Steven Zabel: Yes. So I think the key thing there is for the premium deficiency reserve for the Fairwind block. This change to assumptions did not change our view of the level of reserve — statutory reserves needed related to the premium deficiency reserve. For First Unum, it didn’t change our view a little bit, and that’s why we’re going to need to strengthen our asset adequacy reserve and why we are going to put a little bit more money down in the First Unum entity. So I think that’s the way to think about it.
Jimmy Bhullar: And would that have any implications on a go-forward basis as well in terms of earnings generation or cash flow generation from the block or lack thereof?
Steven Zabel: No. Because really, these two blocks are ones that have not been cash generating. Historically, we’ve had to contribute capital to support them. And as we’ve stated, we believe coming out of 2023, we’re not going to have to do that over the next five years. So I would say just from a capital needs position, nothing has changed in our view based on these assumption changes.
Jimmy Bhullar: Yes. What I meant was this is sort of a onetime injection that you’re viewing or at least in the next few years as opposed to ongoing every year.
Steven Zabel: Yes, I just think about it as a onetime injection.
Jimmy Bhullar: Okay. And then just lastly on disability. Your margins have been pretty good. Everybody else’s have been good as well. Why isn’t that resulting in more of a reduction in pricing as companies are doing their renewals? And I recognize not all the entire block doesn’t get re-priced every year, but the stuff that is getting re-priced. Is it being re-priced somewhat lower or not really?
Michael Simonds: Yes, it’s Mike. I’ll take it, Jimmy. I would say in general, what you’re seeing is that good experience coming through. And like you said, it’s coming through on the portion of the book that is being renewed. And from most of that book, that’s about 1/3 every year that it’s coming through. I’d also say one of the things that muted a little bit as well, Jimmy, is you’re typically using two to three years of experience. So what we’ve encountered for instance here in the last four quarters would just be part of what goes into that renewal and it would extend back a year or two. And so that is going to slow a little bit of the experience coming through as well. In general, it is a good time to be in group benefits and group disability in particular, to the extent that a client is up for renewal.
We’re going to pass along good experience. We still will have sales, where, frankly, we’re seeking rate increases and the balance of the two, we think puts that group disability loss ratio kind of in that low 60s as we look forward here in the short to midterm.
Jimmy Bhullar: All right. Thank you.
Operator: Our final question comes from Maxwell Fritscher with Truist Securities. Your line is open.
Maxwell Fritscher: Good morning. I’m calling in today for Mark Hughes. So you mentioned the pressure in large case sales at Colonial Life. Can you expand on that and maybe the steps that you pointed to that you plan to take in 2024?
Timothy Arnold: Yes, Maxwell, thanks. This is Tim Arnold. Over the past couple of years, we’ve seen some pressure in large case, and we’ve been pretty consistent in saying that at Colonial Life, we’re going to be opportunistic in that segment. 75% of our customers have fewer than 100 employees, and we feel really good about our value proposition in that space. We’ve seen nice growth this year in the 500 and 999 segment. It’s that 1,000 plus segment where we’re feeling the most pressure. There are a couple of capabilities that we’re developing in the second half of ’23 and early ’24 that we think will position us more effectively for sales in ’24 and ’25.
Maxwell Fritscher: All right. Thank you.
Operator: This concludes our Q&A session. I will now turn the call back to Rick McKenney for any closing remarks.
Richard McKenney: Thank you, Brianna. I appreciate everybody staying over a few extra minutes. There’s a few things to get through this quarter, but I just reiterate that as we wrap up this year and head into 2024, lots of confidence across the company in terms of what we’re going to be able to execute on. We’re here for follow-up questions. I’d also say we’ll be out at a couple of conferences and hope to see you around through the rest of this year and early into 2024. And I think that concludes our call today. Thanks for joining.
Operator: Thank you, everyone. This concludes today’s conference. You may now disconnect.
