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Sun Life eyes acquisitions as earnings beat market view

Sun Life Financial building in Toronto.

FRED THORNHILL/REUTERS

Canadian insurer Sun Life Financial said it was looking to use its financial muscle to make acquisitions after reporting fourth-quarter earnings that exceeded market expectations.

Chief Executive Officer Dean Connor said in an interview the company still had $1.6-billion in excess capital having spent $400-million repaying debt in January and also had flexibility to borrow to fund an acquisition if it needed to.

"We've got a very strong balance sheet so we will continue to be actively involved and engaged in looking for M&A. We've got lots of firepower but we'll continue to be very disciplined in the way we go about it," Connor said on Thursday.

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Sun Life has been acquisitive in Asia, a key region where it is expanding rapidly selling products to the growing middle class. The strategy is helping it drive growth and diversify from domestic markets where competition is intense.

The company reported earnings per share, excluding one-off items of $1.05, up from $0.91 the previous year. Analysts had on average forecast earnings, excluding one-off items, of C$1.02, according to Thomson Reuters I/B/E/S data.

Net income, excluding one-off items, grew by 14 per cent to $641-million in the quarter to Dec. 31, 2017, Sun Life said. That included a 45 per cent increase in underlying net income at its U.S. business to $126-billion.

The U.S. performance benefited from the integration of a large employee benefits business which Sun Life acquired from Assurant in 2016 for US$940-million, a deal that made it the sixth biggest provider of group benefits in the United States.

"We're meeting all of the goals we set for ourselves with that acquisition," Connor said, adding he felt confident about prospects for that business in 2018.

"Demand for what we do is driven by volumes related to employment levels and wage levels. The U.S. economy is firing on all cylinders and that's driving more growth in our industry than we've seen for quite a while," he said.

Underlying earnings in Asia grew by 29 per cent to C$80-million which Connor said was in part due to strong sales of wealth products, particularly in India and in Hong Kong and also the benefits of buying out joint venture partners in the region.

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Sun Life said underlying earnings in Canada, its biggest market, fell by 5 per cent to $232-million during the quarter.

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