Q1 2024 Sun Life Financial Inc Earnings Call
Good morning, and welcome to the Sun Life Financial Q1, 2024 Conference call. My name is gaming and that will be a conference operator today.
All lines have been placed on mute to prevent any background noise and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions.
Join the question queue, you May Press Star then one on your telephone keypad.
The host of the call is David Clark Senior Vice President Capital Management and Investor Relations. Please go ahead Mr. Clark.
Thank you and good morning, everyone welcome.
David Clark: Welcome to Sun Life's earnings call for the first quarter of 2024, our earnings release and the slides for today's call are available on the Investor Relations section of our website at <unk> Dot com.
David Clark: We will begin today's call with opening remarks from Kevin strain, President and Chief Executive Officer, Following Kevin Tim Deakin Executive Vice President and Chief Financial Officer, who will present, the financial results for the quarter.
Tim Deakin: After the prepared remarks, we will move to the question and answer portion of the call.
Speaker Change: Other members of management are also available to answer your questions. This morning.
Turning to slide two I draw your attention to the cautionary language regarding the use of forward looking statements and non <unk> financial measures, which form part of today's remarks.
Speaker Change: As is noted in the slides forward looking statements may be rendered inaccurate by subsequent events.
Speaker Change: And with that I'll, now turn things over to Kevin.
Thanks, David and good morning to everybody on the call turning to slide four we continued to deliver on our client impact strategy. During the first quarter as we build a leading asset management and insurance company.
Underlying earning results were mixed strong results in Asia, and steady results in Canada, and the Denver fast were offset by weaker performance in the U S and you'll see it.
In Asia individual protection underlying earnings grew 30%. The results were driven by strong sales in Hong Kong and international and a strong overall result in India.
In the U S. We underperformed this quarter as morbidity gains moderated towards pre COVID-19 levels in our health and risk solutions business, driven by rising U S health care utilization rates, our U S. Dental business continued to experience negative impacts from the end of the public health emergency driven by Medicaid member Disinvolvement and higher claims rate.
Shows on the remaining members, we're working with states to reprice, our Medicaid business with 25 per cent repriced during the quarter at levels consistent with our profitability goals and most of the remaining 75% to be repriced by the end of this year.
We expect dental results will return to levels of profitability more consistent with our pricing targets and expect income levels for dental to be approximately $100 million U S for 2025.
Speaker Change: SLC management underlying earnings were impacted by seed Mark to market losses overall, the alternatives business faces headwinds from higher interest rates, but we remain on track to achieve 20 twenty-five underlying earnings of $235 million we.
We experienced strong growth in insurance sales C S M and assets under management during the quarter.
Individual protection protection sales were up nearly 50% year over year, largely driven by growth in Asia with strong individual protection sales in Hong Kong.
Asia was also a leading driver of Sun life's new business, CSM, which reached $347 million this quarter up 50% year over year and contributed to total company CSM, surpassing $12 billion at the end of the quarter.
We continue to see growth in our asset management businesses with total company AUM, reaching an all time high of 1.47 trillion dollars this quarter up 8% year over year, reflecting the continued strength of our asset management capabilities and market appreciation.
Speaker Change: We ended the quarter in a strong capital position with a light cat ratio of 148% at <unk>, We also announced a 4% increase to our common share dividend and we'll continue to share buyback continuing our share buyback program in the second quarter, demonstrating our commitment to deploying capital efficiently.
Overall, we continued to benefit from our diversified mix of businesses, taking advantage of macro trends like the emergence of the middle class and growing GDP in Asia. The increased demand for health products in Canada, and the U S and the importance of having a broad set of global asset management capabilities from public equities and fixed income to alternatives to help.
Speaker Change: My client needs in a rapidly changing environment.
Turning to slide five this quarter, we delivered on key business initiatives to drive our client impact strategy forward.
In Canada, we made progress on several important initiatives.
We've seen strong demand for the Canadian dental care plan with $1 7 million Canadians signing up by the end of April and we are now successfully processing claims. This program allows us to play a critical role in improving oral health outcomes for Canadians, which we know impacts People's overall health.
We also launched the diabetes care program as part of our online Luminal health Pharmacy App. This innovated signature solutions helps plan members reached their liabilities diabetes schools, and where possible reduced blood sugar levels and reduced medications.
Our aim is to improve health outcomes for our clients and enhance the claims experience for our business.
In the U S. We're differentiating with the large employer group benefits market by offering health navigator powered by Pinnacle cure This personal health care navigation and advisory service helps members get the medical diagnosis and access the right care for their specific needs.
This service also improves health and productivity outcomes for employers.
We're also leveraging our expertise on leave of absence management and returned to work services to offer family leave insurance in Alabama, Arkansas, Florida, Tennessee, and Texas. We were the first major group benefits provider to offer family leave insurance in these states broadening members access to pay lead to prefer paid leave for care.
For loved ones and giving employers the option to provide a valuable benefit to their employees more easily.
Our growth in Hong Kong reflects the strength of our quality distribution channels, Hong Kong delivered strong individual protection sales this quarter driven by our broker relationships, our bancassurance partnership with tossing bank and the momentum with our agency teams.
We're also realizing value from our strategic investments India continues to be an important growth market for Sun life Asia, we have thriving life and asset management business as a part of our joint venture with the deed of Birla group. This.
This quarter, we sold six 3% of our ownership interest in our asset management JB unlocking of $98 million pre tax gain in helping meet the 25% public ownership requirement of listed companies in Asia and India. Since the initial IPO in 2021 Sun life has generated pre tax gains of over $450 million.
While still retaining 32% ownership of the listed entity.
In the U S. Our health and risk solutions business is finding the degenerative AI can securely summarize an organized lengthy and complex medical records for Pinnacle care clients. This solution is expected to reduce turnaround time from 14 days to one day unlocking greater capacity to serve more clients.
Sun life Global investments business, we're using a generative AI chatbot that creates better client experience by providing faster responses to clients on questions for segregated fund topics.
Yeah.
