Earnings are fueled by strategic price hikes and gains in asset management
Actions taken by Sun Life Financial Inc. to adjust its pricing and refine its business strategy are now paying off, with the insurer exceeding analysts' expectations for the first quarter.
The Toronto-based company reported underlying earnings of $1.82 per share, surpassing the $1.71 forecast in a Bloomberg survey.
In addition to the strong earnings, Sun Life raised its quarterly dividend to 88 Canadian cents, up from 84 cents, a move that BNN Bloomberg reported as a signal of the company’s confidence in its financial position.
CEO Kevin Strain said that the quarter marked a return to typical claims patterns, with the insurer benefiting from its recent price adjustments. Despite ongoing global trade uncertainties and a fluctuating macroeconomic environment, Strain emphasized that Sun Life’s strategy remains centered on long-term goals.
“We’re also keenly aware that the economic conditions could change because it is an unusual time,” Strain said, adding that Sun Life’s solid capital base, effective risk management, and diverse business model would help the company navigate any shifts in economic conditions.
The company’s underlying net income grew by 19% year-over-year, reaching $1.05 billion (USD 754 million).
Following the announcement, Sun Life's stock price rose as much as 5.6%, reaching $88.15 on Friday. According to BNN Bloomberg's report, this surge in stock value was its largest intraday increase since January 2021.
However, in contrast to this positive performance, Sun Life Financial had earlier faced a sharp decline in share price last February after reporting earnings below analysts' expectations, driven in part by higher-than-expected claims in its US division. The stock dropped over 10% in morning trading, ultimately closing down 8.1% at $77.80.
Meny Grauman, an analyst at Bank of Nova Scotia, observed that Sun Life posted the largest earnings surprise among its life insurance peers for the quarter. However, Grauman pointed out that the positive results were partly driven by one-time catch-up fees from the SLC Management segment, which are not earned on a regular basis. The asset management business saw a 24% increase in underlying net income from the previous year.
In the US, Sun Life's segment reported a 7% rise in underlying net income, aided by improved dental claims. This performance came after a notable decline in the previous quarter, when the segment’s net income had dropped 39% due to increased morbidity claims.
As noted by Grauman, "After a string of earnings challenges, results here look to be getting back on track, which is an important positive for both SLF’s earnings power and sentiment on the name."
