Q2 2024 Sun Life Financial Inc Earnings Call

Operator: Good morning and welcome to the Sun Life Financial Q2 2024 conference call. My name is Gaylene, and I will be your 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. To join the question queue, you may press star, then one on your telephone keypad.

David Garg: Good morning and welcome to the Sun Life Financial Q2 2024 conference call.

Good morning, and welcome to the Sun Life Financial Q2, 2024 Conference call. My name is Caitlin and I will be your conference operator today.

Operator: My name is Gailene, and I will be your 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.

All lines have been placed on mute to prevent any background noise and the conference is being recorded.

Speaker Change: After the presentation there'll be an opportunity to ask question to.

Operator: To join the question, Q, you may press star, then one on your telephone keypad.

Speaker Change: To join the question queue you May Press Star then one on your telephone keypad.

David Garg: The host of the call is David Garg, Senior Vice President, Capital Management and Investor Relations.

David Garg: The host of the call is David Garg, Senior Vice President, Capital Management and Investor Relations. Please go ahead, Mr. Garg. Thank you, and good morning everyone. Welcome to Sun Life's earnings call for the second quarter of 2024. Our earnings release and the slides for today's call are available in the investor relations section of our website at sunlife.com. We will begin today's call with opening remarks from Kevin Strain, President and Chief Executive Officer. Following Kevin, Tim Deacon, Executive Vice President and Chief Financial Officer, will present the financial results for the quarter. After the prepared remarks, we will move to the question and answer portion of the call.

Speaker Change: The call is David Carr Senior Vice President Capital Management, and Investor Relations. Please go ahead Mr. Clark.

David Garg: Please go ahead, Mr. Garg. Thank you and good morning, everyone. Welcome to Sun Life's earnings call for the second quarter of 2024. Our earnings release and the slides for today's call are available on the Investor Relations section of our website at SunLife.com.

David Garg: 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-IFRS financial measures, which form part of today's remarks. As noted in the slides, forward-looking statements may be rendered inaccurate by subsequent events. And with that, I'll now turn things over to Kevin. Thanks, David, and good morning to everyone on the call. I hope you're all having a great summer.

Speaker Change: Thank you and good morning, everyone welcome to Sun Life's earnings call for the second quarter of 2024, our earnings release and the slides for today's call are available on the Investor Relations section of our website at Sun life Dotcom, We will begin today's call with opening remarks from Kevin strain, President and Chief Executive Officer.

Kevin Strain: Turning to slide four, we delivered strong second-quarter results with a record $1 billion in underlying net income, representing 9% growth over the prior year, underscoring the strength of our diversified business strategy and our commitment to drive growth and deliver long-term value for our clients and our shareholders. Our results this quarter were driven by strong individual protection sales in Canada and Asia, while U.S. Group Benefits continues to perform well. Our wealth and asset management businesses saw good earnings momentum on increased assets under management.

David Garg: We will begin today's call with opening remarks from Kevin Strain, President and Chief Executive Officer. Following Kevin, Tim Deacon, Executive Vice President and Chief Financial Officer, will present the financial results for the quarter. After the prepared remarks, we will move to the question-and-answer portion of the call. Other members of management are also available to answer your questions this morning.

Jim Deakin: Following Kevin Jim Deakin, Executive Vice President and Chief Financial Officer will present, the financial results for the quarter.

Speaker Change: After their 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.

David Garg: Turning to slide two, I draw your attention to the cautionary language regarding the use of forward-looking statements and non-IFRS financial measures, which form part of today's remarks. As noted in the slides, forward-looking statements may be rendered inaccurate by subsequent events.

Speaker Change: Turning to slide two I draw your attention to the cautionary language regarding the use of forward looking statements and non I FRS.

Speaker Change: Natural measures, which form part of today's remarks.

Speaker Change: As noted in the slides forward looking statements may be rendered inaccurate by subsequent events and with that I'll now turn things over to Kevin.

Kevin Strain: And with that, I'll now turn things over to Kevin. Thanks, David. Good morning to everyone on the call. I hope you're all having a great summer. Turning to slide four, we delivered strong second quarter results with a record $1 billion in underlying net income, representing 9% growth over the prior year, underscoring the strength of our diversified business strategy and our commitment to drive growth and deliver long-term value for our clients and our shareholders. Our results with quarter were driven by strong individual protection sales in Canada and Asia, while U.S. Group benefits continues to perform well.

Kevin Strain: Strong individual protection sales for the quarter were driven by stronger sales from both SLFD and our third-party channel in Canada, strong momentum from our bank insurance partnership in Hong Kong, and our joint venture sales in India. Strong individual and group protection sales drove our new business CSM growth, which was up 62% year over year. The Wealth and Asset Management Results were lifted by higher fee income from MFS. We are also pleased to have executed the largest transaction in the Canadian pension risk transfer market by a single insurer, representing a $1.2 billion institutional sale in our Defined Benefits Solution business. Our underlying earnings were partially offset by continued headwinds in our U.S. dental business.

Kevin Strain: Thanks, David and good morning to everyone on the call I hope, you're all having a great summer turning to slide four we delivered strong second quarter results with a record $1 billion and underlying net income representing 9% growth over the prior year underscoring the strength of our diversified business strategy and our commitment to drive growth and deliver long term value for our.

Kevin Strain: And our shareholders.

Kevin Strain: Our results this quarter were driven by strong individual protection sales in Canada, and Asia, While U S group benefits continues to perform well.

Kevin Strain: Our wealth and asset management businesses saw good earnings momentum on increased assets under management. Strong individual protection sales for the quarter were driven by stronger sales from both SLSD and our third party channel in Canada, strong momentum from our bank insurance partnership in Hong Kong, and our joint venture sales in India. Strong individual and group protection sales drove our new business CSM growth, which was up 62% year over year. Well, the national results were lifted by higher fee income from MFS. We are also pleased to have executed the largest transaction in the Canadian pension risk transfer market by a single insurer, representing a 1.2 billion institutional sale in our defined benefit solution business.

Kevin Strain: Our wealth and asset management businesses saw good earnings momentum on increased assets under management.

Kevin Strain: Strong individual protection sales for the quarter were driven by stronger sales from both <unk> and our third party channel and Canada strong momentum from our Bancassurance partnership in Hong Kong.

Kevin Strain: And our joint venture sales in India strong individual and group protection sales drove our new business CSM growth, which was up 62% year over year.

Kevin Strain: Wealth and asset management results were lifted by higher fee income from MFS. We are also pleased to have executed the largest transaction in the Canadian pension risk transfer market by a single insurer, representing a 1.2 billion institutional sale in our defined benefit solutions business.

Kevin Strain: Our underlying earnings were partially offset by continued headlines in our U.S. dental business. Most of the Medicaid dental businesses being reprised during 2024, and as we reprised, we are seeing increased premium rates more consistent with our expectations. As a result, we continued to expect underlying earnings levels from dental to be approximately 100 million US dollars for 2025. MFS continues to experience net outflows this quarter at 14.8 billion US dollars. This was driven by secular shifts from active to passive, public to privates and alternatives, as well as cyclical impacts of investors remaining on the sideline given the high interest rates.

Kevin Strain: Our underlying earnings were partially offset by continued headwinds in our U S. Dental business most of the Medicaid dental business is being repriced during 'twenty 'twenty four and as we reprice. We are seeing increased premium rates more consistent with our expectations. As a result, we continue to expect underlying earnings levels from dental to be approximately 100 million.

Kevin Strain: Most of the Medicaid dental business is being repriced during 2024, and as we reprice, we are seeing increased premium rates more consistent with our expectations. As a result, we continue to expect underlying earnings levels from dental to be approximately 100 million U.S. dollars for 2025. MFS continues to experience net outflows this quarter at 14.8 billion U.S. dollars.

Kevin Strain: U S. The U S 100 million U S dollars, where 2025.

Kevin Strain: MFS continues to experience net outflows this quarter at $14 8 billion U S dollars.

Kevin Strain: This was driven by secular shifts from active to passive, public to private, and alternatives, as well as cyclical impacts of investors remaining on the sidelines given the high interest rate. We are confident in the actions that MFS is taking to address these challenges, including building out their retail capabilities, focus on meeting their clients' needs, and a diverse range of investment products, including active ETFs and separately managed accounts. Our asset management and wealth pillars continue to have strong fundamentals, with total SLF assets under management now $1.47 trillion, up 7% over last year. However, reported earnings were lower than underlying earnings primarily due to market-related impacts driven by the restructuring charge and real estate.

Kevin Strain: This was driven by secular shift from active to passive public to privates and alternatives as well as cyclical impacts of investors remaining on the sidelines given the high interest rates. We are confident in the actions at MFS is taking to address these challenges, including building out the retail capabilities focus on meeting their clients' need.

Kevin Strain: We are confident in the actions that MFS is taking to address these challenges, including building out their retail capabilities, focus on meeting their client's needs, and a diverse range of investment products, including active ETFs and separately managed accounts.

Kevin Strain: In a diverse range of investment products, including active Etfs and separately managed accounts.

Kevin Strain: Awards. Our asset management of wealth pillars continued to have strong fundamentals, with total S-11 assets under management now 1.47 trillion, up 7% over last year. Reporter earnings were lower than underlying earnings, primarily due to market-related impacts driven by the restructuring charge and real estate. Real estate continued to experience headwinds consistent with the overall industry environment. In the quarter, we took a restructuring charge related to expense reductions, and we expect over $200 million of pre-tax savings to be delivered by 2026. Expense initiatives ensure that we stay efficient and competitive, helping us deliver on our purpose by aligning resources.

Speaker Change: Our asset management and wealth pillars continue to have strong fundamentals with total S. A lot of assets under management now 1.47 trillion up 7% over last year.

Speaker Change: Reported earnings were lower than underlying earnings primarily due to market related impacts driven by the restructuring charge and real estate.

Kevin Strain: Real estate continued to experience headwinds consistent with the overall industry environment. In the quarter, we took a restructuring charge related to expense reductions, and we expect over 200 million dollars of pre-tax savings to be delivered by 2026. Expense initiatives ensure that we stay efficient and competitive, helping us deliver on our purpose by aligning resources. Finally, we continue to maintain a strong capital position, reflecting our disciplined financial management and emphasis on capital-light businesses.

Speaker Change: Real estate continued to experience headwinds consistent with the overall industry environment.

Speaker Change: In the quarter, we took a restructuring charge related to expense reductions and we expect over $200 million of pretax savings to be delivered by 2026.

Speaker Change: Expense initiatives ensure that we stay efficient and competitive helping us deliver on our purpose by aligning resources.

Kevin Strain: Finally, we continue to maintain a strong capital position, reflecting our disciplined financial management and emphasis on capital-like businesses. Underlying RE for the quarter of 18.1% is in line with our medium-term financial objectives, where our LICAT ratio at SLF remains strong at 150%.

Speaker Change: Finally, we continue to maintain a strong capital position, reflecting our disciplined financial management and emphasis on capital light businesses.

Kevin Strain: Underlying RE for the quarter of 18.1% is in line with our medium-term financial objectives, where our LICAT ratio at SLF remains strong at 150%. Turning to slide five, this quarter, we delivered on several key business initiatives that help drive our client impact strategy forward. We continue to progress on our digital and innovation capabilities to support client health and financial security. We are scaling generative AI across Sun Life, with thousands of Sun Lifers involved in more than 20 experiments to optimize, automate, and transform client experiences. In the US, the dental team is using Genitive AI to help Sun Life improve accuracy and make quicker recommendations.

Speaker Change: Underlying <unk> for the quarter of 18.1% is in line with our medium term financial objectives, while our like cat ratio. That's a laugh remained strong at 150%.

Kevin Strain: Turning to slide five, this quarter we delivered on several key business initiatives that help drive our client impact strategy forward. We continue to forget on our digital and innovation capabilities to support client health and financial security. We are scaling genitive AI across sunlight with thousands of sun lifers involved in more than 20 experiments to optimize, automate, and transform client experiences. In the US, the dental team is using genitive AI to help sunlight improve accuracy and make quicker recommendations. We also expanded our partnership with Good Path in the US, offering disability members virtual care to help them better look after their physical and mental health.

Kevin Strain: We also expanded our partnership with Good Path in the U.S., offering disability members virtual care to help them better look after their physical and mental health. In Vietnam, a new point of sale platform allows agents to provide a digitally enhanced client onboarding experience. This platform enables enhanced needs analysis in addition to a faster paperless application with 98% of applicants enrolled within one business day. In Canada, we introduced Sun Life Term Insurance for Diabetes, a first-of-its-kind insurance solution designed to empower Canadians living with diabetes to make health and financial decisions on their terms.

Speaker Change: Turning to slide five this quarter, we delivered on several key business initiatives that helped drive our client impact strategy forward.

Speaker Change: We continue to progress on our digital and innovation capabilities to support client health and financial security.

Speaker Change: We are scaling generative AI across sunlight with thousands of Sun lifers involved in more than 20 experiments to optimize automate and transform client experiences.

Speaker Change: In the U S. The dental team is using generative AI to help sun life improve accuracy and make quicker recommendations.

We also expanded our partnership with good path in the U S offering disability members virtual care to help them better look after their physical and mental health.

Kevin Strain: In Vietnam, a new point of sale platform allows agents to provide a digitally enhanced client onboarding experience. This platform enables enhanced needs analysis in addition to a faster paper list application, with 98% of applicants enrolled within one business day. In Canada, we introduce Sunlight term insurance for diabetes. A first of its kind insurance solution designed to empower Canadians living with diabetes to make health and financial decisions on their terms. Recognizing the unique challenges of this condition, this product offers a higher chance of approval compared to conventional life insurance, more affordable premiums, and an access to a customized care plan.

Speaker Change: In Vietnam, our new point of sale platform allows agents to provide a digitally enhanced client onboarding experience. This platform enables enhanced needs analysis. In addition to a faster paperless application with 98% of applicants are enrolled within one business day.

Speaker Change: In Canada, we introduced Sun life term insurance for diabetes.

Speaker Change: First of its kind insurance solution designed to empower Canadians living with diabetes to make health and financial decisions on their terms.

Kevin Strain: Recognizing the unique challenges of this condition, this product offers a higher chance of approval compared to conventional life insurance, more affordable premiums, and access to a customized care plan. These capabilities and offerings reinforce our commitment to finding new and innovative ways to deliver on our purpose. According to Asset Management, we continue to strengthen our position as a market leader. This quarter, SLC Management unveiled SLC Global Insurance Group, a dedicated team focused on serving the complex needs of the world's leading insurance companies with bespoke solutions. Our deep insurance heritage, combined with our diverse suite of investment capabilities, has allowed us to create a differentiated and tailored experience for clients. SLC also launched the Scotia Private Real Estate Fund, distributed through Scotia Bank.

Speaker Change: Recognizing the unique challenges of this condition. This product offers a higher chance of approval compared to conventional life insurance more affordable premiums and the access to a customized care plan.

Kevin Strain: These capabilities and offerings reinforce our commitment to finding new and innovative ways to deliver on our purpose.

These capabilities and offerings reinforce our commitment to finding new and innovative ways to deliver on our purpose.

Kevin Strain: Turning to asset management, we continue to strengthen our position as a market leader. This quarter, SLC Management unveiled SLC Global Insurance Group, a dedicated team focused on serving the complex deeds of the world's leading insurance companies with bespoke solutions. Our deep insurance heritage, combined with our diverse suite of investment capabilities, has allowed us to create a differentiated and tailored experience for clients. SLC also launched the Scotia Private Real Estate Fund, distributed through Scotiabank. Powered by BGO's deep real estate investment capabilities, this new product will give investors an opportunity to diversify their private real estate assets that offer attractive income-focused returns while hedging against inflation.

Speaker Change: Turning to asset management, we continue to strengthen our position as a market leader.

Speaker Change: This quarter SLC management unveiled SLC Global insurance group, a dedicated team focused on serving the complex needs of the world's leading insurance companies with bespoke solutions.

Speaker Change: Our deep insurance heritage combined with our diverse suite of investment capabilities has allowed us to create a differentiated and tailored experience for clients.

Speaker Change: <unk> also launched the Scotia private real estate funds distributed through Scotiabank powered by Biggio deep real estate investment capabilities. This new product will give investors an opportunity to diversify their private real estate assets that offer attractive income focus returns while hedging against the inflation.

Kevin Strain: Powered by BGO's deep real estate investment capabilities, this new product will give investors an opportunity to diversify their private real estate assets that offer attractive, income-focused returns while hedging against inflation. SLC has grown tremendously since its inception over a decade ago. To support our plan for SLC's continued growth, I'm pleased to announce that Steve Peacher, president of SLC, has been appointed to executive chair SLC management. Sonny Kelsey, co-CEO BGO, has been appointed to president and CEO of SLC.

Kevin Strain: SLC has grown tremendously since its inception over a decade ago. To support our plan for SLC's continued growth, I'm pleased to announce that Steve Peacher, President SLC, has been appointed to Executive Chair SLC Management, and the leaders across the SLC group of companies to help set the future strategic direction of the firm with a focus on combining the strength of its global platform to benefit new and existing clients. Additionally, Steve will continue to have oversight of the firm's businesses, with a particular focus on leading the growth of SLC fixed income and driving the firm's high net worth strategy.

Steve Peacher: SLC has grown tremendously since its inception over a decade ago to support our plan for S. O sees continued growth I'm pleased to announce that Steve Peacher, President SLC has been appointed to executive Chair SLC management, Sunny Kelsey co CEO B G. O has been appointed to president and CEO of <unk>.

Kevin Strain: Sonny will continue to spend the substantial majority of his time as co-CEO of BGO in partnership with John Caravan. Steve will partner with Sunny and the leaders across the SLC group of companies to help set the future strategic direction of the firm with a focus on combining the strength of its global platform to benefit new and existing clients. Additionally, Steve will continue to have oversight of the firm's businesses, with a particular focus on leading the growth of SLC fixed income and driving the firm's high net worth strategy.

Speaker Change: Finally, we'll continue to spend the substantial majority of his time as co C O B G O in partnership with John careful.

Speaker Change: Steve will partner with Sunny and the leaders across the SLC group of companies to help set the future strategic direction of the firm with a focus on combining the strength of its global platform to benefit new and existing clients.

Additionally, Steve will continue to have oversight of the firm's businesses with a particular focus on leading the growth of our vessels see fixed income and driving the firm's high net worth strategy.

Kevin Strain: This announcement, along with Jack Parris' appointment as Chief Executive Officer of Infrared last July, and Chris Wright's appointment as President of Crescent Capital Group this year, lays the foundation for SLC's leadership for many years into the future.

Kevin Strain: This announcement, along with Jack Paris's appointment as Chief Executive Officer of Infrared last July, and Chris Wright's appointment as President of Crescent Capital Group this year, lays the foundation for SLC's leadership for many years into the future. We also completed our third sustainability bond offering, issuing $750 million.

Speaker Change: This announcement, along with Jack parishes appointment as Chief Executive Officer of Infrared last July and Chris Wright's appointment as President of Crescent Capital Group. This year lays the foundation for Esol seize leadership for many years into the future.

Kevin Strain: We also completed our third sustainability bond offering, issuing $750 million. In line with our sustainability bond framework, the proceeds from this bond offering will help on green and social projects that support the health of communities, such as investments in hospitals, long-term care, and emergency shelters. Finally, we continue to be recognized for our commitment to drive meaningful positive impacts for our clients, society, and the environment. Some Life was selected by Corporate Knights as being one of the 50 best corporate citizens in Canada for the 19th time.

Speaker Change: We also completed our third sustainability bond offering issuing $750 million.

Kevin Strain: In line with our sustainability bond framework, the proceeds from this bond offering will help fund green and social projects that support the health of communities, such as investments in hospitals, long-term care, and emergency shelters. Finally, we continue to be recognized for our commitment to driving meaningful, positive impacts for our clients, society, and the environment. Sun Life was selected by Corporate Knights as one of the 50 best corporate citizens in Canada for the 19th time.

Speaker Change: In line with our sustainability bond framework. The proceeds from this bond offering will help on green and social projects that support the health of communities such as investments in hospitals long term care and emergency shelters.

Speaker Change: Finally, we continue to be recognized for our commitment to drive meaningful positive impacts for our clients Society and the environment sunlight was selected by corporate Knights as being one of the 50 best corporate citizens in Canada for the 19th time.

