Sun Life Financial Inc.'s new chief executive aims to boost the company's profits to about $2-billion per year by 2015, turning it into the top life insurer in Canada.
Dean Connor didn't shy away from setting high expectations when he outlined his new strategy for analysts in Toronto Thursday.
"This company is changing," he said.
Mr. Connor, who has been CEO for about three months, is throwing down the gauntlet to rivals Manulife Financial Corp. and Great-West Lifeco Inc.
Canada's top three life insurers are each holding their own right now, but Sun Life wants to rise above the pack, he told reporters. The company has recently edged up from the No. 4 spot to No. 2 for individual life insurance sales in Canada.
Mr. Connor faces major obstacles, including low interest rates, in his quest to turn around the company's fortunes. All life insurers took a pounding during the financial crisis. But while Manulife was hard hit early on, analysts recently became more concerned about Sun Life, in part because recent financial results indicated its exposure to interest rates was more troublesome than previously thought. The company lost $525-million in the fourth quarter, much more than analysts had expected.
Since becoming chief executive, Mr. Connor has moved rapidly to signal that he will not necessarily follow the strategy of former CEO Don Stewart. He has already pulled the plug on sales of variable annuities and individual life insurance products in the United States in an effort to contain Sun Life's exposure to interest rates and stock markets.
On Thursday Mr. Connor acknowledged there is more work to do, but said he expects the company will be able to achieve an operating return on equity of 12 or 13 per cent by 2015.
To meet its goals, Sun Life is counting on stock markets rising by about 8 per cent a year and a gradual increase in interest rates. Analysts at the investors' meeting on Thursday questioned whether those assumptions were realistic.
Further illustrating the tightrope that Mr. Connor must walk in such a turbulent economic environment, one analyst asked if he's contemplating an increase in the dividend, while another asked if he might reduce it.
In response, Mr. Connor said he expects Sun Life will have excess capital in 2015, but it's premature to say how he would spend it. Other Sun Life executives said they believe it's important to maintain the current dividend, but it's too early to increase it given the current environment.
The $2-billion goal for 2015 refers to operating profit – that is, earnings before any unusual writedowns or charges. But that target is 34 per cent higher than the amount analysts expect the company to earn this year, Barclays Capital analyst John Aiken said.
"The implied growth appears to be quite a stretch goal and is dependent upon several macroeconomic factors," Mr. Aiken wrote in a note to clients.
The bulk of Sun Life's expected 2015 earnings, $900-million, would come from Canada, up from $660-million last year. Its main focus here is to capture retirees, with roughly 1,000 Canadians turning 65 each day over the next 20 years.
Sun Life's U.S. operations, asset management business and Asian operations would contribute the other pieces of its 2015 profits. The company forecasts that its operations in Asia will post the largest growth rate, although analysts were somewhat skeptical.
Outside Canada, Mr. Connor's goals include bolstering Sun Life's Asian and global asset management businesses, and becoming a top five provider of voluntary benefits in the U.S.