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Sun Life Financial Inc
Symbol SLF
Shares Issued 584,617,001
Close 2024-02-07 C$ 70.78
Market Cap C$ 41,379,191,331
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Sun Life Financial earns $3.72-billion in 2023

2024-02-07 17:25 ET - News Release

Mr. Kevin Strain reports

SUN LIFE REPORTS FOURTH QUARTER AND FULL YEAR 2023 RESULTS

Sun Life Financial Inc. has released its results for the fourth quarter and full year ended Dec. 31, 2023.

  • Underlying net income of $983-million increased $91-million or 10 per cent from Q4 2022 (full year -- $3,728-million increased $359-million or 11 per cent from 2022); underlying ROE (return on equity) was 18.4 per cent (full year -- 17.8 per cent).
    • Wealth and asset management underlying net income: $439-million, up $27-million or 7 per cent (full year -- $1,726-million, up $53-million or 3 per cent);
    • Group -- health and protection underlying net income: $365-million, up $44-million or 14 per cent (full year -- $1,313-million, up $350-million or 36 per cent);
    • Individual -- protection underlying net income: $284-million, up $53-million or 23 per cent (full year -- $1,137-million, up $137-million or 14 per cent);
    • Corporate expenses and other: $(105)-million net loss, an increase of $33-million in net loss or 46 per cent (full year -- $(448)-million net loss, an increase of $181-million in net loss or 68 per cent).
  • Reported net income of $749-million decreased $416-million or 36 per cent from Q4 2022 (full year -- $3,086-million increased $215-million or 7 per cent from 2022; reported ROE was 14.0 per cent (full year -- 14.7 per cent).

"Sun Life closed 2023 with a strong fourth quarter driven by exceptional sales for individual protection, as well as good momentum in our group health and protection businesses, reflecting the value and trust clients place on Sun Life's solutions," said Kevin Strain, president and chief executive officer of Sun Life. "Despite a challenging market, our asset management pillar delivered solid underlying earnings led by record earnings at SLC Management and steady margins at MFS.

"We continue to provide clients with access to quality care through digital innovation and partnerships to support their health journey. In Canada, we completed our acquisition of Dialogue Health Technologies and made an investment in Pillway, a virtual pharmacy."

Underlying net income of $983-million increased $91-million or 10 per cent from prior year, driven by:

  • Wealth and asset management up $27-million: Higher asset management fee-related earnings and higher investment income driven by volume growth and an increase in yields.
  • Group -- health and protection up $44-million: Business premium growth in the United States and Canada, improved disability experience in Canada, and higher investment contributions in the U.S., partially offset by lower results in U.S. dental.
  • Individual -- protection up $53-million: Business growth reflecting good sales momentum in Asia, and higher investment contributions in Canada, partially offset by lower earnings due to the sale of Sun Life U.K.
  • Corporate expenses and other $(33)-million increase in net loss driven by higher operating expenses reflecting business growth and continued investments in the business, partially offset by a lower effective tax rate.
  • Higher earnings on surplus primarily driven by higher net interest income and lower realized losses.

Reported net income of $749-million decreased $416-million or 36 per cent, driven by:

  • Unfavourable market-related impacts primarily reflecting interest rates and real estate experience;
  • The prior-year impact of the Canada tax rate change;
  • Fair value changes in management's ownership of MFS shares, partially offset by:
  • The increase in underlying net income;
  • The impact of the Bermuda corporate income tax change;
  • Lower DentaQuest integration costs.

Business group highlights

In 2023, Sun Life was certified as a Great Place to Work in Canada, the United States, Vietnam, the Philippines, Indonesia, Malaysia, India and Ireland. In addition, SLC Management was also named 2023 Best Places to Work in Money Management for the fourth year in a row by Pensions and Investments. This recognition reflects the company's inclusive culture and commitment to its people. Sun Life fosters a positive work environment where the company provides resources and flexibility to support mental, physical and professional well-being, and where diversity is valued.