Kevin Strain: In closing, we had a strong quarter against our medium term objectives with underlying EPS growth of 10% and an ROE of 18.1%. We also ended the quarter in a strong capital position with a light cat ratio of 150% and have announced our intention to renew our normal course issue of bid to purchase up to 15 million common shares, subject to regulatory approval. We are confident in the resilience of our strategy, our focus on execution, and our sustained commitment to deliver on our purpose.

Kevin Strain: In closing, we had a strong quarter against our medium-term objectives with underlying EPS growth of 10% and an ROE of 18.1%. We also ended the quarter in a strong capital position with a LIHCAT ratio of 150% and have announced our intention to renew our normal course issuer bid to purchase up to 15 million common shares, subject to regulatory approval. We are confident in the resilience of our strategy, our focus on execution, and our sustained commitment to deliver on our purpose. With that, I will turn the call over to Tim, who will walk us through the second quarter financial results. Thank you, Kevin. Good morning, everyone.

Speaker Change: In closing, we had a strong quarter against our medium term objectives with underlying EPS growth of 10% and an ROE of 18, 1%. We also ended the quarter in a strong capital position with a light cat ratio of 150% and have announced our intention to renew our normal course issuer bid to purchase up to 15 million common share.

Speaker Change: Theres subject to regulatory approval, we are confident in the resilience of our strategy our focus on execution and our sustained commitment to deliver on our purpose with that I will turn the call over to Tim who will walk us through the second quarter financial results.

Tim Deacon: With that, I will turn the call over to Tim, who will walk us through the second quarter financial results. Thank you, Kevin. Good morning, everyone. We're now on Slide 7. We are pleased with our strong results as quarter. Underlying that income of $1 billion is up 9%, and underlying earnings per share of $1.72 is up 10% year-over-year, achieving the higher end of our medium term growth objectives. Underlying return on equity of 18.1% also achieved medium term objectives, supported by strength across our diversified businesses. Wealth and asset management comprised 41% of Q2 underlying earnings and was up 9% over the prior year on higher fee income, largely due to higher asset levels driven by equity market appreciation.

Timothy Deacon: We're now on slide seven. We are pleased with our strong results this quarter. Underlying net income of $1 billion is up 9%, and underlying earnings per share of $1.72 is up 10% year-over-year. The higher end of our medium-term growth objective was achieved, supported by strength across our diversified business. Wealth and asset management comprised 41% of Q2 underlying earnings and was up 9% over the prior year on higher fee income largely due to higher asset levels driven by equity market appreciation. This was partially offset by higher expenses. Group health and protection businesses comprised 28% of underlying earnings and were down 15% year-over-year.

Tim: Thank you Kevin Good morning, everyone. We're now on slide seven.

Tim: We are pleased with our strong results this quarter underlying net income of $1 billion is up 9% and underlying earnings per share of $1 72 is up 10% year over year, achieving the higher end of our medium term growth objectives underlying return on equity of 18, 1% also achieved medium term objectives supported by strength across our diverse first.

Tim: <unk> businesses wealth.

Tim: Wealth and asset management comprised 41% of Q2 underlying earnings and it was up 9% over the prior year on higher fee income largely due to higher asset levels driven by equity market appreciation. This was partially offset by higher expenses.

Tim Deacon: This is partially offset by higher expenses. Wealth and protection businesses comprised 28% of underlying earnings and were down 15% year-over-year. Results reflected strong business growth in the US group benefits in Canada that were more than offset by unfavorable morbidity experience and lower US dental results. Individual protection comprised 31% of underlying earnings and was up 31% from last year, driven by business growth in Asian Canada and favorable mortality experience across our business. Reported net income for the quarter was 646 million. The difference between underlying and reported net income was driven by unfavorable market-related impacts, a restructuring charge of 108 million post-tax, or 18 cents per share, and acquisition-related items in the amortization of intangible assets.

Tim: Group Health and protection businesses comprise 28% of underlying earnings and we're down 15% year over year results reflected strong business growth in the U S group benefits in Canada that were more than offset by unfavorable morbidity experience and lower U S dental results.

Timothy Deacon: Results reflected strong business growth in U.S. group benefits and in Canada that were more than offset by unfavorable morbidity experience and lower U.S. dental results. Individual protection comprised 31% of underlying earnings and was up 31% from last year, driven by business growth in Asia and Canada and favorable mortality experience across our business. Reported net income for the quarter was $646 million.

Tim: Individual protection comprised 31% of underlying earnings and was up 31% from last year, driven by business growth in Asia in Canada, and favorable mortality experience across our businesses.

Tim: Reported net income for the quarter was $646 million the difference between underlying and reported net income was driven by unfavorable market related impacts a restructuring charge of 108 million post tax or <unk> 18 per share acquisition related items and the amortization of intangible assets.

Timothy Deacon: The difference between underlying and reported net income was driven by unfavorable market-related impacts, a restructuring charge of $108 million post-tax, or $0.18 per share, acquisition-related items, and the amortization of intangible assets. The restriction charge reflects actions taken to improve productivity and help continue to deliver earnings growth at the higher end of medium-term objectives. Actions under the program include accelerating the digitization of our business, addressing duplicative and redundant capabilities, and optimizing our external spend.

Tim Deacon: The restructuring charge reflects actions taken to improve productivity and help continue to deliver earnings growth at the higher end of medium-term objectives. Actions under the program included accelerated digitization of our business, addressing duplicative and redundant capabilities, and optimizing our external spend. We expect these actions to be implemented over the next 18 months and deliver over 200 million pre-tax in cost efficiencies by 2026. Market-related impacts were primarily driven by unfavorable real estate experience. This reflects modestly negative total returns in the quarter compared to our long-term expectations of approximately 2% per quarter, primarily from market-driven capital-related increases.

Tim: The restructuring charge reflects actions taken to improve productivity and help continue to deliver earnings growth at the higher end of medium term objectives actions under the program included accelerated digitization of our business addressing duplicative and redundant capabilities and optimizing our external spend we expect these actions to be implement.

Gailene: Good morning and welcome to the Sun Life Financial Q2 2024 conference call. My name is Gailene and I will be your conference operator today. All lines have been placed on mute to prevent any background noise and the conference is being recorded.

Timothy Deacon: We expect these actions to be implemented over the next 18 months and deliver over 200 million pre-tax and cost efficiencies by 2026. Market-related impacts were primarily driven by unfavorable real estate experience. This reflects modestly negative total returns in the quarter compared to our long-term expectations of approximately 2% per quarter, primarily from market-driven cap-related increases. We will continue to be cautious on real estate returns in the near term.

Tim: Over the next 18 months and deliver over 200 million pretax and cost efficiencies by 2026 market related impacts were primarily driven by unfavorable real estate experience. This reflects modestly negative total returns in the quarter compared to our long term expectations of approximately 2% per quarter, primarily from market driven.

Gailene: After the presentation, there will be an opportunity to ask questions. To join the question, Q, you may press star then one on your telephone keypad.

David Garg: The host of the call is David Garg, Senior Vice President Capital Management and Investor Relations. Please go ahead, Mr. Garg. Thank you and good morning everyone.

Tim: Cap related increases.

David Garg: Welcome to Sun Life's earnings call for the second quarter of 2024. Our earnings release and the slides for today's call are available on the investor relations section of our website at SunLife.com. We will begin today's call with opening remarks from Kevin Strain, President and Chief Executive Officer. Following Kevin, Tim Deacon, Executive Vice President and Chief Financial Officer, will present the financial results for the quarter. After the prepared remarks, we will move to the question and answer portion of the call.

Tim Deacon: We will 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 are performing in line with our long-term assumptions. Our balance sheet and capital position remains strong with an SLF-like at ratio of 150%, up 2 percentage points from the prior quarter due to strong organic capital generation, a new disclosure for us of 588 million in Q2, and a debt issuance this quarter to pre-fund an expected third quarter redemption. Old co-cash remains strong at 2 billion, and we remain active on our share buyback program, repurchasing 4.1 million shares this quarter.

Tim: We will continue to be cautious on real estate returns in the near term.

Timothy Deacon: We are long-term investors in real estate, and on a 10-year basis, our actual returns are performing in line with our long-term assumptions. Our balance sheet and capital position remains strong with an SLF-LICAT ratio of 150%, up two percentage points from the prior quarter due to strong organic capital generation, a new disclosure for us of $588 million in Q2, and a debt issuance this quarter to pre-fund an expected third quarter redemption. Old Coal Cash remained strong at $2 billion, and we remained active in our share buyback program, repurchasing 4.1 million shares this quarter. We announced our intention to renew our program later this month, pending regulatory approval. Our leverage ratio remains low at 22.6%.

Tim: We are long term investors in real estate and on a 10 year basis. Our actual returns are performing in line with our long term assumptions.

Tim: Our balance sheet and capital position remains strong with an S. L. A light cat ratio of 150% up two percentage points from the prior quarter due to strong organic capital generation, a new disclosure for us of $588 million in Q2, and a debt issuance this quarter to pre fund an expected third quarter redemption.

David Garg: 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-IFRS financial measures, which form part of today's remarks. As noted in the slides, forward looking statements may be rendered inaccurate by subsequent events. And with that, I'll now turn things over to Kevin. Thanks, David. Good morning to everyone on the call.

Tim: Holdco cash remains strong at 2 billion and we remained active on our share buyback program repurchasing four 1 million shares this quarter, we announced our intention to renew our program later this month pending regulatory approval.

Tim Deacon: We announced our intention to renew our program later this month, pending regulatory approval. Our leverage ratio remains low at 22.6%. Also of note, we had a record new business CSM, a 437 million, which was up 62% over the prior year, reflecting strong sales in Hong Kong and Canada. Total CSM is now at 12.5 billion, up 11% year-over-year, representing a growing source of future profits. And finally, book value for share increased by 8% over the prior year, demonstrating our ability to generate growth while returning value to our shareholders.

Tim: Our leverage ratio remains low at 22, 6%.

Timothy Deacon: Also of note, we had a record new business CSM of 437 million, which was up 62% over the prior year, reflecting strong sales in Hong Kong and Canada. Total CSM is now at $12.5 billion, up 11% year-over-year, representing a growing source of future profit. And finally, book value per share increased by 8% over the prior year, demonstrating our ability to generate growth while returning value to our shareholders. Now, let's turn to our business group performance, starting on slide 9 with MFS. MFS's underlying net income of $194 million U.S. was up 4% year-over-year as higher fee income from average net asset growth more than offset higher expenses.

Tim: Also of note, we hadn't record new business, CSM, a $437 million, which was up 62% over the prior year, reflecting strong sales in Hong Kong in Canada.

David Garg: I hope you're all having a great summer. Turning to slide four, we delivered strong second quarter results with a record $1 billion in underlying net income, representing 9% growth over the prior year, underscoring the strength of our diversified business strategy, and our commitment to drive growth and deliver long-term value for our clients and our shareholders. Our results with quarter were driven by strong individual protection sales in Canada and Asia, while U.S. Group benefits continues to perform well.

Tim: Total CSM is now at $12 5 billion up 11% year over year, representing a growing source of future profits.

Tim: And finally book value per share increased by 8% over the prior year, demonstrating our ability to generate growth, while returning value to our shareholders.

Tim Deacon: Now let's turn to our business group performance starting on slide 9 with MFS. MFS underlying net income of 194 million US was up 4% year-over-year, as higher fee income from average net asset growth more than offset higher expenses. Reported net income of 194 million US was up 4% year-over-year. Pre-tax net operating margin of 36.5% was in line with prior year, and AUM of 618 billion was up 5% over the prior year given higher markets, but down 2% from the prior quarter driven by net outflows. Outflows in the quarter included two large institutional mandate reductions and retail net outflows.

Tim: Now, let's turn to our business group performance, starting on slide nine with MFS MFS.

Tim: MFS underlying net income of 194 million U S was up 4% year over year as higher fee income from average net asset growth more than offset higher expenses reported net income of 194 million U S was up 4% year over year.

David Garg: Our wealth and asset management businesses saw good earnings momentum on increased assets under management. Strong individual protection sales for the quarter were driven by stronger sales from both SLSD and our third party channel in Canada, strong momentum from our bank insurance partnership in Hong Kong, and our joint venture sales in India. Strong individual and group protection sales drove our new business CSM growth, which was up 62% year over year. Well, the national results were lifted by higher fee income from MFS.

Timothy Deacon: Reported net income of $194 million U.S. was up 4% year over year, and the pre-tax net operating margin of 36.5% was in line with the prior year. AUM of $618 billion was up 5% over the prior year given higher markets, but down 2% from the prior quarter driven by net outflows. Outflows in the quarter included two large institutional mandate redemptions and retail net outflows. Retail outflows reflected the continued preference in the current environment for shorter-term interest-bearing products.

Tim: Pretax net operating margin of 36, 5% was in line with prior year and AUM of 618 billion was up 5% over the prior year, given higher markets, but down 2% from the prior quarter driven by net outflows.

Tim: In the quarter included two large institutional mandate redemptions and retail net outflows retail outflows reflected the continued preference in the current environment for shorter term interest bearing products.

Tim Deacon: Retail outflows reflected the continued preference in the current environment for shorter term intersparing products. Long-term investment performance for MFS remained good, with 97% of funds' assets ranked in the top half of their respective Morningstar categories for 10-year performance.

David Garg: We are also pleased to have executed the largest transaction in the Canadian pension risk transfer market by a single insurer representing a 1.2 billion institutional sale in our defined benefit solution business. Our underlying earnings were partially offset by continued headlines in our U.S, dental business. Most of the Medicaid dental businesses being reprised during 2024, and as we reprised, we are seeing increased premium rates more consistent with our expectations. As a result, we continued to expect underlying earnings levels from dental to be approximately 100 million US dollars for 2025.

Timothy Deacon: Long-term investment performance for MFS remained good, with 97% of funds' assets ranking in the top half of their respective Morningstar categories for 10-year performance. Turning to slide 10, SLC management generated underlying net income of $42 million, down 5% year-over-year as fee-related earnings growth was offset by higher compensation and seed financing costs. Fee-related earnings of $65 million were up 5% year-over-year on continued growth in fee-earning AUMs. Reported net income of $9 million increased by $12 million as the prior year included mark-to-mark losses on a real estate investment which didn't recur. Capital raising of $3 billion remained resilient, with solid fundraising in BGO's Asia Value Fund and U.S. Diversified Equity Fund.

Long term investment performance for MFS remained good with 97% of funds assets ranked in the top half of their respective Morningstar categories for 10 year performance.

Tim Deacon: Turning to slide 10, SLC Management generated underlying net income of 42 million, down 5% year-over-year, as fee-related earnings growth was offset by higher compensation and seed financing costs. Fee-related earnings of $65 million was up 5% year over year on continued growth in fee-earning AUM. Reported net income of $9 million increased $12 million, as a prior year included mark-to-market losses on a real estate investment, which didn't recur. Capital raising of $3 billion remained resilient, with solid fund raising in BGO's Asia Value Fund and US Diversified Equity Fund. Deployments of $6 billion were up $1.3 billion over the prior year, primarily from strong opportunities in fixed income and private credit in the quarter.

Speaker Change: Turning to slide 10, SLC management generated underlying net income of $42 million down 5% year over year as fee related earnings growth was offset by higher compensation and seed financing costs fee related earnings of 65 million was up 5% year over year on continued growth in fee, earning AUM.

Speaker Change: Reported net income of $9 million increased $12 million as the prior year included Mark to Mark losses on our real estate investment which didn't recur.

David Garg: MFS continues to experience net outflows this quarter at 14.8 billion US dollars. This was driven by secular shifts from active to passive public to privates and alternatives, as well as cyclical impacts of investors remaining on the sideline given the high interest rates. We are confident in the actions that MFS is taking to address these challenges, including building out their retail capabilities, focus on meeting their client's needs and a diverse range of investment products, including active ETFs, and separately managed accounts.

Speaker Change: Capital raising of 3 billion remained resilient with solid fundraising and be Geos Asia value Fund and U S. Diversified equity fund deployments of 6 billion were up 1.3 billion over the prior year, primarily from strong opportunities in fixed income and private credit in the quarter total AUM of 227 billion was up 9 billion from the prior year.

Timothy Deacon: Deployments of $6 billion were up $1.3 billion over the prior year primarily due to strong opportunities in fixed income and private credit in the quarter. Total AUM of $227 billion was up $9 billion from the prior year. Turning to slide 11, Canada delivered record results with underlying net income of $402 million, up 8% year-on-year on strong insurance business growth and higher net investment results. Reported net income of $292 million included an unfavorable market-related impact. Wealth and Asset Management earnings were up 18% year over year on higher fee-related earnings and lower expenses.

Tim Deacon: Total AUM of $227 billion was up $9 billion from the prior year.

Tim Deacon: Turning to slide 11, Canada delivered record results with underlying net income of $402 million, up 8% year-on-year on strong insurance business growth and higher net investment results. Reported net income of $292 million included unfavorable market-related impacts. Wealth and asset management earnings were up 18% year-over-year on higher fee-related earnings and lower expenses. Results included a 1.2 billion transaction in the defined benefits solution, the largest sale in the Canadian pension risk transfer market by a single insurer. Group health and protection underlying earnings were down 5% year-over-year, as business growth and higher investment contributions were more than offset by less favorable, though still positive, morbidity experience.

Speaker Change: Turning to slide 11, Canada delivered record results with underlying net income of $402 million up 8% year on year on strong insurance business growth and higher net investment results reported net income of $292 million included unfavorable market related impacts.

David Garg: Awards. Our asset management of wealth pillars continued to have strong fundamentals with total S-11 assets under management, now 1.47 trillion, up 7% over last year. Reporter earnings were lower than underlying earnings primarily due to market related impacts, driven by the restructuring charge and real estate. Real estate continued to experience headwinds consistent with the overall industry environment. In the quarter, we took a restructuring charge related to expense reductions and we expect over $200 million of pre-tax savings to be delivered by 2026.

Speaker Change: Wealth and asset management earnings were up 18% year over year on higher fee related earnings and lower expenses.

Timothy Deacon: Results included a $1.2 billion transaction in the Defined Benefits Solution, the largest sale in the Canadian pension risk transfer market by a single insurer. Group health and protection underlying earnings were down 5% year over year as business growth and higher investment contributions were more than offset by less favorable, though still positive, morbidity experience. Group health and protection sales were down 7% year over year due to lower large cases.

Speaker Change: <unk> included a $1 2 billion transaction in the defined benefit solution the largest sale in the Canadian pension risk transfer market by a single insurer.

Speaker Change: Health and protection underlying earnings were down 5% year over year as business growth and higher investment contributions were more than offset by less favorable, though still positive morbidity experience group health and protection sales were down 7% year over year to lower large case sales.

Tim Deacon: Group health and protection sales were down 7% year-over-year to lower large-case sales. Individual protection earnings were up 18% year-over-year, driven by favorable mortality experience and higher investment contribution. Individual protection sales were up 8% due to higher power-life sales.

David Garg: Expense initiatives ensure that we stay efficient and competitive, helping us deliver on our purpose by aligning resources. Finally, we continue to maintain a strong capital position, reflecting our discipline financial management and emphasis on capital-like businesses. Underlying RE for the quarter of 18.1% is in line with our medium-term financial objectives where our LICAT ratio at SLF remains strong at 150%. Turning to slide five, this quarter we delivered on several key business initiatives that help drive our client impact strategy forward.

Timothy Deacon: Individual protection earnings were up 18% year-over-year driven by favorable mortality experience and higher investment contribution. Individual protection sales were up 8% due to higher power life sales. Turning to slide 12, U.S. underlying net income of $149 million U.S. was down 7% from the prior year driven by unfavorable morbidity experience and dental results. Reported net income of 91 million U.S. includes market-related impacts, acquisition-related expenses, and the amortization of intangibles. In group health and protection, our group benefits benefited from strong revenue growth and favorable experience; and Employee Benefits.

Speaker Change: Individuals' protection earnings were up 18% year over year, driven by favorable mortality experience and higher investment contribution individual protection sales were up 8% due to higher power life sales.

Tim Deacon: Turning to slide 12, U.S. underlying net income of $149 million U.S. was down 7% year-from-the-prior-year driven by unfavorable morbidity experience and dental results. Reported net income of $91 million U.S. includes market-related impacts, acquisition-related expenses, and the amortization of intangibles. In group health and protection, our growth benefits benefited from strong revenue growth and favorable experience in employee benefits. This was more than offset by lower dental results, which I will cover more detail on the next slide. U.S. group results of 243 million U.S. were down 24% year-over-year, driven by large-case government dental sales in the prior year, which occur periodically.

