Daniel Fishbein: You had asked us what the outlook is, especially considering sales and also what the impact was on other — on loss ratios and expense ratios. So it’s worth commenting as that membership has come off, that just gives us a higher expense ratio, not necessarily higher expenses. There are some higher expenses in the quarter that are related to investments we’ve been making in the new Advantage Dental Plus practices. But since the membership comes off or is coming off more quickly, the expenses don’t come off quite as quickly. We also have seen some modest loss ratio pressure, not surprisingly, the members who come off through the redeterminations tend to be lower utilizing members than members who are staying on, but that’s obviously a temporary impact.
Just in terms of looking forward, a couple of important things to note here. Since the acquisition, which was June of last year, the Dental business has sold about $600 million in new business. About $400 million of that is from seven large Medicare and Medicaid sales and none of that premium is yet on the books. That premium will come on the books in 2024. It’s anticipated during the first three quarters of 2024. And that $400 million in premium is larger than the amount of premium that we expect to be associated with all of the disenrollment. So we do have a bit of a timing challenge obviously, with the disenrollment happening more quickly than the new business coming on and more quickly than anticipated. So there could be some challenge around that over the next three quarters.
But at the end of that transition, the business should actually be larger than it was. And in addition, there’s a very large pipeline of opportunities beyond the sales that have already occurred.
Gabriel Dechaine: Okay. That’s very illustrative, I guess. And I guess, the next few quarters, you’ll see maybe similar to this quarter, but then gradually maybe Q2, Q3 next year starting to go in the other direction in terms of net sales and premiums?
Daniel Fishbein: Well, in terms of premium, yes, the next three quarters, we would see the other half of the membership that’s associated with the redetermination come off, but we would also see that $400 million in new business start to come on [ specialty ] first quarter of next year. In addition, it’s also worth noting that the third quarter of any year is the worst quarter for seasonality. In other words, the highest utilization quarter largely related to kids getting dental care right before school starts. That’s been a very long-standing pattern. So — and there were also some onetime accounting true-ups and contractual true-ups in the quarter. So we would expect those things not to recur. So from a revenue perspective, I would agree with your comment. From an earnings perspective, we would hope that the next quarters would be better.
Kevin Strain: Gabe, it’s Kevin. I might just add that nothing has changed our thesis on the DentaQuest acquisition. We knew that these — the public health emergency was going to end and there was — these people were going to be falling off of the membership. In fact, as Dan said, the sales is ahead. So if we think about our M&A thesis, we’re — nothing has changed our thought process on that. In fact, we think it could be a little bit better, and the integration continues to go well. So yes, you’re seeing some lumpiness in the quarter, but we still expect DentaQuest to perform as we expected it to.
Operator: Thank you. And I show our next question comes from the line of Meny Grauman from Scotiabank. Please go ahead.
Meny Grauman: Hi, good morning. Kevin, I wanted to follow up on your discussion of partnerships and it sounds like the thesis there has changed a little bit for the positive and maybe sharpened. So I’m just hoping you could provide a little bit more insight in terms of that, whether my impression is correct? And then a follow-up on that.
Kevin Strain: Well, Meny, we have a lot of partners around the world that linked into our joint venture partners, which are significant in India and China, our bancassurance relationships, our relationships with different banks. We also have a few opportunities that we continue to sort of push on and look at in terms of partnerships. And having a senior person who thinks globally about that, we think is going to be a benefit to our strategy. And if you think about how quickly the world is changing, in different areas, having these partnerships and understanding how to leverage them, we see being important to the strategy and Ingrid is a great fit for that, as I said in my opening remarks.
Meny Grauman: And is this a signal in terms of capital deployment in this specific area? Should we expect to see more there? Is there a change that you’re signaling in that?
Kevin Strain: I wouldn’t take it as a signal of capital deployment. I would take it as a signal of us leveraging the relationships we have and the opportunities that we see in front of us.
Meny Grauman: Got it. And then if I could just ask a question on Asia just in terms of Hong Kong, specifically, very strong sales. And I’m just wondering if you can maybe disaggregate how much of that is the contribution from the new bancassurance deal? How much of that is from the MCV market specifically?
Kevin Strain: Yes. Meny, Ingrid’s on the line, so I’m going to let her answer the Hong Kong question.
Ingrid Johnson: Thanks, Kevin. Thanks, Meny. We’re delighted with Hong Kong. It really was a standout quarter. So sales strongly up fourfold and interestingly, strongly outpacing the market in the first six months. The factors are really twofold. So one is externally with the border reopening with Mainland China. There’s significant demand and strong momentum generally, but the fact that we’ve outpaced the market shows that we also had significant internal readiness that we’ve been focusing on over the last few years, and a number of those relate to our client value proposition that we’ve invested in. Firstly, as you point out around our distribution. So we’ve emphasized all aspects of distribution. So it’s around our broker relationships that we’ve broadened and deepened agency teams, including focused on MCI.
