Two hours after landing at the Hong Kong International Airport, Sun Life Financial Inc. SLF-T chief executive Kevin Strain was climbing to the top of Hong Kong’s Peak Trail. The popular hiking route overlooks Victoria Harbour and scaling it is Mr. Strain’s favourite pastime in the region.
As a resident of the city when he was head of Sun Life Asia from 2012 to 2017, it’s an area he knows well. But he hadn’t visited for three years because of China’s strict COVID-19 lockdowns and quarantine regimes.
Now, as those restrictions ease up, the head of Canada’s second-largest life insurer since 2021 says the current economic challenges facing some Asian countries – particularly mainland China, which is seeing a surge of COVID cases – opens the door for deal opportunities with less competition from local companies than before.
“You are not seeing as many Chinese companies at the table – they are not as active inside of China at this point in time,” Mr. Strain said during an interview with The Globe and Mail. “You are seeing more capital constraints because of the current conditions, and companies are being more selective and not just targeting anything.”
In many deals, he said, there are only two or three contenders, versus the typical 12 to 15 who would be looking to negotiate in the past.
“If you are in a strong capital position, is it to your advantage to take a look now at some of these opportunities,” Mr. Strain added. “We’ve been building relationships with some target companies over a number of years and think this is the perfect timing.”
Along with Ingrid Johnson, the president of Sun Life Asia, Mr. Strain spent several weeks last month visiting company branches in Hong Kong, Indonesia, Malaysia and Vietnam, where employees are working in offices full-time again.
The reopening of Hong Kong’s border with mainland China this past weekend will boost the overall economy, including insurance and banking sales. But the number of COVID cases is expected to keep surging on the mainland, as they did in North America and Europe in early 2022.
“We are mostly past COVID in North America, but parts of Asia are just moving into it, so that actually gives us a bit of an advantage because some companies in Asia aren’t yet thinking about opportunities,” Mr. Strain said.
The insurer has been boosting its wealth and asset management business in Asia, and the region now accounts for about 18 per cent of Sun Life’s total profits. It saw $175-million in underlying net income in the third quarter, which ended Sept. 30, 2022, up 21 per cent from the year prior. The boost was partly driven by improved mortality, reflecting lower COVID-19-related claims in countries that are emerging from pandemic waves.
Despite the pandemic, Mr. Strain has kept a robust acquisition pipeline since he became CEO in June, 2021. In total, Sun Life has completed six deals in the past 18 months. In Asia, the company completed a bancassurance deal in Indonesia with PT Bank CIMB Niaga Tbk, and raised $432-million in an initial public offering it launched with joint venture partner Aditya Birla Sun Life AMC Ltd.
At the same time, the company announced the sale of its U.K. operation for $385-million in 2022, as well as part of its sponsored-markets business in Canada.
However, the most significant deal was the $3.1-billion purchase of DentaQuest, one of the largest providers of Medicaid dental benefits in the United States. The deal, which closed in June, 2022, is the second-largest acquisition in the history of the company, following the $7.3-billion purchase of Clarica Life Insurance Co. in 2001.
“DentaQuest has really made us a strong player in the United States, and we are now considered a major competitor by some that didn’t see us that way before,” Mr. Strain said.
Along with the purchase of Pinnacle Care International in 2021, DentaQuest is part of Sun Life’s growing extension into the health care business.
“One of the biggest issues we are going to face as a society in Canada – as well as in the U.S. and Europe – is how do you get access to the care you need?” Mr. Strain said. “We have always been focused on helping clients achieve lifetime financial security and to live healthier lives and part of that now is about helping clients get access to the care they need.”
Mr. Strain said shifting into the health care business is a logical extension for insurers as they already provide similar navigation to organizations with group health benefits for employees, such as listing specialty doctors and connecting with treatment centres after a diagnosis.
“We have always had insurance and asset management – and five years ago we extended into alternative asset management,” he said. “Now, we are stepping into helping with access to care, helping provide the navigation to health care and helping provide for the cost of paying for health care.”
That includes a continued focused on digital health care, he said, particularly with virtual doctors and online mental-health support that grew in popularity during the pandemic.
“There is a major concern as baby boomers retire, there will be the combination of them leaving health care jobs such as doctors, nurses, orderlies, etc.,” Mr. Strain added. “But, as the baby boomers age, how do we get the right health care for them? If you look today, there are so many Canadians who do not have a family doctor and they don’t know where to go. That is where virtual care can help them.”