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    SLF
    Earnings call· Sep 2025(Q3 FY25)

    SUN LIFE FINANCIAL INC SLF

    Nov 6, 2025 Source

    Executive summary

    Sun Life Financial Q3 FY25 — Strong Asia/Canada Growth Offset by U.S. Business Headwinds

    Sun Life Financial delivered a strong Q3 FY25, with robust growth in its Asia and Canada segments and solid performance in Asset Management, driving a 6% increase in underlying EPS and an 18.3% ROE. These gains were partially offset by significant headwinds in the U.S. business, particularly in Group Health & Dental, where unfavorable insurance experience and pricing challenges impacted profitability. Management is actively repricing and repositioning the U.S. operations while maintaining confidence in the company's diversified model and capital strength to meet medium-term objectives.

    Highlights

    6

    • Underlying EPS up 6% year-over-year to $1.86.

    • Underlying ROE of 18.3%, progressing towards medium-term objectives.

    • Individual Protection sales grew 35%, and Group Health & Protection sales grew 12%.

    • Almost $3 billion of positive net flows in Asset Management and Wealth.

    • LICAT ratio of 154% demonstrating strong capital position.

    • Dividend increased by $0.04 to $0.92 per share.

    Concerns

    4

    • U.S. business performed below expectations, with underlying net income down 34% year-over-year to USD 107 million.

    • Unfavorable insurance experience in U.S. Group Health & Protection, with underlying earnings down 50% year-over-year.

    • Higher claims frequency in U.S. Dental Medicaid and pricing shortfalls.

    • Medical stop-loss business saw higher frequency of claims over $1 million, leading to increased loss ratio assumptions.

    Guidance & targets

    4
    CategoryTargetConfidence
    SLC Management Underlying Earnings Target
    $235 million
    medium materiality
    High
    Medium-Term Underlying Earnings Growth
    10%
    high materiality
    High
    Medium-Term Return on Equity (ROE)
    20%
    high materiality
    High
    Medium-Term Dividend Payout Ratio
    40% to 50%
    high materiality
    High

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Total Company
    Overall results reflect diversified business strength, with strong growth in Asia and Canada, and solid Asset Management, partially offset by lower earnings in the U.S.
    Underlying Net Income: $1.047 billionUnderlying Net Income YoY Growth: 3%Underlying EPS: $1.86Underlying EPS YoY Growth: 6%Underlying ROE: 18.3%Reported Net Income: $1.1 billionReported Net Income vs Underlying: 6% aboveTotal CSM: $14.4 billionTotal CSM YoY Growth: 12%New Business CSM: $446 millionNew Business CSM YoY Growth: 16%Organic Capital Generation (net of dividends): $624 millionOrganic Capital Generation as % of Underlying Net Income: 60%LICAT Ratio: 154%LICAT Ratio QoQ Change: +3 pointsHoldco Cash: $2.1 billionLeverage Ratio: 21.6%Book Value Per Share: Up 2% YoY
    		————
    Asset Management and Wealth (Consolidated)
    Underlying earnings growth driven by improved credit, higher fee income in Canada, and higher net seed investment income at SLC Management.
    Underlying Earnings YoY Growth: 5%Assets Under Management (AUM): $1.6 trillion (total)AUM managed by asset management businesses: $1.4 trillionAUM on behalf of third-party investors: $1.2 trillion
    		—5%——
    MFS
    Underlying net income slightly down due to decreased net interest income, partially offset by higher fee income. Net outflows were the lowest since 2021, with strong institutional sales.
    Underlying Net Income: USD 215 millionUnderlying Net Income YoY Change: -1%Pretax Operating Margin YoY Change: -1.3 percentage pointsAssets Under Management (AUM): USD 659 billionAUM YoY Growth: 2%AUM QoQ Growth: 4%Net Outflows: USD 0.9 billionRetail Outflows: USD 4.7 billionInstitutional Inflows: USD 3.8 billionInstitutional Gross Sales: USD 12.9 billion
    		———39.2% (Pretax Operating Margin)
    SLC Management
    Strong underlying net income growth driven by higher net seed investment income and fee-related earnings. Well-positioned to achieve full-year earnings target.
    Underlying Net Income: $54 millionUnderlying Net Income YoY Growth: 15%Year-to-date Underlying Net Income: $184 millionFee-related Earnings: $78 millionFee-related Earnings YoY Growth: 8%Capital Raising: $5.6 billionDeployments: $7.4 billionFee-earning AUM: $199 billionFee-earning AUM YoY Growth: 9%
    		—15%——
    Canada
    Strong business growth, favorable insurance experience, and higher fee income. Group sales were down due to timing of large case sales.
    Reported Net Income: $422 millionReported Net Income YoY Growth: 13%Underlying Net Income YoY Growth: 8% (reported)Asset Management and Wealth Underlying Earnings YoY Growth: 19%Asset Management and Wealth AUM: $213 billionAsset Management and Wealth AUM YoY Growth: 11%Group Health & Protection Earnings YoY Growth: 15%Group Sales YoY Change: -21%Individual Protection Earnings YoY Growth: 3%Individual Protection Sales YoY Growth: 16%
    		—13%——
    Sun Life U.S.
    Significant decline in underlying net income due to unfavorable insurance experience in medical stop-loss, higher claims frequency in Dental, and unfavorable disability experience.
    Underlying Net Income: USD 107 millionUnderlying Net Income YoY Change: -34%Group Health & Protection Underlying Earnings YoY Change: -50%Group Health & Protection Sales: USD 273 millionGroup Health & Protection Sales YoY Growth: 25%Individual Protection Underlying Earnings YoY Growth: 29%Reported Net Income: USD 72 millionReported Net Income YoY Change: -71%
    		—-34%——
    Asia
    Record underlying net income driven by strong sales momentum, in-force growth, favorable mortality, and higher earnings in India. Double-digit sales growth across most markets and channels.
    Underlying Net Income: $226 millionUnderlying Net Income YoY Growth: 32%Individual Protection Earnings YoY Growth: 38%Asset Management and Wealth Earnings YoY Change: In line with prior yearReported Net Income: $373 millionIndividual Protection Sales YoY Growth: 38%Total CSM: $6.5 billionTotal CSM YoY Growth: 17%New Business CSM: $322 millionNew Business CSM YoY Growth: 20%Agency Sales YoY Growth: 25%Bank Insurance Sales YoY Growth: 36%Broker Sales YoY Growth: 47%Asset Management Gross Flows and Sales: $2.2 billionAsset Management Gross Flows and Sales YoY Growth: 17%
    		—32%——

