Sun Life Financial Inc. (SLF:CA) Q4 2025 Earnings Call Transcript
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Overview
The earnings call summary shows strong financial performance, particularly in Asia and asset management, alongside strategic growth initiatives and a robust capital position. The Q&A session further supports this with positive insights on capital deployment, stop-loss growth, and disciplined buyback plans. Despite some uncertainties, the overall sentiment is positive, bolstered by a dividend increase and share repurchases, indicating confidence in future growth.
Key Financial Performance
Underlying net income $1.1 billion, up 13% year-over-year. Driven by disciplined execution, diversified business model, and focus on clients and purpose.
Underlying earnings per share (EPS) $1.96, up 17% year-over-year. Reflects strong business performance and growth.
Underlying return on equity (ROE) 19.1%, up from the previous year. Indicates strong profitability and efficient use of equity.
LICAT ratio 157%, up 3 percentage points from Q3. Demonstrates strong capital position.
SLC Management underlying net income $242 million in 2025, exceeding the Investor Day target of $235 million. Driven by higher fee-related earnings.
Canada wealth gross sales Up 46% year-over-year. Driven by strong results in Group Retirement Services and individual mutual funds.
Group Retirement Services sales Doubled year-over-year. Reflects strong large case defined benefit solutions and defined contribution sales.
Individual wealth sales Up 10% year-over-year. Driven by adviser productivity improvements and industry-wide momentum.
Asia protection sales growth 50% year-over-year. Driven by strong distribution excellence, with standout markets in Hong Kong (111% growth) and Indonesia (43% growth).
U.S. medical stop-loss sales growth 58% year-over-year. Reflects underwriting discipline and scale advantages in a hardening market.
MFS institutional gross flows Up 59% year-over-year. Driven by continued large mandate wins.
Underlying EPS growth (full year 2025) 12%, exceeding the medium-term objective of 10%. Reflects balanced and diversified growth strategy.
Full year underlying earnings growth 9%. Driven by strong sales in asset management, wealth, health, and protection.
Assets under management (AUM) $1.6 trillion, with $1.2 trillion in third-party AUM. Reflects strong growth in asset management platform.
Group - Health & Protection underlying earnings $308 million, up 16% year-over-year. Driven by stabilized claims experience in U.S. medical stop-loss and growth in Canadian health businesses.
Individual - Protection underlying net income $362 million, up 17% year-over-year. Driven by business growth and favorable mortality experience in Asia and the U.S.
Corporate underlying net loss $110 million, increased by $13 million year-over-year. Reflects higher financing costs for upcoming buy-ups of BGO and Crescent Capital.
MFS underlying net income USD 224 million, up 4% year-over-year. Driven by higher fee income from higher average net assets.
SLC Management fee-related earnings $99 million in Q4, up 25% year-over-year. Driven by capital raising and higher property management fees.
Canada underlying net income $417 million in Q4, up 14% year-over-year. Driven by lower credit losses, higher fee income, favorable insurance experience, and strong business growth.
U.S. Group - Health & Protection sales USD 1.2 billion, up 45% year-over-year. Driven by record medical stop-loss sales, large case employee benefit sales, and higher Medicaid sales in Dental.
Asia Individual - Protection sales Up 50% year-over-year. Driven by sales growth across most markets and channels, including 111% growth in Hong Kong.
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Operating Highlights
Virtual health offering in Canada: Launched to help 10,000 low-income Canadians access care.
Sun Life Essentials: A fully digital group retirement solution targeting small to medium businesses in Canada.
Reimagined mobile app: New engagement capabilities for wealth increased traffic by 62% and enrollments by 81%.
Asia protection sales: 50% year-over-year growth, with standout markets in Hong Kong (111% growth) and Indonesia (43% growth).
U.S. medical stop-loss business: Achieved 58% sales growth, reflecting underwriting discipline and scale advantages.
Group Retirement Services in Canada: Sales doubled year-over-year, driven by large case defined benefit and defined contribution solutions.
Digital transformation: Improved claims and underwriting processes in the U.S. and Asia, leading to faster processing times and better client satisfaction.
Management equity plan for SLC: Introduced to motivate and retain talent, with 25% ownership by management.
Dental business in the U.S.: Turned profitable with steps like repricing, expense management, and investment in straight-through processing.
Formation of Sun Life Asset Management: Formalized asset management capabilities under one pillar starting January 1, 2026.
BGO and Crescent buy-ups: On track for completion in the first half of 2026 to deepen ownership in high-performing businesses.
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Risk or Challenges
Net outflows at MFS: MFS experienced net outflows of approximately USD 18.2 billion, including retail outflows of $9.8 billion and institutional outflows of $8.5 billion. This was attributed to retail investor preference for passive index strategies and risk-free reinvestments, as well as institutional mandate redemptions due to rebalancing.
