Good morning, and welcome to the Sun Life Financial Q3 2025 Conference Call. My name is Galeen, and I will be your conference operator today. [Operator Instructions] The conference is being recorded. [Operator Instructions] The host of the call is Natalie Brady, Senior Vice President, Capital Management and Investor Relations. Please go ahead, Ms. Brady.

Thank you, and good morning, everyone. Welcome to Sun Life's earnings call for the third quarter of 2025. 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. Other members of management are also available to answer your questions this morning. Turning to Slide 2. 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, Natalie, and good morning, everyone. Turning to Slide 4. We had a good Q3 for top line and for bottom line, demonstrating the benefits and strength of our diversified business model. Our underlying EPS was $1.86, up 6% year-over-year. Underlying ROE was 18.3%, progressing well towards our medium-term objectives, and our book value per share grew 3% quarter-over-quarter. Individual - Protection sales grew 35%, Group - Health & Protection sales grew 12%, and we had almost $3 billion of positive net flows in Asset Management and Wealth. We achieved strong underlying earnings in Asia and Canada with solid underlying earnings in Asset Management. We continue to navigate the industry challenges in our U.S. business, which performed below our expectations this quarter. Results in our U.S. business were challenged by unfavorable insurance experience across group and dental, reflecting the structural changes occurring in the U.S. healthcare system, which are driving higher claims frequency and cost. It is important to remember that our U.S. Group Benefits and dental businesses are repriceable over a 1- to 3-year time frame, and our experience is largely in line with or better than industry trends. Our Employee Benefits business saw higher disability claims in July, but this started to normalize in August and September, and we see this as normal volatility. In our medical stop-loss business, we saw a higher frequency of claims over $1 million in the quarter, and we increased our stop-loss ratio assumptions to reflect this accordingly. We are industry leaders in the stop-loss business with scale and strong capabilities, and we continue to have industry-leading claims ratios. We have seen cycles like this in the past where the claims run ahead of pricing, and we continue to be confident in our ability to pick the best risk and manage the pricing.…

Thank you, Kevin, and good morning, everyone. Turning to Slide 8. Overall, our third quarter results reflect the benefits and strengths of our diversified businesses as strong growth in Asia and Canada, and solid results in Asset Management were partially offset by lower earnings in the U.S. In Q3, we reported underlying net income of $1.047 billion, up 3% year-over-year. Underlying earnings per share of $1.86 were up 6% over the same period. Asset Management and Wealth underlying earnings were up 5% over the prior year on improved credit, higher fee income in Canada and higher net seed investment income at SLC Management. Group - Health & Protection underlying earnings were down 18% year-over-year, driven by unfavorable insurance experience across the U.S., partially offset by business growth and favorable insurance experience in Canada. Individual Protection underlying net income was up 25% over the prior year on business growth, favorable mortality experience in Asia, joint venture earnings in India, and higher investment earnings in Canada. Underlying return on equity was 18.3%, up from the prior year on higher earnings and the impact of share buybacks. Reported net income was $1.1 billion or 6% above underlying net income, driven by a gain from our increased ownership in Bowtie, partially offset by amortization of intangibles, acquisition-related expenses, market-related impacts and the impact of our third quarter review of actuarial assumptions or ACMA. Market-related impacts reflect unfavorable real estate experience as modestly positive returns in the quarter were below our long-term expectations. We completed the annual review of actuarial assumptions, which resulted in a modest net loss of $13 million and $139 million benefit to total CSM. Total CSM, which reflects future profits, increased 12% year-over-year to $14.4 billion, driven by strong organic CSM growth. New business CSM of $446 million increased 16% on…

Thank you, Tim. To help ensure that all of 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 pull the participants.

[Operator Instructions] Our first question is from Paul Holden with CIBC.

Two questions, both related to U.S. Dental. I guess the first would be what kind of expectations do you have for Medicaid repricing to start 2026, i.e., what are you hearing from the states? And what should we expect? And then the second one is maybe talking about growth in U.S. commercial premiums up roughly 6.5% year-over-year. So it's growing. But should we expect sort of reinvigorated efforts to accelerate that growth so to diversify away from the Medicaid business?