    Operational metrics

    22
    Underlying EPS
    $1.86Up 6% year-over-year
    Q3 FY25
    Underlying ROE
    18.3%Up from prior year
    Q3 FY25

    Progressing well towards medium-term objectives.

    Book Value Per Share Growth
    3%quarter-over-quarter
    Q3 FY25
    Asset Management Net Flows
    $3 billionpositive
    Q3 FY25

    Includes strong capital raising and deployments at SLC Management and institutional net inflows at MFS.

    Dividend Per Share Increase
    $0.04increase
    Q3 FY25

    Common shareholder dividend.

    Shares Repurchased
    $400 millionapproximately
    Q3 FY25

    Part of capital return strategy.

    Organic Capital Generation (net of dividends)
    $624 millionstrong
    Q3 FY25

    Well above target range of 30% to 40%.

    Holdco Cash
    $2.1 billion
    Q3 FY25
    Leverage Ratio
    21.6%remains low
    Q3 FY25
    MFS Net Outflows
    USD 0.9 billionlowest since 2021
    Q3 FY25

    Included retail outflows of USD 4.7 billion and institutional inflows of USD 3.8 billion.

    MFS Institutional Gross Sales
    USD 12.9 billionstrong
    Q3 FY25

    Included large mandate wins in separately managed accounts and collective investment trusts.

    SLC Management Capital Raising
    $5.6 billion
    Q3 FY25
    SLC Management Deployments
    $7.4 billion
    Q3 FY25
    Sun Life Global Investment AUM
    $44 billionover
    Q3 FY25

    Since launching in 2010, SLGI has become the largest Canadian-based provider of target-date funds for group retirement plans.

    U.S. Medical Trend
    8.5%rising
    FY25

    Expected to continue into 2026.

    U.S. Medical Stop-Loss Loss Ratio Shortfall
    20%related to prior pricing shortfall
    Q3 FY25

    Part of the unfavorable insurance experience.

    U.S. Medical Stop-Loss Late Claims Emergence
    35%related to claims from cohorts prior to 1/1/25
    Q3 FY25

    Part of the unfavorable insurance experience.

    U.S. Medical Stop-Loss 1/1/25 Cohort Impact
    just under halfrelated to the 1/1/25 cohort itself
    Q3 FY25

    Due to higher number of greater than $1 million claims late in the quarter.

    U.S. Medical Stop-Loss Q4 Impact (1/1/25 cohort)
    1/3 of Q3 adjustmentsmaller amount in single digits
    Q4 FY25

    Expected impact based on updated ultimate loss ratio pick for the year.

    U.S. Medical Stop-Loss Claims Volume Seen
    30%by Q3
    Q3 FY25

    For the 1/1/25 cohort.

    U.S. Group Benefits After-Tax Margin
    6.9%slightly below long-term target
    Q3 FY25

    Long-term target is 7% plus.

    SLC Management Remaining Purchase
    $2 billionaround
    Early next year

    Current capital position reflects preparation for this transaction.

