Sun Life Financial Inc. logo at the company's annual general meeting in Toronto on May 6, 2015.Chris Young/The Canadian Press
Sun Life Financial Inc.’s SLF-T profits climbed to more than $1-billion in the third quarter owing to strong group health and insurance sales in North America, which offset a lagging U.S. dental business that is still feeling the fallout of pandemic health restrictions.
Canada’s second-largest insurer reported adjusted or “underlying” net income of $1.01-billion or $1.76 a share in its third-quarter, up from $930-million or $1.59 in the same period last year. Underlying net income strips out investment losses and makes other accounting adjustments. Analysts had expected income of $1.70 a share, according to LSEG data.
Chief executive officer Kevin Strain said part of the success of the quarter was because of stronger earnings in their group benefit businesses in both Canada and the United States, which account for 31 per cent of underlying earnings and were up 21 per cent year-over-year.
Earnings from Sun Life’s entire Canadian operations rose 11 per cent to $375-million in the quarter, which includes a boost from higher mutual fund sales in the region’s wealth and asset management division.
The quarter also saw an executive shuffle in Canada as Jessica Tan was appointed president of Sun Life Canada on Sept. 30, replacing Jacques Goulet who assumed the new role of executive chair of Sun Life Canada.
In the United States, Sun Life reported underlying net income of US$161-million – up US$21-million from the prior year. And while the group and health benefits business benefited from improved mortality rates, it was partly offset by lower revenue at DentaQuest, a Sun Life subsidiary that provides U.S. Medicaid dental benefits.
Despite the dental business hitting an all-time high of 35 million members, making it the largest dental benefits provider in the country, Mr. Strain said in an interview with The Globe and Mail that enrolment continued to stall this year as a result of public health restrictions following the pandemic.
“DentaQuest still has work ahead, but the company expects results to improve towards the US$100-million of earnings in 2025 that we have planned for,” he added, saying the company will continue to adjust pricing in its Medicaid dental business and generate new sales.
During the pandemic, the government could not disenroll people from Medicaid, even if they no longer qualified. Since the guideline was lifted last year, disenrollment numbers have been higher than usual. Sun Life U.S head Dan Fishbein told analysts during a call on Tuesday that the insurer saw about 19.5 per cent of initial members drop off.
“So while we have cut expenses and driven more efficiencies, that hasn’t completely kept up with that loss of membership,” he said on the call. “However, the membership is stabilizing and actually with new sales starting to grow.”
For example, Mr. Fishbein said Sun Life won three Medicaid contracts in California – a state that has one of the largest Medicaid populations in the country.
Sun Life Asia reported mixed results for the quarter, with underlying net income of $170-million, up just 2 per cent year-over-year. The region continues to see strong sales momentum in Hong Kong and in India’s bancassurance channel‚ which allows the insurer to sell its products to the bank’s client base. Sun Life also saw strong sales momentum in Indonesia, Mr. Strain told analysts, where the company is preparing to expand on a current bancassurance deal with CIMB Niaga on Jan. 1.