Yes. So thanks for the question, Paul. This is David. So yes, we're very much focused on pricing in the U.S. business. The way to think about it is we have states and direct relationships with them, which is the majority of our business, but we also have a significant relationship with health plans where we're the delegated provider of dental services. And then we also have ASO business, which is a mix of both states and health plans. Generally, we're making reasonably good progress with states around '26 with the exception of one large space. Health plans is going slower. We're making less progress. And how we're thinking about it is we continue to focus with them on pricing and repricing appropriately. In some cases, we're making structural changes to plans, including as appropriate, maybe moving from risk to ASO with some health plans and also including maybe terminating contracts if we can't get the price we need. So we're very much committed to it. We're making progress. I would expect it to be gradual in '26, but we're continuing to stay focused on it. Also on the ASO front, we continue to enhance the value of our services to make sure we're getting paid appropriately for the work we're doing in support of those contracts, but it is slow progress. With respect to commercial, your second question, yes, we're making progress. Since the acquisition, premiums have grown more than 30%. Membership has grown more than 20%. This is an important opportunity for growth for us into the future. As you know, in the U.S. market outside of healthcare, commercial dental is the #1 sought-after benefit after healthcare, and it's a great opportunity for us to package commercial dental with the rest of our group benefits products, and we have a really strong employee benefits offering and a great distribution system in which to bring that through. So we're very much focused on that. It will take time, of course, it's a competitive landscape, but we expect to continue to make progress over time with commercial dental sales.

The next question is from Alex Scott with Barclays.

I wanted to see if you could talk about the asset management flows. And can you give us a feel for the institutional progress that's been made there? And to what extent should we view that as more lumpiness and something driven by more of a single mandate as opposed to the things that you're doing to improve the more medium- to long-term trajectory of the flows in the business?

Sure. This is Ted Maloney. I think lumpiness, the word you use is a really important one to use, and it is a reminder that we do have lumpiness in both directions. And so in the quarter, we got a couple of large inflows that Tim mentioned that we think are indicative of themselves longer-term trend. But the broad trends, both institutionally and retail remained with more headwinds than tailwinds. Some of those headwinds may be lessening on the margin, but the headwinds persist. Within that, we'll continue to have big wins as well as continued losses. And in this quarter, we had those couple of big wins. I can give you a little bit more color on them, which might be helpful to think about longer term, which is -- one was a separately managed account within the -- what we would characterize as institutional that is in our -- one of our international strategies, so the world minus the U.S., which is one of the many areas where we have a really dominant set of franchises and are seeing as market leaders. And so that's been a nice growth tailwind for us for a period of time and should continue to be, but that was obviously a very big chunk of a tailwind. The other is actually smaller, but perhaps more exciting. Tim mentioned this as well, the collective investment trust vehicle is the most important vehicle in the retirement space. And there's a unique feature to it, which is that you can't see it yourself, you need a client to be an initial investor. So getting that first investment in a target-date CIT was a huge win on its own, but also allows us to fund CITs across all the components of the target date. So we think that's another one that will provide long-term tailwinds. But again, I do want to reiterate the headwinds across the industry that we've been talking about for a long period of time persist. We are executing well. We believe within those headwinds, they may be abating slightly on the margin, but we are not declaring a change to that. Our long-term strategy very much includes long-term net flow positive growth over time. We think we've got a very clear strategy to execute on that, and we'll continue to do that. We'll need some help from those industry headwinds abating.

Got it. That's helpful. Second one I had is on stop loss. I wanted to see if you could provide a little more detail around how much of it this quarter was unfavorable development from earlier or loss picks that were made earlier in the year. And maybe further to help us think through how much of the cash claims do you still have to come in? And are we getting late enough in the year that it's potentially becoming a little too late to reflect what you're learning in the 1/1/26 renewals? Or do you feel like you are fully getting that? I'm just trying to get a better sense for what to expect going into next year.