Speaker Change: Turning to slide 12 U S. Underlying net income of 149 million U S was down 7% year from the prior year driven by unfavorable morbidity experience in dental results.

Speaker Change: Reported net income of 91 million U S includes market related impacts acquisition related expenses and the amortization of intangibles.

Speaker Change: And group Health and protection, our growth benefits benefited from strong revenue growth and favorable experience in employee benefits. This was more than offset by lower dental results, which I will cover in more detail on the next slide U S group results of 243 million U S were down 24% year over year, driven by four large Kate.

David Garg: We continue to forget on our digital and innovation capabilities to support client health and financial security. We are scaling genitive AI across sunlight with thousands of sun lifers involved in more than 20 experiments to optimize, automate and transform client experiences. In the US, the dental team is using genitive AI to help sunlight improve accuracy and make quicker recommendations. We also expanded our partnership with Good Path in the US, offering disability members virtual care to help them better look after their physical and mental health.

Timothy Deacon: This was more than offset by lower dental results, which I will cover in more detail on the next slide. U.S. group results of 243 million dollars were down 24% year-over-year, driven by four large-case government dental sales in the prior year, which occur periodically.

Speaker Change: Large case government dental sales in the prior year and which occur periodically.

Timothy Deacon: Individual protection underlying earnings were up significantly over the prior year from favorable mortality experience. Turning to slide 13, we provide additional details on our U.S. dental performance. As we've mentioned in prior quarters, the headwinds experienced in our U.S. dental business are largely driven by the impact of the Medicaid redetermination process following the end of the public health emergency. Over the past 12 months, state governments have disenrolled approximately 19% of our Medicaid membership base, which has impacted premiums. Disenrollments are now substantially complete as of the end of July.

Tim Deacon: Individual protection underlying earnings were up significantly over the prior year from favorable mortality experience.

Speaker Change: Individual protection underlying earnings were up significantly over the prior year from favorable mortality experience.

Tim Deacon: Turning to slide 13, we provide additional details on our U.S. Dental performance. As we mentioned in prior quarters, the headwinds experience in our U.S. dental business are largely driven by the impact of the Medicaid redetermination process following the end of the public health emergency. Over the past 12 months, state governments have disenrolled approximately 19% of our Medicaid membership base, which is impacted premiums. Disenrollments are now substantially complete as at the end of July. Further, we have experienced higher utilization from the Medicaid members staying in plan compared to those who were disenrolled, resulting in higher-than-expected loss and expense ratios.

Speaker Change: Turning to slide 13, we provide additional details on our U S dental performance.

David Garg: In Vietnam, a new point of sale platform allows agents to provide a digitally enhanced client onboarding experience. This platform enables enhanced needs analysis in addition to a faster paper list application with 98% of applicants enrolled within one business day. In Canada, we introduce sunlight term insurance for diabetes. A first of its kind insurance solution designed to empower Canadians living with diabetes to make health and financial decisions on their terms. Recognizing the unique challenges of this condition, this product offers a higher chance of approval compared to conventional life insurance, more affordable premiums and an access to a customized care plan.

Speaker Change: As we've mentioned in prior quarters, the headwinds experienced in our U S. Dental business are largely driven by the impact of the Medicaid Redetermination process. Following the end of the public health emergency over the past 12 months. The governments have just enrolled approximately 19% of our Medicaid membership base, which has impacted premiums. Its enrollments are now substantially complete.

Speaker Change: As at the end of July.

Timothy Deacon: Further, we have experienced higher utilization from the Medicaid members staying in the plan compared to those who were disenrolled, resulting in a higher than expected loss in expense ratio. Despite these current headwinds, we maintain a favorable outlook for our dental business and expect to deliver underlying earnings of approximately $100 million in the U.S. by 2025. We will achieve this level of profitability through key actions already underway, including ongoing cost and expense management initiatives, repricing efforts on our existing block of Medicaid business, and from new contract sales across Medicaid, Medicare Advantage, and commercial business loans.

Further we have experienced higher utilization from the Medicaid members staying in plan compared to those who are disenroll, resulting in higher than expected loss and expense ratios. Despite these current headwinds we maintain a favorable outlook for our dental business and expect to deliver underlying earnings of approximately 100 million you asked by 2025, we will achieve this level of profitability.

Tim Deacon: Despite these current headwinds, we maintain a favorable outlook for our dental business and expect to deliver underlying earnings of approximately 100 million U.S. by 2025. We will achieve this level of profitability through key actions already underway, including ongoing cost and expense management initiatives, repartising efforts on our existing block of Medicaid business, and from new contract sales across Medicaid, Medicare Advantage, and commercial business. Line.

Speaker Change: Two key actions already underway, including ongoing cost and expense management initiatives repricing efforts on our existing block of Medicaid business and from new contract sales across Medicaid Medicare advantage and commercial business lines.

David Garg: These capabilities and offerings reinforce our commitment to finding new and innovative ways to deliver on our purpose. Turning to asset management, we continue to strengthen our position as a market leader. This quarter, SLC Management unveiled SLC Global Insurance Group, a dedicated team focused on serving the complex deeds of the world's leading insurance companies with bespoke solutions. Our deep insurance heritage, combined with our diverse suite of investment capabilities, has allowed us to create a differentiated and tailored experience for clients.

Timothy Deacon: Slide 14 outlines Asia's results for the quarter. Underlying net income of $179 million was up 19% year-on-year on a constant currency basis, driven by strong business growth in Hong Kong, our joint ventures, and high net worth. The reported net income of $151 million includes market-related impact. We continue to see strong sales momentum in individual protection, particularly in Hong Kong and India, reflecting our expanded distribution capabilities. Strong sales also drove new business CSM of $220 million in Asia, up 82% from the prior year. Total Asia CSM increased 17% year-on-year.

Tim Deacon: Slide 14 outlines Asia's results for the quarter. Underline net income of $179 million was up 19% year-on-year on a constant currency basis, driven by strong business growth in Hong Kong, our joint ventures, and high net worth. Reported net income of $151 million includes market-related impacts. We continue to see strong sales momentum in individual protection, particularly in Hong Kong and India, reflecting our expanded distribution capabilities. The strong sales also drove new business CSM of 220 million in Asia, up 82% from the prior year. Total Asia CSM increased 17% year-on-year.

Speaker Change: Slide 14 outlines Asia's results for the quarter underlying net income of $179 million was up 19% year on year on a constant currency basis, driven by strong business growth in Hong Kong, Our joint ventures and high net worth reported net income of 151 million includes market related impacts we continue to see strong sales momentum.

Speaker Change: I'm, an individual protection, particularly in Hong Kong, and India reflected are reflecting our expanded distribution capabilities. The strong sales also drove new business CSM of 220 million 20 million in Asia up 82% from the prior year total Asia CSM increased 17% year on year.

David Garg: SLC also launched the Scotia Private Real Estate Fund, distributed through Scotia Bank. Powered by BGO's deep real estate investment capabilities, this new product will give investors an opportunity to diversify their private real estate assets that offer attractive income-focused returns while hedging against inflation. SLC has grown tremendously since its inception over a decade ago. To support our plan for SLC's continued growth, I'm pleased to announce that Steve Peacher, President SLC has been appointed to Executive Chair SLC Management, and the leaders across the SLC group of companies to help set the future strategic direction of the firm with a focus on combining the strength of its global platform to benefit new and existing clients.

Timothy Deacon: Overall, we're pleased with our strong Q2 results. We're entering the second half of the year with positive business momentum, having achieved all of our medium-term objectives. Our diversified and attractive portfolio of businesses, our strong LICAT ratio of 150%, and our differentiated, purpose-driven culture give us confidence to continue to deliver on our client impact strategy and financial objectives. With that, I will turn the call over to David for the Q&A portion of the call. Thank you, Tim.

Tim Deacon: Overall, we're pleased with our strong Q2 results. We're entering the second half of the year with positive business momentum, having achieved all of our medium term objectives. Our diversified and attractive portfolio of businesses, our strong like-at ratio of 150%, and our differentiated purpose-driven culture give us confidence to continue to deliver on our client impact strategy and financial objectives.

Speaker Change: Overall, we're pleased with our strong Q2 results were entering the second half of the year with positive business momentum, having achieved all of our medium term objectives.

David Garg: Additionally, Steve will continue to have oversight of the firm's businesses, with a particular focus on leading the growth of SLC fixed income and driving the firm's high net worth strategy. This announcement, along with Jack Parris' appointment as Chief Executive Officer of Infrared last July, and Chris Wright's appointment as President of Crescent Capital Group this year, lays the foundation for SLC's leadership for many years into the future. We also completed our third sustainability bond offering, issuing $750 million.

Speaker Change: Our diversified and attractive portfolio of businesses are strong like cat ratio of 150% and our differentiated purpose driven culture give us confidence to continue to deliver on our client impact strategy and financial objectives with that I will turn the call over to David for the Q&A portion of the call.

David Garg: With that, I will turn the call over to David for the Q&A portion of the call. Thank you, Tim. To help ensure that our participants have an opportunity to ask questions this morning, please limit yourselves to one or two questions and then re-Q with any additional questions.

David Garg: To help ensure that our participants have an opportunity to ask questions this morning, please limit yourselves to one or two questions and then requeue with any additional questions. I will now ask the operator to poll the participants. Thank you. To join the question queue, you may press star then one on your telephone keypad.

David Carr: Thank you Tim.

Speaker Change: To help ensure that our participants have an opportunity to ask questions. This morning, Please limit yourselves to one or two questions and then re queue with any additional questions I will now ask the operator to poll the participants.

Operator: I will now ask the operator to poll the participants. Thank you. To join the question, Q, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speaker phone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two.

Operator: You'll hear a tone acknowledging your request. If you're using a speakerphone, please back up your handset before pressing any keys. To withdraw your question, please press star then two. Our first question is from Manny Grauman with Scotiabank. Please go ahead. Hi, good morning. I wanted to ask about the restructuring charge and just get a better understanding of what cuts you're making and where from a segment point of view as well. Morning, many. It's Tim.

Speaker Change: Thank you to join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any key.

Speaker Change: Your question. Please press Star then two.

Manny Gromman: Our first question is from Manny Gromman with Scotiabank. Please go ahead. Hi, good morning.

Speaker Change: Our first question is from Manny Korchman with Scotiabank. Please go ahead.

Manny Korchman: Hi, Good morning, I wanted to ask about the restructuring charge and just get a better understanding.

Tim Deacon: I want to ask about the restarction charge and just get a better understanding of what cuts you're making and where from a segment point of view as well. Thanks.

Manny Korchman: What cuts, you're making in where from a segment point of view as well.

David Garg: In line with our sustainability bond framework, the proceeds from this bond offering will help on green and social projects that support the health of communities such as investments in hospitals, long-term care, and emergency shelters. Finally, we continue to be recognized for our commitment to drive meaningful positive impacts for our clients, society, and the environment. Some life was selected by corporate knights as being one of the 50 best corporate citizens in Canada for the 19th time.

Manny Korchman: Thanks.

Yeah.

Manny Korchman: Yeah.

Tim Deacon: Hi, morning, Manny. It's Tim. Thanks for the question. First, I would say that financial discipline is a key part of our client impact strategy and is a priority for us. So I would characterize this as a modest enterprise-wide program that we expect to execute over the next 18 months, and it's really across all of our business groups and corporate functions. And the types of areas that were focused on are opportunities to accelerate the digitization of our business, eliminating duplicative or redundant capabilities, and optimizing our external spend. I would say we've run similar programs from time to time.

Manny Korchman: Hi, good morning, many it's Tim Thanks.

Timothy Deacon: Thanks for the question. First, I would say that financial discipline is a key part of our client impact strategy and is a priority for us. So I would characterize this as a modest enterprise-wide program that we expect to execute over the next 18 months, and it's really across all of our business groups and corporate functions. And the types of areas that we're focused on are opportunities to accelerate the digitization of our business, eliminate duplicative or redundant capabilities, and optimize our external spend. I would say we've run similar programs from time to time, so this is not new for Sun Life, but it's been some time since we've executed on a focused program like this.

Speaker Change: Thanks for the question.

Speaker Change: First I would say that financial discipline is a key part of our client impact strategy and is a priority for us. So I would characterize this as a modest enterprise wide program that we expect to execute over the next 18 months and it's really across all of our business groups and corporate functions and the types of areas that we're focused on our opportunities to accelerate the digitization of our.

David Garg: In closing, we had a strong quarter against our medium term objectives with underlying EPS growth of 10% in an ROE of 18.1%. We also ended the quarter in a strong capital position with a light cat ratio of 150% and have announced our intention to renew our normal course issue of bid to purchase up to 15 million common shares subject to regulatory approval. We are confident in the resilience of our strategy, our focus on execution, and our sustained commitment to deliver on our purpose.

Speaker Change: Business, eliminating duplicative of redundant capabilities and optimizing our external spend.

Speaker Change: I would say we've run similar programs from time to time. So this is not new for Sun life, but it's been sometime since we've executed on a focused program like this and as we've indicated in our disclosures. We expect these actions to deliver over 200 million pretax of efficiencies by 2026, and this is really to help moderate expenses and support the earnings.

Tim Deacon: So this is not new for some life, but it's been some time since we've executed on a focused program like this. And as we've indicated in our disclosures, we expect these actions to deliver over 200 million pre-tax efficiencies by 2026. And this is really to help moderate expenses and support the earnings growth at the top of an end of our MTOs. So you'd expect the majority of this would flow through earnings over time, starting in the second half of this year through to 2026. With this small portion being strategically reinvested to help accelerate our digital transformation and areas of investment in AI.

Timothy Deacon: And as we've indicated in our disclosures, we expect these actions to deliver over 200 million pre-tax in efficiencies by 2026. And this is really to help moderate expenses and support the earnings growth at the top end of our MTOs. So you'd expect the majority of this would flow through earnings over time, starting in the second half of this year through to 2026, with a small portion being strategically reinvested to help accelerate our digital transformation and areas of investment in AI.

Speaker Change: Growth at the top end of our M. T. OS. So you would expect the majority of this would flow through earnings over time, starting in the second half of this year through to 2026 with the small portion being strategically reinvested to help accelerate our digital transformation and areas of investment in AI.

Tim Deacon: With that, I will turn the call over to Tim who will walk us through the second quarter financial results. Thank you, Kevin.

Tim Deacon: Good morning, everyone. We're now on slide 7. We are pleased with our strong results as quarter. Underlying that income of $1 billion is up 9%, and underlying earnings per share of $1.72 is up 10% year-over-year achieving the higher end of our medium term growth objectives. Underlying return on equity of 18.1% also achieved medium term objectives supported by strength across our diversified businesses. Wealth and asset management comprised 41% of Q2 underlying earnings and was up 9% over the prior year on higher fee income largely due to higher asset levels driven by equity market appreciation.

Tim Deacon: So we'll really show up on a variety of line items, including other expenses, other fee income, which is net of expenses, our corporate segment results, and to some extent in CSM. So, just to paraphrase some pretty broad-based across segments, like we shouldn't expect one segment to show more of a benefit of that 200 million that you're indicating versus another. No, that's right. It's quite broad-based across all of our business groups. And then just as the follow-up, so you took the restructuring charge, non-core through corporate, but are there any benefits coming through this court already in any of the segments on an adjusted basis?

Timothy Deacon: So we'll really show up in a variety of line items, including other expenses, other fee income, which is net of expenses, our corporate segment results, and to some extent, CSM. So, just to paraphrase, it's pretty broad-based across segments, like we shouldn't expect one segment to show more of a benefit of that $200 million that you're indicating versus another? No, that's right.

Speaker Change: So it will really show up in a variety of line items, including other expenses other fee income, which is net of expenses, our corporate segment results and to some extent in CSM.

Speaker Change: Well.

Speaker Change: So to paraphrase some pretty broad based across segments.

Speaker Change: One segment to show more of a benefit of about 200 million that youre, indicating versus another.

Timothy Deacon: It's quite broad-based across all of our businesses. And then, just as a follow-up, so you took the restructuring charge, non-corporate through corporate, but are there any benefits coming through this quarter already in any of the segments on an adjusted basis? Yeah, a small portion has come in, but I would expect that to ramp up in the second half of this year as the actions that we're taking will occur over time.

Speaker Change: That's right, it's quite broad based across all of our business groups.

Speaker Change: And then just as a follow up so you took the restructuring charge noncore through corporate.

Tim Deacon: This is partially offset by higher expenses. Wealth and protection businesses comprised 28% of underlying earnings and were down 15% year-over-year. Results reflected strong business growth in the US group benefits in Canada that were more than offset by unfavorable morbidity experience and lower US dental results. Individual protection comprised 31% of underlying earnings and was up 31% from last year driven by business growth in Asian Canada and favorable mortality experience across our business.

Speaker Change: Are there any benefits coming through this quarter already in any of the segments.

Speaker Change: Adjusted basis.

Tim Deacon: Yes. Yeah, small portions come in, but I would expect that to ramp up in the second half of this year as the actions that we're taking will occur over time, but you'll start to see that coming through as it said through the second half of this year, rateably through to 2026. Would you be able to quantify what's coming through this court already? It's not very material in the grand context. It'd be probably more than the second half. Okay. Thank you.

Timothy Deacon: But you'll start to see that coming through, as I said, through the second half of this year, relatably through 2021. Would you be able to quantify what's coming through this corridor already? It's not very material in the grand context; it'd be probably more in the second.

Speaker Change: Yeah, a small portion has come in but I would expect that to ramp up in the second half of this year as the actions that we're taking will occur over time, but you'll start to see that coming through as you said through through the second half of this year.

Speaker Change: Ratably through to 2026.

Speaker Change: Would you be able to quantify what's coming through this quarter already.

Tim Deacon: Reported net income for the quarter was 646 million. The difference between underlying and reported net income was driven by unfavorable market-related impacts, a restructuring charge of 108 million post-tax, or 18 cents per share, acquisition-related items in the amortization of intangible assets. The restructuring charge reflects actions taken to improve productivity and help continue to deliver earnings growth at the higher end of medium-term objectives. Actions under the program included accelerated digitization of our business, addressing duplicative and redundant capabilities, and optimizing our external spend.

Speaker Change: It's not very material in the Grand context, it would be probably more in the second half.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Tom McKinnon: The next question is from Tom McKinnon with BMO Capital Markets. Please go ahead. Yeah, thanks very much.

Timothy Deacon: Okay, thank you. The next question is from Tom MacKinnon with BMO Capital Markets. Please go ahead.

Speaker Change: The next question is from Tom Mackinnon with BMO capital markets. Please go ahead.

Kevin Strain: Yeah, thanks very much. Maybe a question for... Kevin, I understand that the partnership with MFS has been a long-term, well-entrenched partnership, but these kinds of consistent net outflows really make it tough to be able to grow over time with more, you know, normal markets in line with your medium-term objectives. So you can kind of see that. If outflows are kind of 2% of the AUM, and markets even grow at 8%, this is like a six-year grower, not the eight to 10 you would want. So in your talks to the board, how do you justify this? Is it just strictly because you like the free cash flow and, I guess, as a follow-up. R.I.

Tom Mackinnon: Yeah, Thanks, very much maybe a question for.

Kevin Strain: Maybe question for Kevin. I understand the partnership with MFS has been a long-term, well-entrenched partnership, but kind of consistent net outflows really make it tough to be able to grow over time with more. You know, normal markets in line with your medium-term objectives. So you can kind of see that if outflows are kind of 2% of the AUM and markets even grow at 8, that's just like a 6th grower, not the 8 to 10 you would want.

Tom Mackinnon: Kevin and I understand that the partnership with MFS has been a long term well entrenched partnership, but kind of consistent net outflows really make it tough to be able to grow.

Speaker Change: Over time with more normal markets.

Tim Deacon: We expect these actions to be implemented over the next 18 months, and deliver over 200 million pre-tax in cost efficiencies by 2026. Market-related impacts were primarily driven by unfavorable real estate experience. This reflects modestly negative total returns in the quarter compared to our long-term expectations of approximately 2% per quarter, primarily from market-driven capital capital-related increases. We will 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 are performing in line with our long-term assumptions.

Speaker Change: In line with your medium term objectives.

Speaker Change: So you can kind of see that.

Speaker Change: Outflows are kind of 2% of the AUM in markets you can grow at eight that's just as like a sixth grower not the eight to 10, you would want so in your talks to the board how do you justify this.