Dental business challenges: The dental business faced a higher claims environment, requiring repricing and alignment efforts with states. Operational expenses increased due to higher claims volumes, and actions are underway to mitigate these challenges in 2026.
Corporate segment losses: The corporate segment reported a loss of $110 million, reflecting higher financing costs to support upcoming buy-ups of BGO and Crescent Capital. This is expected to continue with losses of approximately $110 million to $120 million per quarter.
Market-related impacts on net income: Total company reported net income was 34% lower than underlying net income due to market-related impacts, including risk-free rates, swap and credit spreads, and timing-related mark-to-market items from rate movements.
Asia joint ventures: Lower contributions from joint ventures in Asia impacted earnings, despite strong sales growth in the region.
Operational expenses in U.S. Dental: Operational expenses in the U.S. Dental business increased due to higher claims volumes, which are being addressed with actions planned for 2026.
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Guidance & Outlook
Revenue and Earnings Growth: Sun Life projects continued strong earnings growth aligned with its medium-term objectives, supported by digital initiatives and operational efficiencies. The company achieved 12% year-over-year underlying EPS growth in 2025 and expects to maintain this trajectory.
Asset Management and Wealth: The company plans to complete the BGO and Crescent Capital buy-ups in the first half of 2026, further strengthening its alternative asset management platform. Fee-related earnings and capital raising are expected to grow, with a focus on scaling benefits and expanding fixed income mandates.
Asia Market Expansion: Sun Life anticipates sustained growth in Asia, driven by strong sales momentum in Hong Kong and Indonesia. The company expects continued benefits from its bancassurance partnership with CIMB Niaga in Indonesia.
Digital Transformation: The company is deploying digital solutions globally to enhance client experiences, improve operational efficiencies, and reduce expenses. Initiatives include digital claims processing, underwriting, and the launch of Sun Life Essentials for small to medium businesses in Canada.
U.S. Medical Stop-Loss Business: Sun Life expects to capitalize on a hardening market in the U.S. medical stop-loss business, with robust sales growth projected to continue into 2026.
Dental Business: The company is implementing repricing actions and operational improvements to address challenges in its Dental business, with a multiyear plan to achieve profitability.
Capital Position: Sun Life maintains a strong capital position with a LICAT ratio of 157%, enabling continued investments in growth opportunities and shareholder returns.
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Shareholder Return Plan
Dividend payout ratio: 47% for the year 2025
Dividends and share buybacks: Returned $3.7 billion to shareholders through dividends and share buybacks in 2025
Share buybacks: $400 million of share buybacks executed in Q4 2025
Total shareholder returns: Returned $3.7 billion to shareholders through dividends and share buybacks in 2025
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Key Q&A
Q:In terms of the stop-loss experience, are we hoping to see improvements in 2026 again?
A:David Healy stated that they are pleased with improved results and strong sales at the end of the year. They saw a modest improvement in the loss ratio for the 1/1/25 cohort, which was neutral overall, and they are in good shape heading into 2026.
Q:Are we now opening the taps for sales along these products, given the uptick in sales in Q4?
A:David Healy mentioned that they maintained pricing discipline and benefited from a hardening market. They achieved the rate increases they were seeking and will remain disciplined in pricing as they head into 2026. For the Dental business, there was a modest improvement in sales year-over-year, reflecting seasonality and a large Medicaid contract returning for 2026.
Q:Did you increase pricing by 17% on the Jan 1 block, and will that get you back to target margins soon?
A:David Healy confirmed the 17% average price increase on renewal business, which was at their target margins.
Q:What are your thoughts on capital deployment broadly and the buyback program renewal in May?
A:Timothy Deacon explained that their priorities remain disciplined capital deployment, focusing on organic investments, completing purchases of private asset affiliates, and bolt-on acquisitions. They expect to resume share buybacks later in the year, pending market conditions, and typically do not buy back shares at a rate higher than organic capital generation.
Q:Is the growth in stop-loss a longer-term focus, and will it lead to elevated margin volatility?
A:David Healy emphasized their long track record of success, low loss ratios, and strong capabilities in risk selection and pricing. Kevin Strain added that their scale provides an advantage in managing claims and volatility.
Q:What is your strategy for entering the corporate dental market, given its competitiveness?
A:David Healy stated that they are actively in the market with a strong distribution footprint, often bundling dental products with other employee benefits. They grew 7% in premium volume versus 2024 and 20% since acquiring DentaQuest, with plans to continue growing.
Q:Does the 17% rate increase on stop-loss include changes in terms and conditions like attachment points?
