Daniel Fishbein: Yeah. So we certainly expected the redeterminations to happen. And there was some uncertainty if you go back to when the transaction was announced as to when that would occur. And the Biden Administration decided to extend the Public Health Emergency longer and longer until the spring of last year. So membership had — excess membership had certainly accumulated. We certainly expected that there would be some impact on the loss ratio because those who were being disenrolled were more likely to already have other coverage from getting a job or so forth. So we knew there would be that effect. The size of that impact, though, I think, has surprised everyone, including us and including the state. So I think this was anticipated, but the size of the impact was greater than we anticipated.
Gabriel Dechaine: I guess another way to look at it is maybe the redetermination — as you alluded to, the redeterminations were pushed out. So maybe the stuff that you would have expected to happen in late 2022 into 2023, and you’d be back on track in ’24, it’s more of a kind of a byproduct of — extension of a pandemic relief program, right?
Daniel Fishbein: Yeah. I think exactly. And in fact, we were — during the pandemic, our earnings were quite favorable and grew and grew at a stable rate, which is kind of remarkable with all of the impacts that we were having. So we were benefiting in the Sun Life US business from a uniquely diversified set of businesses. Of course, there was a very big negative impact on our Group Life business. And then there were positive impacts on the stop-loss business from lower health care utilization and in the dental business from the inflated Medicaid membership. Thankfully, the mortality impact in Group Life wound down about a year ago, whereas these two more positive tailwind effects in stop-loss and dental are winding down now. Have they all wound down in synchrony at the same time, we hardly would have noticed this.
Gabriel Dechaine: Okay. And if I could sneak one more in there, apologies to the IR team. But Kevin had mentioned in his opening remarks that the morbidity experience in group is now in line with pre-COVID levels, something along those lines. There’s been a lot of more positive quarters in that morbidity bucket over the past couple of years and back to normal. Is there a run rate? Do you price for an expectation of morbidity gains? And if so, what kind of range we should be anticipating because like last quarter, it was really high, didn’t view that as sustainable. Maybe this quarter is more normal. I just want to get a better sense of that, please.
Daniel Fishbein: Yeah. And what that is specifically referring to is stop-loss, the stop-loss portion of group. Throughout the pandemic, we were experiencing exceptional morbidity well — the loss ratio was well below what we priced for. And we’ve been saying throughout that period that it would gradually return to what we price for, it has to. And in the first quarter, the loss ratio is now fairly close to our pricing loss ratio. We price to about a 72.5% loss ratio and we’re approaching that number. That still generates very favorable margins. And in fact, we’re still somewhat favorable. So I think the way of thinking about it is stop-loss is still performing well, generating higher than its — strong margins, but just not as favorable as it was during the pandemic and aftereffects of the pandemic.
Kevin Strain: Kevin. I might add two things to that. First, we’re a leading provider in the stop-loss business in the US and we have been for years. So we have really strong capabilities, and we’ve been adding things like PinnacleCare, which makes that — those pricing ratios even more sustainable. And as Dan was saying, you were seeing earlier on higher mortality through COVID and better morbidity. You’re seeing both of these have a very strong margin. The combined group benefits was over 9% in the quarter. So you’re seeing that business do well. And our expectation is we would continue to do well, given our position and our investments and our investments into digital. The other thing I would say is on the DentaQuest because I know there’s a lot of questions about DentaQuest.
We still think it’s a very good acquisition. It added capabilities we didn’t have, it added scale. We are pushed back probably approximately a year a little bit if you think about that $100 million in 2025. But we’re still a big believer in this business and the acquisition we did and that it’s going to meet the long-term objectives we had for the business. And I think you’ve heard that from Dan, as he talked about what’s happened. It’s not been a straight line; you can see that. But we think we still have the thesis that we started with and the capabilities and the scale that it built.
Gabriel Dechaine: Okay. Have a good weekend.
Operator: Next question is from Paul Holden with CIBC. Your line is open.
Paul Holden: Thanks, good morning. Most of the questions have been taken, but one more on US group. Lots of references to run rate, earnings in dental of $100 million a year. Are you able to give us what it was for the quarter? Just to give us a sense of upside from here.
Daniel Fishbein: Well, in dental in the quarter, it was $6 million for the quarter, and that’s in our materials. And just an additional comment on the $100 million that we’ve mentioned several times, that’s really what we’re saying is our thinking for 2025. But as Kevin just said, longer term, we think it’s obviously higher than that. It’s still equal to or greater than what we anticipated when we announced the transaction. The growth trajectory of the business is very good. This temporary redetermination issue notwithstanding. And in fact, we’re winning new contracts. So we’re winning major new contracts. We’re winning contracts from competitors. We also have significant opportunity to grow, not just in the Medicaid business, but in Medicare Advantage and in commercial.
The commercial business has had a really good growth trajectory in the past year. And as of January 1, we added our largest Medicare Advantage contract ever. So there’s a lot of future potential here to continue growing this business.
Paul Holden: Got it. Okay. And then I want to go back to the discussion quickly on MFS and expenses there. I mean if I just look at the average asset growth versus the earnings growth, there’s a pretty big difference there. So I get that some of it was attributable to the additional compensation expense. But I’m assuming like that’s not normally what we would expect over time. So again, was there any kind of true-up or top-up? Maybe it’s related to time of year on that? And if we thought about sort of 8% type average earnings asset growth over time, what kind of earnings growth should we attribute to that?
