Sun Life Financial has reported its financial results for the second quarter ending June 30, 2024, showing an increase in underlying net income to $1 billion, up by 9% or $80 million from the same period last year.
The company’s wealth and asset management segment saw a $36 million increase in underlying net income, driven by higher fee income in its asset management businesses in Canada and Asia, although these gains were partly offset by increased expenses.
In contrast, the group - health & protection segment experienced a $55 million decline in underlying net income, primarily due to lower results in US dental following Medicaid redeterminations and less favourable morbidity experience in Canada and U.S. medical stop-loss. These decreases were somewhat mitigated by strong business growth in US group benefits and in Canada.
In the individual - protection segment, underlying net income rose by $82 million, supported by business growth in Asia and Canada, and favourable mortality experience in Canada and the US. Additionally, corporate expenses decreased by $17 million, driven by lower operating expenses and financing costs.
Sun Life reported a net income of $646 million for the quarter, a decrease of $14 million or 2% compared to the prior year. This decline reflects a restructuring charge of $138 million ($108 million post-tax) aimed at improving productivity and driving earnings growth.
The company said that it expects these actions to result in annual savings of approximately $200 million by 2026. The restructuring charge was partly offset by the increase in underlying net income and market-related impacts primarily linked to interest rates and real estate investments.
The underlying return on equity (ROE) for the quarter was 18.1%, while the reported ROE stood at 11.7%, down from 17.7% and 12.7% respectively in Q2 2023. Sun Life ended the quarter with a LICAT ratio of 150%.
In its asset management segment, underlying net income increased by 4% to $307 million, driven by higher fee income from MFS due to increased average net assets, though this was partially offset by higher expenses.
SLC Management saw a slight decline of $2 million in underlying net income, as higher fee-related earnings were offset by lower net seed investment income. The segment’s reported net income was $274 million, up by $26 million or 10% from the previous year, largely due to prior year losses on real estate investments held in the SLC Management surplus account.
Foreign exchange translation contributed an additional $4 million to both underlying and reported net income. Asset Management ended the quarter with $1.072 trillion in assets under management (AUM), with MFS accounting for $845 billion and SLC Management for $227 billion. The segment reported net outflows of $21 billion during the quarter.
In Canada, Sun Life’s underlying net income increased by $30 million or 8% to $402 million, driven by higher fee-related earnings in wealth and asset management and business growth in individual - protection, which was also supported by favourable mortality experience.
The group - health & protection segment, however, saw an $8 million decrease due to less favourable morbidity experience. The reported net income for Canada rose by $82 million or 39% to $292 million, benefiting from market-related impacts and the increase in underlying net income.
In the US, underlying net income decreased by 7% to $149 million, primarily due to lower results in dental, reflecting the impact of Medicaid redeterminations, and unfavourable morbidity experience in medical stop-loss.
This was partly offset by strong business growth in group benefits and improved mortality experience in individual - protection. Reported net income for the US declined by 32% to $91 million, reflecting favourable ACMA in the prior year, market-related impacts, and the decrease in underlying net income.
Asia saw a 19% increase in underlying net income to $179 million, driven by business growth in wealth and asset management, and individual - protection. The region’s reported net income rose by 24% to $151 million, boosted by the increase in underlying net income and favourable ACMA impacts, although these were partially offset by a Pillar Two global minimum tax adjustment and market-related impacts. Foreign exchange translation added $1 million to underlying net income and $3 million to reported net income.
In line with its commitment to sustainable investing, Sun Life completed a $750 million sustainability bond offering on May 15. The proceeds will be used to finance or refinance new and existing eligible assets as defined in the company’s Sustainability Bond Framework.
"Sun Life had a strong quarter with a record $1 billion in underlying net income," said Kevin Strain (pictured above), president and CEO of Sun Life.
He noted that the results were driven by continued solid growth in Canada and Asia, with favourable experience in US group benefits, though offset by challenges in dental. Strain also highlighted the momentum in the wealth and asset management businesses and indicated that the company expects to continue share buybacks in the third quarter.
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