Sun Life Financial announced its financial results for the second quarter ended June 30, 2024, showing an increase in core net income to $1 billion, an increase of 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 asset management businesses in Canada and Asia, although those gains were partially offset by higher expenses.

In contrast, the Group’s Health & Protection segment saw a $55 million decrease in underlying net income, primarily due to lower dental outcomes in the U.S. following Medicaid redesignation, less favorable patient experience in Canada and the loss of medical discontinuity in the U.S. These declines were somewhat mitigated by strong business growth in Group Benefits in the U.S. and Canada.

In the Personal Protection segment, underlying net income increased by $82 million, supported by business growth in Asia and Canada, and positive mortality experience in Canada and the U.S. Additionally, corporate expenses decreased by $17 million, driven by lower operating expenses and finance costs.

Sun Life reported net income of $646 million for the quarter, down $14 million, or 2%, from a year earlier. The decline reflected restructuring costs of $138 million ($108 million after tax) aimed at improving productivity and driving earnings growth.

The company said it expects these actions to result in annual savings of approximately $200 million by 2026. The restructuring costs were partially offset by an increase in core net income and market-related impacts primarily related to interest rates and real estate investments.

The underlying return on equity (ROE) for the quarter was 18.1%, while the reported return on equity was 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 the asset management segment, underlying net income rose 4% to $307 million, driven by higher fee income from MFS due to higher average net assets, although this was partially offset by higher expenses.

SLC Management saw a slight decrease of $2 million in underlying net income, as higher fee-related gains were offset by lower net investment income. Reported net income for the segment was $274 million, an increase of $26 million, or 10%, from the prior year, largely due to prior year losses on real estate investments held in SLC Management’s surplus account.

Foreign currency translation contributed an additional $4 million to both core and reported net income. The Asset Management segment ended the quarter with assets under management (AUM) of $1.072 trillion, with MFS accounting for $845 billion and SLC Management accounting for $227 billion. The segment reported net outflows of $21 billion during the quarter.

Sun Life Financial Results – How did it perform in different regions?

In Canada, Sun Life’s underlying net income increased $30 million, or 8%, to $402 million, driven by higher fee-related gains in wealth and asset management and growth in individual protection, which was also supported by positive mortality experience.

However, the Group – Health & Protection segment saw a decrease of $8 million due to a less favorable patient experience. Reported net income in Canada increased by $82 million, or 39%, to $292 million, benefiting from market-related impacts and increased underlying net income.

In the United States, underlying net income decreased 7% to $149 million, primarily due to lower outcomes in dental, reflecting the impact of Medicaid redetermination, and unfavorable patient experience in medical stop-loss.

This was partially offset by strong business growth in group benefits and improved mortality experience in individual protection. Reported net income in the US decreased 32% to $91 million, reflecting a favorable ACMA in the prior year, market-related impacts and lower underlying net income.

Asia saw a 19% increase in underlying net income to $179 million, driven by growth in Wealth & Asset Management and Personal Protection. Reported net income in the region increased 24% to $151 million, supported by higher underlying net income and positive ACMA impacts, although partially offset by the adjustment to the global minimum tax on Pillar 2 and market-related impacts. Foreign exchange translation added $1 million to underlying net income and $3 million to reported net income.

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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 under the company’s sustainability bond framework.

“Sun Life had a strong quarter with record underlying net income of $1 billion,” said Kevin Strain (pictured above), Sun Life Chairman and CEO.

He noted that the results were driven by continued strong growth in Canada and Asia, with positive experience in the US group’s benefits, though offset by challenges in the dental business. Strain also highlighted momentum in the wealth and asset management business and noted that the company expects to continue share buybacks in the third quarter.

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