We're embracing our responsibility to create a more sustainable and brighter future sustainability is critical to our purpose and we are focused on increasing financial security fostering healthier lives and advancing sustainable investing.
SLC management continues to invest in assets that generate a stable and attractive yield and generate a positive environmental impact.
This quarter Biggio completed Ontario's first all electric net zero carbon industrial building owned by Sun life, a milestone in our efforts to achieve net zero greenhouse gas emissions in investments and operations by 2050 PTO.
<unk> was also awarded the 'twenty 'twenty four energy Star partner of the year sustained Excellence award for the 14th consecutive year.
Also infrared capital partners, our infrastructure investment manager continues to invest in assets that are helping to build a sustainable future.
Infrared acquired a portfolio of two operating utility scale renewable energy assets in the U S.
In closing, we're competence and the resilience of our strategy driven by our diversified business mix, our people and culture and our sustained commitment to delivering on our purpose to help clients achieve lifetime financial security and live healthier lives.
And now I'd like to welcome our new CFO Kim Deacon to his first earnings call Kim joined Sun life in April and brings extensive extensive experience in asset management wealth insurance real estate and sustainability all areas that are critical to sunlight. He's a great addition to our sunlight executive team and its fit in so seamlessly that in many ways. It feels.
He's been here for years and with that I'll turn the call over to Tim to detail, our first quarter financials.
Thank you for that warm welcome Kevin before I begin I want to thank my Sun life colleagues for all the support I've received over the last month since joining I look forward to actively contributing to Sun life strategy continued growth and value creation for our clients employees communities and investors.
With that let's begin on slide seven which provides an overview of our first quarter results.
We delivered mixed results this quarter as underlying net income of $875 million and underlying earnings per share of $1 50 were modestly lower year over year by 2% and 1%, respectively and relatively in line with the prior year when accounting for the sale of our U K business in the second quarter of last year.
Underlying return on equity was 16%.
We remain confident in our ability to meet our medium term ROE objective supported by our attractive and diverse mix of businesses.
Turning to our business performance wealth and asset management comprised 42% of Q1 underlying earnings and was down 1% from the prior year as higher asset management related fee earnings was offset by higher compensation related expenses and mark to market losses on seed investments in our S. L C.
Group Health and protection businesses comprise 29% of underlying earnings and were down 8% year over year results reflect business growth that was more than offset by less favorable morbidity experience and lower dental results.
Individual protection earnings comprised 29% of underlying earnings and was down 4% last year, primarily driven by the sale of Sun life U K.
New business CSM of $347 million was up 50% from the prior year, reflecting continued strong sales in Hong Kong.
Ported net income for the quarter was $818 million. The 57 million difference between underlying and reported net income was driven by unfavorable market related impacts and amortization of intangibles, partially offset by acquisition related and other items.
Market related impacts were driven primarily by unfavorable real estate experience, partially offset by favorable interest and equity market impacts.
Real estate experience reflects modestly negative total returns driven by holdings in the industrial sector and to a lesser extent office in the current quarter versus our long term expectations of approximately 2% per quarter, while we continue to be cautious on real estate returns in the near term. We are long term investors in real estate and on a 10 year basis, our actual returns of X.
Seeded our long term expectations, we continue to view real estate as a key component of our diversified investment portfolio.
Our balance sheet and capital position remains strong with S. S. L F White cat ratio of 148%, which was lower by one percentage point from the prior quarter, primarily driven by strong organic capital generation that was more than offset by deployments, including our common share dividend and continued share buybacks and market impacts.
Value per share increased 2.5% quarter over quarter holds.
Holdco cash remains strong at $1 5 billion and we remained active on our share buyback program repurchasing 2.4 million shares this quarter.
Our leverage ratio remains low at 21, 1%.
Now, let's turn to our business group performance, starting on slide nine with MFS M.
Speaker Change: MFS underlying net income of 100, and 989 million U S was in line with the prior year as higher fee income from average net asset growth was offset by higher compensation related expense primarily related to the increase in the fair value of MFS shares reported net income of 180 million U S was down 10% year over year, driven by the fair value change.
And shares owned by MFS management pre.
Pretax net operating margin of 37% was in line with prior year.
AUM of 630 billion U S was up 31 billion from the prior quarter driven by market appreciation, partially offset by net outflows of $8 6 billion.
MFS long term investment performance remains good with 97% of funds assets ranked in the top half of their respective Morningstar categories for 10 year performance.
Turning to slide 10, our cell C management generated underlying net income of $28 million flat compared to prior year as fee related earnings growth was offset by mark to market losses on seed investments fee related earnings of $69 million was up 1% year over year on continued growth in fee, earning AUM reported net income of 42.
2 million benefited from a gain on the early termination of a distribution agreement.
Capital raising of $3 5 billion, primarily at B G O and Crescent remained resilient and was up 1.3 billion or 52% year on year totally AUM of 226 billion was up 8 billion from the prior year. This includes $21 billion that is not yet earning fees. Once invested these assets are expected to generate annualized fee revenue of <unk>.
More than $188 million.
Turning to slide 11, Canada underlying net income of $310 million was modestly lower year over year, a strong insurance business growth was more than offset by lower net investment results reported net income of $290 million included unfavorable market related impacts.
Wealth and asset management underlying earnings were down 4% year over year, driven by lower earnings on surplus.
Speaker Change: Group Health and protection underlying earnings increased 20% year over year, reflecting business growth and improved disability experience individual protection.
Protection earnings were down 19% year over year, which included unfavorable mortality experience. It is worth noting that there is a mostly offsetting benefit to the CSM from this negative mortality that is not reflected in earnings.
Speaker Change: Group Health and protection sales were up 114% year over year on large higher large case sales while individual protection sales were lower by 4% due to lower power life sales.
Turning to slide 12 U S underlying net income of 141 million U S down 20% from the prior year driven by less favorable morbidity experience and dumped hold results rip.
Speaker Change: Reported net income of 71 million U S includes market related impacts and group health and protection our group benefits business benefited from strong revenue growth. This was more than offset by less favorable morbidity experience from a higher loss ratio in health and risk solutions, which is now normalizing closer to pre pandemic levels compared to prior year.
