The issue isn’t the lapse and replacement policy. The issue is when it’s too much of what you sell, meaning you want to be driving more new customers and have the proportion of your lapsed and reissued or replacement policies be a lower percentage of your overall sales. That’s why you’re seeing what we’re doing, developing coming back out with WAYS, which attracts a younger, as I mentioned, and newer cohort of investors. Creating products like the disability or income products that are sold and now small businesses to employees who lack that type of coverage, and elderly care product, which is a growing market, albeit a slow growing market. All of this is designed to try to attract and develop new customers. And we believe we can make progress on that.
But right now, the lapse reissue is naturally higher when you launch a new cancer product. And that’s really typical of what we’ve seen in the past.
Max Broden: And just to add, Suneet, to how this impacts our P&L, it obviously impacts our benefit ratio and expense ratio as well. The benefit ratio was lower by about 90 basis points in the quarter from increased lapse and reissue activity, and our expense ratio was roughly 50 basis points higher because of higher DAC monetization that Fred referenced.
Suneet Kamath: Got it. I think last quarter, you had said that the lapse reissue is over 50%. Is that kind of still where it’s running in Japan?
Todd Daniels: Yes, Suneet, this is Todd. It’s still running around that rate. We saw it a little higher in the third quarter when we launched. And naturally, that rate starts to come down. So I think as a whole, over the first six months or so, we anticipate being around 50%.
Operator: The next question comes from Ryan Krueger of KBW. Please go ahead.
Ryan Krueger: Could you talk a little bit more about what you saw in terms of the elevated U. S. lab activity in the fourth quarter? And then, also if you can provide any commentary on if that’s continued into January or is settled down?
Fred Crawford: I commented in my script, this is Fred, about the lapse rates in the U.S., and it really mimics what I said. And there’s really two categories to look at it. One is our individual products. You can think of these as our traditional products sold to small businesses, the largest portion of our in-force and sales. And that lapse rate was down around 1% and, honestly, down 1.5-or-so early in the year and then slowly recovered to where, by the fourth quarter, it was down more modestly.
Dan Amos: Yes, Fred, Steve’s got some numbers here on that, I think. Steve?
Steve Beaver: Yes, I would just add that Fred’s script and talking points were spot on. We did see account lapses in the fourth quarter, particularly in our group business. not attributable to anything specific or systemic. We do have — we did experience some large account lapses. We did pick up, as Fred highlighted, in the third quarter, some large accounts through the last half of the year. But net-net, we were down through the last half of the year at group. I would just add that looking forward into 2023, we are going to — we have this office on persistency where we’re going to approach this experience that we had in 2022 through product development, client service, technology solutions and incentive designs, but moderating that or modifying that to how the economy performs in 2023. That’s an important thing for us to make sure that we use data to drive our actions in 2023 to get persistency back online.
