Stephen Peacher: Yes, Nigel, thank you for the question, Steve. Yes, we did — in terms of our earnings profile, maybe a quick comment first. Most of our business is very steady quarter-to-quarter. We got page management fees on the assets we manage, and it’s very predictable. But then in any given quarter, our earnings can be impacted by some things that probably one time is the wrong term, but episodic might be the right term. And that — an example would be mark-to-market gains, hopefully, gains, but could be losses on seed. It could be catch-up fees when we have a closing on a fund where you earn catch-up fees, could be carried interest. We think we’ll see more of that going forward. So from time to time, we have some tax movements one way or the other.
In this quarter, we had $70 million of underlying net income as was reported. And while I’d love to say that, that is the new run rate, we did have some things break our way. So we did have some mark-to-market gains there in the quarter. We also had some catch-up fees related to a BGO fund that was being raised in Asia. So if you’re asking me kind of, where do I think our core earnings rate is on underlying income netting today, I would say it’s around more like $50 million-ish and moving up. So we did have some things move our way positively this quarter.
Nigel D’Souza: Okay. That’s helpful. And then if I could just quickly follow up on the unfavorable credit experience in Canada. Could you remind me again what exactly drove that this quarter?
Randolph Brown: Yes. It’s Randy. Sorry, I trouble hearing that. The unfavorable credit experience, we had one particular loan in the U.K. where the borrower ran into difficulties across the broader portfolio, so defaulted on several things. And I view it is idiosyncratic not representative of the larger portfolio. To put it into context, it’s about 15 basis points on the whole on the portfolio.
Nigel D’Souza: And sorry, could you remind me which segment that was recognized under?
Randolph Brown: Canada.
Operator: And we do have a follow-up question from Thomas MacKinnon with BMO Capital.
Tom MacKinnon: Yes. Thanks very much. Just a follow-up question here with the good morbidity experience you continue to have here. Help us understand, do you — what is contributing to this? Do you — how much would it be in sort of the company’s hands to be able to have continued morbidity experience like claims management and good underwriting or do you think it’s more a function of just a strong employment market. Just some context around that? And how — what’s your outlook for this trend just given it’s been pretty favorable in the past.
Kevin Strain: Tom, it’s Kevin. And it hits differently by market. So Jacques’ going to speak to Canada, and Dan will speak to the U.S.
Jacques Goulet: Yes. Thanks, Kevin, and thanks, Tom. Obviously, we’re pleased about the results there. And as I’ve outlined before, Tom, there are really three levers that are impacting the insurance experience. The first one, and we do have control over these are the pricing decisions that we made. And you might recall, back in 2019, we started seeing that the elevated experience would continue lot of it driven, by the way, by mental health issues. And we took actions pretty early, and we wanted our pricing to be in line with expected experience. So that’s definitely contributing. The other factor, the second lever is the volumes of visibility cases that come to us. And you’ve mentioned, for example, the economy employment levels.
But it’s something that we don’t actually control very much. Or if at all. And the third one is the duration of visibility cases. And that, I would say, to a certain extent, we do have an element of control. I mean some of it is a bit outside our control. But visibility case managers are handling these cases very well. And to the extent we’re able to reduce duration that helps. One example I would give you is we offer something called the mental health coach and we’ve noticed that when people are using the mental health coach, they’ve got lower and shorter durations of visibility. So it’s a complex environment, if you like, and we watch this very, very carefully all the time, particularly where we need to take pricing action because we see that as something that we need to adjust on a dynamic basis.
I hope it helps on that situation in Canada.
Daniel Fishbein: And this is Dan Fishbein. Like Jacques, I’ll give a three-part answer, breaking it into the three businesses where we have morbidity. First, to comment on the dental business. morbidity. We are seeing the loss ratio go up there related to the Medicaid redeterminations because the levers have a lower level of utilization than the stayers. So we — that is part of the pressure that we are seeing in the disability business, very much like what Jacques was saying, we — a fair amount of this is the way we’re managing claims, the way we’re helping people get back to work. And we have seen favorable disability for five to six quarters. In the immediate prior quarter compared to the same quarter of the prior year, you may not see that because we have an exceptionally strong quarter.
morbidity in the fourth quarter of 2022. But overall, we’re seeing favorable disability results and experience. And in the stop-loss business, we actually have seen some increase in the loss ratio or therefore, a reduction in morbidity results. Now we expected that. And of course, we said that would happen as we move back from the impacts of COVID towards our pricing loss ratio. But we view that as something that’s being managed to be a soft landing. In fact, in 2023, the stop-loss ratio went up by only 90 basis points. And we might have projected more than that, to be honest. But we continue to take a very disciplined approach to pricing, while still at the same time, still supporting record sales. And so we see that loss ratio likely to continue to move toward pricing targets but at a measured pace.
Operator: We have no further questions at this time. I will turn things back to Mr. Garg for closing remarks.
David Garg: Thank you, operator. This concludes today’s call. A replay of the call will be available on the Investor Relations section on our website. Thank you, and have a great day.
Operator: This concludes today’s program. Thank you all for participating. You may now disconnect.