Lower dental results were driven by the continued impacts of the Medicaid with termination Redetermination process. Following the end of the public health emergency and the U S last may which decreased the number of plan members.
This contributed to an increase in the loss ratio as those are leaving the plan generally had lower utilization than those remaining in the plan.
U S group sales of 142 million U S were down 43% year over year, driven by large case dental sales in the prior year.
Individual protection results reflected credit losses in the quarter.
Slide 13 outlines Asia's results for the quarter underlying net income of $177 million was up 27% year on year on a constant currency basis results benefited from strong business growth as well as favorable protection experience and higher earnings and surplus.
Reported net income of 235 million included a gain related to the partial sale of our India asset management joint venture.
We continued to see strong sales momentum, particularly in Hong Kong. The strong sales results also drove new business CSM of $230 million in Asia up 128% from the prior year over the past year Asia has added almost $1 billion of C. S M.
Overall, while our Q1 results were mixed we are pleased by the strong momentum in our Asia business solid growth in expected insurance earnings across all business groups and the steady increase to total company C. S M, which is a store of future profits we expect to.
Generate earnings growth in line with our medium term financial objectives underpinned by our strong fundamentals capital position and continued focus on execution Phi.
Finally, turning to slide 14, we're pleased to announce that we are hosting an investor day on November 13th 2024 at a one New York Street office in Toronto, This will be an opportunity to update investors on our strategic priorities and our progress against our strategic pillars. We look forward to seeing you at this event with that I will now turn the call over to David for Q&A.
Hey.
Thank you Tim to help ensure that all of our participants have an opportunity to ask questions. This morning, Please limit yourself to one or two questions and then requeue without with any additional questions I will now ask the operator to poll the participants.
Speaker Change: Thank you.
David Clark: He joined the question you May Press Star then one on your telephone keypad, well here, telling me acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any key.
John Your question Press Star then two.
My first question is from 90 Goldman with Scotiabank. Your line is open.
Hi, Good morning, I wanted to talk about the policyholder experience.
Came in a unfavorable especially relative to expectations and impacted Canada and then in the U S. Tim.
Tim you talked about some of the dynamics are around are the dental business, but I know, it's also impacting stop loss I guess the real question.
Question is just how temporary you expect these pressures to be both in Canada and in the U S. If you could address those both separately.
Yeah.
Okay.
How many it's Kevin Morrissey. Thanks for that question, maybe I'll start off with the experienced policyholder behavior.
Company level.
We had a small loss and you would have observed in the quarter that was that was coming out of Asia. It was quite small and it was across a variety of of.
David Clark: Of countries there, we didnt, we didnt have any losses in Canada or the U S on policyholder behavior in the quarter.
And just in terms of them.
Suzanne: Hi, My name is Suzanne did you want me to address in transit experience in Canada.
Yes. Please.
Okay. Thank you so much.
Suzanne: The entrance experiences on favorable this quarter, you might recall and by the way that.
It was quite strong in Q2, Q3, and Q4 of last year and this was driven by disability.
Are you experiencing some lifestyle.
I want to point out that the.
Visibility experience is still quite positive.
But what we are noticing this quarters mortality losses and individual insurance.
Resulting from the larger number of claims and larger amounts of claim.
Suzanne: As Tim pointed out in his remarks.
Suzanne: This is offset by the release of reserves in some so we don't see mortality being outside of what I would call the normal volatility parameters.
I'm not a trend.
Other item, that's coming up this quarter as the higher level of claims in the non visibility part.
Sun Life Health. These are the payer medical claims.
Suzanne: They are seasonal so Q4 and Q1 are typically elevated.
The thing I would point out is that there are built in maximum in terms of coverage for these claims.
Again, we don't see that as a trend going forward.
Got it thank you.
Good morning, Manny, It's Dan Fishbein, just some quick comments on the U S insurance experience as I'm sure you've noticed the experience has been favorable in recent quarters and that was primarily driven by better than expected results in the stop loss business as we've described.
Suzanne: There has been lower utilization really throughout the pandemic and lingering for a long time afterwards because of shortages in the provider capacity.
Those shortages appear to have largely resolved in stop loss experience, while still quite favorable has returned closer to pre COVID-19 levels. So the favorable experience we had been getting.
Above expectations in stop loss has certainly you know largely moderated and then of course. In addition, there was unfavorable experience in the dental business.
This quarter.
On the other hand, there was quite favorable experience in the group business. So when you add the three together we had a small negative experience item in the U S.
And just a follow up in the U S. So it sounds like and on the stop loss side, It's just a sort of normalizing back to pre COVID-19 levels, but in terms of dental.
And you addressed this last quarter as well, but I'm just wondering what the timeline is there an end in terms of improving like could it actually get worse before it gets better and on on the experience side.
Suzanne: Well you know as we've been saying for quite a while this is about a four quarter problem and of course the background on that is there were no just enrollments from the Medicaid program at all medical or dental or otherwise.
For more than three years as a result of the Covid public health emergency that ended in April of last year and the states, we're able to start distant rolling people as of that time.
Suzanne: Hence we have seen declining enrollment in the third and fourth quarters of last year in the first quarter of this year. That's a 14 month process by regulation that will be complete by the end of June so they're likely or some additional membership declines.
Still in progress and still ahead of us.
The primary result of that that's affecting our results is not just the membership itself, but the fact that those who were no longer eligible for coverage, we're utilizing care at a meaningfully lower rate than those who remained in the programs that means the average experience of the people who remain is.
Suzanne: Higher than the experience.
Of the program as a whole when the dis enrollment began.
The key will be the state's adjusting the rates, which is mostly an annual process as those rates renew about 83% now actually of our contracts will renew this year with revised rates.
Through the end of the first quarter about 25% of the contracts that you already had new rates established so getting the right rates is key.
It is as our other initiatives that we have in progress, including an additional claim management initiatives as well as expense management. So with continued membership losses, we would not necessarily expect things to improve materially in the second quarter, but in the second half of the year are the result.
