’re in the other camp, right? We’re in — I can’t speak to other strategy. Everyone has — I mean all the strategies seem to be pretty sound and it’s in the eye of the beholder. For us, we have to reinvest cash and grow mentality. We just happen to believe that longer term growing book value per share, and we’ve grown at 19% per annum since we went public. It will be harder as we get bigger, but that’s the challenge. And it’s going to force you to put capital to work to continue to grow that book value per share. And I think that’s what we’re focused on.
And I think, again, a lower result on the provision would give us more cash to pursue that goal.
Operator: Your next question comes from the line of Geoffrey Dunn from Dowling & Partners. Your line is open.
Geoffrey Dunn: I fell off for a minute, so I’m not sure if I missed this, but can you provide the dollar impact of the tender offers on ceded premium this quarter?
Mark Casale: $8 million, I think, was an additional ceded premium.
Geoffrey Dunn: And then I wanted to follow up on pricing. And so, I understand your pricing for the longer-term credit, normalized credit. How do the mechanics of investment yield and higher interest rates affecting cost of capital factor into that. Obviously, we’re thinking forward to when, let’s say, it’s a soft landing and the economic expectations get better. I’m trying to understand kind of the puts and takes that might help sustain pricing at these improved levels versus what might be given back, as economic expectations hopefully improve?
Mark Casale: Yes. Good question. Again, I think on the yield, that’s another factor where our yields historically have been kind of in that 2% to 3% range, putting new money to work at 5%. That’s a pretty significant increase both in nominal dollars, right, falling to the bottom line and certainly improves the unit economics. But however, we — when pricing we use probably a more normalized investment yield kind of closer to like a 3-ish percent. So, we don’t incorporate that into our pricing is really kind of the short answer. It’s really driven around credit. We look at pricing on an unlevered basis. So, we don’t really look at the cost of debt. We don’t have a lot of debt anyway for — to make meaningful. I think again, Geoffrey, you’re looking — if the economy brightens, I’m not sure that lowers pricing.