Okay. Thanks for the question. It's David again. Yes, let me just break down the unfavorable insurance experience for medical stop loss in the quarter. There was really three factors involved. About 20% of it was related to the pricing shortfall that we've previously discussed on this call that we knew this year. 35% of it was related to late emergence of claims from cohorts prior to 1/1/25, including one large claim that came through in the quarter. And the rest, just under half was related to the 1/1/25 cohort itself. So we did see a higher number of greater than $1 million claims late in the quarter. So we did update our loss ratio pick for the year. It's important to know that as a result of doing that, it reflects really 3 quarters of updates to reserves, as Tim had mentioned, for Q1, Q2, and Q3 premiums that came in. You'd also asked about pricing and I think how we're looking at it for 2026. Well, obviously, U.S. healthcare costs are elevated. Medical trend has been rising to 8.5% this year, and we expect that to continue into 2026. And our pricing reflects our view of leverage trend. And it's also considering recent experience. So we continue to stay focused and disciplined in our pricing approach. You asked about how much of it has come through. In terms of what we see at this point in the year, obviously, Q3, we had enough credible claims to be able to update our loss ratio pick for the year. We typically see about 30% of our claims by Q3 and then a further 30% come through in the fourth quarter. So it's still early in the cohort of 1/1/25, but we're certainly updating our view on experience as we see it.

Alex, it's Kevin. I just wanted to maybe sort of reiterate some of what David was saying. We expected significant increase in price when we went into this year, and we increased prices by 14%. And as we saw the year-end experience, we added another 200 basis points to that. So we continue to see that trend. And then this quarter, we added another 1% approximately, which was for the 3 quarters sort of experience we were seeing. This business is repriceable. But when costs are rising so rapidly, it's hard to keep up with that repricing. But over time, we will be able to do that. We have confidence in our ability to do that because we do have scale and we do have good risk selection there. But when costs and claims are rising so rapidly, we can lag a little bit, and we've seen that in the past. So I think that we're taking the right actions. A chunk of what you saw this quarter was for the year-to-date, but it all reflects that increasing claims experience that we're seeing at the higher end, which I referenced in my speaking comments.

The next question is from Gabriel Dechaine with National Bank Financial.

Yes. So if I understand correctly, your 17% of the total repricing target, and that's the number you'll try to have fully embedded in the book by Jan 1, '26. And I guess aside from pricing actions, what other -- and the timing of the effectiveness, what other considerations are there? It's one thing to just increase pricing, but market share impact. There are some known unknowns, I guess, because we saw that with dental, where there's a dynamic with the counterparties that wasn't anticipated. And I'm wondering if there's a similar kind of dynamic that we should be aware of when repricing or seeking repricing when it comes to this stop-loss business, which is a commercial one, not state.

Gabe, it's Kevin. Let me just -- since I mentioned the [ 14 and the 2 and the 1 ], that's for this year, right? That's what we thought we would have priced at if we had all the full information of how claims were coming through. So that's related to this year, and we're going through the repricing for next year right now. So I'm not signaling what we're doing for next year, but maybe David can go into some more detail.

Yes. Just to add to that, as Kevin noted, we do have a typical underwriting cycle in this business, and there are times when claims can come out ahead of pricing updates, and we've seen this before. Historically, we've had amongst the lowest loss ratios in the industry, and we continue to do that. There are other things, of course, we're doing. We have a very talented team. We're not just only focused on pricing, although it's a specific focus for us. We continue to build out our cost containment programs, which are really important. We have expert clinical capabilities. Our clients are really seeking out more cost containment support in light of the rising healthcare costs. And then we have care navigation capabilities as well, which we're building that help support employers and their employees as they deal with the escalating costs in the U.S. healthcare system. So we're confident that we can work through this. We have an industry-leading position, and we're certainly continuing to stay focused on it.

The next question is from Tom MacKinnon with BMO Capital Markets.

Maybe you can share with us sort of an outlook for the Medicaid dental loss ratio going forward? How much is that going to be improved as a result of any pricing benefits? And as we move into 2026, would you reset your expected -- your earnings on PAA business in the U.S. as a result of perhaps a different expected loss ratio for U.S. Medicaid Dental?

Yes. So I noted that we're very focused on pricing and working through them on a state-by-state and contract-by-contract basis. What we're seeing at the same time is we're seeing rising utilization in the U.S. and that has eaten up some of the pricing gains that we even saw coming through this year. We're still seeing a pretty conservative view on forward-looking trend in utilization. And so we're certainly trying to influence that in what we're doing and the work we're doing with states and health plans. But it is a gradual progress that we're seeing and that we're expecting to make.

So if you were to maintain your best estimate here in terms of your Medicaid dental loss ratio, is the outlook for continued negative insurance experience with respect to this line at the kind of the same level that you had in the quarter? Or should it improve?