<unk> should start to reflect both the higher rates and those initiatives and certainly and as Kevin mentioned in the introduction, we expect much better results when we get to 'twenty to 'twenty five.
Yeah.
That's great. Thanks.
Yeah.
Suzanne: The next question is from Tom Mackinnon with BMO capital markets. Please go ahead.
Yeah. Thanks, very much just a question with respect to S. L. C. A I think if Steve peacher, there he talked about a 50 million kind of run rate for underlying earnings are.
For that and it's 28 in a quarter I think there there's talk of some mark to Mark.
Suzanne: Losses on some seed capital there. So just some color with respect to a S. L C and the outlook there. Please thanks.
Yeah, Thanks, Tom It's Steve Yes.
Now a few comments on the quarter relative to our run rate, which is really your question.
Given that the $28 million is lower than the run rate that I indicated on last last quarter.
Our earnings call and there were two things that impacted us I guess I'll start I'll say that we think where our run rate hasnt changed our core run rate two things pushed us lower this quarter than our normal the way. He was our quarterly run rate. One was as you mentioned the mark to market on seed assets. So let me give some color on that.
That mark to market related primarily to a portfolio of industrial properties at biggio that we've seeded.
The impact on currently on this quarter's results from that was about $10 million. After tax that there was a few other items in there, but the primary driver was that the mark to market on that portfolio that has a very strong portfolio of industrial properties across the U S and in fact that portfolio was marked up in the second half of last year because.
Suzanne: Meaningfully.
Suzanne: Strong performance in the underlying properties that was actually one of the factors that helped us in the fourth quarter.
This quarter, we gave up a portion of those gains and you.
You saw valuations across industrial properties and not just in this portfolio, but kind of across the industry.
In the first quarter as valuations reflected higher cap rates and I think in appraisers view more modest assumptions for a lease rate increases going forward.
But net net that portfolio has had a positive mark to market over the last 12 months. It's just that in the first quarter. We gave back some of the positive mark in the second half of last year.
The other thing that impacted us versus our run rate. This year is that we have some seasonality in compensation.
In the first quarter like many firms we pay bonuses in the first quarter, we accrued for those bonuses throughout the year in crude in Q1, we paid out bonuses that were slightly higher than our core for the year, so that impacted us, but the bigger impact was that those bonus payments trigger related payments.
Such as contributions to benefit plans and that impacts Q1.
Proportionately. So if you adjust our results for that mark to market versus what we'd normally expect proceed on a kind of a run rate basis, and you reflected reflect the seasonality. It gets us back to a run rate of almost $50 million figure that I mentioned last quarter.
Okay, Thanks for that and as a follow up.
M F as it seems to be some higher <unk>.
Expenses in the quarter two is there any seasonality associated with them or are they kind of related to any.
Suzanne: Extra compensation at MFS that are that can be volatile and may have happened in the first quarter.
Hi, Tom, it's Tim or something like that.
Tom Mackinnon: Yes go ahead.
Speaker Change: Thanks for that question.
Yeah.
There were two pieces really on the compensation costs for this quarter. There is some since seasonality in the first quarter. We have shares that vest that are issued to M. If its employees and when they become retirement eligible they immediately vest and that always happens in the first quarter of the year. So we do get a bit of noise coming through that but that relates to the second.
Piece, which was the more material part in the quarter was really that the mark to market gain on the appreciation of these shares that flows through as compensation expense.
And Youll recall, there's two pieces to that one one that's in our underlying earnings and you can think of that as a long term incentive plan and those shares are mark to market based on the fair value of MFS has an enterprise value.
Speaker Change: And we saw gains in the overall increase in the MSS shares. So that's flowed through its compensation and costs and then on the reported net income side, we have a component that relates to vested shares. So these are shares that have already been awarded and fully vested we have to set up a liability for that and that gets mark to market and through income and that flows through on the reported income.
[noise] side. So it's really the two pieces, we had share appreciation, which caused compensation costs. Both in underlying net income and reported net income plus the seasonality.
Yeah.
Speaker Change: And one of those components, maybe just the second one you mentioned is that part of that margin that you gave I think you'd get a U S. GAAP margin as opposed to and this might not be a U S. GAAP item, but it might be and I have for S item do I have that right.
Yeah, so that they come to that I just made around the competition. That's all I have for S accounting and so the margin guidance that we gave is on the U S GAAP basis, and so those vested shares and is as an example, those flow through equity, though those don't hit the P&L under U S. GAAP.
Speaker Change: Okay.
Oh it would be helpful. If we could have a something that wasn't U S. GAAP related at least and I for a 17 margin. Just so we could have a look at that thing Ana I for S basis going forward.
And I would add thanks, Tim This is Mike Roberge, Tom I wish I would just add to that is obviously as we run the business and think about the business year over year U S. GAAP revenues were up 5% expenses were up four and pre tax income was up 7%. So if you think about those things that are controllable here and then long term.
Compensation just runs through and so when you're in a period, where the stock prices going up because year over year. The business is driving better results that's going to flow through earnings that goes the other way when the stock's going down it's a benefit to us, but that clearly is and how we're thinking about running the business quarterly.
Okay. So that seems to be more accounting nuances than anything fundamental with respect to MFS is that the way I shouldn't be thinking about that.
Yes from an MFS perspective, and Tim I'll, let you answer from yours.
Yeah, No I think that's exactly right.
Okay appreciate that thanks.
The next question is from Mario Mendonca with TD Securities. Please go ahead.
Mario Mendonca: Good morning can we start first in Asia, So the sunlight.
Hong Kong sales were very strong and I understand that Hong Kong is a oh.
Brother Sun life is strong in the broker channel and Hong Kong.
So it would be helpful. I, perhaps weren't mandate is what did you see in the broker channel was there any sort of behavioral changes in the broker channel in response to the regulatory investigation and then how did somebody to do it because the the message we're getting from the domestic players and the players like I'm, saying folks the domestic players.
Hong Kong is that this is having an effect on the broker channel. So perhaps you could speak to that.
These investigations and what it might mean to somebody.
Good morning, Mario its mandate.