Kevin Strain: So, in your talks to the board, how do you justify this? Is it just strictly because you like the free cash flow?

Speaker Change: Is it just strictly because you like the free cash flow and I guess as a follow up.

Kevin Strain: And I guess, as a follow-up, are I assume the broad-based expense cuts that you're implementing some of those must be an MFS, and how do you think that should impact margins there? Thanks.

Speaker Change: Or I assume.

Speaker Change: The broad based expense cuts that you're implementing or some some of those must be in MFS and how do you think that should impact margins there. Thanks.

Tim Deacon: Our balance sheet and capital position remains strong with an SLF-like at ratio of 150%, up 2 percentage points from the prior quarter due to strong organic capital generation, a new disclosure for us of 588 million in Q2, and a debt issuance this quarter to pre-fund an expected third quarter redemption. Old co-cash remains strong at 2 billion, and we remain active on our share buyback program, repurchasing 4.1 million shares this quarter. We announced our intention to renew our program later this month, pending regulatory approval.

Kevin Strain: Thanks for the question, Tom.

Kevin Strain: Soon. [inaudible] Broad Base. Transcripts provided by Transcription Outsourcing, LLC. Thanks for the question, Tom. It's Kevin.

Kevin Strain: Thanks for the question, Tom It's Kevin So.

Kevin Strain: It's Kevin. So MFS is absolutely included in our medium-term objectives and as part of those numbers that we give. So when you think of our medium-term objectives, we've factored in what MFS is going to contribute to that. MFS is an important part of our asset management strategy. Where the largest asset manager in the country, we have 1.47 trillion in assets under management. And we like the fact that we go from public equities and public fixed income into the alternatives and a growing asset management business that sort of combined between management's leadership and Steve and Asia.

Kevin: MFS is a absolutely included in our medium term objectives and as part of those numbers that we give so when you think about our medium term objectives. We've factored in what MFS is going to contribute to that.

Kevin Strain: So MFS is absolutely included in our medium-term objectives and as part of those numbers that we give. So when you think of our medium-term objectives, we've factored in what MFS is going to contribute to that. MFS is an important part of our asset management strategy.

Speaker Change: MFS is an important part of our asset management strategy, where the largest asset manager in the country. We have 1.47 trillion in assets under management and we like the fact that we go from public equities in public fixed income into the alternatives and a growing asset management business the sort of combined between manage its leadership in <unk> and Stephen.

Kevin Strain: We're the largest asset manager in the country. We have 1.47 trillion in assets under management, and we like the fact that we go from public equities and public fixed income into alternatives and a growing asset management business that's sort of combined between Manjit's leadership and Steve in Asia. So MFS is an important part of that. For sure, they're, and you heard this in my opening remarks, you know they're in a cycle where they've had some headwinds around passive and alternatives. That's why we built out the Alternatives platform.

Tim Deacon: Our leverage ratio remains low at 22.6%. Also of notes, we had a record new business CSM, a 437 million, which was up 62% over the prior year, reflecting strong sales in Hong Kong and Canada. Total CSM is now at 12.5 billion, up 11% year-over-year, representing a growing source of future profits. And finally, book value for share increased by 8% over the prior year, demonstrating our ability to generate growth while returning value to our shareholders.

Speaker Change: And in Asia. So MFS is an important part of that for sure there and you heard this in my opening remarks, they are in a cycle, where they've they've had.

Kevin Strain: So MFS is an important part of that. For sure there, and you heard this in my opening remarks, you know, they're in a cycle where they've had some headwinds around passive and alternatives. That's why we built out the alternatives platform. But we do believe that they're taking all the right actions. They're doing the right things. They have a strong team. They're client focused. And so, you know, they're an important part of this company, and they're an important part of our overall asset management strategy. And, as I said, that goes all the way. We like the fact that it goes from public equities and fixed income rate to alternatives.

Some headwinds around passive and alternatives that is why we built out the old alternatives platform, but.

Kevin Strain: But we do believe that they're taking all the right actions, they're doing the right things, they have a strong team, they're client-focused, and so you know they're an important part of this company, and they're an important part of our overall asset management strategy, and as I said, that goes all the way. We like the fact that it goes from public equities and fixed income right through alternatives. And the fact that it hasn't kind of hit your medium-term objective. Even if you look back, you know, for the last seven or eight years.

Tim Deacon: Now let's turn to our business group performance starting on slide 9 with MFS. MFS underlying net income of 194 million US was up 4% year-over-year, as higher fee income from average net asset growth more than offset higher expenses. Reported net income of 194 million US was up 4% year-over-year. Pre-tax net operating margin of 36.5% was in line with prior year, and AUM of 618 billion was up 5% over the prior year given higher markets, but down 2% from the prior quarter driven by net outflows.

Speaker Change: But we do believe that they're taking all the right actions, they're doing the right things they have a strong team.

Speaker Change: Their client focused and so they are important part of this company and they are an important part of our overall asset management strategy and as I said that goes all the way.

Speaker Change: We like the fact that it goes from public equities and fixed income rate for alternatives.

Speaker Change: And the fact that it doesn't kind of hasn't really hit your medium term objectives, even if.

Kevin Strain: And it's the fact that it doesn't kind of, hasn't really hit your medium-term objectives, even if you look back, you know, for the last seven or eight years. What is it that, what is it really contributed to the story then, if it's not growing at the 8 to 10 that you want it to grow at? Well, as you know, MFFUM has been growing, despite the fact that they've been in, in that redemptions, and I think that that growth has been part of the earning story, but they've also been an important part, as you noted, of cash flow, and they send cash up to the whole co, which has allowed us to do the, the M&A work and the capital work we've done over the past 10 years, right?

Speaker Change: If you look back.

Speaker Change: For the last seven or eight years.

Kevin Strain: What is it that... What does it really contribute to the story then if it's not growing at the 8 to 10 that you want it to grow at? Well, as you know, MFS AUM has been growing despite the fact that they've been in net redemptions. And I think that that growth has been part of the earnings story. But it's also been an important part, as you noted, of cash flow. And they send cash up to the whole company, which has allowed us to do the M&A work and the capital work we've done over the past 10 years, OK?

Speaker Change: What is it that a.

Tim Deacon: Outflows in the quarter included two large institutional mandate reductions and retail net outflows. Retail outflows reflected the continued preference in the current environment for shorter term intersparing products. Long-term investment performance for MFS remained good with 97% of funds assets ranked in the top half of their respective Morningstar categories for 10-year performance.

Speaker Change: What does it really contribute to the story than if it's not growing at the eight to 10 that you want it to grow at well, let you know MFS AUM has been growing despite the fact that they've been in net redemptions and I think that that growth has been part of the earnings story, but they've also been an important part as you noted of cash flow and they send cash up to the whole.

Tim Deacon: Turning to slide 10, SLC management generated underlying net income of 42 million, down 5% year-over-year as fee-related earnings growth was offset by higher compensation and seed financing costs. Fee-related earnings of $65 million was up 5% year over year on continued growth in fee-earning AUM. Reported net income of $9 million, increased $12 million, as a prior year included mark-to-mark losses on a real estate investment, which didn't recur. Capital raising of $3 billion remained resilient, with solid fund raising in BGO's Asia Value Fund and US diversified equity fund.

Speaker Change: Co, which has allowed us to do.

Speaker Change: The M&A work and the capital work, we've done over the past 10 years right. So if you look at the.

Kevin Strain: So if you look at the significant deployment of capital we've done, MFS has been a good supporter of that deployment of capital. Okay, understood. Thanks. The next question is from Doug Young with Desjardins. Please go ahead.

Kevin Strain: So if you look at the significant deployment of capital we've done, MFFS has been a good supporter of that deployment of capital.

Speaker Change: Difficult at deployment of capital we've done MFS has been a good supporter of that deployment of capital.

Kevin Strain: Okay, understood, thanks.

Speaker Change: Okay understood. Thanks.

Doug Young: The next question is from Doug Young with Desjardins. Please go ahead. Hi, good morning. Maybe just a kind of a big, big picture question for, like $1.72 of underlying earnings, Kevin. Like, is this the true earnings power of the company? Obviously, it was a lot less last quarter, and it's bounced around a little bit. Can you talk a bit about, you know, when you think of that and trying to gauge whether that is the case? Like what went for you and against you this quarter when you think through that?

Speaker Change: The next question is from Doug Young with Desjardin. Please go ahead.

Kevin Strain: Hi, good morning. Maybe just a kind of a big, big picture question for you, like $1.72 of underlying earnings, Kevin. Is this the true earnings power of the company? Obviously, it was a lot less last quarter, and it's bounced around a little bit. Can you talk a bit about when you think of that and trying to gauge whether that is the case, like what went for you and against you this quarter when you think through that?

Doug Young: Hi, Good morning, maybe just a kind of a big picture.

Tim Deacon: Deployments of $6 billion were up 1.3 billion over the prior year, primarily from strong opportunities in fixed income and private credit in the quarter. Total AUM of $227 billion was up 9 billion from the prior year.

Doug Young: Question or.

Doug Young: It's like $1 72 of underlying earnings Kevin like is this the true earnings power of the company. Obviously it was a lot less last quarter and it's bounced around a little bit and can you talk a bit about.

Tim Deacon: Turning to slide 11, Canada delivered record results with underlying net income of $402 million, up 8% year-on-year on strong insurance business growth and higher net investment results. Reported net income of $292 million included unfavorable market-related impacts. Wealth and asset management earnings were up 18% year-over-year on higher fee-related earnings and lower expenses. Results included a 1.2 billion transaction in the defined benefits solution, the largest sale in the Canadian pension risk transfer market by a single insurer.

Speaker Change: When you think of that and trying to gauge whether that is the case like what went for you and against you this quarter when when you think through that.

Kevin Strain: I guess we, as we talked about, I see last quarter; I see last quarter is more of the anomaly, and this quarter is a return to sort of what our expectations would have been. We had a number of things that went against us last quarter, and we talked about those. For sure, the dental results will continue to impact us this year, but we see yourself earning our way through that.

Kevin Strain: Doug, as we talked about, I see last quarter was more of an anomaly, and this quarter is a return to sort of what our expectations would have been. We had a number of things that went against us last quarter, and we talked about those.

Speaker Change: Doug as we as we talked about I see last quarter I see last quarter is more of the anomaly in this quarter is a return to sort of what our expectations would have been we had a number of things that went against us last quarter and we talked about those.

Speaker Change: For sure that dental results.

Speaker Change: We will continue to impact us this year, but we see yourself, earning our way through that so I see this as a return to more of what our expected levels of underlying earnings would be.

Tim Deacon: Group health and protection underlying earnings were down 5% year-over-year, as business growth and higher investment contributions were more than offset by less favorable, those still positive morbidity experience. Group health and protection sales were down 7% year-over-year to lower large-case sales. Individual protection earnings were up 18% year-over-year driven by favorable mortality experience and higher investment contribution. Individual protection sales were up 8% due to higher power-life sales.

Kevin Strain: So I see this as a return to more of what our expected levels of underlying earnings would be.

Kevin Strain: For sure, the dental results will continue to impact us this year, but we see ourselves earning our way through that. So I see this as a return to more of what our expected levels of underlying earnings would be. Okay, and then, Okay, I'll leave it at that. And then Dan, on the US stop loss side, you had a negative morbidity experience.

Speaker Change: Okay and then.

Doug Young: Okay, I'll leave it at that.

Daniel Fishbein: Yet, it was attributed to just normalizing claims utilization. So, does this imply that you're baking in, you know, more COVID utilization into your pricing? Or can you help me think through this and talk about, you know, pricing trends in this business? And why, as dental gets better, should we, you know, obviously, there's going to be a deterioration in the stop loss business? Why shouldn't we be kind of worried about those two opposing trends? Sure, Doug.

Speaker Change: Okay I'll leave it there and then Dan on the U S stop loss side.

Dan Fishbein: And then Dan, on the US stop-loss side, you had negative morbidity experience, yet it was attributed to just normalizing claims utilization. So this is a supply that you're baking in, you know, more COVID utilization into your pricing, or can you help me think through this and talk about pricing trends in this business, and why, you know, as dental gets better, you know, you should be, you know, obviously there's going to be potentially a deterioration in the stop loss business. Why should we be kind of worried about those two opposing trends? Sure, Doug. You know, what we've seen this year is, as we've talked about, a normalization of utilization, especially hospital utilization and things like outpatient surgery. That normalization back to pre-COVID levels happened a little faster over the past two or three quarters than I think anybody was expecting.

Speaker Change: Had negative morbidity experience.

Speaker Change: Yes, it was.

Speaker Change: Attributed to just normalizing claims utilization. So so does this imply that you're baking in.

Speaker Change: More COVID-19 utilization into your pricing or can you help me think through best in and talk about pricing trends in this business and why is that they'll get better.

Tim Deacon: Turning to slide 12, U.S, underlying net income of $149 million U.S, was down 7% year-from-the-prior-year driven by unfavorable morbidity experience and dental results. Reported net income of $91 million U.S, includes market-related impacts, acquisition-related expenses, and the amortization of intangibles. In group health and protection, our growth benefits benefited from strong revenue growth and favorable experience in employee benefits. This was more than offset by lower dental results, which I will cover more detail on the next slide.

Speaker Change: Should we obviously theres going to be essentially a deterioration in the stop loss business why shouldn't we be kind of worried about those two opposing trends.

Daniel Fishbein: You know, what we've seen this year is, as we've talked about, a normalization of utilization, especially hospital utilization and things like outpatient surgery. That normalization back to pre-COVID levels happened a little faster over the past two or three quarters than I think anybody was expecting, but it had been happening gradually over time.

Sure Doug.

Speaker Change: What we've seen this year is as we've talked about normalization of utilization, especially hospital utilization and things like outpatient surgery.

Tim Deacon: U.S, group results of 243 million U.S, were down 24% year-over-year driven by large-case government dental sales in the prior year, which occur periodically. Individual protection underlying earnings were up significantly over the prior year from favorable mortality experience.

Speaker Change: Normalization back to pre Covid levels happened, a little faster over the past two or three quarters than I think anybody was expecting it had been happening gradually over time, most likely that it is due to hospitals big hospitals systems, especially now being able to staff fully win that was a challenge for quite some time even lag.

Daniel Fishbein: Most likely, that is due to hospitals, big hospital systems especially, now being able to staff fully when that was a challenge for quite some time, even lagging after the worst of COVID. So we seem to be back to normal utilization. As far as the particular, you know, sequential quarter results, we do have some seasonality in our reserving. Generally, the way the reserves emerge, we release some reserves in the first and fourth quarters and strengthen reserves in the second and third quarters.

Dan Fishbein: It had been happening gradually over time, most likely that is due to hospitals, big hospital systems, especially now being able to staff fully when that was a challenge for quite some time, even lagging after the worst of COVID. So we seem to be back to normal utilization.

Tim Deacon: Turning to slide 13, we provide additional details on our U.S, dental performance. As we mentioned in prior quarters, the headwinds experience in our U.S, dental business are largely driven by the impact of the Medicaid redetermination process following the end of the public health emergency. Over the past 12 months, state governments have disenrolled approximately 19% of our Medicaid membership base, which is impacted premiums. Disenrollments are now substantially complete as at the end of July.

Tim Deacon: Further, we have experienced higher utilization from the Medicaid members staying in plan compared to those who were disenrolled, resulting in higher than expected loss and expense ratios. Despite these current headwinds, we maintain a favorable outlook for our dental business and expect to deliver underlying earnings of approximately 100 million U.S, by 2025. We will achieve this level of profitability through key actions already underway, including ongoing cost and expense management initiatives, repartising efforts on our existing block of Medicaid business, and from new contract sales across Medicaid, Medicare Advantage and commercial business. Line.

Speaker Change: Again.

Speaker Change: After the worst of Covid, so we seem to be back to normal utilization as far as the particular sequential quarter results. We do have some seasonality in our reserving generally the way the reserves emerge we release some reserves in the first and fourth fourth quarters and strengthened reserves in the second half.

Dan Fishbein: As far as the particular, you know, sequential quarter results, we do have some seasonality in our reserving. Generally, the way the reserves emerge, we release some reserves in the first and fourth quarters, and strengthen reserves in the second and third quarters. So most of the sequential difference that you saw was simply that seasonal reserving pattern. What's most important in what we look at is the year-to-date result, and right now both our loss ratio and our margins in the stop loss business are consistent with our pricing targets. Going forward, we see some signs that utilization is stabilizing.

Speaker Change: Third quarter. So most of the sequential difference that you saw was simply that seasonal reserving pattern.

Daniel Fishbein: So most of the sequential difference that you saw was simply that seasonal reserving pattern. What's most important in what we look at is the year-to-date result. And right now, both our loss ratio and our margins in the stop-loss business are consistent with our pricing targets. Going forward, we see some signs that utilization is stabilizing. You may hear that from some of the health insurers as well. And we are taking, as we always do, a conservative approach to pricing. Over the past few years, some of our competitors have been, you know, this is what happens, they have good results, and they get aggressive. We generally did not participate in that.

Speaker Change: Most important and what we look at is the year to date result, and right now both our loss ratio on our margins in the stop loss business are consistent with our pricing targets.

Speaker Change: Going forward, we see some signs that utilization is stabilizing.

Dan Fishbein: You may hear that from some of the health insurers as well. And we are taking, as we always do, a conservative approach toward pricing. Over the past few years, some of our competitors were, you know, this is what happens. They have good results; they get aggressive. We generally did not participate in that. And now, in some other competitors' calls, they've talked about raising rates.

Speaker Change: May hear that from some of the health insurers as well and we are taking as we always do a conservative approach toward pricing over the past few years some of our competitors were.

Speaker Change: This is what happens.

Tim Deacon: Slide 14 outlines Asia's results for the quarter. Underline net income of $179 million was up 19% year-on-year on a constant currency basis driven by strong business growth in Hong Kong, our joint ventures and high net worth. Reported net income of $151 million includes market-related impacts. We continue to see strong sales momentum in individual protection, particularly in Hong Kong and India, reflecting our expanded distribution capabilities. The strong sales also drove new business CSM of 220 million in Asia up 82% from the prior year. Total Asia CSM increased 17% year-on-year.

Speaker Change: Have good results they get aggressive we generally did not participate in that and now in some other competitors' calls they've talked about raising rates. So we're probably looking toward a one one next year, where the market starts to push pricing upward.

Daniel Fishbein: And now, on some other competitors' calls, they've talked about raising rates. So we're probably looking toward a 1-1 next year, where the market starts to push prices upward. Okay. I appreciate the colors, thank you.

Dan Fishbein: So we're probably looking toward a 1-1 next year where the market starts to push pricing upward.

Dan Fishbein: Okay.

Speaker Change: Okay.

Dan Fishbein: Appreciate the color.

Speaker Change: I appreciate the color. Thank you.

Dan Fishbein: Thank you.

Tom Gallagher: The next question is from Tom Gallagher with Evercore ISI. Please go ahead. Good morning. A few questions on the US. The 100 million of dental learnings that you're guiding to for 25. Is any of that driven by this 200 million of cost saves plan for 26? Or is most expected to come from loss ratio improvement?

Daniel Fishbein: The next question is from Tom Gallagher with Evercore ISI. Please go ahead. Good morning. A few questions on the U.S.

Speaker Change: The next question is from Tom Gallagher with Evercore ISI. Please go ahead.

Daniel Fishbein: The $100 million of dental earnings that you're guiding to for 2025, is any of that driven by this $200 million cost saves plan for 2026? Or is most of that expected to come from loss ratio improvement? It comes really from all of that and other things as well.

Tom Gallagher: Good morning.

Two questions on the U S D. The hundred million of dental learnings that you're guiding to for 25 is any of that driven by this $200 million of cost saves plan for 'twenty six or is most of that are expected to come from loss ratio improvement.

Tim Deacon: Overall, we're pleased with our strong Q2 results. We're entering the second half of the year with positive business momentum having achieved all of our medium term objectives. Our diversified and attractive portfolio of businesses, our strong like-at ratio of 150% and our differentiated purpose-driven culture give us confidence to continue to deliver on our client impact strategy and financial objectives.

Dan Fishbein: It comes really from all of that and other things as well. So we have a series of initiatives that are underway, most of which, even though they've been underway for some time, will start to show in the results in the second half of the year. So, on the expenses, that is one of the tactics we're using. The dental business is one of the larger consumers of the reserve and of those actions. So there's quite a bit of that that will start to layer into the results in the second half of the year. We also have a robust set of dental cost management actions, additional utilization review, claims that it, and also adjustments to network composition to make sure that we're matching the cost to the prices that we're getting.

