The insurer, Canada’s second largest, has done a flurry of deals throughout the past 18 months, completing 12 transactions since March 11, 2020, when the World Health Organization declared a global pandemic.
“We generate a significant amount of capital and we’ve been very good at deploying it,” Mr. Strain said in an interview.
He added that any future deals would have to bring capabilities that align with the company’s growth strategy, which consists of four “pillars”: expanding Sun Life’s U.S. group benefits business, growing its global asset management segment, boosting its presence in Asia and making the company into a leader in Canada’s insurance and wealth management market.
“Canada is largely consolidated, so it means that there’s more chance of transactions in the U.S. and Asia – which are bigger markets – than there is in Canada,” Mr. Strain said.
Any deal worth considering, Mr. Strain continued, must also have “financial discipline” and support the company’s three- to five-year objectives, which include increasing earnings per share by 8 to 10 per cent, obtaining a 16-per-cent or greater return on equity and reaching a dividend payout ratio of 40 to 50 per cent.
Mr. Strain’s focus on Asia is born of experience. Beginning in 2012, he spent five years as president of Sun Life Asia, during which he expanded the company into Vietnam and Malaysia. He took over Sun Life’s top job in August following the retirement of then-CEO Dean Connor.
Asia now accounts for more than 20 per cent of the company’s profits, up from just 6 per cent in 2011. As Mr. Connor does, Mr. Strain believes that the region – where Sun Life operates in eight markets – will become an even larger part of the insurer’s footprint.
In October, Sun Life hired Ingrid Johnson as the new president of its Asian division. She replaced Léo Grépin, who led the group for almost two years before departing the company on Oct. 15.
“Relationships are so important in Asia,” Mr. Strain said. “Everything that happens in Asia will be unlocked through the people who work for us there, the partnerships we have and building on those relationships. And Ingrid is someone who will take the time to understand every aspect of what’s happening, to drive the results.”
In countries such as the Philippines, Vietnam, Indonesia and Malaysia, opportunity lies in the developing middle class, who are looking for enhanced insurance products, Mr. Strain added. He said he also sees untapped potential in the growing high-net-worth market in China.
“We’re in three of the four largest markets in the entire world, in terms of population, so there’s just tremendous opportunity if you take the right steps.”
The new deals and partnerships the company announced throughout the pandemic have all been part of a “programmatic” merger and acquisition strategy, meaning Sun Life is focusing on small-to-medium-sized transactions, but is doing them in relatively large numbers. It’s a strategy Mr. Strain said he won’t change in the future.
In June, 2020, when many Canadians were still unable to see family doctors in person, Sun Life boosted its digital footprint in the Canadian health care sector by taking a minority stake in Montreal-based telemedicine startup Dialogue for $32.7-million. Last week, the insurer doubled down on that bet, increasing its stake to nearly one quarter of the company with an additional $48-million investment.
Mr. Strain will also look at larger deals if they meet his objectives. In October, the insurer doubled the size of its U.S. employee benefits business with a US$2.48-billion acquisition of oral health provider DentaQuest. The deal allows Sun Life to enter the underserved market for government-funded dental care.
At the end of 2020, Sun Life acquired a 51-per-cent stake in U.S.-based Crescent Capital Group, a loan provider that manages US$28-billion. The deal helped bolster Sun Life’s asset management division, which now accounts for about 50 per cent of the company’s underlying net income.
“Today, we’re as much an asset management company as we are an insurance company,” Mr. Strain said.
“If you look at the asset management businesses, there’s none that have the insurance strength that we have.”
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