But more importantly, when we think about capital generation expectations under varying scenarios over the next few years, feeling confident that we should be able to execute against that and use the full authorization.
Soham Bhonsle: Okay, great. And then I’m looking at Slide 6, maybe I’m not reading this correctly, but if I look at so the percentage of development related to the other sort of line how you break it out, it seems like a lot of the improvement did not come from claim this quarter, claim rate sorry and it was other something like severity or things like that. Am I reading that wrong? Like what should we read into that?
Nathan Colson: Yes. It’s Nathan. I’ll take that. I mean, I think the severity in Q4, it was a little bit less just because we had I think a little bit more claim rate improvement. So that drove the ratio between those two a little bit. But the 16%, I think, is reflective of another quarter where our actual severity on claims was, I think in the low 60s versus our reserving assumptions are typically above 100%. So, a lot of that is as we have not only realized actual claims that are at lower severities than what we would have expected, but also as loans are curing, those severities are also I think are also being adjusted. So, the go forward on that, I think it’s probably not going to look like what we showed here in the first quarter of last year where it’s 100% and 0.
I think a split between both claim rating and severity in the current environment. If we have a continuation of this current environment, I think we’ll see improvement both claim rate and severity, just because actual severities right now are running so much lower than what we have in the reserve assumptions.
Soham Bhonsle: Got it. And just one more. On the net investment income line, it looks like you’ve been growing that line about $2 million every quarter. I mean is that sort of a sustainable run rate here as portfolio rolls off and you come into new money yield? How should we sort of think about that developing through the year?
Nathan Colson: Yes, I would maybe call out two things. I mean, what we said was we do think that the book yield will continue to increase, but probably at a slower pace. And we’ve already seen that a little bit. We had increases of approximately 20 basis points a quarter for some time, this quarter it was like 10 basis points so, it is still increasing but at a slower rate. So that will slow the growth in net investment income all sequel as well. The other factor is the amount of kind of balance sheet assets that we have invested. As we over the last couple of years that has grown as well as well as the yield increasing. Depending on what our kind of capital return levels are, we hold the balance sheet capital closer to flat that will also limit the growth of net investment income.
But I think from a what we’re thinking about managing to is what we’re invested in, really no changes there in terms of what the strategy is, just reinvestment rates continue to be somewhere around 150 basis points higher than the current book yield. So as that rolls over, and as new money comes in, that will provide an opportunity for incremental increase in the book yield.
Operator: Now we’re going to take our next question. And the question comes from the line of Mihir Bhatia from Bank of America. Your line is open. Please ask your question.
Mihir Bhatia: Hi. I appreciate my question. Can you talk a little bit about the embedded equity in the delinquent inventory? Any stats you can share there? And then also, I know you expect like delinquency to kind of normalize over time, but where you think that settles out like on a steady state relative to pre pandemic levels?
Nathan Colson: It’s Nathan, I’ll take the embedded equity and I missed the last part of the question. So, I may ask you to repeat that, when you have to recover the embedded equity. But we’ve gotten this question a lot and I mean, we certainly have it’s something that we have the statistics on. But I think for us, those are based on typically CBSA level average home prices. And the delinquent inventory is for us right now about 2%. You’re not dealing with the average situation in that case. You’re dealing with kind of the tail of a distribution of home prices and economic situations. And that’s we’re not really holding capital. The business isn’t really geared around the average. It’s really geared around these kind of tail scenarios. So for us, we could look at that, but I think get less maybe comfort in that, from a resolution of delinquent loans just because I think it’s more likely for those loans that they haven’t experienced the average home price appreciation.
Mihir Bhatia: Got it. That’s helpful. And then my follow-up to that was just like where you think delinquencies like normalized on like a steady state like relative to pre-pandemic levels? Like I realized that you think they’re going to go upwards, but like how much higher do they go like until things don’t realize? And if I can ask my follow-up now to, just curious what you’re hearing from like origination partners as we enter like peak housing season and has the recent move up in like interest rates changed, any impact there?
Nathan Colson: I’m sorry, it’s probably the audio RN, but were you asking about delinquency rates normalizing or something else?
Mihir Bhatia: Yes. So, on the first part, sorry, like delinquency is like rates going higher, just like curious if we think that normalizes out on like a steady state level. And then just my follow-up would be on like what you’re hearing from origination partners as we enter peak housing season? And like has the higher interest rate environment as that kind of ticked back up, have those conversations changed over the last couple of months?
Nathan Colson: Got it. Just on the I’ll let Tim cover the origination question, but on the delinquency rates, I mean, we’re in kind of the low 2% right now for us on account basis delinquency rate. We’ve said that we think we notice this may take a little bit higher, but in a kind of a typical or the type of economic environment that we’ve been experiencing recently, I think that’s probably stays in the 2% to 3% range. Really what we were trying to call out is that the movement down this quarter, we don’t think is indicative of an expectation that a move down will continue. But, obviously delinquency rates for us are and for mortgages in general are very tied to unemployment. So, if unemployment rate remains very low like it is right now, that will be beneficial for delinquencies. But if unemployment or the macroeconomic condition worsens, then I think delinquency rates will react to that as well.