So it's important to note that this quarter is a seasonally high quarter. As Tim noted, we do typically see this in the third quarter. We ensure a lot of children, they go back to school. They use the dentist a lot in this quarter. It's traditionally the highest quarter in the year. Q4, by contrast is the most favorable quarter. And so we do expect things to improve in the next quarter. And like I said, going into 2026, we do expect gradual improvement in the loss ratio as we move forward, and we're continuing to work through that.

Tom, it's Brennan Kennedy. Just on your question about the reset, the earnings on short-term insurance. So we do reset that at the beginning of the year, looking at the premiums in force and the pricing assumptions that are in effect.

Tom, it's Kevin. I would say that there's a variety of reasons, but I've been following the benefits business a long time. And when people think their benefits are going to end because they're going to retire or something is going to happen to it, they tend to use them more. And I think that's what we're seeing in the U.S. Medicaid Dental space. There's concern that they'll be losing those benefits, and so they're utilizing them. There's other factors, but that's the big one. We do continue to believe that over time, the states will reflect -- this is an important benefit. David talked about it. This is an important benefit for people. And the states will reflect that cost and that need. It just will take some time to come through. So we still believe that this is going to turn. But as I was saying earlier, when you're in a rapid change in terms of utilization, it can take a little bit of time to get that reflected in the price. So it's not -- it's more of a shorter-term issue, 1 to 2 years. And over the longer term, we expect that to come back to more of our pricing levels when we did the deal.

Great. And then as a follow-up, I mean, if I look at the organic capital you generated and you add the dividend here, it's over 100% of your underlying earnings. And that's been a trend -- that's been -- we've seen over the last several quarters here. So why not step up on the share buyback? I realize you've got some money here to be earmarked for SLC buy-ins. But if you're generating capital at this kind of rate, why shouldn't you step up the share buyback here to offset any kind of pain you might see from some of the dental?

Well, Tom, as you know, we have the remaining purchase for SLC early next year for the BGO and the Crescent transactions. And so our current capital position does reflect that, and we're preparing for that transaction, which will be around $2 billion. Historically, we've also run the buyback at roughly what we're generating for capital, and we're committed to seeing the current buyback through, and we're committed to buybacks on a longer-term basis as one of our tools to manage capital levels. So I think you're going to see us be active on the buyback that we have in place, and you're going to see us be committed to the capital priorities that we've had, one of those being the buyback. And I think that consistent approach to the buyback is something that we think is important and valued by our shareholders.

The next question is from Doug Young with Desjardins Capital Markets.

Just maybe -- I apologize, back to the U.S. medical stop-loss business. I just want to make sure I understand this. So based on your description, it seems like you've had a 2% shortfall that's been running through and you had 3% shortfall coming through this quarter, but you had to kind of make up for the last 2 quarters. So when we look forward to Q4 and we think about the experience that should flow through in Q4, it should be about a 3% loss ratio shortfall. Do I have that correct? Any way you can quantify that? And then second part of the question, are there ways you can temper the volatility such as being a little bit more conservative on the reserve pick early in the year in these times of uncertainty and higher medical cost inflation? I just thought I'd throw that out there.

Yes. So in terms of the -- quantifying it for Q4, I would say, like I said, the 1/1/25 cohort, we did update our ultimate loss ratio pick for the year because we did that, it reflected reserve updates for the first 3 quarters. So in Q4, you would expect it to be 1/3 of that. So it would be a smaller amount in the single digits. And so that's how you should think about it. It was updated by just over 1 point from where we had in Q4.

Sorry. And then just -- so single-digit U.S. dollar millions is the negative impact for Q4 and the experience. Is that what you suggested?

That's what our current projection is based on our cohort and how it has evolved so far. Obviously, it could get a little better than that or it could deteriorate further. And we've seen about 30% of the claim volume that we expect on that cohort. We'll see another 30% in Q4 that will be a more meaningful view of what the ultimate loss ratio will be for this cohort of business from 1/1/24.

And then I don't know for David or for Kevin, just in terms of just mitigating the volatility in terms of is there ways you can be a little more conservative than the reserve picks early in the year? And similar to like property and casualty insurance and reserve development is the way I think of it. And just like I think I've asked this before, but has there been any conversations around that?

Doug, it's Brennan Kennedy. So using our current method, this is the volatility we see. We continuously look at ways to refine things that we're doing to maintain best practice, and this is something that we've had discussions on and we will take away.

