Dan Houston: Yeah. And I’ll have Deanna take that one. Thanks.
Deanna Strable: Yeah. So obviously, over the past few years, we went through the COVID, where we did see some benefit of mortality. But ultimately, as we do every third quarter, we step back and we look at all of our actuarial assumptions and make sure that we are reflecting that in our reserve levels. New this year under LDTI is the fact that this annual actuarial review also applies to FAS 60 products, which includes our pension risk transfer products. And so again, that wouldn’t have been something we would have reflected historically in our AAR, but now are reflecting that. One of the things that we have seen is that, ultimately, we are not seeing the expected mortality improvement that we had factored into our assumptions.
And so we trued that up and ultimately then increase the mortality expectations on those PRT lives. And that led to that slightly over $50 million benefit in the PRT. We aren’t changing our future mortality assumptions. There is a slight benefit in the run rate expectations for AAR, but that was really the driver of what happens.
Wilma Burdis: Okay, thank you [technical difficulty]. And then the adjusted benefit ratio in Specialty Benefits was 58%, which was better than your targets and improved 4 points year-over-year. It sounds like the group disability could continue to outperform in the near-term, but could you go into the other drivers and what we should expect in the coming quarters?
Dan Houston: Excellent. Thanks, Wilma. Amy, please.
Amy Friedrich: Yeah. So, Wilma, as you’ve noted, the group disability one is probably one of the bigger drivers that’s giving us that overall result. And again, as we’ve talked a little bit about, some of that will continue. I do think that third quarter is not repeatable in terms of when you adjust out the AAR, you’re looking at that almost 46% loss ratio. That’s not something that will continue, but we will see some improvement from those historical levels. The other piece I would say is Group Life, is continuing to perform really, really well. I made a point in an earlier question to talk a little bit about our focus on those knowledge industries, I do think that tends to have a little bit of impact in Group Life as well.
So the type of business that you’ve built over time and the type of patterns you see against that business really do matter. And so, I would expect Group Life to continue to perform pretty well. Dental has been one that we have been seeing a little bit more utilization and severity over the last year, year and a half since COVID. It’s been one of those we’re trying to kind of find that next normal pattern. I do see it beginning to kind of slowly return to those patterns that we used to see prior to COVID, we’re always willing to make some modest pricing adjustments to make sure we’re continuing to be good stewards of that line of business. But I would expect to see that to continue to have probably even a little bit better performance than we saw in the trailing 12-month number from that.
And then our supplemental health line, I would continue to expect to see the type of performance that we’ve seen from that in the past and then individual disability could also see some of those benefits we’ve talked about, but I would continue to see it performing consistent with some of those historical levels.
Dan Houston: Hopefully, that helps, Wilma.
Wilma Burdis: Yeah. Thank you.
Operator: Thank you. Our next questions come from the line of Wesley Carmichael with Wells Fargo. Please proceed with your questions.
Wesley Carmichael: Hey, good morning. So last quarter, I think you talked about you expected variable investment income to be a little bit below normal levels for the remainder of 2023. And are you still expecting that into the fourth quarter? And maybe just if you think that could persist in 2024 or when you expect that to turn around?
Dan Houston: Thank you, Wes. I’ll have Deanna take that one.
Deanna Strable: Yeah. I think when you look at 3Q relative to what we saw in first quarter and second quarter. The real improvement came because we did see some real estate sales in the quarter that then transferred into that variable investment income. As I look forward to the fourth quarter, I think you probably – it is hard to predict, especially given the volatile market that we have. But probably expect to see fourth quarter be closer to 1Q and 2Q levels as we sit here today. For 2024, I’ll defer to more detail on the February outlook call. But I do think it is obvious to understand that as the interest rates continue at this high level, we’re going to continue to see ongoing pressure from prepays. And it’s really the other alts and the real estate that can be volatile quarter-to-quarter.
Wes Carmichael: Yeah, thanks. And maybe as a follow-up. In the Individual Life business, it seems like that maybe came in a little bit below your expectations, maybe even for the last couple of quarters or so. So just wondering if there is an impact related to mortality or what’s driving a little bit of the pressure there?
Dan Houston: Yeah. The only thing I just want to say before Amy delves into this is, what an outstanding job she and her team have done in pivoting from that retail franchise with the divested businesses, the reinsurance agreements. And there is going to be a little volatility there, but the business owner executive solutions and NQ business has really been powerful for the organization and really complementary to the entire platform. But Amy, you want to take on the loss ratios here?
Amy Friedrich: Yeah. Dan, you’ve hit one of the points I would make about that is that, I would say that Life business sort of refocus has been meeting or exceeding our expectations in terms of getting ourselves focused on those business owner, really meaningful business owner relationships, about 50% of the business that we do in non-qualified in any given quarter is going to be tied into the Life Insurance business now. And when we look at those business owner offerings, they tend to not only purchase Life Insurance products, but they tend to deepen the relationship across our retirement and asset management franchise as well. And so those are really nice small business relationships for us to be building. You’ve hit the point in terms of the question, which is, there have been some things in the last couple of quarters in terms of mortality that we’ve seen a little bit more.