Speaker Change: It comes really from all of that and other things as well. So we have a series of initiatives that are underway.

Daniel Fishbein: So we have a series of initiatives that are underway, most of which, even though they've been underway for some time, will start to show in the results in the second half of the year. So on the expenses, that is one of the tactics we're using. The dental business is one of the larger consumers of the reserve and of those actions.

Speaker Change: Most of which even though they've been underway for some time, we will start to show in the results in the second half of the year.

David Garg: With that, I will turn the call over to David for the Q&A portion of the call. Thank you, Tim. To help ensure that our participants have an opportunity to ask questions this morning, please limit yourselves to one or two questions and then re-Q with any additional questions.

Speaker Change: On the expenses that is that is one of the tactics we are using.

Speaker Change: The dental business is one of the larger consumers of the of the reserve.

Gailene: I will now ask the operator to poll the participants. Thank you. To join the question, Q, you may press star than one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speaker phone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two.

Speaker Change: Those actions so there's quite a bit of that that will start to layer into the results in the second half of the year.

Daniel Fishbein: So there's quite a bit of that that will start to layer into the results in the second half of the year. We also have a robust set of dental cost management actions, additional utilization review, claims edits, and also adjustments to network composition to make sure that we're matching the cost to the prices that we're getting. And then prices themselves are a big aspect of this as well. Thirteen contracts have so far been renegotiated. Twelve of those thirteen have been at or above the levels that we thought were needed.

Speaker Change: We also have a robust set of dental cost management actions additional utilization review claims at Ed and also adjustments the network composition to make sure that we're matching.

Manny Gromman: Our first question is from Manny Gromman with Scotiabank. Please go ahead. Hi, good morning.

Speaker Change: The cost to the prices that we're getting and then prices themselves are a big aspect of this as well.

Dan Fishbein: And then prices themselves are a big aspect of this as well. 13 contracts have so far been renegotiated. 12 of those 13 have been above the levels that we thought were needed. There are that represents about half the business. Another 40% or so will reprise between now and the end of the year. So we will start to see meaningful impact from the repricing as well. So it's really on all of the above kind of strategy.

Tim Deacon: I want to ask about the restarction charge and just get a better understanding of what cuts you're making and where from a segment point of view as well. Thanks. Hi, morning, Manny. It's Tim. Thanks for the question. First, I would say that financial discipline is a key part of our client impact strategy and is a priority for us. So I would characterize this as a modest enterprise wide program that we expect to execute over the next 18 months and it's really across all of our business groups and corporate functions.

Speaker Change: <unk> 13 contracted so far beating.

Speaker Change: Renegotiated 12 of those 13 have been at or above the levels that we thought were needed.

Daniel Fishbein: That represents about half the business. Another 40% or so will reprice between now and the end of the year, so we will start to see meaningful impact from the repricing as well. So it's really an all of the above kind of strategy.

Speaker Change: There are that represents about half the business.

Speaker Change: They're 40% or so will reprice between now and the end of the year. So we will start to see meaningful impact from the repricing as well. So it's really on all of the above kind of strategy.

Tom Gallagher: Gotcha, thanks.

Daniel Fishbein: Gotcha, thanks. And then just for a follow up on medical stop loss. So it sounds like pricing is firming a bit based on how you described it. Would you, even though your, I guess, experience has been trending in line with pricing, still expect to be able to get some rate yourself? Or would you expect to take some market share and see better growth? Yes, it's, of course, been a very unusual last four to five years with COVID.

Speaker Change: Got you. Thanks, and then Mike just for a follow up on medical stop loss.

Dan Fishbein: And then just for a follow-up on medical stop loss. So it sounds like pricing is firming a bit based on how you described it. Would you, even though your, I guess, experience has been trending in line with pricing, would you still expect to be able to get some rate yourself, or would you expect to take some market share and see better growth? Yes, it's, of course, been a very unusual last four to five years with COVID. There's been a historic classic underwriting cycle on stop loss. Three years of improving results where pricing gets more aggressive and then three years of deteriorating results where pricing goes up.

Tim Deacon: And the types of areas that were focused on our opportunities to accelerate the digitization of our business, eliminating duplicative or redundant capabilities and optimizing our external spend. I would say we've run similar programs from time to time. So this is not new for some life, but it's been some time since we've executed on a focused program like this. And as we've indicated in our disclosures, we expect these actions to deliver over 200 million pre-tax of efficiencies by 2026.

Speaker Change: So it sounds like pricing is firming a bit based on how you described it.

Speaker Change: Would you even though you're.

Speaker Change: I guess experience has been trending in line with pricing would you still expect to be able to get some rate yourself or would you expect to take some market share and to better growth.

Speaker Change: Yes. It is of course being a very unusual lapped four to five years with Covid. There has been a historic classic underwriting cycle in stop loss three years of improving results, where pricing gets more aggressive and then three years of deteriorating results where pricing goes up that whole cycle was delayed.

Tim Deacon: And this is really to help moderate expenses and support the earnings growth at the top of an end of our MTOs. So you'd expect the majority of this would flow through earnings over time, starting in the second half of this year through to 2026. With this small portion being strategically reinvested to help accelerate our digital transformation and areas of investment in AI. So we'll really show up on a variety of line items, including other expenses, other fee income, which is net of expenses, our corporate segment results and to some extent in CSM.

Daniel Fishbein: There's been a historic classic underwriting cycle on stop loss, three years of improving results where pricing gets more aggressive, and then three years of deteriorating results where pricing goes up. That whole cycle was delayed by three to four years by the impacts of COVID, particularly around utilization. We've seen a pretty aggressive pricing market in the last year, including currently. We're anticipating that pricing will firm as we head towards the one-one cycle.

Dan Fishbein: That whole cycle was delayed by three to four years by the impacts of COVID, particularly around utilization. We've seen a pretty aggressive pricing market in the last year, including currently, where anticipating that pricing will firm as we head towards the one long cycle. As you're seeing other companies report, loss ratio substantially higher than ours. We have been taking some share, although most recently a lot of that has been coming from new partnerships that we put in place. We have a really good set of partnerships both with health plans and certain markets, as well as with captive management partners.

Speaker Change: By three to four years by the impacts of Covid, particularly around utilization, we've seen a pretty aggressive pricing market in the last year, including currently we're anticipating that pricing will firm as we head towards the one one cycle as youre seeing other companies report loss.

Tim Deacon: So, just to paraphrase some pretty broad-based across segments, like we shouldn't expect one segment to show more of a benefit of that 200 million that you're indicating versus another. No, that's right. It's quite broad-based across all of our business groups. And then just as the follow-up, so you took the restructuring charge, non-core through corporate, but are there any benefits coming through this court already in any of the segments on an adjusted basis?

Daniel Fishbein: As you're seeing other companies report, the loss ratio is substantially higher than ours. We have been taking some share, although most recently, a lot of that has been coming from new partnerships that we've put in place. We have a really good set of partnerships, both with health plans in certain markets, as well as with captive management partners.

Speaker Change: Ratio is substantially higher than ours.

Speaker Change: We have been taking some share although most recently a lot of that has been coming from new partnerships that we've put in place. We have a really good set of partnerships, both with health plans in certain markets as well as with captive management partners.

Dan Fishbein: And that has contributed to our growth. In general, in the direct market, we're a careful price, and this is the time where we really have to be the most careful. But we're optimistic, especially as we head into 2025, that the market will be one that's favorable.

Speaker Change: And that has contributed to our growth.

Daniel Fishbein: That has contributed to our growth. In general, in the direct market, we're a careful pricer. This is the time when we really have to be the most careful, but we're optimistic, especially as we head into 2025, that the market will be one that's favorable. Hey, thanks. The next question is from Gabriel Dechaine from National Bank Financial. Please go ahead.

Speaker Change: In general in the direct market, where a careful pricer and this is the time, where we really have to be the most careful.

Tim Deacon: Yes. Yeah, small portions come in, but I would expect that to ramp up in the second half of this year as the actions that we're taking will occur over time, but you'll start to see that coming through as it said through through the second half of this year, rateably through to 2026. Would you be able to quantify what's coming through this court already? It's not very material in the in the grand context. It'd be probably more than the second half. Okay. Thank you.

Speaker Change: But we're optimistic, especially as we head into 2025 that the market will be.

One thats favorable to us.

Dan Fishbein: Thanks to us. Thanks.

Speaker Change: Okay. Thanks.

Gabriel Dechaine: Next question is from Gabriel Dechaine from National Bank Financial. Please go ahead. Good morning. Just a question on the dental business again, similar to the last question, but the $100 million target, that's an absolute target. It's not an annual run rate, exit rate kind of thing for next year. I'm assuming that's the case. And then from a glide path sort of way, is it more of a back end hold at figure? How should we be anticipating how to evolve over next year? Yeah, so to your first question, it is a full year target that we're talking about there, not just getting there at the end of the year.

Speaker Change: The next question is from Gabrielle Zhou Shane from National Bank Financial. Please go ahead.

Daniel Fishbein: Good morning. Just a question on the dental business again, similar to the last question, but the $100 million target is an absolute target. It's not an annual run rate, exit rate kind of thing for next year. I'm assuming that's the case. And then, from a glide path sort of way, is it more of a back-end loaded figure?

Speaker Change: Good morning, just a question on the dental business again, the similar similar to the last question, but the $100 million target. That's an absolute target it's not a annual run rate exit rate kind of thing for next year.

Tom McKinnon: The next question is from Tom McKinnon with BMO Capital Markets. Please go ahead. Yeah, thanks very much.

Kevin Strain: Maybe question for Kevin. I understand the partnership with MFS has been a long-term well-entrenched partnership, but kind of consistent net outflows really make it tough to be able to grow over time with more. You know, normal markets in line with your medium term objectives. So you can kind of see that if outflows are kind of 2% of the AUM and markets even grow at 8, that's just like a 6th grower, not the 8 to 10 you would want.

Speaker Change: I'm, assuming that's the case and then from a glide path sort of way as it is it more of a backend loaded figure of how should we be anticipating went up to evolve over the course of the next year yes.

Daniel Fishbein: How should we be, you know, anticipating that to evolve over the course of next year? Yeah, so to your first question, it is a full year, you know, target that we're talking about; they're not just getting there at the end of the year. There is some seasonality in the dental business.

Speaker Change: Yes.

Speaker Change: Your first question it is a full year.

Speaker Change: The target that we're talking about there.

Speaker Change: Not just getting there at the end of the year.

Gabriel Dechaine: There is some seasonality in the dental business, so we'll have to remember that. There's a big, big portion of our dental business, of course, that's Medicaid, and a big portion of that is kids. So we actually see some significant seasonality in the business. For example, the summer is when a lot of kids go to the dentist, getting ready for the school year. Those kinds of things will create some natural volatility quarter to quarter. We see recovery of the business beginning in the third quarter, and then a significant recovery in the fourth quarter of this year.

Speaker Change: There is some seasonality in the dental business. So we all have to remember that the there is a.

Daniel Fishbein: So we'll have to remember that, you know, there's a big, big portion of our dental business, of course, that's Medicaid, and a big portion of that is kids. So we actually see some significant seasonality in the business. For example, the summer is when a lot of kids go to the dentist, getting ready for the school year.

Speaker Change: Big Big portion of our dental business of course, that's Medicaid and a big portion of that is kids. So we actually see some significant seasonality in the business. For example, the summer is when a lot of kids go to the dentist getting ready for the school year.

Kevin Strain: So in your talks to the board, how do you justify this? Is it just strictly because you like the free cash flow? And I guess as a follow-up, are I assume the broad-based expense cuts that you're implementing are some of those must be an MFS and how do you think that should impact margins there? Thanks. Thanks for the question, Tom. It's Kevin. So MFS is absolutely included in our medium term objectives and as part of those numbers that we give.

Speaker Change: Those kinds of things will create some natural volatility quarter to quarter, we think we see recovery of the business beginning in the third quarter.

Daniel Fishbein: So those kinds of things will create some natural volatility quarter to quarter. We think, you know, we see recovery of the business beginning in the third quarter and then a significant recovery in the fourth quarter of this year, putting us in a good position for next year. So in Q3 of this year, do you expect better dental despite the whole back-to-school kids going to the dentist thing? Yes, I think, you know, that is a mitigating factor. So, you know, we wouldn't expect to see a dramatic increase in the third quarter, but we do expect a more significant increase to emerge in the fourth quarter. I got it.

Speaker Change: And then a significant recovery in the fourth quarter of this year.

Gabriel Dechaine: It puts us in a good position for next year. So keep you through this year, you expect better dental despite the whole back to school kids going to the dentist thing? Yeah, so that is a mitigating factor, so we wouldn't expect to see a dramatic increase in the third quarter. But we do expect a more significant increase to emerge in the fourth quarter. God, and then your comments on stop loss in the US again. I hear that competitors are going to be repricing because of underpricing previously.

Speaker Change: Okay puts us in a good position for next year.

Speaker Change: So Q3 of this year, you expect better dental despite the whole back to school should go into that at this point.

Yes, I think that is.

Kevin Strain: So when you think of our medium term objectives, we've factored in what MFS is going to contribute to that. MFS is an important part of our asset management strategy where the largest asset manager in the country, we have 1.47 trillion in assets under management. And we like the fact that we go from public equities and public fixed income into the alternatives and a growing asset management business that sort of combined between management's leadership and Steve and Asia.

Speaker Change: Mitigating factor so we wouldn't expect to see a dramatic increase in the third quarter, but we do expect a more significant increase to emerge in the fourth quarter.

Daniel Fishbein: And then your comments on stop loss in the US again, I, you know, I hear that competitors are going to be, you know, repricing because of, you know, underpricing previously. I'm not quite sure I understand what your strategy is. Can you talk about the duration of these contracts as well and how quickly repricing can actually have an effect? And then in Canada, I guess normalization of morbidity experience, you're still positive, but less positive than it was before. So that tailwind is fading.

Speaker Change: Got it and then your comments on stop loss.

Speaker Change: In the U S again I I.

Speaker Change: Sure. The competitors are going to be you know repricing because of you know underpricing previously I'm not quite sure I got what your strategy is.

Dan Fishbein: I'm not quite sure I got what your strategy is. Can you talk about the duration of these contracts as well, and how quickly repricing can actually have an effect. And then in Canada, I guess the normalization of morbidity experience, you're still positive, but less positive than it was before. So that tailwind is fading, correct me if I'm right there.

Kevin Strain: So MFS is an important part of that. For sure there, and you heard this in my opening remarks, you know, they're in a cycle where they've had some headwinds around passive and alternatives. That's why we built out the alternatives platform. But we do believe that they're taking all the right actions. They're doing the right things. They have a strong team. They're client focused. And so, you know, they're an important part of this company and they're an important part of our overall asset management strategy.

Speaker Change: Can you talk about the duration of these contracts is rolling how quickly repricing can actually.

Speaker Change: Have an effect and then Canada.

Speaker Change: So I guess the normalization of our morbidity experience, there's still positive but less positive than it was before so that tailwind is feeding a correct me if I'm wrong there.

Daniel Fishbein: Correct me if I'm wrong there. Like, is this something that we should view as we're back to a new normal, or is there a similar repricing strategy afoot for the Canadian business? Sure. This is Dan.

Dan Fishbein: Is this something that we should view as we're back to a new normal, or is there a similar repricing strategy afoot for the Canadian business?

Speaker Change: That's something that we should view as we're back to a new normal or is there a similar repricing strategy a foot for the Canadian business.

Kevin Strain: And as I said, that goes all the way. We like the fact that it goes from public equities and fixed income rate to alternatives. And it's the fact that it doesn't kind of, hasn't really hit your medium-term objectives, even if you look back, you know, for the last seven or eight years, what is it that, what is it really contributed to the story then, if it's not growing at the 8 to 10 that you want it to grow at?

Dan Fishbein: Sure, this is Dan. I'll start with the US boss question. So we tend to be a conservative pricer, so when there are these cycles, we are not one of the carriers that goes out and prices aggressively for market share. Now you saw we had good sales results in the second quarter, but a lot of that came from some of these new partners versus aggressive pricing. We do think that pricing will get more rational as we head into next year because a lot of our competitors are not having that same kind of experience. And on your question about how often this repric is, one of the things we love about the business, but also one of the things that makes it most challenging, is almost all of it renews every year.

Daniel Fishbein: I'll start with the U.S. loss question. So we tend to be a conservative pricer. So, when there are these cycles, we are not one of the carriers that goes out and prices aggressively for market share. Now, you saw we had good sales results in the second quarter, but a lot of that came from some of these new partnerships versus aggressive pricing. We do think that pricing will get more rational as we head into next year because a lot of our competitors are not having that same kind of experience.

Speaker Change: Sure. This is Dan I'll start with the U S.

Speaker Change: Last question.

So the.

Dan: We tend to be a conservative pricer. So when there are these cycles. We are not one of the carriers that goes out and prices aggressively for market share. Now you saw we had good sales results in the second quarter, but a lot of that came from some of these new partners partnership.

Dan: Versus from aggressive pricing.

Kevin Strain: Well, as you know, MFFUM has been growing, despite the fact that they've been in, in that redemptions, and I think that that growth has been part of the earning story, but they've also been an important part, as you noted, of cash flow, and they send cash up to the whole co, which has allowed us to do the, the M&A work and the capital work we've done over the past 10 years, right? So if you look at the significant deployment of capital we've done, MFFS has been a good supporter of that deployment of capital.

Speaker Change: Do you think that pricing will get more rational as we head into next year, because a lot of our competitors are not having that same kind of experience and on your question about how often this re prices one of the things we love about the business, but also one of the things that makes it most challenging is almost all of it renews.

Daniel Fishbein: And on your question about how often this reprices, one of the things we love about the business, but also one of the things that makes it most challenging, is that almost all of it renews every year. So, we're able to reprice the business annually. Now, that, of course, means we also have a big task. We have to try and renew all the business every year, but it does enable us to react pretty quickly to these kinds of changes in the market. Okay. And Jacques?

Tom McKinnon: Okay, understood, thanks.

Speaker Change: Every year, so we're able to regrow the business annually.

Dan Fishbein: So we're able to rewrite the business annually. Now, of course, that of course means we also have a big task. We have to try and renew all the business every year, but it does enable us to react pretty quickly to these kinds of changes in the market. Okay. Benzak? Yeah, this is a good morning. So you're correct? The experience and visibility is positive this quarter, but not as positive as the same quarter last year, as you pointed out. Keep in mind that at 372 a earnings last year, that would already a record quarter for us.

Speaker Change: This means we also have a big task, we have to try and renew all of the business every year, but it does enable us to react pretty quickly to these kinds of changes in the market.

Doug Young: The next question is from Doug Young with Desjardins, please go ahead. Hi, good morning. Maybe just a kind of a big, big picture question for, like $1.72 of underlying earnings, Kevin. Like, is this the true earnings power of the company? Obviously it was a lot less last quarter, and it's bounced around a little bit. Can you talk a bit about, you know, when you think of that and trying to gauge whether that is the case? Like what went for you and against you this quarter when, when you think through that?

Speaker Change: Okay.

I'm Doug Yeah. Yeah. This is John good morning.

Jacques Goulet: Gabriel, this is Jacques. Good morning. So, you're correct. Good morning.

Corona.

Jacques Goulet: The experience and visibility is positive this quarter, but not as positive as the same quarter last year, as you pointed out. But keep in mind that 372 million earnings last year was already a record quarter for us. In terms of your comment on sustainability, I remind you, as we've discussed before, that some of it comes from the pricing action that we've taken; we've been quite disciplined in terms of our pricing and wanting to make sure that we deliver on our objectives.

Speaker Change: Experience visibility.

Speaker Change: Is positive this quarter, but not as positive as the same quarter last year as you pointed out.

Speaker Change: Keep in mind that a 372 of earnings last year that was already a record quarter for us.

Dan Fishbein: In terms of your comment on sustainability, remind you, as we've discussed before, that. You know, some of it comes from the pricing action that we've taken. We've been quite disciplined in terms of our pricing and wanting to make sure that we deliver on our objectives. So some of it will continue. I mean, at the level we're at now in terms of earnings, I would say there's probably going to be some moderation. But you know, some of it is definitely going to continue.

