Sun Life Financial (NYSE:SLF) executives highlighted “strong” fourth-quarter results and progress toward medium-term objectives during the company’s latest earnings call, pointing to broad-based performance across business groups, continued momentum in Asia protection sales, and improved results in U.S. medical stop-loss. Management also addressed capital deployment priorities, upcoming buyouts at SLC Management, and ongoing efforts to improve the U.S. dental business.
Quarterly performance and capital position
CEO Kevin Strain said underlying net income reached CAD 1.1 billion in the quarter, contributing to 17% underlying earnings per share growth versus the prior-year quarter and an underlying return on equity of 19.1%. CFO Tim Deacon said underlying net income was up 13% year-over-year, with underlying EPS of CAD 1.96. The company ended the quarter with a LICAT ratio of 157%, which Deacon said was supported by debt issuance and organic capital generation, partially offset by dividends and CAD 400 million of share buybacks in the quarter.
Business group results: asset management, wealth, health, and protection
Management described strength across multiple segments. Deacon said asset management and wealth underlying earnings were CAD 534 million, up 10% year-over-year, supported by lower credit losses and higher fee income in Canada and higher average net assets at MFS. Group Health and Protection underlying earnings rose 16% to CAD 308 million as U.S. medical stop-loss experience stabilized and Canadian health businesses grew. Individual protection underlying net income increased 17% to CAD 362 million, driven by business growth and favorable mortality experience in Asia and the U.S.
In Canada, Deacon reported underlying net income of CAD 417 million, up 14% year-over-year, with a record underlying ROE of 30.1%. Executives said Canadian wealth results were strong, with gross flows and wealth sales up 46% year-over-year. Strain said Group Retirement Services sales doubled year-over-year, and individual wealth sales rose 10%.
In Asia, Deacon said fourth-quarter underlying net income increased 19% year-over-year on a constant currency basis to CAD 207 million. Strain said Asia delivered 50% year-over-year protection sales growth, including sales growth of 111% in Hong Kong. He also pointed to Indonesia sales growth of 43%, attributing momentum to the expanded bank insurance partnership with CIMB Niaga that took effect at the start of 2025.
In the U.S., Deacon said underlying net income increased 30% year-over-year. U.S. Group Health and Protection sales were $1.2 billion, up 45%, driven by record medical stop-loss sales and other employee benefits and dental-related sales. Medical stop-loss sales growth was cited as 58% year-over-year.
Stop-loss pricing and experience: “hardening market” and disciplined approach
Stop-loss was a focal point in the Q&A. Management characterized the market as hardening and said scale and underwriting discipline are key differentiators. In response to analyst questions, executives said the company achieved an average 17% price increase on renewal business for the January 1 block, and management emphasized that the renewal pricing reflected expected medical cost trend as well as leverage trend and plan design changes such as deductibles and attachment points.
David (a Sun Life executive in the U.S. business) said the ultimate loss ratio for the 1/1/25 cohort improved modestly versus what was shared in Q3, and that fourth-quarter results were “almost identical” to prior projections, describing the loss ratio as stable. Asked about reserve actions, he said the Q4 loss ratio held with marginal improvement. Another executive, Brendan Kennedy, said there were no reserving methodology changes to highlight.
Strain reiterated that Sun Life views stop-loss as a long-term business where the company has “scale, the data, and underwriting advantages,” and noted the acquisition of PinnacleCare as part of a service model to help members manage serious illness. Management also said the company had taken pricing actions earlier than some competitors, and that being selective in risk selection is part of its approach.
SLC Management buyouts, management equity plan, and “Sun Life Asset Management” integration
Strain and Deacon highlighted progress at SLC Management, with Strain noting full-year underlying net income of CAD 242 million, exceeding an investor day target of CAD 235 million. Deacon said fourth-quarter underlying net income at SLC was CAD 58 million, with fee-related earnings of CAD 99 million up 25% and a pre-tax fee-related earnings margin of 27.5%, up 450 basis points year-over-year.
Executives said the company remains on track to complete the BGO and Crescent Capital buyouts in the first half of 2026. Strain also said the company is introducing a management equity plan in which SLC management will own up to 25% of the business, which he described as a best practice to attract and retain talent in alternatives. Management said most eligible employees are choosing to participate.
During the Q&A, executives described 2026 as a “transition year” at SLC in the context of shifting ownership percentages and aligning the platform. Steve Peacher said the transition is more about harnessing the platform—given the firm’s history of building capabilities through acquisitions—once the buyouts are completed. Tim Deacon said non-controlling interest will be replaced by a new non-controlling interest tied to employee ownership, and that the company expects to provide enhanced disclosures as the changes take effect.
Management also discussed the formation of Sun Life Asset Management, effective January 1, and framed it as a way to better connect the company’s insurance balance sheet, wealth businesses, and asset management capabilities. Deacon pointed to opportunities to provide seed and permanent capital to support growth in alternatives and highlighted collaboration between SLC and the pension risk transfer business. Executives said they are focused on growth opportunities rather than cost synergies between traditional and alternative asset management operations.
Capital deployment: organic investment, near-term priorities, and buybacks
With the LICAT ratio at 157%, analysts pressed management on capital deployment and buybacks. Deacon said priorities remain unchanged:
- Organic investment, including scaling Asia and asset management, and continued investment in digital and AI.
- Near-term inorganic focus on completing the BGO and Crescent buyouts.
- Beyond that, bolt-on acquisitions to add adjacent capabilities, rather than “transformative” deals.
- Share buybacks expected to resume later in the year, pending market conditions, with the company maintaining a discipline of not buying back shares faster than organic capital generation.
Deacon said the company generated CAD 4.2 billion in organic capital in 2025 and returned CAD 3.7 billion to shareholders through dividends and buybacks. He also cited a CAD 2.2 billion liability related to the private asset affiliate buyouts, with potential final adjustments of at least another CAD 150 million.
In closing remarks, Strain also expressed condolences regarding a tragedy in Tumbler Ridge, British Columbia, and recognized first responders and healthcare workers.
About Sun Life Financial (NYSE:SLF)
Sun Life Financial Inc, founded in 1865 and headquartered in Toronto, Ontario, is an international financial services organization that provides a range of insurance, wealth management and asset management solutions. The company serves individual and institutional clients, offering products designed to protect against life and health risks, help clients save for retirement, and manage investments on behalf of customers and third parties.
Core business activities include life and health insurance, group benefits for employers, retirement and pension products, and wealth management services such as mutual funds and segregated fund solutions.
