Sun Life Financial(US:SLF)2022-05-12 17:46Financial Data and Key Metrics Changes - Reported net income for Q1 2022 was $858 million, down 8% from the prior year, while underlying net income was $843 million, broadly in line with last year [4][15] - Underlying return on equity was 14% in the quarter, with assets under management at $1.35 trillion, reflecting declines in equity markets and rising interest rates [16] - Book value per share increased by 11%, while value per share was up 7% over the prior year, excluding impacts from other comprehensive income [16] Business Line Data and Key Metrics Changes - MFS reported net income of $228 million, up 23% from the prior year, with underlying net income up 4% driven by higher average net assets [16][17] - SLC Management delivered net income of $19 million, with fee-related earnings up 38% year-over-year, reflecting strong capital raising activity [18] - Canada reported net income of $263 million, down 35% year-over-year, while underlying net income was up 5% due to broad-based business growth [19] - U.S. reported net income of $133 million, down 20% from the prior year, with underlying net income impacted by COVID-related effects [20] - Asia reported net income of $161 million, down 16% from the prior year, with underlying net income down 1% on a constant currency basis [22] Market Data and Key Metrics Changes - The company noted improvements in U.S. COVID-related mortality, with expectations for normalization in mortality rates [27] - In Asia, sales were impacted by corporate-related lockdown measures, but the company remains optimistic as restrictions are lifted [22] Company Strategy and Development Direction - The company is focused on sustainability, launching the first ESG savings plan in Hong Kong, and expanding partnerships in Indonesia [7][8] - Digital leadership is emphasized with the launch of new tools like Prospr by Sun Life and Benefits Explorer to enhance client experience [10][11] - The company is committed to maintaining a strong capital position, with a LICAT ratio of 143% and a focus on organic growth and dividend increases [6][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from geopolitical pressures, inflation, and rising interest rates but expressed confidence in the diversified business model to navigate these headwinds [6][23] - The company expects continued pressure on equity markets but anticipates that higher interest rates will drive profitability [6][23] Other Important Information - The company announced a 4.5% increase in its quarterly dividend, reflecting its commitment to delivering shareholder value [6] - The acquisition of DentaQuest is progressing well, with expectations to close in the first half of the year [12] Q&A Session Summary Question: Details on U.S. mortality outlook - Management noted significant improvement in U.S. mortality rates, with expectations for continued improvement and normalization over time [27][28] Question: Margin outlook for MFS - Management indicated that margins may be pressured due to market conditions but remain comfortable with long-term targets [32][34] Question: Non-COVID long-term disability experience - Management acknowledged elevated morbidity in long-term disability, with pricing adjustments being made in response [35][36] Question: Yield enhancement gains - Management attributed gains to favorable market conditions and indicated that similar opportunities may continue [38][41] Question: Capital allocation and excess capital generation - Management confirmed a disciplined approach to capital allocation, focusing on organic growth, dividends, and potential M&A opportunities [67][70] Question: Group morbidity experience in Canada - Management acknowledged unfavorable morbidity experience but indicated that it is being monitored closely and is expected to normalize [53][54]