Jacques Goulet: So some of it will continue. I mean, at the level we're at now in terms of earnings, I would say there's probably going to be some moderation. But, you know, some of it is definitely going to continue. Okay, great. Enjoy the rest of your summer, everybody.

Speaker Change: In terms of your comment on sustainability I remind you.

Speaker Change: As we've discussed before that.

Speaker Change: Some of it comes from the pricing actions that we've taken we've been quite disciplined.

Kevin Strain: I guess we, as we talked about, I see last quarter, I see last quarter is more of the anomaly, and this quarter is a return to sort of what our expectations would have been. We had a number of things that went against us last quarter, and we talked about those. For sure, the dental results will continue to impact us this year, but we see yourself earning our way through that. So I see this as a return to more of what our expected levels of underlying earnings would be.

Speaker Change: In terms of our pricing and wanting to make sure that we deliver on our objectives.

Speaker Change: Some of it will continue I mean.

Speaker Change: At the level. We're at now in terms of earnings I would say, there's probably going to be some moderation.

Speaker Change: Okay.

Speaker Change: Some of it is definitely going to continue.

Dan Fishbein: Okay, great. Enjoy the rest of your summary, everybody. Thank you.

Speaker Change: Okay great.

Speaker Change: The rest of your summer everybody.

Speaker Change: Thank you.

Paul Holden: The next question is from Paul Holden with CIDC. Please go ahead. Thank you. Good morning. We'll ask a question on the new disclosure round organic capital generation. So 580 million for the quarter. So first off, thanks for that new disclosure. I find it very helpful. But my question really is, is that a good indicative run rate of what we should expect quarterly? Was there anything that may be added to it? This quarter is protracted. It's just trying to get a sense of run rate. Thank you.

Speaker Change: The next question is from Paul Holden with CIBC. Please go ahead.

Paul Holden: Thank you. This question is from Paul Holden with CIBC. Please go ahead.

Paul Holden: Good morning. I want to ask a question on the new disclosure around organic capital generation, so $588 million for the quarter. So first off, thanks for that new disclosure. I find it very helpful.

Doug Young: Okay, I'll leave it at that.

Paul Holden: Thank you and good morning.

Dan: And then Dan, on the US stop last side, you had negative morbidity experience, yet it was attributed to just normalizing claims utilization. So this is a supply that you're baking in, you know, more COVID utilization into your pricing, or can you help me think through this and talk about pricing trends in this business, and why, you know, as dental gets better, you know, you should be, you know, obviously there's going to be potentially a deterioration in the stop loss business.

Paul Holden: What I ask a question on the new disclosure around organic capital generation, So 588 million for the quarter. So first off thanks for that new disclosure I find it very helpful.

Timothy Deacon: But my question really is, is that a good indicative run rate of what we should expect quarterly? Was there anything that may have been added to it this quarter or subtracted? I was just trying to get a sense of the run rate. Thank you.

Speaker Change: But my question really is is that a good indicative run rate of what we should expect quarterly or was there anything that maybe added to it this quarter subtract it anyway.

Speaker Change: Hey, I was just trying to get a sense of.

Speaker Change: Of run rate. Thank you.

Tim Deacon: Hi, Paul. It's Tim. Thanks for the question. You're right. This is a new disclosure, and we really sought to help give more transparency to how we view a more normalized capital contribution. And the same way we think of underlying net income, but for capital. So this would be excluding market-related impacts. So taking our underlying net income and our organic CSM movement, less our shareholder dividends. And so you're right that the number that you referenced, the 588 for this quarter, was net of dividends. And we haven't set a formal target, but generally expect that organic capital generation should range between 20% to 30% of underlying net income.

Timothy Deacon: Thanks for the question. You're right, this is a new disclosure, and we really sought to help give more transparency to how we view a more normalized capital contribution in the same way we think of underlying net income, but for capital. So this would be excluding market-related impacts. So, taking our underlying net income and our organic CSM movement less our shareholder dividends. So you're right that the number that you referenced, the 588 for this quarter, was net of dividends. And we haven't set a formal target, but generally expect that organic capital generation should range between 20 to 30% of underlying net income.

Hi, Paul its Tim Thanks for the question.

Dan: Why should we be kind of worried about those two opposing trends? Sure, Doug. You know, what we've seen this year is, as we've talked about, a normalization of utilization, especially hospital utilization and things like outpatient surgery, that normalization back to pre-COVID levels happened a little faster over the past two or three quarters than I think anybody was expecting. It had been happening gradually over time, most likely that is due to hospitals, big hospital systems, especially now being able to staff fully when that was a challenge for quite some time, even lagging after the worst of COVID.

Speaker Change #100: You're right. This is a new disclosure and we really sought to help give more transparency to how we view a more normalized.

Speaker Change #101: Capital contribution in the same way, we think of underlying net income, but FERC for capital. So this would be excluding market related impacts so taking our underlying net income in our organic CSM move.

Speaker Change #101: Movement less our shareholder dividend, so you're right that the number that you referenced the 588 for this quarter was net of dividends and we havent set a formal target, but generally expect that organic capital generation should range between 20% to 30% of underlying net income.

Tim Deacon: So for Q2 at almost 600 million, that's, you know, almost 60% of Uni. So obviously above target result and really driven by strong sales in Canada and Asia that we referenced, and that created the higher new business CSM versus our expectations. So elevated this quarter and last quarter because of the strong sales growth, but over time within that 20 to 30% range net of dividends. Got it. Okay. Thank you for that.

Timothy Deacon: So for Q2, at almost 600 million, that's almost 60% of uni. So obviously, an above-target result and really driven by strong sales in Canada and Asia that we referenced. And that created a higher new business CSM versus our expectations. So, elevated this quarter and last quarter because of the strong sales growth, but over time within that 20 to 30 percent range. Got it.

Speaker Change #102: So for Q2 at almost 600 million, that's almost 60% of Uni. So obviously above target result, and really driven by a strong sales in Canada and Asia that we referenced and that created the higher new business U S M versus their expectations.

Dan: So we seem to be back to normal utilization. As far as the particular, you know, sequential quarter results, we do have some seasonality in our reserving. Generally, the way the reserves emerge, we release some reserves in the first and fourth quarters, and strength and reserves in the second and third quarters. So most of the sequential difference that you saw was simply that seasonal reserving pattern. What's most important in what we look at is the year-to-date result, and right now both our loss ratio and our margins in the stop loss business are consistent with our pricing targets.

Speaker Change #102: Elevated this quarter and last quarter because of the strong sales growth, but over over time within that 20% to 30% range net of dividends.

Steve Peacher: Okay. Thank you for that. I guess my second question is with respect to SLC and the net income target there for 2025. So, just looking for confirmation that that has not changed and wondering if the recently announced cost restructuring will have any impact on, or really help your ability to achieve that 2025 target. Thank you. Hi Paul.

Speaker Change #103: Got it okay. Thank you for that I.

Tim Deacon: I guess a second question is with respect to SLC and the net income target there for 2025. So just looking for confirmation that that has not changed. And wondering if the recently announced cost restructuring will have any impact on or really help your ability to achieve that to 25 target. Thank you.

Speaker Change #104: I guess second question is with respect to F. L C.

Speaker Change #105: And the net income target there for 2025, so just looking for confirmation that that has not changed.

Dan: Going forward, we see some signs that utilization is stabilizing. You may hear that from some of the health insurers as well. And we are taking, as we always do, a conservative approach toward pricing. Over the past few years, some of our competitors were, you know, this is what happens. They have good results, they get aggressive. We generally did not participate in that. And now, in some other competitors' calls, they've talked about raising rates. So we're probably looking toward a 1-1 next year where the market starts to push pricing upward.

Doug Young: Okay.

Speaker Change #106: And wondering if the recently announced cost restructuring will have any impact on or.

Speaker Change #106: Or really helps your ability to achieve that 225 target. Thank you.

Steve Peacher: Thanks for the question, Steve Peacher. Yeah, you know, I think that we're still on track for the targets that we put out there. We'll talk more about our longer-term expectations for 25 and beyond at our investor day in the fall. You know, SLC is participating as part of the cost reduction initiative that was discussed, but I would say, as much as anything, we're also looking to keep investing in the business as we try to get benefits out of the platform as we approach the take calls, and we invest more in distribution with resources that can sell the entire range of products we have across SLC.

Tim Deacon: Hi, Paul. Thanks for the question. That's the future. Yeah, you know, I think that we're still on track for the targets that we put out there. We'll talk more about our expect longer term expectations for 25 and beyond at the Investor Day in the fall. You know, we did for we SLC is participating as part of the cost reduction initiative that was discussed, but I would say as much as anything as we, you know, we're also looking to keep investing in the business as we try to get benefits out of the platform as we approach the put calls and we invest more in distribution with resources that can sell the entire range of products we have across SLC.

Steve Peacher: Oh, Hi, Paul Thanks for the question Steve.

Speaker Change #107: I think that we're still on track for the targets that we put out there we'll talk more about our expect longer term expectations for 'twenty five and beyond at the Investor day in the fall.

Speaker Change #108: We did for we are also seeing is participating in his part of the cost reduction initiative that was discussed but I would say as much as anything as we you know we're also looking to keep investing in the business as we try to get benefits out of the platform as we approach the put calls and we invest more in distribution.

Doug Young: Appreciate the color.

Tom Gallagher: Thank you. The next question is from Tom Gallagher with Evercore ISI. Please go ahead.

Speaker Change #108: With resources that can sell the entire range of products, we have across ourselves see so I would say, we expect to get we expect to grow earnings by growing AUM.

Tom Gallagher: Good morning. A few questions on the US. The 100 million of dental learnings that you're guiding to for 25. Is any of that driven by this 200 million of cost saves plan for 26? Or is most expected to come from loss ratio improvement? It comes really from all of that and other things as well. So we have a series of initiatives that are underway, most of which, even though they've been underway for some time, will start to show in the results in the second half of the year.

Tim Deacon: So I would say we expect to get; we expect to grow earnings by growing AUM and delivering more strategies to existing clients and to new clients over time. And while cost discipline will certainly be part of that, it's really about growing revenue and AUM and less about cost. So will we get some benefits out of cost reduction certainly, and we're trying to be mindful of that, but I don't I don't do that as a driver.

Steve Peacher: So I would say we expect to grow earnings by growing AUM and delivering more strategies to existing clients and to new clients over time. And while cost discipline will certainly be part of that, it's really about growing revenue and AUM and less about cost. So will we get some benefits out of cost reduction? Certainly, and we're trying to be mindful of that, but I don't view that as a driver. That's helpful. I'll leave it there.

Speaker Change #108: And delivering more strategies to existing clients into new clients over time, and while cost discipline will certainly be part of that it's really about growing.

Speaker Change #108: Revenue in our U N and less about cost so will we get some benefits out of cost reduction certainly when we're trying to be mindful of that but I don't I don't see that as a driver of our earnings call.

Speaker Change #109: Okay. That's helpful I'll leave it there thank you.

Speaker Change #109: Okay.

Tom Gallagher: So on the expenses, that is one of the tactics we're using, the dental business is one of the larger consumers of the reserve and of those actions. So there's quite a bit of that that will start to layer into the results in the second half of the year. We also have a robust set of dental cost management actions, additional utilization review, claims that it, and also adjustments to network composition to make sure that we're matching the cost to the prices that we're getting.

Mario Mendonca: Next question is from Mario Mandonka with TD Securities. Please go ahead. Good morning. This might be for Dan, maybe Tim. Tim, and you're opening comments. You referred to the higher loss ratio in Medicaid. You said it was largely related to the redetermination. I look at that increase in the loss ratio from 86.2 to 94 and four quarters. It just seems like such a significant increase for when 19 percent have left. Notion that the bear has had much higher utilization.

Steve Peacher: Thank you. The next question is from Mario Mendonca with TD Securities. Please go ahead. Good morning. This might be for Dan, or maybe Tim.

Speaker Change #109: The next question is from Mario Mendonca with TD Securities. Please go ahead.

Mario Mendonca: Tim, in your opening comments, you referred to the higher loss ratio in Medicaid and said it was largely related to the redetermination. And I look at that increase in the loss ratio from 86.2 to 94 in four quarters, and it just seems like such a significant increase for when 19% have left. I mean, that notion that

Mario Mendonca: This might be for Dan maybe Tim Kevin you're in your opening comments you referred to the higher loss ratio in Medicaid.

Speaker Change #111: You said it was largely related to the Redetermination.

And I look at that increase in the loss ratio from $86 two to <unk> 94 and.

Speaker Change #112: Four quarters and it just seems like such a significant increase for 119% have left I mean that notion that the.

Tom Gallagher: And then prices themselves are a big aspect of this as well. 13 contracts have so far been renegotiated. 12 of those 13 have been after above the levels that we thought were needed. There are that represents about half the business. Another 40% or so will reprise between now and the end of the year. So we will start to see meaningful impact from the repricing as well. So it's really on all of the above kind of strategy.

Daniel Fishbein: And then your phrase, the Turner phrase, largely related to the redetermination, made me think there's more going on. So maybe this is a question for Dan. What else is going on in dental beyond Medicaid redetermination? Yeah, in terms of the dental, the Medicaid loss ratio, it really is redeterminations. And let me give a little more color on that, you know, that kind of loss ratio impact. A lot of the people who had become enrolled during the public health emergency no longer needed the coverage; there's a fair amount of churn, people coming on and off the Medicaid rolls as they get jobs, etc., which is, and then get other coverage.

Speaker Change #113: Payers have much higher utilization.

Dan Fishbein: It made me; that chart makes me think that there's more going on here than just the redetermination. And then your phrase, the turn of phrase, but largely related to the redetermination. It made me think there's more going on.

Speaker Change #114: It made me. This chart makes me think that there's more going on here than just the Redetermination and then your phrase that turn of phrase largely related to the Redetermination made me think there's more going on so maybe maybe this is a question for Dan what else is going on in dental beyond Medicaid Redetermination.

Tom Gallagher: Gotcha, thanks.

Dan Fishbein: So maybe this is a question for Dan. What else is going on in dental beyond Medicaid registration? Yeah, in terms of the dental, the Medicaid loss ratio, it really is the redetermination. And let me give a little more color on that kind of loss ratio impact. A lot of the people who had become enrolled during the public health emergency no longer needed the coverage. There's a fair amount of turn people coming on and off the Medicaid roles as they get jobs, etc., which is and then get other coverage. So there were a significant number of people who, for whom the states were paying premium, but who were not using the benefit.

Dan: In terms of the dental the Medicaid loss ratio. It really is the Redetermination and let me give a little more color on that that kind of loss ratio impact.

Speaker Change #115: A lot of the people who had become enrolled during the public health emergency no longer needed. The coverage. There is a fair amount of churn people coming on and off the Medicaid roles as they get jobs et cetera, which is and then get other coverage. So there were a significant number of people who.

Tom Gallagher: And then just for a follow up on medical stop loss. So it sounds like pricing is firming a bit based on how you described it. Would you, even though your, I guess, experience has been trending in line with pricing, would you still expect to be able to get some rate yourself, or would you expect to take some market share and see better growth? Yes, it's of course been a very unusual last four to five years with COVID.

Daniel Fishbein: So there were a significant number of people for whom the states were paying a premium but who were not using the benefits. And the way they price, of course, as any actuary would price, they look at the most recent periods of experience, and that got baked into their pricing. And then when you have, in some cases, you know, in a very short period of time, a state disenrolling a big portion of the membership, you can get a very big mix shift. So Texas, for example, disenrolled one third of its entire Medicaid population.

Speaker Change #115: For whom the states, we're paying premium, but who were not using the benefit.

Dan Fishbein: And the way they price, of course, as any actuary would price, they look at the most recent periods of experience, and that got baked into their pricing. And then when you have, in some cases, in a very short period of time, a state disenrolling a big portion of the membership, you can get a very big mixed shift. So Texas, for example, disenrolled one third of its entire Medicaid population. So it's not surprising that you get a six or eight percent change in the loss ratio with a 19 percent change in membership. Now, related to that, of course, there are dentists and what are called DSOs, large groups of dental practices that primarily serve the Medicaid market.

Speaker Change #116: And the way they price of course, there's any actuary would probably if they look at the most recent periods of experience and that got baked into their pricing and then when you have and in some cases in a very short period of time a state. This enrolling a big portion of the membership you can get a very big mix shift.

Tom Gallagher: There's been a historic classic underwriting cycle on stop loss. Three years of improving results where pricing gets more aggressive and then three years of deteriorating results where pricing goes up. That whole cycle was delayed by three to four years by the impacts of COVID, particularly around utilization. We've seen a pretty aggressive pricing market in the last year, including currently, where anticipating that pricing will firm as we head towards the one long cycle.

Speaker Change #116: So Texas for example, this enrolled one third of its entire Medicaid population.

Daniel Fishbein: So it's not surprising that you'd get a 6% or 8% change in the loss ratio with a 19% change in membership. Now related to that, of course, there are dentists and what are called DSOs, you know, large groups of dental practices that primarily serve the Medicaid market. So if they lose 19% of their members and, therefore, 19% of their revenue, and they have a certain amount of capacity, they're going to do everything they can to fill that capacity.

Speaker Change #117: It's not surprising that you'd get a six or 8% change in the loss ratio with a 19% change in membership.

Speaker Change #118: Now related to that of course, there arent dentists and what are called Dsos.

Tom Gallagher: As you're seeing other companies report, loss ratio substantially higher than ours. We have been taking some share, although most recently a lot of that has been coming from new partnerships that we put in place. We have a really good set of partnerships both with health plans and certain markets as well as with captive management partners. And that has contributed to our growth. In general, in the direct market, we're a careful price and this is the time where we really have to be the most careful, but we're optimistic, especially as we head into 2025, that the market will be one that's favorable.

Speaker Change #119: Large groups of dental practices that primarily serve the Medicaid market. So if they lose 19% of their members and therefore, 19% of their revenue and they have a certain amount of capacity, they're going to do everything they can to fill that capacity that.

Dan Fishbein: So if they lose 19 percent of their members and therefore 19 percent of their revenue, and they have a certain amount of capacity, they're going to do everything they can to fill that capacity. That being in some cases, that means taking people off of waiting lists and getting them in for care sooner, which is a good thing. But in some cases, it may mean providing more dental care to those people in order to fill those appointments. So that's part of the story here as well. And it's also the reason why we're putting in place significantly more robust utilization management capabilities to make sure that we're facing appropriately against that dynamic.

Tom Gallagher: Thanks to us.

Daniel Fishbein: That means, in some cases, it means taking people off of waiting lists and getting them in for care sooner, which is a good thing. But in some cases, it may mean providing more dental care to those people in order to fill those appointments.

Speaker Change #119: That would be in some cases that means taking people off of waiting list and getting them in for care sooner, which is a good thing but in some cases it may mean, providing more dental care to those people in order to fill those appointments. So that's part of the story here as well and it's also the reason why we're putting in place significantly more.

Daniel Fishbein: So that's part of the story here as well, and it's also the reason why we're putting in place significantly more robust utilization management capabilities to make sure that we're facing off appropriately against that. Okay, maybe a sort of follow-up question to that, and more from a positive perspective.

Speaker Change #119: Just utilization management capabilities to make sure that we're facing off appropriately against that dynamic.

Dan Fishbein: OK, maybe a sort of follow-up question to that and more from a positive perspective. Some life pay, I believe, was 2.5 billion US for Dental Quest back in 2021. Your aspirations are for US$100 million next year. My just looking at those numbers makes me think that your longer term goals must be for more than 100 million. So what do you think this business is capable of in a normal environment? Yes, so absolutely yes is the answer to that question. Our longer term aspirations and all the modeling we did is obviously much greater than that number.

Daniel Fishbein: Sun Life paid, I believe it was 2.5 billion US dollars for DentaQuest back in 2000. Their 21-year aspirations are for US $100 million next year. Just looking at those two numbers makes me think that your longer-term goals must be for more than $100 million. So what do you think this business is capable of in a normal environment? Yes, so absolutely yes is the answer to that question. However, our longer-term aspirations and all the modeling we did are obviously much greater than that number.

Speaker Change #119: Okay, maybe a sort of a follow up question to that and more from a positive perspective.

Gabriel Dechaine: Thanks. Next question is from Gabriel Dechaine from National Bank Financial. Please go ahead. Good morning. Just a question on the dental business again, similar to the last question, but the $100 million target, that's an absolute target. It's not an annual run rate exit rate kind of thing for next year. I'm assuming that's case. And then from a glide path sort of way, is it more of a back end hold at figure?

