The Sun Life Financial building in Toronto.Michelle Siu/The Globe and Mail
Sun Life Financial Inc. is in the final stages of selling off a risky U.S. annuities business in a move that reduces its exposure to volatile markets so that it can focus on organic growth through other business channels and in other marketplaces.
But one of those channels, and a bright spot in the insurer's first-quarter earnings results, came from another U.S. business. The company's Boston-based money management arm MFS had a strong quarter of sales gains, and set a new record of $348-billion in assets under management, the company reported late on Wednesday.
Many analysts pointed to this as the the most encouraging part of the quarter from an investor's perspective: "The business is performing very well, confirming that MFS is the most positive part of the investment thesis here," said Robert Sedran, analyst with CIBC World Markets Inc., in a note.
However, analyst Peter Routledge from National Bank Financial Inc. indicated that while he's optimistic MFS will be successful, the business "did not generate meaningful growth in net income for common shareholders (after adjusting for the cost of share-based payments)" in the quarter.
Dean Connor, Sun Life's chief executive officer, said the company is is top form. "MFS is firing on all 12 cylinders," he said in an interview. "When you see $23-billion (U.S.) of gross sales in the quarter, you see the kind of investment performance they are delivering for their clients, when you see the low turnover of staff and investing in their business... we're really pleased with their progress."
The Canadian insurance business, on the other hand, has been slower to post gains. As the Globe reported last week, individual life insurance sales in the country declined at both Manulife Financial Corp. and Great-West Lifeco Inc. That was due to the decision to increase prices in an effort to cushion profit margins, which have been hit by the prolonged period of low interest rates.
Sun Life hasn't followed that lead, and individual insurance sales at the company were simply flat compared to the first quarter of 2012. Sales growth in the wholesale business channel was balanced out by a drop in sales within its own career sales force.
"I think the Canadian life insurers, and certainly Sun Life, have taken a practical and responsible approach to resetting prices, particularly those that are interest-sensitive products to reflect this low-interest rate environment," Mr. Connor said. He went on to say that in universal life insurance products, for example, there have been several rounds of price increases over the past two years.
"I'm not going to comment on whether or when there will be more price changes, or which direction they might be in, but we're feeling good about our growth in insurance sales," Mr. Connor said.
Sun Life expanded further geographically in January launching a partnership in Malaysia, a country with a rising middle class. It also recently got regulatory approval for its business in Vietnam, a country it describes as having an insurance market in its infancy, but a fast-growing economy.
The company is now primarily focused on organic growth, Mr. Connor said, although it remains "in the flow" on mergers and acquisitions, and continues to look for opportunities.