What Sun Life Financial (SLF) Said on Its Q3 Earnings Call

Key Points

• Underlying earnings grew, but reported profit fell: Q3 underlying EPS rose 10% and underlying net income increased 9% to CAD 1.146 billion, while reported net income declined to CAD 785 million amid market impacts, acquisition and integration costs, and restructuring expenses. Sun Life also raised its quarterly dividend by CAD 0.04 to CAD 1 per share.
• U.S. growth came with claims pressure: U.S. underlying net income rose 32%, supported by strong medical stop-loss performance and 62% growth in stop-loss sales. Higher long-term disability claims weighed on employee benefits, and the company expects elevated claims in the near term.
• Asset management faced outflows while Canada and Asia advanced: MFS recorded CAD 26.9 billion in net outflows, while GreenOak contributed to asset management earnings growth. Canada and Asia underlying net income rose 6% and 8%, respectively, on a constant-currency basis.

Sun Life Financial NYSE: SLF reported 10% growth in third-quarter underlying earnings per share and raised its quarterly dividend, even as market-related losses, acquisition costs and restructuring expenses weighed on reported profit.

The insurer reported underlying net income of CAD 1.146 billion, up 9% from a year earlier, and underlying earnings per share of CAD 2.05. Reported net income fell to CAD 785 million from CAD 1.1 billion a year earlier.

Chief Financial Officer Tim Deacon said the gap between underlying and reported results primarily reflected unfavorable market impacts from higher interest rates and a flatter yield curve, along with costs associated with combining GreenOak businesses and completing the Bell Partners acquisition. An annual assumption review reduced reported earnings by CAD 33 million, primarily because of updates to policyholder behavior assumptions in Asia.

The board approved a four-cent increase in the quarterly dividend to CAD 1 per common share. Sun Life ended the quarter with a life insurance capital adequacy test ratio of 142%, down three percentage points from the second quarter, primarily because of interest rates.

Stop-loss growth offsets disability pressure

U.S. underlying net income rose 32% to $141 million, driven by medical stop-loss performance and a lower loss ratio than a year earlier, Deacon said. Medical stop-loss sales increased 62%.

David Healy, president at Sun Life, said Health & Risk Solutions earnings rose 45% year over year after adjusting for a reserve change in the prior-year quarter. He attributed much of the improvement to increased sales and customer retention, supported by pricing actions.

Employee benefits results, meanwhile, were affected by higher incidence and severity of long-term disability claims. Healy said claims included elevated mental health claims and were more pronounced in some industries, including health care and manufacturing. He said the company could not point to artificial intelligence as a specific cause.

Healy expects disability claims to remain elevated in the near term but said it was too early to know how long the trend would persist. Sun Life is focusing on claims management, pricing and expenses. Repricing renewals typically takes two to three years, he said, with about one-third of premium volume affected each year.

Dental results improved from a year earlier, but Deacon said underlying dental earnings are expected to remain muted as the company repositions the business. Expense reductions have lagged declines in Medicaid membership tied to terminated contracts and broader industry trends, he said.

MFS outflows persist as GreenOak expands

Asset management underlying net income increased 6% to $297 million, helped by GreenOak, including contributions from the recently acquired U.S. multifamily real estate business Bell Partners. MFS earnings were broadly consistent with the prior year.

MFS recorded net outflows of $26.9 billion, primarily from U.S. retail equity mutual funds. Deacon said returns continued to be affected by an underweighting to technology stocks and investors’ preference for passive strategies, conditions the company expects to persist in the near term.

MFS CEO Ted Maloney said roughly two-thirds of the firm’s costs are directly variable, but he did not expect or want meaningful additional cuts to fixed expenses if assets decline. The firm is investing in areas including fixed income, separately managed accounts and active exchange-traded funds, he said.

At GreenOak, CEO Sonny Kalsi said he remained confident in reaching a fee-related earnings margin target of more than 35%, compared with a current margin in the high 20s cited by an analyst. He pointed to potential revenue and expense synergies as five businesses are combined under one platform. Deacon said GreenOak integration and restructuring costs are expected to continue in 2027.

Canada and Asia support growth

Canada underlying net income rose 6% to CAD 422 million, supported by higher wealth fee income, growth in Sun Life Health, favorable investment earnings and expense discipline. Wealth assets under management and administration increased 11% to CAD 284 billion.

Asia underlying net income increased 8% on a constant-currency basis to CAD 227 million, while individual insurance sales rose 9% to CAD 937 million. Asia President Manjit Singh said year-to-date earnings were up 14% and that he remained comfortable with the business’s ability to generate double-digit earnings growth going forward.

Sun Life’s underlying return on equity was 19%, compared with its medium-term objective of 20%. Deacon said Canada, Asia and GreenOak were contributing more than originally anticipated toward that goal, although the company remained confident in the U.S. outlook.

About Sun Life Financial (NYSE:SLF)

Sun Life Financial Inc is a Canadian financial services company that provides insurance, wealth management and asset management services. Founded in 1865 as Sun Life Assurance Company of Canada, it has grown into an international business serving individual, workplace and institutional clients.

The company offers life, health and dental insurance, disability coverage and group benefits, as well as savings, retirement and investment products. Its asset management businesses provide investment management services to individuals and institutions.

Sun Life serves clients in Canada, the United States and markets across Asia, and its asset management operations have a global reach.

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