Erik Bass: Hi, thank you. Can you provide some more color on your non-medical health underwriting results this quarter, in particular, the experience in dental and disability and how you’re thinking about those going forward?
Ramy Tadros: Sure, Erik. It’s Ramy here. So, I’ll start with disability. So, all results this quarter were favorable year-over-year. We’re seeing favorable incidents and very strong recovery levels and I’m very pleased with the performance of that line this quarter. And as I just noted before, we have seen about a one-point impact on the ratio given some of those reserve refinements which we referred to earlier. On disability, we’re continuing to benefit from tailwinds here in terms of favorable macroenvironment and interest rates and tight labor markets. But aside from the macro factors, we’re also benefiting from our strong underwriting, our return to health capabilities, the deployment of data and technology and how we run this business.
And we also continue to invest in our leave and absence capabilities which give us pricing power and continue to resonate well in the marketplace. From a dental perspective, we have seen a slight elevation, our trend this quarter, driven by an increase in our claims costs. As part of the normal course of managing this product, we adjust our pricing to make sure we meet our target margins. So as a reminder, we reprice the majority of our dental book, call it about 80% annually and we’re always monitoring the trend and adjusting our pricing accordingly. So this is part of the course in terms of managing a dental book. And maybe if you want to kind of step back and look at the non-medical health benefit ratio for the full year which is inclusive of dental and disability, we expect to be at the midpoint of our guidance range for the full year here.
Erik Bass: Thank you. And then if it could pivot to Asia, Japan sales continue to be very strong. So we could talk a little bit more about what’s driving this, the current competitive dynamics in the market and what impact a change in BOJ policy could have on the business.
Lyndon Oliver: Hey, yes, thanks Erik. It’s Lyndon here. So look, we’re very pleased with the overall sales performance we’ve seen in Asia in the second quarter. You’ve seen Asia’s sales overall have grown 34%. And Japan in particular is up 42% and the rest of Asia up 17%. Now if we look a little deeper in Japan, foreign currency products continue to drive our sales growth over there. The market for single premium foreign currency products has been strong given the higher rate environment. And we continue to sustain our market position in the annuity segment. Michele pointed out in his opening remarks, our ability to bring new products to market quickly has really helped us in terms of launching our single premium foreign currency product.
We’ve also optimized our capital structure for these products by leveraging our internal reinsurance in Bermuda. So the combination of both the product differentiation, the speed to market, as well as the strength of our distribution in the face to face as well as bank assurance has really been a strong factor in growing sales. If we look the rest of Asia, we’ve recovered really well this year. We’ve seen broad based improvement in China, India and Korea. And overall, all the initiatives we’ve taken on the customer side, the distribution side, as well as on the product, the new product launches have really helped in these markets. And if we look ahead to the outlook, our management actions have really continued to drive the sales momentum. But when we look at the year over year comparison for the second half, we’re going to be challenged given we had a strong second half of the year last year.
However, we’re on track to be at the high end of the full year guidance of mid to high single digits.
Erik Bass: Thank you.
Operator: Next, we move to a question from Jamminder Bhullar with JP Morgan. Please go ahead.
Jamminder Bhullar: Good morning. So first, just a question on threads in the retirement business. Assuming that interest rates sort of followed the forward yield curve, it would be reasonable that your yield would pick up, but should we assume that spreads would improve as well? Or are you at a point where now any incremental increases in yield in the retirement business would need to be passed through to customers through higher productivity?
John McCallion: Hey, Jimmy, it’s John. Good morning. Look, as we think about yield, as you said, we had a really strong quarter and certainly an RIS. We were 132 all in. And if you exclude VI, we’re a healthy 142. And probably if you kind of normalize for VII, that puts us at the high end of the range, it’s very much in line with what we gave at our outlook. We thought the first half of the year, even though the Ford curves have moved around and things like that, that we would have kind of a higher level in Q1 and Q2. I think as you look forward, we would think spreads kind of hover around this point. I’m not so sure it would kind of — now, why it does that is not necessarily exactly, I’d say, perfectly aligned with the pass-through comment you made.