    Industry KPIs

    8
    MetricValueDetails
    Capital returns$0.92CAD
    ROE operating ROE18.3%%
    Book value per share—
    Net investment income—
    Life specific when present$446 millionCAD
    Renewal rate change pricing14%%
    Statutory regulatory capital154%%
    Prior year reserve development35%%

    Product announcements

    1
    ProductTypeDetails
    SLGI ETF serieslaunch

    Deals & partnerships

    1
    BowtieIncreased ownership in Bowtie.

    Contributed to reported net income being $1.1 billion, 6% above underlying net income.

    Risks & headwinds

    5
    U.S. Business UnderperformanceQ3 FY25

    Underlying net income down 34% YoY to USD 107 million.

    Mitigation: Repricing, expense actions, and growth of commercial business.

    U.S. Group Health & Protection Unfavorable Insurance ExperienceQ3 FY25

    Underlying earnings down 50% YoY.

    Mitigation: Repricing efforts, cost containment programs, expert clinical capabilities, care navigation capabilities.

    U.S. Medical Stop-Loss Higher Claims FrequencyQ3 FY25

    Led to increased stop-loss ratio assumptions.

    Mitigation: Disciplined pricing approach, cost containment programs, expert clinical capabilities.

    U.S. Dental Medicaid Pricing Shortfalls and High UtilizationQ3 FY25, ongoing into 2026.

    Pricing shortfalls and higher claims frequency.

    Mitigation: Repricing, expense actions, growth of commercial business, influencing state rate-setting process.

    Asset Management Industry HeadwindsQ3 FY25, ongoing.

    MFS retail outflows of USD 4.7 billion.

    Mitigation: Executing well within headwinds, focusing on long-term net flow positive growth, specific wins in institutional and active ETFs.

    What to watch in Q4 FY25

    5

    U.S. Medical Stop-Loss Q4 Impact

    Q4 FY25
    CurrentExpected to be 1/3 of Q3 adjustment (single-digit millions).
    TargetActual impact on Q4 earnings.

    Why it matters

    To assess the ongoing impact of elevated claims and the effectiveness of updated loss ratio picks for the 1/1/25 cohort.

    So in Q4, you would expect it to be 1/3 of that. So it would be a smaller amount in the single digits.

    Q&A highlights

    6

    What are the expectations for Medicaid repricing in 2026, and will efforts be reinvigorated to accelerate commercial dental growth to diversify away from Medicaid?

    Management is making progress on Medicaid repricing with states, but health plans are slower. They are considering structural changes and contract terminations if pricing isn't met. Commercial dental has grown over 30% in premiums and 20% in membership since acquisition and is a key growth opportunity, especially packaged with other group benefits.

    “Generally, we're making reasonably good progress with states around '26 with the exception of one large space. Health plans is going slower. We're making less progress.”

    asked by Paul Holden · answered by David Healy

    2 min read5 chapters

    Detailed Narrative

    01

    U.S. Business Challenges and Repricing Efforts

    The U.S. segment faced significant headwinds, with underlying earnings down 34% YoY. This was primarily driven by unfavorable insurance experience in Group Health & Protection, including higher disability claims in July (normalizing later in the quarter), increased frequency of medical stop-loss claims over $1 million, and pricing shortfalls in Medicaid Dental. Management emphasized that these businesses are repriceable within 1-3 years and are actively engaged in repricing, expense actions, and commercial growth strategies to address these issues.

    02

    Asset Management Strategic Focus

    Sun Life announced Tom Murphy as President, Sun Life Asset Management, effective January 1, 2026, to accelerate growth globally. The strategy involves leveraging MFS's public equities and fixed income expertise, SLC Management's alternative asset capabilities, and unlocking synergies with Sun Life's insurance and wealth businesses, particularly in Asia where over $140 billion in assets are managed.

    03

    Strong Capital Position and Shareholder Returns

    The company maintained a strong capital position with a LICAT ratio of 154%, up 3 points from the prior quarter, supported by a $1 billion debt issuance and organic capital generation. Sun Life increased its common shareholder dividend by 4.5% to $0.92 per share and repurchased approximately $400 million of shares in the quarter, demonstrating commitment to returning value to shareholders.

    04

    Asia and Canada Growth Momentum

    Asia posted record underlying net income, up 32% YoY, driven by strong individual protection sales (agency up 25%, bank insurance up 36%, broker up 47%) and robust new business CSM growth of 20%. Canada's underlying net income was up 13% YoY, benefiting from strong business growth, favorable insurance experience, and higher fee income, with individual protection sales up 16%.

    05

    MFS and SLC Management Performance

    MFS reported net outflows of USD 0.9 billion, the lowest since 2021, with strong institutional gross sales of USD 12.9 billion, including large mandate wins. SLC Management saw fee-earning AUM grow 9% YoY to $199 billion, driven by $5.6 billion in capital raising and $7.4 billion in deployments, positioning it to achieve its full-year earnings target.

    AI-generated summary of the company’s earnings call. Not investment advice.