Sun Life Boosts U.S. Business With DentaQuest Buy

The $2.48 billion deal will position Sun Life as a leader in providing publicly-funded dental benefits in the U.S.
Matthew HellerOctober 4, 2021

Canadian insurer Sun Life has agreed to buy DentaQuest for $2.48 billion in a move that will allow it to enter the underserved market for publicly-funded dental benefits in the U.S.

DentaQuest is one of the largest providers of Medicaid dental benefits in the U.S., servicing more than 33 million members. It also offers insurance to employers and individual customers.

Sun Life provides dental insurance through employer-sponsored plans, but not publicly subsidized plans. The acquisition of DentaQuest, announced on Sunday, will double the size of its U.S. employee benefits business by revenues and will position it as a leader in providing government dental benefits.

“We were looking at ways to add scale and capabilities in our U.S. group benefits space, and to be quite frank, we were smaller than we would have liked to have been on the dental side, “ Sun Life CEO Kevin Strain told The Globe and Mail.

“When this transaction came up, it lifted us significantly, obviously on the dental side, but it also introduced us to – and this had not been on our radar prior to this – a business that was significant in the Medicare and Medicaid space,” he said.

According to Sun Life CFO Manjit Singh, the deal will add US$100-million in underlying profit in the first full year after closing and boost the contribution of the insurer’s U.S. division to total underlying profit to more than 19%, up from 16% at the end of 2020.

DentaQuest is currently owned by the nonprofit CareQuest Institute for Oral Health and private equity firm Centerbridge. Its 2021 revenue is projected at $2.7 billion and, according to Sun Life, it has seen robust growth in its Medicare Advantage and other segments.

“They have done a great job of finding very creative ways and approaches to expand access to previously underserved populations,” said Dan Fishbein, president of Sun Life U.S.

National Bank research analyst Gabriel Dechaine said DentaQuest’s government program business could benefit from a significant expansion of the pool of members if President Biden’s “Build Back Better’ bill passes” with dental coverage included for all Medicare recipients.