Asset management: a global leader in both public and alternative asset classes through MFS and SLC Management

Asset management underlying net income of $331-million increased $7-million or 2 per cent from prior year, driven by:

  • MFS down $15-million (down $11-million (U.S.)): Higher expenses offset by higher fee income from average net assets (ANA). The MFS pretax net operating profit margin was 39.4 per cent for Q4 2023, compared with 39.5 per cent in the prior year.
  • SLC Management up $22-million: The increase in underlying net income was driven by higher fee-related earnings and higher net seed investment income. Fee-related earnings increased 26 per cent driven by higher AUM, reflecting strong capital raising and deployment across the platform and the AAM acquisition. Fee-related earnings margin was 24 per cent for Q4 2023, consistent with the prior year.

Reported net income of $297-million decreased $24-million or 7 per cent from prior year, largely reflecting fair value changes in management's ownership of MFS shares.

Asset management ended Q4 2023 with $1,016-billion of AUM, consisting of $793-billion ($599-billion (U.S.)) in MFS and $223-billion in SLC Management. Total asset management net outflows of $11.4-billion in Q4 2023 reflected MFS net outflows of $15.3-billion ($11.2-billion (U.S.)) partially offset by SLC Management net inflows of $3.9-billion.

During the year, MFS became the ninth-largest fund group for the U.S. retail mutual fund industry based on AUM.

SLC Management continued its growth trajectory closing the year with $177-billion in fee-earning AUM, up 8 per cent from prior year, and won the 2023 CIO's Industry Innovation Awards for Private Credit.

Canada: a leader in health, wealth and insurance

Canada underlying net income of $350-million increased $85-million or 32 per cent from prior year, reflecting:

  • Wealth and asset management up $20-million: increase in investment income driven by higher volume and yields;
  • Group -- health and protection up $57-million: business premium growth and improved disability experience reflecting higher margins, lower claims volumes and shorter claims durations;
  • Individual -- protection up $8-million: higher investment contributions partially offset by unfavourable mortality experience;
  • Higher earnings on surplus, primarily driven by realized gains in the current year.

Reported net income of $348-million decreased $105-million or 23 per cent from prior year, driven by market-related impacts primarily from interest rates and real estate experience, and the prior-year impact of the Canada tax rate change, partially offset by ACMA impacts and the increase in underlying net income.

Canada's sales:

  • Wealth sales and asset management gross flows of $5-billion were up 32 per cent, driven by higher individual wealth sales, primarily from mutual funds and higher defined benefit sales in group retirement services (GRS).
  • Group -- Health and protection sales of $174-million were up 63 per cent, driven by higher large case sales.
  • Individual -- Protection sales of $171-million were up 23 per cent, driven by higher participating whole life insurance sales.

The company continues to focus on strengthening and expanding its health business to help clients live healthier lives. During the quarter the company completed the acquisition of Dialogue Health Technologies Inc., Canada's premier virtual health care and wellness platform providing affordable on-demand access to quality care. Further, the company finalized a contract with the government of Canada to be the administrator of the Canadian dental care plan, which will provide access to dental care for up to nine million additional Canadians in need. The company also completed a minority investment in Simpill Health Group Inc., operating as Pillway, a virtual pharmacy offering the ability to consult a knowledgeable pharmacist by chat or phone call and direct delivery of medication in Canada, expanding upon the company's digital health services and offerings, including the Q2 2023 launch of the Lumino Health Pharmacy app.

The company continues to expand the company's distribution capabilities through the creation of a securities investment dealer, Sun Life Canada Securities Inc. (SLCSI). The company received approval from the Canadian Investment Regulatory Organization in the fourth quarter, and expect an operational launch in 2024. The company's expanded offerings in SLCSI will broaden access to wealth solutions to help clients achieve lifetime financial security.

United States: a leader in health and benefits

U.S. underlying net income of $187-million (U.S.) increased $14-million (U.S.) or 8 per cent ($253-million increased $23-million or 10 per cent) from prior year, driven by:

  • Group -- health and protection down $7-million (U.S.): Lower dental results reflecting the impact of Medicaid redeterminations following the end of the Public Health Emergency, partially offset by higher group benefits results. In group benefits, strong revenue growth, higher net investment results and favourable mortality experience was partially offset by less favourable morbidity experience.
  • Individual -- protection up $21-million (U.S.): The inclusion of the United Kingdom payout annuity business and improved mortality experience.

Reported net income of $77-million (U.S.) decreased $74-million (U.S.) or 49 per cent (decreased $101-million or 50 per cent) from prior year, driven by ACMA impacts, and market-related impacts largely from interest rates and real estate experience, partially offset by lower DentaQuest integration costs and the increase in underlying net income.