So as you noted you know we have a strong we had very strong results in Hong Kong. This quarter and you know part of those sales results were driven by sales that we do through brokers. There are a number of different businesses that we do have that we use brokers force or about a third of the sales are related to MSCI client business about half of that is for <unk>.
Mario Mendonca: High net worth clients, where we work with brokers, who 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 it 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 are well that's driving our growth is also we've been we were underweight in that business prior to the pandemic and we've made some investments over the last few years to group to grow that business and so that includes establishing strong relationships with quality brokers.
So looking at our product lineup in revamping our product lineup enhancing the services and interactions that we provide to our clients, including opening up our new client center and the T. S. T 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.
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 writing is quite high. So overall, we're very very pleased with the with the momentum in our Hong Kong business.
So do you expect any effect from the controversy in the broker channel.
So far as you know that the that that was just something that the HIA conducted last last month to date, we have not seen any impacts to our business.
Okay.
Speaker Change: A much broader question now probably for Kevin maybe for Tim.
When a company of Sun life's caliber.
Speaker Change: Ports a quarter like this like a meaningful miss relative to what the street was looking for.
It can either it can go one of two ways either management.
You know confidently declares that this quarter was the anomaly.
And the earnings power is not meaningfully affected or the messages.
Estimates are just too high for the company not just for the quarter, but on a go forward basis.
It would be helpful to hear probably from Kevin first if I can let me know, which which of those two is it is this.
A message that our members need to come down or is this the anomalous quarter.
Thanks for the question Mario its Kevin.
Kevin Strain: The U S and more specifically dent to quest 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 a good momentum in particular in Hong Kong and International I think you heard from 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 200 and $235 million target from their Investor day for 2025, so that that sort of put those pieces in context.
The U S outside of Denver Quest is in a similar situation to the other businesses in fact in the quarter as Dan mentioned group benefits business maintain very strong margins that quest is going to take some time and we expect <unk> will take the rest of the year for the re pricing to work its way through and claims experience and claims experienced by the way in that.
<unk> continues to be high in April so.
2025.
We're looking at getting closer to the U S $100 million for dental quest, but this year I think there's still be some some headwinds in terms of the identical 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 you know I think the.
The answer to your question is probably specific into the the business groups and the one piece that I think continues to have a bit of that headwind is dental question. It has to do with the repricing.
Kevin Strain: That Dan talked about but also the continued sort of higher claims experience.
That was a very precise answer so if I if I could.
Paraphrase that if Delta quest is the one area that may take more time to get back to normal and everything else feels like it should normalize relatively quickly.
What I'm hearing then is that a very modest part of Sun life, because let's be clear, we're talking about $30 million of the best quarters in terms of earnings from dental.
It's a much much bigger companies in that it sounds to me then.
But for the most part this was the anomaly this quarter.
Modest with exception of dental.
Merrill Your are your math is is as accurate as always and I think that's a good interpretation of what we're seeing.
Got it thank you.
Okay.
The next question is from Doug Young with Desjardin. Your line is open.
Hi, Good morning, maybe back to Dan and you know you.
You're talking about or Kevin can you talk about repricing the dent to quest business in and so I assume you know before you were thinking of growing earnings and revenues and 24 versus 23 I assume that's off the table.
Correct me, if I'm wrong, but what I'm more curious is how hard is it to push through price increases by state.
And that the quest I mean.
Can they just say no like can you talk a bit about that obviously when you had when you and.
Paul trying to push through pricing and.
And states for certain categories of the population it can get difficult. So I'm just curious.
Yeah. Thanks, Doug just a quick comment on the revenue dental quest 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 are we where theres a little bit of a range there, but were approximately or will be approximately in the pre COVID-19 range and then expect to continue growing from their 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.
Our business is very well positioned from a growth.
Respective obviously this is a <unk>.
Once in a century pandemic that we're dealing with very unique after effects are in.
In this case in particular, the government, saying that the normal dis enrollment for Medicaid, which is substantial it annually was frozen in place for more than three years. So this this has to correct.
In terms of the price changes now these really arent Ah Ah.
A typical negotiation with state government set their rates now they certainly listen to the input of the contractors and there are many contractors not just dental but medical as well and we're not the only dental contractor, we certainly provide input and data where we can but ultimately the states set those rates now the reason.
And we're confident that they will reset the rates to the appropriate level is there something more than 20 years history here all of the states setting the rates very fairly and within a very narrow range of what's needed. This is obviously a shock event. That's never happened before the states really you know, even though I think they.
Painted some of this impact did not anticipate as big of an impact on the average utilization in the loss ratio as they distant enrolled the non utilize the resort the lower utilize.
Utilize there's so the states have the programs properly funded.
That's a long history, and we fully expect that they'll put the rates back at acceptable and appropriate levels.
But they do that as per their natural schedule. So that's why we talk about we've there's actually.
18 major contracts that constitute the 83% of the business that should be fully repriced by November.
And so far we've gone through eight of those contracts and seven of them have repriced at or better than the rates that we think are needed based on the emerging experience. So so far so good but we have a ways to go as well.
Okay, Perfect and then just Kevin I know I think I've asked you this before.
But I'll throw it out here again, you have this enforce management business from time to time. It gives you a little volatility this quarter I think it was on the credit side and I guess the argument about not needing the capital and generating a nice earnings.
And are we but.
Again, it puts up volatility from time to time.
At what point do you pull the trigger and reinsure that business and you.
You know what would be the driver to do that.
So there's a number of things that that business continues to hit our hurdle rates for our OE and how we think about it. It's also a good provider of cash flow back into <unk>. If you think about a lot of vessels six competitors in the U S. They're buying close blocks of business because they they like the cash flow so that those would both be.
Kevin Strain: Part two is factoring into our thinking we're always looking for different solutions to make it more capital efficient. So we would time to time see different things in and assess them, but at this point the combination of of the results and also the cash flow and as you'll see we think is important Kevin wanted to add a comment.
Doug It's Kevin Morrissey the only thing I wanted to add there is on the credit side, what youre seeing in that credit line is the losses that we experienced in the quarter in the releases of provisions and the expected investment earnings. So on a net basis, we actually had a net gain so if you look at credit.
