Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sun Life Financial Inc (SLF, Financial) reported a strong quarter with an EPS of $1.76, up 11% year over year, exceeding their medium-term financial objective.
- The company maintained a robust capital position with a LICAT ratio of 152%, reflecting strong financial discipline.
- Sun Life Financial Inc (SLF) achieved solid growth across all business groups, with notable increases in Canada and US group health and protection sales, and individual protection sales.
- Assets under management (AUM) reached an all-time high of $1.5 trillion, making Sun Life Financial Inc (SLF) the largest asset manager in Canada.
- The company announced an increase in their quarterly common share dividend and executed a share buyback program, demonstrating strong capital generation and commitment to returning capital to shareholders.
Negative Points
- Sun Life Financial Inc (SLF) faced challenges with institutional outflows at MFS, largely due to portfolio rebalancing and a preference for high-growth tech stocks.
- The company experienced adverse credit impacts of $43 million before tax, attributed to a few names across several sectors.
- There were unfavorable mortality experiences in Asia, particularly impacting the international high net worth business.
- The US dental business faced expense pressures due to lower Medicaid membership, impacting profitability.
- Despite strong performance, the company's ROE growth in Asia is expected to take time due to the large denominator effect.
Q & A Highlights
Q: In terms of the retroactive premiums on dental, is there anything else in the pipeline that may be coming down towards you? And does this change how you expect $100 million to be recognized through 2025?
A: Dan Fishbein, President, Sun Life U.S.: The retroactive premium was for the past year and reflects states' understanding that premiums need adjustment post-public health emergency. While retroactive premiums are unusual, proactive premium adjustments are ongoing. We believe the $100 million target for next year is achievable.
Q: Credit seems elevated this quarter. Can you elaborate on what was driving that, and is it indicative of something else?
A: Randy Brown, Chief Investment Officer: Credit performance should be viewed long-term due to its episodic nature. This quarter's impairments were limited to a few credits with specific challenges, mainly in Canada. Our fixed income portfolio is well-diversified, and these periodic losses are relatively benign.
Q: With a strong capital position and low leverage, what are your thoughts on capital deployment, especially regarding dividends and share buybacks?
A: Kevin Strain, President & CEO: Our priorities remain funding organic growth, dividend increases, and M&A opportunities. We target a 40% to 50% dividend payout ratio. Excess capital is returned to shareholders through buybacks, and our priorities have not changed.
Q: How are you tracking towards the $200 million in efficiencies by 2026 from the restructuring announced last quarter?
A: Tim Deacon, EVP & CFO: We are on track to deliver about 40% of the savings this year, with 80% expected by the end of next year. Savings will come across all business lines, particularly in the US and Canada, and are designed to help achieve our EPS growth target.
Q: Can you provide more color on MFS's institutional outflows and what to expect in the coming quarters?
A: Mike Roberge, CEO, President and Executive Chairman of MFS Investment Management: Recent outflows were due to a specific strategy impacted by MAG 7. We expect this to moderate. We see momentum in fixed income and the launch of active ETFs as growth opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
