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DentaQuest deal to scale Sun Life US business, spur price competitiveness – exec

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DentaQuest deal to scale Sun Life US business, spur price competitiveness – exec

Sun Life Financial Inc.'s planned acquisition of dental benefits provider DentaQuest will help scale up the insurer's U.S. business and allow it to be more aggressive on pricing, according to a top executive.

Speaking on a conference call to discuss the US$2.48 billion deal, Sun Life Financial U.S. President Daniel Fishbein said the company was looking for revenue synergies from the DentaQuest deal in two main areas: commercial dental and the white-label business for regional and national health plans.

On commercial dental, Fishbein noted that DentaQuest had only operated in "a handful of states," while Sun Life has national distribution. Putting that together with DentaQuest's capabilities in areas such as claims processing care management and dental expertise, Fishbein said the company expects commercial dental sales to rise significantly.

While Sun Life's U.S. business will continue to look at potential deals following the DentaQuest transaction, Fishbein said it is now "very well along in filling in the blanks that we had identified" thanks to the scale this deal provides.

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Along with simply getting bigger overall, a further ambition for Sun Life's U.S. business is to expand its stop-loss offering, Fishbein said. Some expansion had been achieved through the acquisition of PinnacleCare International LLC, but the company also wants to grow the stop-loss business in the pharmacy industry. The company will look at achieving that growth goal through both M&A and partnerships, Fishbein added.

The DentaQuest deal will add 33 million members to Sun Life's dental benefits business, which now has 1 million commercial members. Some 29 million of the DentaQuest members are from government programs, while 4 million are commercial members.

Sun Life expects the acquisition to add 17 Canadian cents to its underlying EPS and add 42 basis points to return on equity in 2022. Those numbers will rise to 24 cents and 50 basis points, respectively, in 2024.

The insurer expects pretax transaction and integration costs of about US$250 million and run-rate cost savings of US$60 million to be achieved in 2024. Fishbein said the US$60 million "was not a huge expense synergy" for an acquisition of this size.

"This is much more of a growth story," he said.