Large from an overall perspective on that block it was a net positive contributor to underlying earnings.
Kevin.
Understand that can you tell us maybe at the consolidated level.
Kevin Strain: What is the typical annual release of the credit provision and then in the credit line like typically what would you expect like would you expect between the net between the two to kind of be breakeven like can you kind of talk a bit about that.
Sure I can give you a kind of high level, we see a release in the expected investment earnings of about 35 million per quarter and so you can see that that's a net positive.
Longer term, that's our expectation right. So we would expect to see kind of that largely neutral that has an expected component and a risk margin. So maybe over time, we would expect to see a slight positive from that in terms of net release of those risk margins because that gives you a sense for kind of what we would expect longer term.
I appreciate the color. Thank you.
Okay.
Our next question is from getting out of the same with National Bank Financial. Please go ahead.
Yes. Good morning first question just on the CRE stuff both in.
Speaker Change: And the you know the investment experience. So it sounds like a S. L. C. I heard you know the the negative investment experience in theory, mostly was tied to industrials. This quarter and then in addition to that there was a seed capital losses or no gains or whatever in our industrials fund is up.
The the what I'm hearing.
Hi, Gabriel its it's Randy Brown. So thank you for the question, yes, the losses that we saw in the in CRE. This.
Quarter I'll talk about the overall level and then Steve one comment on <unk>.
So we were down about 1% total rate of return so despite the headlines and everything we all read about that disaster and real estate portfolio is actually doing quite well really benefiting from the restructuring that I talked about in the past.
The valuation drops was mostly industrial would also office.
On industrial specifically.
The valuation changes Steve touched on it but really based on a couple of factors for us for the general color was primarily in the inland Empire inland from L. A so it services support we had seen outsized gains there in prior quarters. This quarter, we had a cap rate and yield.
<unk> compression, which we expect.
But also dropping the achievable rents.
There had been very strong development completions and extensive growth.
Speaker Change: That specific area throughout the pandemic.
Which led to an over supply bubble, that's putting downward pressure on rents. So it's not only the upgrades.
Compressing yourself forward rank growth expectation.
Speaker Change: Now that oversupply, we expect to be temporary.
Speaker Change: Industrial completions dropped to the lowest level in 14 years there.
Overall that being said our portfolio, they're 100% occupied strong tenants extended lease terms, so doing quite well.
Office continues to experience negative valuation changes again, it's the market seeks a floor.
<unk>.
But we've seen the pace of those drops slowing down.
Yeah. So it sounds like a temporary supply issue not a secular type thing where thing in office.
Completely.
And.
Moving onto this dumped their craft stuff.
Well listen our crush him a silly one but.
You caught off guard by this Oh, the Redetermination impact and then the kind of the claim dynamic where you know the coverage that was trimmed are purged.
Lower utilization rates because.
It certainly caught me off guard and because this is the year, where we were expecting to hit the $100 million of.
U S D anyway earnings contribution I guess, he's getting pushed back the next year right.
Yeah. So.
We certainly expected the redetermination to happen and you know there was some uncertainty if you go back to when the transaction was announced as to when that would occur.
And the the biting administration decided to extend the public health emergency longer and longer until the spring of last year. So membership had you know excess membership has certainly accumulated we certainly expected that there would be some impact on the loss ratio because those who were being just enrolled we're more likely to already.
Have other coverage from getting a job or so forth.
Speaker Change: So we knew there would be that in fact, 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.
I guess another way to look at it as maybe the Redetermination I alluded to the other.
Uh huh.
The redetermination that were pushed out so.
Maybe this stuff that you would've expected to have happened in late 2022 into 'twenty, three and you'd be back on track in 44, it's more of a.
Kind of a byproduct of our extension of our of our pandemic relief program right.
Yes, I think exactly and in fact, you know we were during the pandemic.
Our earnings were quite.
Favorable end 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 U S 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 stock.
<unk> business from lower health care utilization, then in the dental business from the inflated Medicaid membership.
Speaker Change: Thankfully the mortality impact on group life wound down about a year ago, whereas the two more positive tailwind effects in stop loss and dental are winding down now had they all wound down and synchrony at the same time, we hardly would've noticed us.
Okay, and if I could sneak one more in there and I apologize 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 and that the you know morbidity bucket over the past couple of years and back to normal as there were a run rate do you price for an expectation of morbidity.
And if so what kind of a you know range, we should be anticipating because like last quarter was really high didn't view that as sustainable and maybe this quarter is more normal I I just want to get a better sense of that please.
Yeah, and what does it specifically referring to is stop loss the stop loss portion of group.
Throughout the pandemic, we were experiencing exceptional.
<unk> well you know the loss ratio was well below what we price for and we've been saying throughout that period that it would gradually returned to what we price where it has to do.
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's 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 you know strong margins, but just not as favorable as it was during the pandemic and after effects of that.
That Mike.
Hey, Kevin I might add two things to that first we're a leading provider in the in the stop loss business in the U S and we have been for years. So we have really strong capabilities and we've been adding things like clinical cure, which makes that those pricing race 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've seen that that business to do well and you know our expectation is we would continue to do well given our position and our investments in our investments into the digital the other thing I would say is on the dental.
Because I know, there's a lot of questions about them to quest, 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 U S. Dollar $100 million in 2025, but we were still a big believer in this business and the acquisition we did in that it is going to do.
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 what's happened it's not been a straight line. You can you can see that but we think we are we still have the thesis that we started with them the capabilities and the scale that it built.
Okay I have a good weekend.
Okay.
The next question is from Paul Holden with CIBC. Your line is open.
Thanks, Good morning, most of the questions have been taken but one more on U S crude lots.
Lots of references to run rate earnings in dental of U S $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.
Well yeah in in dental in the quarter. It was 6 million four for the quarter and that's in our materials and it's just an additional comment on the 100 million that we've mentioned several times that's really what we're saying is you know our thinking for 'twenty to 'twenty five but as Kevin just said longer term, we think it's obviously higher than that.