Speaker Change #120: Paid I believe it was $2 5 billion U S. Four tenths of course back in 2000.

Speaker Change #121: 'twenty one your aspirations are for U S 100 million next year.

Speaker Change #121: Mike just looking at those two numbers makes me think that your longer term goals.

Mike: Must be for more than $100 million. So what do you think this business is capable of in a normal environment.

Daniel Fishbein: And generally, we, you know, the way we thought about this is that we still think that all of that is applicable, but pushed out by about a year or so by the events of the redetermination. One good way to think about the business is a 5% after-tax profit. That seems to be what most businesses support across the states and non-government business as well. It's a little different in the different segments, but that's a reasonable rule of thumb.

Speaker Change #123: So absolutely yes is the answer to that question our longer term aspirations and all the modeling we did it's obviously much greater than that number.

Gabriel Dechaine: How should we be anticipating how to evolve over next year? Yeah, so to your first question, it is a full year target that we're talking about there, not just getting there at the end of the year. There is some seasonality in the dental business, so we'll have to remember that. There's a big, big portion of our dental business, of course, that's Medicaid and a big portion of that is kids. So we actually see some significant seasonality in the business.

Kevin Strain: And generally, the way we thought about this is we still think that all of that is applicable but pushed out by about a year or so by the events of the redeterminations. One good way to think about the business is a 5% after-tax profit that seems to be what most of the business supports in across the states and the non-government business as well. It's a little different in the different segments, but that's a reasonable rule of thumb. So we are a little shy of 3 billion in revenue today, but we see lots of growth opportunity in the business.

Speaker Change #123: And generally we the way we thought about this is we still think that all of that is applicable but pushed out by about a year or so by the events of the re determinations.

Speaker Change #124: One good way to think about the business is a 5% after tax profit.

Gabriel Dechaine: For example, the summer is when a lot of kids go to the dentist getting ready for the school year. Those kinds of things will create some natural volatility quarter to quarter. We see recovery of the business beginning in the third quarter, and then a significant recovery in the fourth quarter of this year. It puts us in a good position for next year. So keep you through this year, you expect better dental despite the whole back to school kids going to the dentist thing? Yeah, so that is a mitigating factor, so we wouldn't expect to see a dramatic increase in the third quarter. But we do expect a more significant increase to emerge in the fourth quarter.

Speaker Change #125: That seems to be what most of the business supports in across the states and the non government business as well, it's a little different in the different segments, but thats a reasonable rule of thumb.

Kevin Strain: So we are a little shy of $3 billion in revenue today, but we see lots of growth opportunities in the business. First of all, Medicaid continues to grow and will continue to grow now that the redeterminations are over. We continue to have a great pipeline there and to win contracts. But we also have lots of opportunity to grow in Medicare Advantage, in Affordable Care Act exchanges, and especially in commercial. So we see significant revenue growth in the future, and you can do your own calculations based on that 5%. Thank you, Mario. It's Mario.

Speaker Change #126: We are a little shy of $3 billion in revenue today, but we see lots of growth opportunity in the business first of all Medicaid continues to grow and will know that the redetermination are over we continue to have a great pipeline there and to win contracts, but we also have lots of opportunity to grow in Medicare advantage.

Kevin Strain: First of all, Medicaid continues to grow, and now that the redeterminations are over, we continue to have a great pipeline there and to win contracts. But we also have lots of opportunity to grow in Medicare Advantage, in Affordable Care Act exchanges, and especially in commercial. So we see significant revenue growth in the future, and you can do your own calculations based on that 5%.

Speaker Change #126: <unk> and affordable care Act exchanges and especially in commercial so we see significant revenue growth in the future and you can do your own calculations based on that 5%.

Gabriel Dechaine: God, and then your comments on stop loss in the US again, I hear that competitors are going to be repricing because of underpricing previously. I'm not quite sure I got what your strategy is. Can you talk about the duration of these contracts as well, and how quickly repricing can actually have an effect. And then in Canada, I guess the normalization of morbidity experience, you're still positive, but less positive than it was before. So that tailwind is fading, correct me if I'm right there. Is this something that we should view as we're back to a new normal, or is there a similar repricing strategy afoot for the Canadian business?

Kevin Strain: Thank you, Mario. It's Mario's Kevin. I would just add to it that when we did the acquisition, it was during COVID, and we actually knew that the public health emergency would end. We did modeling of that. The public health emergency went longer and was deeper than we expected, and some of the impacts were probably more than we expected in this year. But over the long term, we still expect, as Dan had talked about, that. This is going to be a very good business for Sun Life, and we'll return back to the sort of pricing that we would have expected, and we're seeing that as we reprice the business.

Kevin Strain: It's Kevin. I would just add to it that when we did the acquisition, it was during COVID, and we actually knew that the public health emergency would end. We did modeling of that. The public health emergency went on longer and was deeper than we expected, and some of the impacts were probably more than we expected this year.

Speaker Change #126: Thank you.

Speaker Change #126: Mario its Kevin I would I would just add to it that.

Mario Mendonca: When we did the acquisition it was during Covid and we actually knew that the public health.

Mario Mendonca: Emergency would end, we did modeling of that.

Speaker Change #127: The public health emergency went longer than was deeper than we expected and some of the.

Lemar Persaud: But over the long term, we still expect, as Dan talked about, that this is going to be a very good business for Sun Life and we'll return to the sort of pricing that we would have expected. And we're seeing that as we reprice the business. So I think overall, our thesis for the dental business in the US hasn't changed. And I think you see our culture and our financial discipline in action by how we've disclosed this transparently to our investors and how we're taking action to deal with it. Thank you. The next question is from Lemar Persaud with Cormark Securities. Please go ahead.

Speaker Change #127: The impacts were probably more than we expected and in this year, but over the long term, we still expect as Dan had talked about that this is going be a very good business for Sun life, and we'll return back to the sort of.

Speaker Change #128: Pricing that we would have expected and we're seeing that as we repriced the business. So I think overall our thesis for the dental business in the U S hasn't hasn't changed and I think you see our our culture and our financial discipline and action by how we disclose this transparently to to our investors and how we're taking action to.

Kevin Strain: So I think overall our thesis for the dental business in the US hasn't changed, and I think you see our culture and our financial discipline in action by how we've disclosed this transparently to our investors and how we're taking action to deal with it. Thank you.

Dan: Sure, this is Dan, I'll start with the US boss question. So we tend to be a conservative pricer, so when there are these cycles, we are not one of the carriers that goes out and prices aggressively for market share. Now you saw we had good sales results in the second quarter, but a lot of that came from some of these new partners versus aggressive pricing. We do think that pricing will get more rational as we head into next year because a lot of our competitors are not having that same kind of experience.

Deal with it.

Speaker Change #128: Thank you.

Speaker Change #128: Okay.

Lamar Prasad: The next question is from Lamar Prasad with Cormart Securities. Please go ahead. Thanks.

Speaker Change #128: The next question is from Lamar Prasad with Cormack Securities. Please go ahead.

Timothy Deacon: Thanks. My first question, just going back to the restructuring, is probably appropriate. Is this the first of more restructuring charges, or is this a broader restructuring program? How big could further restructuring charges be? I guess you mentioned the $200 million pre-tax savings portion of that; is that portion of that $200 million pre-tax going to go through the CSM, or is that $200 million pre-tax all going to go through the Underlines? Thanks, Lemar.

Tim Deacon: My first question is going back to the restructuring; is probably appropriate for Tim. Is this the first of more restructuring charges, like is this a broader restructuring program? How big could further restructuring charges be? And then I guess you mentioned the 200 million pre-tax savings portion of that. Is that portion of that 200 million pre-tax going to go through the CSM, or is that 200 million pre-tax? I'll go through the underlying earnings. Thanks, Lamar.

Lamar Prasad: Okay. Thanks, My first question just going back to the restructuring is probably appropriate for Tim is this the first of our more restructuring charges like is this a broader restructuring program, how big could further restructuring charges to be in that.

Speaker Change #129: Yes, you mentioned, the 200 million pretax savings.

Speaker Change #131: Savings a portion of that is that a portion of that 200 million pretax kind of go through the CSM or is that 200 million pretax all going to go through the yeah, Yeah, Yeah underlying earnings.

Dan: And on your question about how often this repric is, one of the things we love about the business, but also one of the things that makes it most challenging, is almost all of it renews every year. So we're able to rewrite the business annually. Now of course that of course means we also have a big task. We have to try and renew all the business every year, but it does enable us to react pretty quickly to these kinds of changes in the market.

Timothy Deacon: So, this is a program that we just initiated now. It's a one-time charge of $138 million pre-tax, the 108 that flowed through reported net income, and that's a singular program that will be executed over the 18 months that I had referenced. You know, I also referenced financial discipline as a core part of our client impact strategy, so we're always going to be continually focused on cost discipline. But, as I said, we hadn't run a program like this in a little while, so it was time for a bit of a catch-up just as we looked at our expense growth and relative to continuing to ensure we can get to the top end of our earnings growth objectives.

Tim: Thanks Omar. So this was a program that we just initiated now it's a one one time charge of 138 million pretax I want to wait that flowed through reported net income and that's a singular program that will be executed over the 18 months that I had referenced.

Tim Deacon: So this was a program that we just initiated now. It's a one-time charge of 138 million pre-tax, a 108 that flowed through reported net income, and that's a singular program that will be executed over the 18 months that I had referenced. Also referenced financial discipline, a core part of our client impact strategy. So we're always going to be continually focused on cost discipline. But, as said, we hadn't run a program like this in a little while. So it was time for a bit of a catch up just as we looked at our expense growth and relative to continuing to ensure we can get to the top end of our earnings growth objectives.

Dan: Okay. Benzak? Yeah, this is a good morning. So you're correct? The experience and visibility is positive, this quarter, but not as positive as the same quarter last year as you pointed out. Keep in mind that at 372 a earnings last year that would already a record quarter for us. In terms of your comment on sustainability, remind you as we've discussed before that. You know, some of it comes from the pricing action that we've taken.

Tim: I said also referenced financial discipline, a core part of our client impact strategy. So we're always going to be continually focused on cost discipline, but as said we hadn't run a program like this and in a little while so it was time for a bit of a catch up just as we looked at our expense growth and relative to continuing to ensure we can get to the top end of our earth.

Tim: <unk> growth objectives.

Tim Deacon: In terms of where this shows up, this will come off across a variety of the line items. So it's not all CSM. It'll come through other expenses, come through other fee income, which is net of expenses. So you'll see it in a bunch of places. And as I referenced earlier, we'll likely look to maybe take a portion of that, a small portion for reinvestment. And as I said, to probably accelerate our digitization efforts and look at areas like generative AI and the progress that we've been making, there is a way to accelerate that. So this is a singular program, but will always be focused on cost discipline going forward.

Timothy Deacon: In terms of where this shows up, this will come off across a variety of line items, so it's not all CSM. It'll come through other expenses. It'll come through other fee income, which is net of expenses, so you'll see it in a bunch of places. And as I referenced earlier, we'll likely look to maybe take a portion of that, a small portion, for reinvestment, as I said, to probably accelerate our digitization efforts and look at areas like generative AI and the progress that we've been making there as a way to accelerate that. So this is Okay, what about the mix through CSV?

Tim: In terms of where this shows up this will come off across a variety of the line items. So it's not all CSM it'll come through other expenses.

Dan: We've been quite disciplined in terms of our pricing and wanting to make sure that we deliver on our objectives. So some of it will continue. I mean, at the level we're at now in terms of earnings, I would say there's probably going to be some moderation. But you know, some of it is definitely going to continue. Okay, great.

Tim: Come through other fee income, which is net of expenses. So you'll see it in a bunch of the places and as Ed referenced earlier, it will likely look to maybe take a portion of that a small portion for reinvestment as I said, you probably accelerate our digitization efforts and look at areas like generative AI and the progress that we've been making there is a way to access.

Dan: Enjoy the rest of your summary everybody.

Speaker Change #132: All right that so this is a singular program, but we'll always be focused on cost discipline going forward.

Paul Holden: Thank you. The next question is from Paul Holden with CIDC. Please go ahead. Thank you. Good morning. We'll ask a question on the new disclosure round organic capital generation. So 580 million for the quarter. So first off, thanks for that new disclosure. I find it very helpful. But my question really is, is that a good indicative run rate of what we should expect quarterly? Was there anything that may be added to it? This quarter is protracted. It's just trying to get a sense of run rate. Thank you.

Tim Deacon: Okay, what about the mix through CSM and regular earnings? Yeah, predominantly earnings, but there is a portion through CSM. But you expect most of that to earnings. Okay, perfect. Thanks.

Speaker Change #132: Okay, and what about the the mix through CSM and.

Speaker Change #134: Our regular earnings.

Timothy Deacon: Yeah, predominantly earnings, but there is a portion through CSM, but you'd expect most of that through earnings. Okay, perfect. Thanks.

Speaker Change #135: Yep Yep predominantly earnings, but there is a portion through a true CSM, but you'd expect most of that through earnings.

Lemar Persaud: And then just moving on to a different type of question here on MFS. If we see rate cuts play out in the US, do you think that's going to be helpful to net flows performance? at MFS, just given its products mixed more towards value-based equities up. Is that kind of the right way to think about the impact? Lower U.S. rates on that bit of the MFS. Good morning, Lemar. It's Mike Roberge.

Speaker Change #136: Okay perfect. Thanks, and then just moving onto a different type of question here at MFS, if we see rate cuts play out in the U S. Do you think that's that's going to be helpful to the net flows performance at MFS, just given it's a product mix to more towards like value based equity is that is that kind of the right way to think about a the impact of lower.

Lamar Prasad: And then just moving on to a different type of question here on MFS. If we see rate cuts play out of the US, do you think that's going to be helpful to the net flow's performance at MFS, just given its products mix to more towards value-based equities? Is that kind of the right way to think about the impact? of lower U.S. rates on the MFS business.

Speaker Change #136: U S rates on that but on the MFS business.

Tim Deacon: Hi, Paul. It's Tim. Thanks for the question. You're right. This is a new disclosure and we really sought to help give more transparency to how we view a more normalized capital contribution. And the same way we think of underlying net income, but for capital. So this would be excluding market related impacts. So taking our underlying net income and our organic CSM movement less our shareholder dividends. And so you're right that the number that you referenced the 588 for this quarter was net of dividends.

Michael Roberge: Good morning, Lamar. It's Mike Roberge. Yeah, I mean, that's how we're thinking about it. If you look at prior cycles, you know, as Fed and central bank start to cut rates and people look at their cash yields going down, they re-engage back in the market with longer-term fixed income and equity products. If you look at, you know, rate pre-COVID, which is probably the last normal environment that we have, and you apply that Taurus at base today, that would take you back to net positive U.S. Retail flows at MFS. And so the question ultimately comes, is what does normal look like?

Michael Roberge: Yeah, I mean, that's how we're thinking about it. If you look at prior cycles, you know, as the Fed and central banks start to cut rates, and people look at their cash yields going down, they re-engage back in the market with longer-term fixed income and equity products. If you look at, you know, industry sales rates, you look at our sales rate pre-COVID, which is probably the last normal environment that we have, and you apply that to our asset base today, that would take you back to net positive US retail flows at MFS. And so the question ultimately comes down to, what does normal look like?

Speaker Change #136: Hey, good morning remarks, Mike Bearish.

Mike Bearish: Yes, I mean, that's how we're thinking about it if you look at prior cycles.

Speaker Change #138: As fed and central banks start to cut rates and people look at their cash.

Speaker Change #139: Yields going down.

Speaker Change #139: Reengage back into the market with longer term fixed income and equity products and if you look at <unk>.

Speaker Change #140: Industry sales rates, you look at our sales rate pre COVID-19, which is probably the the last normal environment that we have and you apply that to our asset base today that would take you back to net positive U S. Retail flows at MFS and so the question becomes is what is normal look like we think the industry is going to look a lot more normal as cash rates begin to come down.

Tim Deacon: And we haven't set a formal target, but generally expect that organic capital generation should range between 20 to 30% of underlying net income. So for Q2 at almost 600 million, that's, you know, almost 60% of uni. So obviously above target result and really driven by strong sales in Canada and Asia that we referenced and that created the higher new business CSM versus our expectations. So elevated this quarter and last quarter because of the strong sales growth, but over time within that 20 to 30% range net of dividends. Got it. Okay. Thank you for that.

Michael Roberge: We think, you know, the industry is going to look a lot more normal as cash rates begin to come down, and people have to seek returns in other parts of their portfolio other than cash. Okay, thank you. The next question is from Nigel D'Souza with Veritas Investment Research. Please go ahead.

Michael Roberge: We think, you know, the industry is going to look a lot more normal as cash rates begin to come down and people have to seek returns in other parts of their portfolio other than cash.

Speaker Change #140: And people have to seek returns and in other parts of their portfolio other than cash.

Lamar Prasad: Okay, thank you. That's it for me.

Speaker Change #141: Okay. Thank you that's it for me.

Nigel D'Souza: The next question is from Nigel D'Souza with Veritas Investment Research. Please go ahead. Thank you. Good morning.

Speaker Change #141: The next question is from Nigel just seems that with Veritas investment research. Please go ahead.

Nigel D'Souza: Thank you. Good morning. I wanted to follow up again on the restructuring initiatives here and the Cadence of the timing of how that flows through into earnings. Is this a linear ramp up, or is it more back-end loaded? And is the right way to think about this, that the 200 million will be fully flowing through underlying net income in Q1 of 26? Hi Nigel, it's Tim.

Nigel: Thank you good morning, I wanted to follow up again on the restructuring initiatives.

Tim Deacon: I wanted to follow up again on the restructuring initiatives here. And cadence of the timing of how that flows into earnings. Is this a linear ramp-up or is it more back-end loaded? And it's the right way to think about this, that the 200 million will be fully flowing through underlying net income in Q1 of 26.

Tim Deacon: I guess a second question is with respect to SLC and the net income target there for 2025. So just looking for confirmation that that has not changed. And wondering if the recently announced cost restructuring will have any impact on or really help your ability to achieve that to 25 target. Thank you.

Nigel: Initiatives share in.

Nigel: Cadence at the timing of how that flows through into earnings is this a linear ramp up or is it more backend loaded and it's the right way to think about this that the $200 million.

Speaker Change #143: It won't be fully flowing through underlying net income in Q1 of 'twenty six.

Timothy Deacon: It's referenced earlier in some of the questions. We will start to see some of that expense savings come through in earnings in the second half of this year. It's mostly ratably through 2025 into 2026.

Tim Deacon: Hi, Nigel. It's Tim. Yeah, it's referenced earlier in some of the questions. We will start to see some of that expense savings come through earnings in the second half of this year. It was mostly rateably through 2025 into 2026. So, by the time we hit 2026, we'll have achieved the full 200 million pre-tax. In terms of how it shows up as said, it'll come through the variety of the line items that are referenced because of the way our disclosures under IFRS-17 require us to report expenses of the mix of the directly attributable as well as these other expenses that don't get allocated.

Hi, Nigel it's Tim Yeah. It it's referenced earlier in some of the questions. We will start to see some of that expense savings come through through earnings in the second half of this year.

Tim Deacon: Hi, Paul. Thanks for the question. That's the future. Yeah, you know, I think that we're still on track for the targets that we put out there. We'll talk more about our expect longer term expectations for 25 and beyond at the investor day in the fall. You know, we did for we SLC is participating as part of the cost reduction initiative that was discussed, but I would say as much as anything as we, you know, we're also looking to keep investing in the business as we try to get benefits out of the platform as we approach the put calls and we invest more in distribution with resources that can sell the entire range of products we have across SLC.

Timothy Deacon: So by the time we hit 2026, we'll have achieved the full $200 million pre-tax. In terms of how it shows up, as I said, it'll come through the variety of the line items that are referenced because of the way our disclosures under IFRS 17 require us to report expenses of a mix of directly attributable as well as these other expenses that don't get allocated. So you would expect to see that occur over time.

Speaker Change #144: It was mostly ratably through a 2025 into 2020 six so by the time, we hit 2026 will have achieved the full 200 million pretax.

Speaker Change #145: In terms of how it shows up.

Speaker Change #146: It'll come through a variety of the line items that I referenced because of the way our disclosures on under eye for 17 require us to report expenses of mix of the <unk>.