U.S. group sales of $932-million (U.S.) were up $33-million (U.S.) or 4 per cent ($1,269-million, up $48-million or 4 per cent), driven by higher medical stop loss and commercial dental sales, partially offset by lower employee benefits sales and lower large case sales in dental.

The company continues to advance its strategy of helping more people get access to the health care and coverage they need. In the fourth quarter, the states of Iowa and Arkansas awarded DentaQuest Medicaid dental benefits contracts, supporting the company's mission to provide access to dental care for families and children in underserved communities. The dental business has recorded more than $650-million (U.S.) in sales since closing the DentaQuest acquisition on June 1, 2022, and has approximately 36 million members as of Jan. 1, 2024.

In health and risk solutions, the company continues to differentiate its medical stop-loss offering with solutions that increase access to health care and improve clinical outcomes for members, while protecting against high-cost claims for employers. The company recently announced a partnership with in-home, tech-enabled medical care provider Somatus to provide one-on-one support to its members with chronic kidney disease and congestive heart failure, two common high-cost conditions. The company also announced a partnership with Virtual Me to provide the company's Health Navigator product through Virtual Me's telehealth services that cater to business clients, as well as individuals who are underinsured or uninsured.

Asia: a regional leader focused on fast-growing markets

Asia underlying net income of $143-million increased $8-million or 6 per cent from prior year, driven by:

  • Individual -- protection up $20-million: business growth reflecting good sales momentum, partially offset by lower earnings on surplus;
  • Regional office expenses and other $(12)-million increased net loss primarily reflecting continued pan-Asia investments in the business.

Reported net income of $44-million decreased $48-million or 52 per cent from prior year, driven by ACMA impacts, partially offset by the impact of the Bermuda corporate income tax change.

Asia's sales:

  • Individual sales of $536-million were up 49 per cent, primarily driven by higher sales in Hong Kong reflecting increased demand as pandemic-related travel restrictions were lifted in early 2023, and in international reflecting continued demand for the company's products, partially offset by lower sales in Vietnam reflecting market conditions, and China.
  • Wealth sales and asset management gross flows of $2-billion were up 12 per cent, primarily driven by higher mutual fund sales in India, partially offset by lower money market fund sales in the Philippines.

New business CSM of $223-million in Q4 2023 was up from $122-million in the prior year, primarily driven by sales in Hong Kong and high net worth.

The company is dedicated to helping clients achieve lifetime financial security by expanding product offerings to meet their evolving needs. In Singapore, the company launched a new index universal life product, providing high-net-worth clients a dynamic balance between long-term protection and growth, with the flexibility to customize premium payments and allocations among investment options to meet their goals. This new product has been well received by the market, contributing to Singapore's Q4 2023 strong sales growth.

The company's diversified mix of high-performing, quality-focused distribution channels, including its new bancassurance partnership with Dah Sing Bank, contributed to record sales and increased market position for Sun Life Hong Kong.

Corporate

Corporate underlying net loss was $94-million compared with underlying net loss of $62-million in the prior year, driven by the sale of Sun Life U.K. and higher operating expenses, partially offset by a lower effective tax rate.

Reported net loss was $41-million compared with reported net income of $97-million in the prior year, reflecting the impacts from the sale of Sun Life U.K., the prior-year impact of tax-related matters and the change in underlying net loss.

About Sun Life Financial Inc.

Sun Life is a leading international financial services organization providing asset management, wealth, insurance and health solutions to individual and institutional clients. Sun Life has operations in a number of markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China, Australia, Singapore, Vietnam, Malaysia and Bermuda. As of Dec. 31, 2023, Sun Life had total assets under management of $1.40-trillion.

Earnings conference call

The company's Q4 2023 financial results will be reviewed at a conference call on Thursday, Feb. 8, 2024, at 10 a.m. ET. Visit the Sun Life website 10 minutes prior to the start of the event to access the call through either the webcast or conference call options. Individuals participating in the call in a listen-only mode are encouraged to connect via the company's webcast. Following the call, the webcast and presentation will be archived and made available on the company's website until the Q4 2024 period-end.

We seek Safe Harbor.

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