The logo of Sun Life Financial is seen in Toronto May 6, 2015.Fred Thornhill/Reuters
Sun Life Financial Inc.'s little deals and investments in Asia are adding up.
In the last three years Sun Life has committed nearly $1-billion to the region, said Dean Connor, chief executive of Sun Life. He has plans to make the Toronto-based insurer's presence in Asia a bigger part of his company, but making big bets isn't his style.
On Wednesday, Sun Life said it will buy the remainder of an Indonesian insurance business called PT CIMB Sun Life from Malaysian CIMB Group, the continuation of a joint venture forged in 2009. Investments like these can fly under the radar when deal values aren't announced and price tags are diminutive. In this case, the transaction was worth about $55-million.
But these bite-sized acquisitions have been compounding. This is the third deal announced in Asia in the last few months, following plans to increase its stakes in partnerships with large financial companies in Vietnam and India.
Sun Life and Manulife Financial Corp. have maintained a presence in Asia for decades. But their focus on the region has intensified in recent years as the rising middle classes in certain countries, such as China, create new markets for life and health insurance, as well as savings products.
"Indonesia is the fourth most populous country in the world – 250 million people. The top 80 million can afford what our industry sells, and only about 15 million have actually bought anything," Mr. Connor said. One of the main products Sun Life sells in the region is called Universal Life, which is a hybrid life insurance and savings product.
Now the Asia-Pacific region is in a transitional period, according to a 2016 outlook report by Ernst & Young. "With economic growth in the region trending slower than in recent decades, and trade activity subdued, the likelihood of a downturn is raising further concerns about the life insurance gap," the report states.
Sun Life's president in Asia, Kevin Strain, has said that insurance industry growth has tapered across Asia amid slower economic growth and market volatility, but that there were still opportunities to expand and improve. Changes to health care systems are converging with new technologies, changing the way people in some parts of Asia buy insurance and file claims. The company has been investing in digital systems.
Other financial firms are making similar targeted, incremental moves in developing economies. Peter Routledge, analyst at National Bank Financial, likens Sun Life's slow-but-steady style to Bank of Nova Scotia's build out in Latin America. Scotiabank CEO Brian Porter has said the bank will focus on the fast-growing "Pacific Alliance" countries made up of Mexico, Chile, Colombia and Peru, where profits climbed by 21 per cent in the most recent quarter.
"Sun Life has taken a measured approach, entering into foreign markets through joint ventures with experienced international partners and gradually increasing its presence as it familiarizes itself with a particular market's competitive landscape," Mr. Routledge wrote in a note to clients.
Joint ventures allow Sun Life to get a foot in the door, and invest more once it knows and understands the business, reducing risk.
At the same time, regulatory pressures and consumer awareness are reshaping insurer's products and plans in some markets. In Indonesia, for example, the government's changes meant to encourage consolidation of smaller insurers were part of what made Sun Life's most recent opportunistic deal possible.
Sun Life also said recently that it would spend $40-million on improving its agency force in Indonesia, bolstering its online presence and boosting its brand after opening three new offices.