Okay. And then just second, maybe for Manjit, Asia underlying earnings, 16.2%. I think you've hit your target already. Is there anything unusual this quarter? Is this kind of like the new sustainable run rate? And can you talk a little bit about where you think you can take that underlying ROE in Asia?

Doug, it's Manjit. So as you noted, we've had some pretty strong performance in Asia over the last little while. I'm pleased with what we've been able to deliver. We delivered 17% earnings growth last year. And year-to-date, we've delivered 20% growth. I think there are a number of factors that's driving that growth, Doug. So first of all, I feel we have very good fundamentals. We're in attractive markets with high growth potential. We have good partnerships across the region. We've got strong distribution across banca, agency and broker, and we've got a talented team. We've also made some pretty good investments over the last little while. We've invested in digital to increase our straight-through processing. We've invested in delivering better client experiences, which has resulted in record high client satisfaction scores and also in our agent experience. We've also invested in our brand, and that's also resulted in record high brand awareness. And the third thing I'd point out is that we've also increased our focus and capabilities to drive strong execution. So I think all those things are contributing to the strong results that you're seeing. In this current quarter, the results did reflect some favorability that we had in high net worth mortality as well as some strong security gains. So those will bump around quarter-to-quarter. You won't necessarily see them in every quarter. Some quarters, it might go a little bit the other way. So I think fundamentally, we've got a very strong business and expect to see strong performance in Asia going forward.

Doug, it's Kevin. Sorry, I was just going to say it's been a long time since we've seen 6 of our 8 markets growing in double digits. And I think Manjit is doing a good job creating momentum across the Asia platform, and I think that's really important. And it's all the -- it's a whole bunch of factors, but leadership matters, and I think he's doing a great job driving that change in the Asia outlook.

The next question is from Mario Mendonca with TD Securities.

I want to look beyond 2025 and the medical stop loss and think about '26 and help me sort of gain this out. But assuming the company is sufficiently conservative in building the reserves throughout the year and again, perhaps in Q4, and you've got it right, assuming everything works out right, would it then be appropriate to assume that the experience gains and losses that we see in the U.S. would relate solely to dental and solely to experience on the 2026 cohort. Is that the right way to think about it?

Mario, it's David. Yes, that's a fair assumption.

And then -- so help me then go to the next level. So if you get that right, then growth in this business, then, of course, there would be a change in the level of experience gains relative to last year, that certainly helps. But what's the other big driver? Would it simply be the net premiums in the business and the extent to which that grows or perhaps shrinks as you push through some significant pricing increases? Is that the way to think about it that the base from which the short-term insurance earnings emerge could potentially decline during the renewal period?

That's the way to think about it is the base of premiums does drive ultimately the earnings over time.

And is it your expectation?

Sorry, Mario, it's Kevin. I mean we've I think exactly like you're discussing. We've got the ability to price for the cost because the employers want this coverage. We've got the experience to underwrite this well. And it's that the costs have been rising rapidly with some of the structural changes that are happening in the U.S. And so that will eventually level itself out, and we will be able to price for the costs that we're seeing there. So I think you've got that exactly right. And our expectation is we'll be able to price right now for the 2026 experience that we expect to see. So that's our expectation. But we're watching closely what's going on with those structural changes in the U.S., which are driving that higher cost.

Where I was going with this is, is there a potential other sort of shoe to drop in the form of a much smaller business in 2026 relative to 2025, like that base, that install of business simply declines as your customers go to other providers or decide to self-insure. Is there some reason why that base could shrink materially in '26?

So no, we have -- we're very confident in our plans and how we're approaching the market. We have a great platform. We have a great distribution network, and we have strong customer relationships. We have historically had some of the most low loss ratios in the business, and we expect that to continue. We are going through this period of adjustment for sure, but we feel very well-positioned competitively, and we continue to expect to grow the business over time.

I would add to that, Mario, that others are seeing the same higher cost. And so it's not like we're negatively positioned for that. In fact, given our scale, we're positively positioned. So I think our strategic positioning would support growth in that sort of environment versus declines. We do have pricing discipline, which is serving us well because our loss ratios remain less than the industry, but the industry is experiencing the same higher costs, and it's going to have to reflect that in pricing as well.

So that's your real -- that's the real takeaway. I'm taking from what you're suggesting that strategically, competitively, Sun Life is not disadvantaged. It's just a matter of the entire industry repricing going into 2026.