That is still equal to or greater than what we anticipated when we announced the transaction, but the growth trajectory of the business is very good as you know this temporary redetermination issue notwithstanding and in fact, we're winning new contracts. We are winning major new contracts, we are 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 of the past year and as of January 1st we added our largest Medicare advantage contract ever so theres a lot of future potential here to continue to grow.
This business.
Got it okay.
And then I want to go back to the discussion quickly on NFS and expenses. There I mean, if I just look at the average asset growth versus the <unk>.
Versus the earnings growth or if there's a pretty big difference there so I get that some of it was.
If at all to the to the additional compensation expense, but I'm, assuming like that's not normally what we would expect over time. So again was 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 the 8% type average earnings asset growth over time, what kind of earnings growth should we attribute to that.
Yeah, I mean, maybe this is Mike maybe I'll piggyback, whereas I said before as well I mean.
Speaker Change: If you think about it in U S. GAAP is we had revenues 5% year over year in the quarter, we had expenses up for good earnings pretax earnings up 7% in the quarter.
And then there's deferred comp and the stock price, which comes through the P&L for an I O F. I F. R. S perspective, and so you know from a U S. GAAP in terms of the model that we manage to the business performed as you would expect with revenues up as D&A was up some operating leverage relative to that.
And are the things that run through the P&L from a deferred comp true up on the stock price side our.
Issues that impact longer term compensation and they'll come in and they'll come out of the of the profitability of the quarter, but we think U S. GAAP is a better representation from our perspective of how the business is is being managed.
Okay. So I can't really it's just.
Noise okay.
One more.
Sneak in if at all.
Date on the capital fund raising outlook for the year.
Yeah.
Yeah. Thanks, Paul It's it's you know you saw in the quarter that we are.
Reyes.
Paul: Garner new commitments of about three and a half.
We were positive net flow, which also takes into account.
Paul: Really to put money to work for about two of about $2 9 billion into fee, earning AUM.
We would expect fundraising to increase over the year for a couple of reasons, one and that's largely related to some big funds that we have we're initiating fundraising on so in particular, we have two large crescent funds a one that is on its fourth series one data Science night series, we should be.
Saint <unk> closes this year for both of those funds so that will have an impact.
One thing I would say, though in general, especially on the real estate side is that with interest rates over the last couple of years, having gone from effectively zero to slightly above 5%.
On the real estate side that is a headwind for fundraising. So we think fundraising will increase given the different funds. We have in the market, which are very specific industrial fund cold storage Fund an Asia fund it's.
Done very well, we are facing a headwind, especially in real estate in terms of interest rates and obviously there was a protection in the market going back a few months that we would see the fed cutting rates and interest rates going down below that obviously help us I think those expectations have been tempered.
And so we have to deal with that reality in the marketplace, but we do have some big funds coming online, which will help us over the course of this year and into next.
Alright, that's it for me thank you.
The next question is from Lamar Prasad with Carmike. Please go ahead.
Yeah. Thanks for taking my question. So I'll start off on the S. L. C. I Wonder if you could talk about what.
What gives you the confidence in this in.
In the $235 million by 2025 in the context of higher for longer rates like is there a real risk that we could be talking about more mark to market losses in this business kind of.
Weighing down earnings or is the rate outlook not a material consideration in getting to this too.
$235 million.
Well.
Thanks Omar for the question I would say a couple of things. One is you know do you.
Rate the rate environment is.
A significant.
Market environment.
Comes into play in it it has some puts and takes for us, but I would say net net higher rates or a negative for us like they are for most investment businesses.
On the negative side. It makes it's tougher to raise real estate funds when rates are higher.
Rates impact the ability to deploy money because of the dislocation, especially in real estate peak between buyers and sellers and deploying money is important to us because we have a big 20 ish million dollars of committed but yet uninvested capital and we generally get paid fees when we invest that capital.
It can have an impact obviously on valuations in real estate and in fixed income and our fees are paid on valuations so that can be a headwind.
Paul: It can help us, though so it makes fixed income assets in general more attractive on a relative value basis. So we've seen good demand for our fixed income capabilities and the other thing is on our private credit capabilities those tend to be floating rate. So you can earn 10 plus percent on our private credit portfolio today, and that's attractive for investors on a relative.
[noise] basis, but that's certainly a headwind that we have to face I think what gives US a couple of things that gives me confidence as we go into next year. One is that we have but I think this was intentional as we built a cell C. We have a very diversified platform. So our asset classes go from investment grade fixed income both on the public and private side below investment grade both public.
Private and in fixed income our real estate equity, but also real estate debt, which is an important area for us and thats, particularly it's particularly attractive to be a real estate lender in this market. We've got infrastructure of course, so I think that you've seen the diversity.
Of that Oh of SLC, when you look at how our fundraising changes quarter to quarter and I think that gives us confidence that while we have to deal we're always going to have to deal with some headwinds some tailwind in the market.
But it should allow us to do that the other thing that I'll say is that we've intentionally really managed what we call. The affiliate so biggio Crescent infrared separately. During this interim period between our initial investment in the back into those deals we're approaching the back into those deals we call. It internally, we refer to them as to put calls.
As we do that as we start to announce leadership that will transcend the put call I think we're going to start to think increasingly about.
What are synergies across the platform what are das we can connect across the platform and I think the.
It would be especially prevalent on the distribution side and so I think that's going to help us.
Turbocharge growth at the platform level. So I'll give you one quick stat I think across the platform, we've got something like 1300 institutional clients.
Only about 50 of those clients invest with us in more than one area across our platform that number should be much higher and I think as we start to really try to connect those dots where can that that's kind of what kind of see that helped us as well.
Yeah.
Paul: The bottom line you feel like you can you can still deliver on this even if for even if rates don't really move into to enter 2025, just given the puts and takes of that come to the bottom line.
I'll say it a different way I don't think our ability to achieve that to hit that target is dependent upon rates falling I hope they do it will make things easier for us.
But I think we can work through it if they don't.
If they don't fall from there.
Okay I appreciate it and then my second question just on <unk>.
