Manjit Singh: Good morning, Mario, it’s Manjit. So as you noted, we have a strong — we had very strong results in Hong Kong this quarter. And part of those sales results are driven by sales that we do through brokers. There are a number of different businesses that we do have that we use brokers for. So about a third of the sales are related to MCI client business. About half of that is for high net-worth clients where we work with brokers. We have established relationships with global private banks and the remainder is for local Hong Kong and pan-Asian clients. I think the issue that you’re talking about really relates to the first portion, which is the MCI clients, which I said is a smaller part of our overall business. And one of the things that we — that’s driving our growth is also we were underweight in that business prior to the pandemic.
We’ve made some investments over the last few years to grow that business. And so that includes establishing strong relationships with quality brokers, also looking at our product lineup and revamping our product lineup, enhancing the services and interactions that we provide to our clients, including opening up our new client center in the TST, enhanced digital capabilities, more Mandarin-speaking staff and improved after sales client service. And we’ve also made significant investments in our brand, which is also paying dividends. So the other thing I would note, Mario, is that our overall business that we are writing continues to have very good margins and more importantly, strong persistency, which suggests the quality of business that we’re riding is quite high.
So overall, we’re very pleased with the momentum in our Hong Kong business.
Mario Mendonca: So, Manjit, do you expect any effect from the controversy in the broker channel in [indiscernible]?
Manjit Singh: So far, Mario, as you know, that was just something that the HIA conducted last month. To date, we have not seen any impacts to our business.
Mario Mendonca: Okay. A much broader question now, probably for Kevin, maybe for Tim. When a company of Sun Life’s caliber reports a quarter like this, like a meaningful miss relative to what the Street was looking for, it can either — it can go one or two ways, either management confidently declares that this quarter was the anomaly and earnings power is not meaningfully affected, or the message is estimates are just too high for the company, not just for the quarter, but on a go-forward basis. It’d be helpful to hear, probably from Kevin first, if — like, let me know which of those two, is this a message that our numbers need to come down or is this the anomalous quarter?
Kevin Strain: Thanks for the question, Mario. It’s Kevin. Outside of the US, and more specifically, DentaQuest, the negative items that hit us this quarter were largely normal volatility and were unique to the quarter. So for Canada, MFS and SLC, we’d expect results to normalize. And as you noted, Asia showed good momentum, in particular in Hong Kong and international. I think you heard from Jacques and Mike and Steve on that. And as I already discussed in my opening remarks, SLC, we should see building nicely the rest of the year towards the $235 million target from their Investor Day for 2025. So that sort of puts those pieces in context. The US outside of DentaQuest is in a similar situation to the other businesses. In fact, in the quarter, as Dan mentioned, Group Benefits business maintained very strong margins.
DentaQuest is going to take some time. And we expect DentaQuest will take the rest of the year for the repricing to work its way through and claims experience, by the way, in dental continues to be high in April. So in 2025, we’re looking at getting closer to the $100 million for DentaQuest. But this year, I think there’ll still be some headwinds in terms of the DentaQuest piece. I would also point out that the global minimum tax is expected to begin as early as next quarter and will impact us by 1% to 2%, which we previously signaled. So I think the answer to your question is probably specific into the business groups. And the one piece that I think continues to have a bit of that headwind is DentaQuest, and it’s to do with the repricing that Dan talked about, but also the continued sort of higher claims experience.
Mario Mendonca: That was a very precise answer. So if I could paraphrase that. If DentaQuest is the one area that may take more time to get back to normal and everything else feels like it should normalize relatively quickly, then what I’m hearing then is that a very modest part of Sun Life because to be clear, we’re talking about $30 million at the best of the quarters in terms of earnings from dental. Again, a much, much bigger company than that. It sounds to me than that, for the most part, this was the anomalous quarter with that modest exception of dental.
Kevin Strain: I think, Mario, your math is accurate as always, and I think that’s a good interpretation of what we’re seeing.
Mario Mendonca: Got it. Thank you.
Operator: The next question is from Doug Young with Desjardins. Your line is open.
Doug Young: Hi, good morning. Maybe back to Dan, and you talk about — or Kevin, you talked about repricing the DentaQuest business. And so I assume, before you were thinking of growing earnings and revenues in ’24 versus ’23, I assume that’s off the table, but you can kind of correct me if I’m wrong. But what I’m more curious is how hard is it to push through price increases by state in DentaQuest? I mean, can they just say no? Like can you talk a bit about that? Obviously, when you all trying to push through pricing in states for certain categories of the population, it can get difficult. So just curious.
Daniel Fishbein: Yes. Thanks, Doug. Just a quick comment on the revenue. DentaQuest continues to win business and in fact, more so than our competitors and from competitors in some situations. So we’ve actually — we’re actually anticipating, from a revenue perspective, being largely back to where we were. There’s a little bit of a range there, but we’re approximately or will be approximately in the pre-COVID range, and then expect to continue growing from there. Medicaid historically has a 6% compound annual growth rate just in the program itself, and then we continue to win contracts. So in the longer term, we think that the business is very well positioned from a growth perspective. Obviously, this is a once in a century pandemic that we’re dealing with, with very unique aftereffects in this case, in particular, the government saying that the normal disenrollment from Medicaid, which is substantial annually, was frozen in place for more than three years.
