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Sun Life US President Releases Update On DentaQuest Acquisition

Sun Life US President Releases Update On DentaQuest Acquisition

Sun Life US President Releases Update On DentaQuest Acquisition

Sun Life US President Releases Update On DentaQuest Acquisition

The second-largest dental benefits company in the US by membership, DentaQuest, was recently acquired by Sun Life Financial US for $2.475 billion. After the transaction closes on June 1, 2022, Sun Life US’s annual benefits revenues are anticipated to surpass $7 billion.

With its wide range of services and products, which include disability, absence management, life, dental, vision, voluntary, medical stop-loss, and care navigation, the multinational financial services company today provides support to more than 50 million Americans. Sun Life US is now among the biggest suppliers of speciality benefits in the nation thanks to its DentaQuest acquisition.

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“Over the past decade we have transformed the US business from a mostly retail individual life and annuities business to a high-performing market leading benefits business,” said Dan Fishbein, president, Sun Life Financial US. “The DentaQuest acquisition continues this evolution, changing the footprint of our business in the US into a larger, more healthcare-focused organization, now with more than 70% of our benefits revenue coming from healthcare.

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Sun Life US President Releases Update On DentaQuest Acquisition

“These changes have transitioned Sun Life US from a capital-intensive to a capital-light business with strong cash flow generation; from businesses with long-term risk profiles to mostly short-term risk and fee-based businesses; from slow-growth markets to higher growth markets; and from return on equity (ROE) in the single digits to a return on tangible equity in the high teens.”

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DentaQuest, a Boston-based company started in 2001, transferred more than 2,400 workers and more than 33 million customers across 36 states to Sun Life US. It was the biggest provider of US Medicaid dental benefits at the time of the acquisition, with expanding Medicare Advantage, commercial, and US Affordable Care Act (ACA) exchange businesses.

According to Fishbein, the leadership team for the combined dental benefits business under Sun Life US is made up of leaders from both DentaQuest and Sun Life who are all focused on growth initiatives, revenue synergies, and performance optimization.

Sun Life US President Releases Update On DentaQuest Acquisition

“We’re approaching integration with great care and our goal is to realize the full potential of the transaction for all our stakeholders, including providing enhanced offerings for clients, delivering our accretion and cost savings targets for shareholders, creating new opportunities for our employees, and delivering a positive integration experience for all,” he explained.

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“We have a strong track record of successfully integrating group benefits businesses, while minimizing disruption for our clients. Many of the leaders who managed the Assurant integration are involved in the DentaQuest integration. We are focused on integration activities that will support our run rate cost savings target of $60 million by 2024. We’re off to a strong start with a fully integrated leadership team, engaged employees, and a detailed plan for the remaining steps.”

On August 3, Sun Life US released its financial results for the second quarter of 2022. It recorded insurance sales of $213 million, up 13% from the prior year thanks to stronger sales of dental and medical stop-loss insurance. The company recorded net income of $213 million, an increase of 36%, or $56 million, from the same quarter last year. However, costs associated with the DentaQuest purchase somewhat offset this increase.

Sun Life US President Releases Update On DentaQuest Acquisition

When Sun Life first announced the DentaQuest deal, it gave an accretion projection of an additional 42 basis points to underlying ROE in 2022 on an annualized basis. In 2024, upon realization of expense synergies, Sun Life expects the acquisition to add approximately 50 basis points to underlying ROE.

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“The underlying earnings for DentaQuest in the one month [June 2022] was $10 million,” said Fishbein. “We’re still confident in the accretion projections that we made when we announced the transaction, and certainly, the results in June would support that. We did see higher margins in June than perhaps we expected, and a little lower revenues, but the higher margins more than made up for the small variance in revenues. Overall […] this first month gives us confidence in our prior projections.”

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Sun Life US President Releases Update On DentaQuest Acquisition

Fishbein said he’s excited about the future at Sun Life US, adding: “We now have four strong businesses with market leading positions in dental and stop-loss, and a top 10 employee benefits business. Although recent results have been somewhat masked by COVID impacts, once this subsides, we remain confident in achieving our medium-term targets for the US, including 10% or more earnings growth for our benefits businesses.”


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IBEH C. JOE

Financial analyst, Entrepreneur, Blogger and Business model

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