Sun Life Financial Inc. surpassed analysts’ profit expectations as Asia’s economic recovery escalated, especially after Hong Kong reopened its border with mainland China earlier this year.
Sun Life Financial SLF-T reported its second-quarter “underlying” net income of $920-million or $1.57 a share, up from $808-million or $1.38 in 2022′s second quarter. The insurer emphasizes “underlying net income,” a version of earnings that strip out investment losses and make other accounting adjustments.
Canada’s second-largest insurer reported a 14-per-cent jump in adjusted earnings, which chief executive Kevin Strain said was driven by stronger insurance sales in Asia and good “momentum” from several acquisitions and strategic partnerships made over the past year.
In January, the company announced a 15-year bancassurance deal – a deal between a bank and insurance company – with Dah Sing Bank in Hong Kong. Mr. Strain said in a statement the partnership has had a “strong start” with the bank that now offers Sun Life insurance products to its more than 570,000 retail bank customers.
Sun Life Asia, which operates in eight Asian countries, reported an underlying net income of $150-million for the quarter – a 27-per-cent increase from the same quarter in 2022.
The Dah Sing Bank bancassurance deal added to the larger boom in insurance sales for the Hong Kong region, which has seen four times the sales volume since COVID-19 restrictions were lifted at the end of 2022. As well, during the second quarter of this year, Hong Kong opened a new wealth management office for high-net-worth clients and introduced eSunPro, a digital health care provider that can assist in diagnosis and post-treatment care.
“In terms of our prepandemic level of sales, Asia roughly accounted for around 10 per cent to 15 per cent [of sales],” Ingrid Johnson, president of Sun Life Asia, said during an analyst call. “We’re now seeing this being more than double that.”
Sun Life’s acquisition of Medicaid dental provider DentaQuest, which closed in June, 2022, was another driver to the quarter’s profit. The dental insurer contributed to the 57-per-cent jump in profit for the U.S. business, along with higher investment contributions from clients and an improved mortality rate compared to last year when COVID-19 outbreaks were still elevated.
During the quarter, Mr. Strain said, the company recorded the largest Medicare Advantage contract in DentaQuest history – expecting to add approximately 700,000 Medicare and Medicaid members over the next year. The new contract brings the total sales for the dental program to about $580-million.
In the Canadian division, underlying net income climbed to $372-million, up $73-million or 24 per cent from the year prior. While the wealth and asset management business saw sales drop by $3-billion, both individual insurance products and the group benefits business in Canada saw positive sales of $25-million and $48-million, respectively. The jump in profit for the group benefits business was driven by lower claims volumes and shorter claim durations, as people re-enter the work force from disability or sick leaves sooner than projected.
During the second quarter, the Canadian business also launched online Lumino Health Pharmacy, and last month, Sun Life entered an agreement to purchase a majority stake in telemedicine company Dialogue Health Technologies Inc. for $277-million.
The insurer also announced plans on Tuesday to buy back 17 million shares, or about 2.9 per cent of its common shares outstanding, in the coming year, pending regulatory approval. It is Sun Life’s first buyback announcement since 2019.
With about $2-billion currently sitting in cash reserves – and growing – analysts continue to inquire about Mr. Strain’s next big move. Over the last two years, Mr. Strain has completed more than eight deals across the globe.
“There is a big focus right now on executing on the capital we have already deployed,” Mr. Strain told The Globe in an interview.
“That said, we have such a strong capital position that we can support our announced share buyback that is subject to regulatory approval, but also we’ve left ourselves with the flexibility to do M&A if the opportunity arose to add either scale or capabilities to areas we wanted to.”