The expectation for dental earnings in 2024, so $6 million this quarter and a weak Q2, so say somewhat in line with that but then what happens in the back half of the year or is it just a gradual build to get into that kind of $25 million a quarter in 2025, I'm just trying to figure out how to model. This for the remainder of the year just given all the moving parts are.
These determinations are repricing them down to quest and premiums from 2023 sales coming online. So any help there would be helpful.
Yeah, I don't think we can you know give specifics quarter by quarter, but generally we would expect the results to start getting significantly better in the third and especially the fourth quarters and that relates to the timing of the rate increases. So we have three very large contracts yet.
To have their rates reset one is on 711 is on nine one and one is on 10 one.
That affects the way we think about it. In addition, we have other initiatives expense initiatives claim management initiatives that are coming into play as well.
Many of those are playing out in May and June so that would actually start to help us in the third quarter.
But we would expect no meaningful improvement in the third and especially the fourth quarter.
Okay. Thanks for that guys.
The next question is from Nigel D'souza with Veritas investment Research your line is open.
Good morning. Good morning. Thank you for taking my question I wanted to first just follow up and clarify on.
Less favorable U S. Morbidity experienced staff was just wanted to confirm if I understand it correctly that utilization rate.
Normalized pre pandemic levels.
Unknown Attendee: I heard you say that was driven by capacity issues just wanted to confirm if that's correct. Then of course the implication there is that we're now.
Unknown Attendee: I guess the normal run rate for a morbidity experience for that business because that's the way to think about it.
Well.
The first part of what you said is you always is what we said, yes, absolutely we've seen provider capacity and that's largely been a staffing issue recover to pre pandemic levels or at least very close to pre pandemic levels.
And we've seen utilization move in concert with that it seems to be stabilizing and this is based on external data.
The way I would think about that for our business is we've seen a the morbidity which had been you know favorable beyond our expectations returned back close to where we would expect them to be not quite where we'd expect them to be but close to that level.
So you know, we still are generating favorable margins and favorable to our pricing.
But certainly not as favorable as in the past whether you know.
I'm not sure we can predict precisely what the morbidity will be each quarter remember there is some volatility in this as well.
But you know certainly work flows to the pre pandemic levels at this point.
Great and then I guess I would start.
Nigel it's alright, sorry, it's Kevin.
You know like all of our businesses and especially if you think about health and risk solutions. The stop loss business in the U S. Given the investments we've made we expect that business to grow topline and Bottomline alongside of it. So is the Dan talks about the margins coming back in we still expect growth in that business overall.
For the long term, because we really have a unique position there versus our competitors.
Unknown Attendee: Yeah.
Got it that makes sense and I think where we're going.
As you know when you look at your experience gains last year. It was about 300 million favorable and I'm trying to think through what makes up for that shortfall. If you know assuming experience for neutral this year.
Thank you could point to growth in Asia high if CSN amortization.
Somebody that Sun life asset management delivering.
Higher underlying income as well, but I was wondering if you could touch on another component the investment earnings and earnings on surplus I'll look for that this year.
This quarter was relatively soft despite.
What are your constructive financial market conditions to start the year. So any color there would be helpful.
I know adults Tim I can take the question on the earnings on surplus so.
You'll see in our disclosures, we break that into three components, we have what we call core investment income and that's really from the portfolio. That's backing our surplus and that's predominantly in fixed income like securities and so you see a nice uptick from year over year, and even quarter over quarter, and that's really because of the higher yields that we're generating on that portfolio, given the current environment and but.
There are a couple of other pieces that are a little bit more variable in the second one being the realized gains and losses that are are realized on the fair value through OCI securities and in last year, we had strong gains, particularly in Canada on that portfolio.
We had modest gains this quarter, we had a slight losses last last quarter, so that bounces around a little bit and that's really dependent on a rate environment in terms of what's the accumulated unrealized gain or loss balance in that portfolio and then finally the law.
Last item, which we described as other really has mark to market components from derivatives and other hedging activities and that that bounces around a little bit, but it's it's not as material. So overall you've seen.
Healthy earnings on surplus and offsetting all of that we have interest on debt and that's come down a bit just because we've had some repayments of some of our financing so healthy portfolio, mostly fixed income over the rate dependent.
Okay.
Anything on <unk>.
Yes.
Yeah, Hi, Nigel it's a it's Randy.
I'll address them.
I think what you're getting at here is its credit I think Kevin Morrissey covered in a sense overall credit experience.
Overall was positive for the quarter, the actual experience being less than what's assumed in the assumption what's used in the assumption for liability.
We did however see three.
Impairment that I would say or not.
Systemic, but rather specific liquidity issues.
All three began during Covid and then just manifested over time, so having you.
Literally thousands of credit not unexpected to have a couple.
She hit issues at any given time.
Net migrations were flat ECL was lower than in prior quarters. So you did see lumpiness by business group, but we manage on a global H S and globally.
A diversified portfolio is performing as expected.
Okay. That's helpful. Thank you.
Yeah.
We have a follow up question from many Grumman with Scotiabank. Your line is open.
Hi, Thanks for taking the follow up just wanted to follow up on Mario's question. Just ask is there any reason to believe that you won't be able to hit an 18% Roe.
For the remainder of the area. It sounds like dental redemptions are too small to push you off track on that but just wanted to get your thoughts on that connecting it to the army.
Well, our ROE you can present as a meeting.
Sorry, there's feedback there is a medium term objective and we still feel confident that that will deliver on that the the I think I addressed the earnings and you can figure out the <unk> from the from the earnings sort of comments and.
As we said earlier, we think that the quest will will have a more difficult year than we will grow more slowly but the other pieces were sort of more negative activity Nick negative volatility that we would normally see them were specific to the quarter.
Thanks, Kevin.
Yeah.
We have no further questions at this time.
And I will turn it.
Speaker Change: Back over to Mr. <unk>.
Thank you operator. This concludes today's call a replay of the call will be available on the Investor Relations section of our website. Thank you everybody and have a great day.
Thanks, Joe and end today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
Okay.
Yeah.
Yeah.
Okay.
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