A:David Healy confirmed that the 17% rate increase reflects expected medical cost trend increases, claims experience, and leverage trend, including factors like deductibles, attachment points, and coverage layers.
Q:How much will stop-loss sales growth contribute to premium growth, and what is the outlook for Asia growth?
A:David Healy noted strong sales growth and record persistency in the stop-loss business, leading to positive premium flows for 2026. Manjit Singh mentioned that while Hong Kong's growth may moderate, they expect good performance overall in Asia, with notable growth in Indonesia.
Q:Why not buy back more shares given the excess capital?
A:Timothy Deacon explained their disciplined approach, focusing on completing private asset affiliate purchases and maintaining flexibility for future opportunities. They typically align buybacks with organic capital generation.
Q:What impact will buying up SLC minority interests have on underlying earnings, and what is the goal of putting all asset management businesses under one roof?
A:Stephen Peacher explained that the buy-ups and management equity plan will align employees with shareholders, enhancing growth. Tom Murphy added that the integration aims to leverage synergies across businesses, focusing on growth rather than expense synergies.
Q:What led to the 50%+ growth in stop-loss, and is there a wider range of outcomes expected?
A:David Healy attributed growth to a hardening market, scale, and early pricing actions. He noted that scale helps manage volatility, and Kevin Strain emphasized their experience with rising U.S. healthcare costs.
Q:What is the outlook for U.S. Dental in 2026, and can commercial premium growth accelerate?
A:David Healy expects modest progress in 2026, focusing on repricing, cost containment, and managing expenses. They aim to grow the commercial segment carefully, leveraging their employee benefits distribution.
Q:Are there early signs of improvement in MFS flows and performance?
A:Edward Maloney noted that international strategies have been a net inflow driver, and while the dominance of the Mag 7 has been a headwind, its reduced impact could benefit performance and flows.
Q:How will the SLC management equity plan affect non-controlling interest (NCI)?
A:Timothy Deacon explained that the management equity plan will replace existing NCI, with employees owning up to 25% of SLC. This aligns employees with the platform's growth.
Q:Is there potential for operating expense synergies between MFS and SLC?
A:Tom Murphy stated that their focus is on growth opportunities rather than expense synergies, as traditional and alternative asset managers have different operating models.
Q:What caused the variance in joint venture income in Asia, and what is the outlook?
A:Manjit Singh attributed the variance to security gains and losses in China and India, which can fluctuate. For the full year, earnings were up over 10%, and they expect continued growth in the medium term.
Q:Did the stop-loss loss ratio stabilize in Q4, and what was the final loss ratio for 2025?
A:David Healy confirmed that the loss ratio stabilized in Q4, marginally improving. Historically, loss ratios have been in the mid-70s, which remains their target.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about the outlook for future stop-loss experience, stating that they do not comment on future experience despite having internal projections.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Asset Wealth
BGO Crescent
Canada Sun
Crescent Capital
ETF product
Kong sale
Ms Vice
Page
ROE dividend
SLC income
USD loss
asset platform
buy ups
case employee
charge
claim volume
credit loss
currency basis
dividend payout
equity plan
income increase
income market
increase income
inflow
life sale
loss fee
loss sale
mandate win
mortality experience
objective ROE
payout ratio
processing
purpose
ratio capital
sale case
sale health
sale life
sale result
scale advantage
solution
step
wealth sale
SLF Transcript
Sun Life Financial Inc. (SLF:CA) Q4 2025 Earnings Call Transcript
Positive2-12
The earnings call summary shows strong financial performance, particularly in Asia and asset management, alongside strategic growth initiatives and a robust capital position. The Q&A session further supports this with positive insights on capital deployment, stop-loss growth, and disciplined buyback plans. Despite some uncertainties, the overall sentiment is positive, bolstered by a dividend increase and share repurchases, indicating confidence in future growth.
Sun Life Financial Inc. (SLF:CA) Presents at Desjardins Toronto Conference Transcript
Neutral11-25
Sun Life Financial Inc. (SLF:CA) Q3 2025 Earnings Call Transcript
Positive11-6
The earnings call highlights strong growth in Asia, particularly in individual protection sales and total CSM, which are significant positive indicators. The Q&A section reveals some challenges, such as Medicaid repricing and stop-loss business pricing, but overall, the company maintains a strong capital position with ongoing share buybacks and positive asset management performance. The company's focus on digital transformation and capital management further supports a positive outlook. Despite some uncertainties, the overall sentiment leans towards a positive market reaction, especially with optimistic guidance in key growth areas.
Sun Life Financial Inc. (SLF:CA) Presents At Barclays 23rd Annual Global Financial Services Conference Transcript
Neutral9-10
SLF Slides
SLF Report
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