Yes. I'd even say we're advantaged.

The next question is from Darko Mihelic with RBC Capital Markets.

Just a follow-up on that line of questioning there. I just want to ensure one thing. Are we still talking about your targeted return of 7% in the stop loss? As you hit...

So if you look at our quarter results, our group benefits after-tax margin was at 6.9%, so slightly below our long-term target of 7% plus. We do price for a margin in the medical stop-loss business higher than what we're currently experiencing. And so we certainly expect that to move up over time. As Kevin noted, our loss ratios are 10 to 15 points better than others that disclose their loss ratios in the industry. So we're in a good position here, and we continue to work through the cycle.

Okay. So it's a hardening market and your expectation would be that with the entire market hardening that you should actually gain share in '26. Is that how I should at your targeted profit margin. Is that -- I just want to be very clear on that.

Dark, I'd say it a little bit differently. We're holding our pricing discipline, and that will -- it will a little bit depend on what others are doing, but others are seeing high loss ratios as well. So we expect them would -- they would also be reflecting that. So we'll see how that turns out, but we will hold our pricing discipline. But we are very good risk selectors as well, and we've added additional capabilities, which support us being -- getting the types of margins that we have been getting. So we still see this as a really good business for us. We see -- we have a great management team there. And I think that over time, that we'll get back to being in a very strong competitive position. We'll see what others do when it comes to pricing. as we go through the process for next year. But we are not giving up on our pricing discipline, and we certainly think that even given that, we'll keep our scale.

Okay. Okay. That's helpful. And just a follow-up on the -- for the fourth quarter in terms of the expectation. I just wanted to make sure that I understood something. You had mentioned that the -- reserving this quarter for the stop-loss was based on 30% claims experience. Is that different from the 50% reports that you get by this time of year?

Yes. So this is David again. So this is an accumulation product, and we hold reserves for 26 months. And so how we [Audio Gap] to assess our ultimate loss ratio pick. We'll see another 30% of claims come through in Q4 and typically another 30% in what would essentially be [Audio Gap] how it will play out.

The next question is from Gabriel Dechaine with National Bank Financial.

I guess, I got cut off. My line dropped there last time around. My second question, on the dental business and the repricing outlook there, there's a couple -- it's not so straightforward in that if you need 10%, 15%, 20%, whatever the number is, percentage pricing increases for your counterparties to accept those, they have to also accept an accelerated recognition of loss experience. So I understand it's a 3-year look back, maybe 1- or 2-year good years in the look back in there. So you want to have them emphasize the most recent experience, which hasn't been as favorable. I'm wondering how those discussions are progressing, if you can shed some light on how difficult of a challenge that is, if it is.

Yes. So it's David again. Thanks for the question. So we continue to work through it. As Kevin noted, this is a repriceable business, and we ultimately expect repricing to catch up with the experience. In Medicaid, the rates are reset annually and by the state. And they typically look back, as you said, through a period of time, can be more or less than 1 year, either directly with us, where we have those direct relationships or through health plans where we're subcontracting to those states. We can influence the rates. We provide a lot of data and insight and our opinion. And as you noted, it does include historical experience, but it also has to take into consideration a forward look for what utilization is going to be in the future And that's where we're seeing some conservatism in the rate setting process. Some of it is related to the dampening effect of really the broader government pullback on spending in healthcare. And so people are taking a more conservative view of what that utilization might be. But what we're actually experiencing is a higher rate of utilization in the claims experience from what they're projecting and actually what we were seeing even pre-pandemic when rates were more normalized. So we do expect it to catch up and return, but it is taking time, and we continue to influence the rate setting process as we educate on what we're seeing through experience coming through.

So there's a disconnect. Yes. Sorry, go ahead.

I was just going to say -- sorry, I thought as your last question, and I'm going to just add to it a little bit.

What is my last question? It's not unrelated. So stick with the dental, I guess.