Speaker Change #146: Directly attributable as well as these other expenses that don't get allocated.

Tim Deacon: So you would expect to see that occur over time. As I said, it's an 18-month program. So there's some actions that we've already taken now. Dan referenced some of the dental business actions that we're taking, and we'll be starting to show through in the second half of this year. But it really is over time. And I guess just to re-emphasize, this is really to help again hit our earnings growth targets towards the top end of our MTOs. So, in terms of how you think about that in terms of forward guidance. Yeah, that's helpful.

Speaker Change #146: So you would expect to see that occur over time as I said, it's an 18 month program. So there are some actions that we've already taken now Dan referenced some of the dental business actions that were taken.

Timothy Deacon: As I said, it's an 18-month program, so there are some actions that we've already taken now. Dan referenced some of the dental business actions that were taken and will be starting to show through in the second half of this year. But it really is over time.

Tim Deacon: So I would say we expect to get, we expect to grow earnings by growing AUM and delivering more strategies to existing clients into new clients over time. And while cost discipline will certainly be part of that, it's really about growing revenue and AUM and less about cost. So will we get some benefits out of cost reduction certainly and we're trying to be mindful of that, but I don't I don't do that as a driver.

Dan: And we'll be starting to show through in the second half of this year.

Speaker Change #151: But it really is overtime and I guess just to reemphasize. This this is really to help again hit our earnings growth targets towards the top end of our MTO. So in terms of how you think about that in terms of Ford Ford guidance.

Timothy Deacon: And just to re-emphasize, this is really to help, again, hit our earnings growth targets towards the top end of our MTOs. So in terms of how you think about that in terms of forward guidance, yeah, that's helpful.

Timothy Deacon: And then my second one was on other fee income there. There's a bump up there in the line item this quarter. I understand part of that is related to expenses, and the other part is related to wealth. Could you kind of break that out for us and kind of get a sense of what the run rate is for other fee income going forward? So, I'll take that one and see if others want to supplement it.

Speaker Change #147: Okay. That's helpful. And then my second one was on other fee income there is a.

Tim Deacon: And then my second one was on other fee income. There's a bump up there in the line item this quarter. I understand part of that is related to expenses. The other part is related to wealth income. Could you kind of break that out for us and kind of get a sense of what the run rate is for other fee income going forward? Great. So I'll take that one and see if others want to supplement. So the quarter of our quarter increases. You noted we're seeing a nice uptick in that. And that's really on the strong performance of our wealth businesses.

Speaker Change #148: Bump up there in that line item this quarter I understand part of that is related to expenses. The other part is related to <unk>.

Kevin Strain: [inaudible] Thank you, Mario, it's Mario's Kevin. I would just add to it that when we did the acquisition, it was during COVID and we actually knew that the public health emergency would end. We did modeling of that. The public health emergency went longer and was deeper than we expected and some of the impacts were probably more than we expected in this year. But over the long term, we still expect as Dan had talked about that.

Speaker Change #147: <unk> income.

Speaker Change #149: Could you kind of break that out for us and kind of get a sense of what the run rate is for other fee income going forward.

Timothy Deacon: So, the quarter over quarter increase, as you noted, we're seeing a nice uptick in that, and that's really due to the strong performance of our wealth businesses, both in Canada as well as in Asia. So, in Canada, we had strong performance in the GRS business because we had favorable markets. Our AUM was up 10% year over year, and we had net inflows of just under a billion dollars coming into that business. And then, similarly, in Hong Kong, in particular the MPF business, we saw strong growth there. So, that's really driving the majority of it.

Speaker Change #147: Great. So I'll take that one and see.

Speaker Change #150: See if others want to supplement so.

Speaker Change #152: The quarter over quarter increase as you noted we've seen a nice uptick in that and that's really up on the strong performance of our wealth businesses. That's both in Canada as well as in Asia. So in Canada, We had strong performance in the GRS business, we had favorable markets. Our AUM was up 10% year over year, we had net inflows of just.

Tim Deacon: That's both in Canada as well as in Asia. So in Canada we had strong performance in the GRS business. You know, we had favorable markets. Our AUM was up 10% year over year. We had net inflows of just under a billion coming into that business. And then similarly in Hong Kong, in particular MPF business, we saw a strong growth there. So that's really driving the majority of it. On the costs because this is other fee income also includes our ASO businesses. So whenever we're onboarding new clients, sometimes there's startup costs related to that and in the buildup of that.

Speaker Change #152: Under a billion coming into that business and then similarly in Hong Kong in particular M. P. S business, we saw a strong strong growth there. So that's really driving the majority of it on the quarter quarter variance. We also had some costs. Because this is our other fee income also includes our ASO businesses. So whenever we are onboarding new clients, sometimes there are start up costs for.

Timothy Deacon: On the quarter-to-quarter variance, we also had some costs because this is other fee income that also includes our ASO businesses. So, whenever we're onboarding new clients, sometimes there's startup costs related to that and the buildup of that. So, we had costs in the first quarter, and now we're reporting revenue on those businesses for some of our larger programs. And so, that's now improved our results because we're starting to report revenue through that.

Speaker Change #152: To that end in the buildup to that so we had costs in the first quarter and now we're reporting revenue on those businesses for for some of our larger programs and so that's now improved the results because we are starting to report revenue through that so it's it.

Tim Deacon: So we had costs in the first quarter. And now we're reporting revenue on those businesses for some of our larger programs. And so that's now improved the results because we're starting to report revenue through that. So it's, you know, it obviously varies based on markets and where AUM positions are. So we'll get variability in that lineup from time to time. But you know, on the basis that markets continued performing, our AUM comes up. That's a healthy run rate for us.

Timothy Deacon: So, it obviously varies based on markets and where AUM positions are. So, you will get variability in that lineup from time to time, but on the basis that markets continue to perform and our AUM increases, that's a healthy run rate for us. Okay, that's it for me.

Speaker Change #152: Obviously varies based on markets and were a M positions are so you will get variability in that line of them from time to time, but on the basis that markets continue to perform in a M comes up that said, that's a healthy run rate for us.

Speaker Change #152: Yeah.

Tim Deacon: Okay, that's it for me. Thank you.

Speaker Change #153: Okay. That's it for me thank you.

Speaker Change #153: Yes.

John Aiken: The next question is from John Aiken with Jeffrey Securities. Please go ahead. Good morning.

John Aiken: Thank you. The next question is from John Aiken with Jeffrey Securities. Please go ahead.

Speaker Change #153: The next question is from John Aiken with Jefferies Securities. Please go ahead.

Manjit Singh: Good morning. I apologize if you've addressed this already. And if that's the case, just send me back to the transcript, but I wanted to drill down a little bit more in terms of the performance in Asia. Can you give us a little more detail in terms of, as you talked about the joint venture contributions that occurred in the quarter, and secondarily, talk about the sustainability of the sales levels in the new business CSM was generating? Good morning, John. It's Manjit.

John Aiken: Good morning, I apologize if you've addressed this already and if that's the case just send me back to the transcript, but wanted to drill down a little bit more in terms of the performance in Asia.

Manjit Singh: I apologize if you've addressed us already in a fast case to send me back to the transcript, but wanted to drill down a little bit more in terms of performance in Asia. Can you give us a little more detail in terms of Asia talk with the joint venture contributions that occurred in the quarter? And I secondarily talk about the sustainability of the sales levels and the new business CSM was generating, really.

Can you give us a little more detail in terms of if you talk about the joint venture contributions that occurred in the quarter.

Speaker Change #155: And a.

Speaker Change #155: Secondarily talk about the sustainability of the sales levels and the new business CSM It was generated.

Manjit Singh: Good morning, John. It's Manjit. In terms of the sales performance, I'm very pleased with the year-to-date sales performance that we've seen in Asia and looking forward to remain confident in our ability to continue to generate good sales growth. And that's really underpinned by a number of things. Now, we have a good presence in growing markets with good and attractive demographics. We have a strong focus on making sure that we're meeting our client needs. We've also broadened out, as we talked about in the past, our distribution capabilities, both through a new bank insurance partnership, but also through growth in organic growth in our agency workforce as well.

Manjit Singh: In terms of sales performance, I'm very pleased with the year-to-date sales performance that we've seen in Asia, and looking forward, I remain confident in our ability to continue to generate good sales growth. And that's really underpinned by a number of things. You know, we have a good presence in growing markets with good and attractive demographics. We have a strong focus on making sure that we're meeting our client needs. We've also broadened out, as we've talked about in the past, our distribution capabilities, both through new bank assurance partnerships and also through organic growth in our agency workforce as well.

Speaker Change #156: Good morning, John It's management in terms of the sales performance I'm very pleased with the year to date sales performance that we've seen in Asia and looking forward I remain confident in our ability to continue to generate good sales growth.

Speaker Change #156: And that's really underpinned by a number of things now where we have a good presence in growing markets with good and attractive demographics, we have a strong focus on making sure that we're meeting our client needs and we've also broadened out as we've talked about in the past our distribution capabilities.

Speaker Change #156: Both through new Bancassurance partnerships with also through growth and organic growth in our agency workforce as well and that's resulted in good market share gains in several markets that we operate in.

Manjit Singh: And that's resulted in good market share gains in several markets that we operate in. We're also investing in digital capabilities to make sure that we deliver simple, fast, and easy experiences for our clients. We have also invested in brands, and we're seeing really good upticks in our brand awareness across our markets. And, of course, all of that's underpinned by our strong team that we have in Asia.

Manjit Singh: And that's resulted in good market share gains and several markets that we operate in. We're also investing in digital capabilities to make sure that we deliver simple, fast, and easy experiences for our clients. We've noted that we've also invested in brand, and we're seeing really good uptick in our brand awareness across our markets. And of course, all of that's underpinned by our strong team that we have in Asia. So, with all of that, I remain confident in our ability to grow in Asia.

Speaker Change #156: So investing in digital capabilities to make sure that we deliver simple fast and easy experiences for our clients.

Speaker Change #156: We've noted that we've also invested in brand and we're seeing really good uptick in our brand awareness across our markets and of course all of that is underpinned by our strong team that we have in Asia. So with all of that I remain confident in our ability to grow continue to grow in Asia.

Manjit Singh: So with all of that, I remain confident in our ability to continue to grow in Asia. And sorry, Manjit, can you address the sustainability of the new business CSM that was generated in your segment? Yeah, I think that is partially related to the sales growth, John. So I think, you know, we continue to remain optimistic and that, as well, you're going to see quarter and quarter volatility from a number of factors, macro factors, and competitive factors.

Manjit Singh: And so I mentioned, can you address the sustainability of the new business CSM that was generated in your segment? Yeah, I think that is partially related to the sales growth, John. So I think we continue to remain optimistic in that as well. You're going to see quarter-to-quarter volatility from a number of factors: macro factors and competitive factors. But over the medium term, we continue to view our ability to generate CSM and the mid-teens rate that we've talked about.

Speaker Change #157: And so I mentioned can you can you address the sustainability of the new business CSM that was generated.

Speaker Change #158: Your your segment.

Manjit Singh: But over the medium term, we continue to view our ability to generate CSM and mid teens rates that we've got. Great, thank you. We have no further questions at this time. I'll turn things back over to Mr. Garg. Thank you, operator. This concludes today's call. A replay of the call will be available in the investor relations section of our website. Thank you, everyone, and have a good day. This brings today's conference call to a close.

Speaker Change #159: I think that is partially related to the sales growth. John So I think we continue to remain optimistic in that as well youre going to see quarter on quarter volatility from a number of factors macro factors and competitive factors, but over the medium term, we continue to view our ability to generate CSM and a mid teens rate that we've talked about.

Manjit Singh: Thank you.

Speaker Change #159: Great. Thank you.

David Garg: We have no further questions at this time.

Mr Guards: We have no further questions at this time I'll turn things back over to Mr Guards.

David Garg: I'll turn things back over to Mr. Garge. Thank you, operator.

Mr Guards: 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 everyone and have a good day.

Operator: This concludes today's call. A replay of the call will be available on the Investor Relations section of our website. Thank you, everyone, and have a good day.

Operator: This brings to a close today's conference. Well, you may disconnect your lines.

Manjit Singh: You may disconnect your lines. Thank you for participating and have a pleasant day. [music] www.sunlife.com BF-WATCH TV 2021, Ingrid Goulet, Tom MacKinnon, Tom MacKinnon, Tom MacKinnon [inaudible] I'm not sure if I'm right, I'm not sure if I'm right, I'm not

Speaker Change #162: This brings to a close today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.

Operator: Thank you for participating, and have a pleasant day.

Speaker Change #162: [music].

Speaker Change #162: Okay.

Speaker Change #162: Okay.

Speaker Change #162: Okay.

Speaker Change #162: Hum.

Speaker Change #162: Yeah.

Speaker Change #162: [music].

Kevin Strain: This is going to be a very good business for Sun Life and we'll return back to the sort of pricing that we would have expected and we're seeing that as we reprice the business. So I think overall our thesis for the dental business in the US hasn't changed and I think you see our culture and our financial discipline in action by how we've disclosed this transparently to our investors and how we're taking action to deal with it. Thank you.

Lamar Prasad: The next question is from Lamar Prasad with Cormart Securities. Please go ahead. Thanks.

Tim Deacon: My first question is going back to the restructuring is probably appropriate for Tim. Is this the first of more restructuring charges like is this a broader restructuring program? How big could further restructuring charges be? And then I guess you mentioned the 200 million pre-tax savings portion of that. Is that portion of that 200 million pre-tax going to go through the CSM or is that 200 million pre-tax? I'll go through the underlying earnings. Thanks, Lamar. So this was a program that we just initiated now.

Speaker Change #162: Yeah.

Speaker Change #162: [music].

Speaker Change #162: Uh huh.

Speaker Change #162: Yeah.

Speaker Change #162: [music].

Speaker Change #162: Yes.

Tim Deacon: It's a one time charge of 138 million pre-tax, a 108 that flowed through reported net income and that's a singular program that will be executed over the 18 months that I had referenced. Also referenced financial discipline, a core part of our client impact strategy. So we're always going to be continually focused on cost discipline. But as said, we hadn't run a program like this in a little while. So it was time for a bit of a catch up just as we looked at our expense growth and relative to continuing to ensure we can get to the top end of our earnings growth objectives.

Speaker Change #162: [music].

Tim Deacon: In terms of where this shows up, this will come off across a variety of the line items. So it's not all CSM. It'll come through other expenses, come through other fee income, which is net of expenses. So you'll see it in a bunch of places. And as I referenced earlier, we'll likely look to maybe take a portion of that, a small portion for reinvestment. And as I said, to probably accelerate our digitization efforts and look at areas like generative AI and the progress that we've been making there is a way to accelerate that.

Tim Deacon: So this is a singular program, but will always be focused on cost discipline going forward. Okay, what about the mix through CSM and regular earnings? Yeah, predominantly earnings, but there is a portion through CSM, but you expect most of that to earnings. Okay, perfect. Thanks.

Speaker Change #162: Yeah.

Lamar Prasad: And then just moving on to a different type of question here on MFS. If we see rate cuts play out of the US, do you think that's going to be helpful to the net flow's performance at MFS, just given its products mix to more towards value-based equities? Is that kind of the right way to think about the impact? of lower U.S, rates on the MFS business. Good morning, Lamar, it's Mike Roberge.

Speaker Change #162: [music].

Operator: I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here, I know you're here.

Lamar Prasad: Yeah, I mean, that's how we're thinking about it. If you look at prior cycles, you know, as Fed and Central Bank start to cut rates and people look at their cash yields going down, they re-engage back in the market with longer-term fixed income and equity products. If you look at, you know, rate pre-COVID, which is probably the last normal environment that we have, and you apply that Taurus at base today, that would take you back to net positive U.S, retail flows at MFS.

Speaker Change #162: Okay.

Lamar Prasad: And so the question ultimately comes is what does normal look like? We think, you know, the industry is going to look a lot more normal as cash rates begin to come down and people have to seek returns in other parts of their portfolio other than cash. Okay, thank you.

Lamar Prasad: That's it for me.

Nigel D'Souza: The next question is from Nigel D'Souza with Veritas Investment Research. Please go ahead. Thank you.

Tim Deacon: Good morning. I wanted to follow up again on the restructuring initiatives here. And Cadence of the timing of how that flows into earnings. Is this a linear ramp up or is it more back-end loaded? And it's the right way to think about this, that the 200 million will be fully flowing through underlying net income in Q1 of 26. Hi, Nigel. It's Tim. Yeah, it's referenced earlier in some of the questions. We will start to see some of that expense savings come through earnings in the second half of this year.

Tim Deacon: It was mostly rateably through 2025 into 2026. So by the time we hit 2026, we'll have achieved the full 200 million pre-tax. In terms of how it shows up as said, it'll come through the variety of the line items that are referenced because of the way our disclosures under IFRS-17 require us to report expenses of the mix of the directly attributable as well as these other expenses that don't get allocated. So you would expect to see that occur over time as I said, it's an 18 month program.

Tim Deacon: So there's some actions that we've already taken now. Dan referenced some of the dental business actions that we're taking and we'll be starting to show through in the second half of this year. But it really is over time. And I guess just to re-emphasize, this is really to help again hit our earnings growth targets towards the top end of our MTOs. So in terms of how you think about that in terms of forward guidance.

Tim Deacon: Yeah, that's helpful. And then my second one was on other fee income. There's a bump up there in the line item this quarter. I understand part of that is related to expenses. The other part is related to wealth income. Could you kind of break that out for us and kind of get a sense of what the run rate is for other fee income going forward? Great. So I'll take that one and see if others want to supplement.

Tim Deacon: So the quarter of our quarter increases. You noted we're seeing a nice uptick in that. And that's really on the strong performance of our wealth businesses. That's both in Canada as well as in Asia. So in Canada we had strong performance in the GRS business. You know, we had favorable markets. Our AUM was up 10% year over year. We had net inflows of just under a billion coming into that business. And then similarly in Hong Kong, in particular MPF business, we saw a strong growth there.

Tim Deacon: So that's really driving the majority of it. On the costs because this is other fee income also includes our ASO businesses. So whenever we're onboarding new clients sometimes there's startup costs related to that and in the buildup of that. So we had costs in the first quarter. And now we're reporting revenue on those businesses for some of our larger programs. And so that's now improved the results because we're starting to report revenue through that.

Tim Deacon: So it's, you know, it obviously varies based on markets and where AUM positions are. So we'll get variability in that lineup from time to time. But you know, on the basis that markets continued performing our AUM comes up. That's a healthy run rate for us.

Tim Deacon: Okay, that's it for me.

Tim Deacon: Thank you.

John Aiken: The next question is from John Aiken with Jeffrey Securities. Please go ahead.

John Aiken: Good morning. I apologize if you've addressed us already in a fast case to send me back to the transcript, but wanted to drill down a little bit more in terms of performance in Asia. Can you give us a little more detail in terms of Asia talk with the joint venture contributions that occurred in the quarter? And I secondarily talk about the sustainability of the sales levels and the new business CSM was generating really.

Manjit Singh: Good morning, John, it's Manjit. In terms of the sales performance, I'm very pleased with the year-to-day sales performance that we've seen in Asia and looking forward to remain confident in our ability to continue to generate good sales growth. And that's really underpinned by a number of things. Now, we have a good presence in growing markets with good and attractive demographics. We have strong focus on making sure that we're meeting our client needs.

Manjit Singh: We've also broadened out as we talked about in the past, our distribution capabilities, both through a new bank insurance partnership, but also through growth in organic growth in our agency workforce as well. And that's resulted in good market share gains and several markets that we operate in. We're also investing in digital capabilities to make sure that we deliver simple, fast and easy experiences for our clients. We've noted that we've also invested in brand and we're seeing really good uptick in our brand awareness across our markets. And of course, all of that's underpinned by our strong team that we have in Asia. So with all of that, I remain confident in our ability to grow in Asia.

Manjit Singh: And so I mentioned, can you address the sustainability of the new business CSM that was generated in your segment? Yeah, I think that is partially related to the sales growth, John. So I think we continue to remain optimistic in that as well. You're going to see quarter and quarter volatility from a number of factors, macro factors and competitive factors. But over the medium term, we continue to view our ability to generate CSM and the mid teens rate that we've talked about. Thank you.

David Garg: We have no further questions at this time. I'll turn things back over to Mr. Garge. 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, everyone, and have a good day. This brings to a close today's conference. Well, you may disconnect your lines. Thank you for participating and have a pleasant day.

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