Sun Life Financial Inc. Q4 FY2024 earnings call

• Sun Life remains committed to helping clients achieve lifetime financial security. Fourth quarter results had good performance in Canada, Asia, and Asset Management, offset by weaker U.S. results due to stop-loss morbidity.
• Asset Management: SLC achieved record capital raising $10 billion, MFS had strong fund performance with 95% of funds in top Morningstar categories.
• Asia: Accelerating growth with agency channel growth, bancassurance relationships, and India joint venture surpassing $100 million underlying earnings.
• Canada and U.S.: Strength in core health businesses; Canada Group Benefits revenue up 11%, U.S. Group Benefits revenue up 6%; digital initiatives like Dialogue in Canada and Advisor Buddy in Philippines.
• Strong capital position with SLF LICAT ratio 152%; continued share buybacks under normal course issuer bid.

Asset Management

• MFS: Underlying net income $216 million, up 13% y/y; assets under management $606 billion, up 1% y/y but down 6% q/q. 95% of MFS fund assets ranked in top half of Morningstar categories over 10 years.
• SLC Management: Underlying net income $59 million, down 16% y/y; record capital raising $10.2 billion this quarter, full-year total $24 billion; net flows $14.1 billion, deployments $6.3 billion.

Canada

• Underlying net income $366 million, up 5% y/y; wealth AUM $189 billion, up 13% y/y; Group Health and Protection underlying earnings down 4% y/y; Individual Protection earnings up 13% y/y.

U.S.

• Underlying net income $115 million, down 39% y/y; Group Health and Protection underlying earnings down 46% y/y due to unfavorable morbidity in medical stop-loss; Dental business saw improvements from repricing and claims expense management.

Asia

• Underlying net income $175 million, up 20% y/y constant currency; total CSM $6 billion, up 30% y/y; strong growth in individual protection sales.

• Continue building on business strength and remain purpose-driven into the new year.
• Expect organic capital generation to be around 30%-40% of underlying net income.
• Continue executing on share buybacks under normal course issuer bid.

• U.S. stop-loss claims experience driven by higher severity, impacting results; industry-wide observed trend.
• Tax-exempt income volatility due to material strengthening of U.S. dollar vs. Canadian dollar; actions to mitigate volatility.
• Real estate market pressures affecting SLC's capital raising in real estate sleeve.
• Potential Medicaid cuts in U.S. and their impact on Sun Life's Medicaid business, particularly dental for kids.

Q: About stop-loss loss ratio and pricing trends in U.S.

A: Dan Fishbein explained 2024 stop-loss loss ratio 74% vs. pricing target 73%; started raising prices mid-2024, achieved 14% increase 1/1/2025, with additional 2% needed. Utilization returned to normalized levels causing loss ratio rebound.

Q: On tax-exempt income volatility A: Tim Deacon said it was a one-time item due to U.S. dollar strength vs. Canadian dollar; action to mitigate volatility by adjusting asset designation strategy, which may lead to modestly higher effective tax rate.

Q: On net flows in MFS and SLC A: Ted Maloney said MFS flows had institutional outflows due to rare confluence of factors, expecting improvement over time; Steve Peacher said SLC had strong fundraising, expecting higher fundraising in 2025 due to trends in asset classes like real estate and private credit