Yes. Well, I was just going to say, Gabe, that it's -- I'm glad you asked the question again about the dental business, and we've had a lot of questions about stop-loss. And they are going through a structural change to some of these things in the U.S. This is a repriceable business. We will -- we've got a strong management team and capabilities and scale there. David comes from an IT and operations background, and he's been in the group business his whole career. He's ran our employee benefits and also our -- he's ran our dental business. He's ran IT there. I have a lot of confidence that we're going to work our way through these issues. And I think you heard that on the call. If you look at the quarter, the diversified nature of our business model and the growth that we saw in Asia, in Canada and the strong asset management results we're in line with our medium-term objectives, right? We -- so I think that I have a lot of confidence that Asia will -- or Asia and Canada will continue to do well, but the U.S. will turn this around, and that's going to be part of our growth story as we go forward. But it's going to be -- it's a difficult time, but they'll work their way through it, and they're doing all the right things to do that. But as a company, if you look at the diversified nature of our business, I still am committed even with the U.S. being a little slower to achieving our medium-term objectives, and you saw that in the quarter. So I think it's a very strong quarter in Asia and Canada under Manjit and Jess's leadership. I think we're poised for growth in the asset management space. And we're going to work through these issues in the U.S., and we're going to work through it together, and we're going to work through it with the same type of discipline that we provide. But we have good people there, and we have good scale, and we have good business capabilities. So it's -- when I step back, I see us really positioned quite well through the quarter and that it was a strong quarter.

No, I'm not disputing that. I think even in -- with this challenge, you have an 18% plus ROE or something like that. So it's just -- we're learning as we go a little bit and trying to get a sense of the moving pieces and what could -- what sort of timing and we should expect for stuff to stabilize, I suppose. But that brings me -- just to clarify Tim's comment about the Q4 stop-loss outlook, I believe you -- just to dumb it down, you've adjusted your reserves to accelerate recognition of these -- the trends in that 30% of the claims volume you've seen on the Jan 1 cohort such that if you have the same experience in Q4 as you did in Q1, same claims or whatever, you would have a lower experience loss, but then you would probably have some other item -- line item elsewhere that would be lower, I assume. I don't know. Maybe we can take that offline.

Yes. So it's David. I'll just quickly comment that, yes, we have updated our best estimate loss ratio pick for the entire 1/1/25 cohort, and that reflects what we currently expect in Q4, but it can change based on the claims that show up in the quarter. And -- but at the moment, that is how we are viewing it.

The next question is a follow-up from Paul Holden with CIBC.

I guess the question that we're all trying to get at on U.S. dental is that USD 100 million profit target. Are you confident that, that can be achieved in 2026 or too early to know because of the uncertainty in terms of these utilization rates and uncertainty in pricing?

Yes. So I think we've signaled that we are continuing to focus on pricing, and we're making progress. We're taking a very careful approach to it and working closely with the states and the health plans we work with. But it's going to be slow progress over the course of 2026, and we do need to see some of the more recent utilization trends being better reflected in our pricing as we move forward, and that's something that we're working through.

Okay. So $100 million in '26 might be too much to ask at this point. That's what I'm going to take away.

We have a follow-up from Tom MacKinnon with BMO Capital Markets.

Yes. A question just with respect to other fee income, especially in Canada, up nicely year-over-year and quarter-over-quarter, probably up better than the asset growth rate. Is there anything else in that number that could be driving that? And how sustainable is it going forward?

Tom, this is Jessica. Yes. No, I think there are two pieces. I think one is that indeed, our asset management and wealth is quite strong. If you look at our core, it was up 13%. If you look at the underlying growth, both in insurance investment, other fee income is underlying 7% growth. So our AUMA grew up by 11%. So that definitely helps a lot. And then I think our group business on the fee side has also increased. So you see our group premiums actually increased by 6%. So as Kevin was saying, I think both -- in Canada, there's strong underlying growth, and we continue to do well.

So that kind of trend is continue -- should continue assuming asset -- assuming the markets behave. But I guess how much of that is really driven by ASO fees, which are probably just more a function of net premium growth in group?

Yes. I think the wealth part, we expect to continue to do the momentum. You see that actually, if you take out DBS, which is more lumpy and is a softer market this year, we had net inflows in Canada of $1.5 billion, which is almost twice the net inflows from last year. So I think you'll continue to see strong growth in our asset management and wealth AUM. And if you look at year-to-date, our underlying net income in Canada is at 8%, up, which is, I think, well above our medium-term target of 6%. So we feel very confident of our 6% growth.

This concludes the question-and-answer session. I'd like to turn the call back over to Natalie Brady for closing remarks.

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, and have a good day.

This brings to an end today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.