Sun Life Financial Inc.

Good morning and welcome to the Sun Life Financial Q3 2023 conference call. My name is Dilem and I'll be your conference operator today. All lines have been placed in mute to prevent any background noise. The host of the call is David Garg, Senior Vice President, Capital Management and Investor Relations. Please go ahead, Mr. Garg.

Thank you and good morning, everyone. Welcome to Sun Life's earnings call for the third quarter of 2023. Our earnings release and the slides for today's call are available on the investor relations section of our website at sunlife.com. We will begin today's call with opening remarks from Kevin Strain, President and Chief Executive Officer. Following Kevin, Manjit Singh, Executive Vice President and Chief Financial Officer, will present the financial results for the quarter. After the prepared remarks, we will move to the question and answer portion of the call. Other members of management are also available to answer your questions this morning. I draw your attention to the cautionary language regarding the use of forward-looking statements and non-IFRS financial measures, which form part of today's remarks. As noted in the slides, forward-looking statements may be rendered inaccurate by subsequent events. And with that, I will now turn things over to Kevin.

Thanks, David, and good morning, everyone. Turning to slide four, we delivered good performance during the quarter, reflecting our diversified business mix, our focus on execution, and the continued importance our clients put on health and financial security. We achieved solid underlying earnings for the quarter of $930 million, maintaining steady growth year-to-date. Our positive results this quarter are attributed to good performance in our Canadian group and wealth businesses, higher fee-related earnings in asset management, and favorable growth in Asia's individual protection business. Sun Life Canada achieved strong earnings this quarter, up 15% from the prior year, driven by strong investment results and improved disability experience. Sun Life Asia also had strong third quarter results, driven by individual insurance sales, which were up 60% year over year. In Hong Kong, sales were four times higher than the prior year and over 50% higher than the previous quarter, supported by strong performance across our distribution channels. Earnings were down 19% from the prior year in our Sun Life US business, largely due to lower dental results. This was driven by faster than expected state Medicaid redeterminations associated with the end of the public health emergency, as well as continued investments in the Advantage Dental Plus business. Our total SLF assets under management now sit at $1.34 trillion, up 6% over last year. In our asset management pillar, MFS and SLC continue to perform well despite challenging market conditions. SLC management fee-related earnings increased 17% driven by higher AUM, reflecting strong capital raising and deployment across the platform and the AAM acquisition. MFS maintained healthy margins. Net outflows were driven by industry conditions. On a year-to-date basis, defined contribution sales at MFS were up 14% compared to the prior year due to strong placement on consultant, advisor, and record-keeping platforms driving approximately $3 billion U.S. in net inflows. We maintained an underlying ROE of 17.7% this quarter, approaching our medium-term financial objective of 18% plus, reflecting our disciplined capital management and sustained emphasis on capital light businesses. Further, we maintained a strong capital position with a LICAT ratio of 147% for the quarter. We also announced a $0.03 increase to our quarterly common share dividend And we're active on our share buyback program, demonstrating our commitment to returning capital to shareholders. Turning to slide five, two years ago, we introduced our client impact strategy focused on six key areas, including people and culture, financial discipline, digital leadership, distribution excellence, sustainability, and a strong and trusted brand. all areas that we believe are critical to delivering on our purpose to help clients achieve lifetime sense of security and live healthier lives. Over the past few months, we've refreshed our strategy to highlight our focus on trusted brand and our core values, caring, authentic, bold, inspiring, and impactful. And we link sustainability to our culture. Further, we sharpen the emphasis of our strategic imperatives to highlight the importance of deeper client relationships, thinking and acting more like a digital company, unleashing our talent and culture strategy, and delivering value from our past M&A, all with the goal of realizing our ambition to be one of the best asset management and insurance companies in the world. Turning to slide six, we continue to execute on our client impact strategy, as demonstrated by several key business initiatives delivered this quarter. Improving access to care and helping clients live healthier live healthier lives remains a top priority for us, and we are continuing to expand our health-oriented businesses in multiple markets. This quarter, we were selected to move forward in the final stages of contact negotiations with the Government of Canada to be the administrator of the Canadian Dental Care Plan, which will provide access to dental care for Canadians in need. Through the plan, up to 9 million additional Canadians will have access to dental care. We are excited for the opportunity to expand our role in Canada's health ecosystem and to leverage the deep knowledge from our U.S. DentaQuest business to create a positive impact in our home market. In the U.S., we established a preferred partnership with OptiMed to make specialty drugs more accessible and affordable for our stop-loss members. The new program will improve how specialty drugs are administered for members while also managing rising health care costs. We are also continuing to make it easier for clients to access care and benefits through digital channels. In October, we completed the acquisition of Dialog, Canada's leading virtual health and wellness provider. Dialog provides access to quality, high-touch care to 50,000 organizations, representing nearly 2.8 million clients in Canada and internationally. Dialog will play a key role in delivering on our purpose for clients. As an example, where Dialog is having an impact beyond Canada, last week we launched the Sun Life Health 360 app in the U.S., a digital front door to health and wellness support and resources for Stop Loss members, including direct access to Health Navigator, powered by Pinnacle Care Advisors. The app was developed by Dialogue in collaboration with the U.S. and offers our U.S. members the chance to enable access to valuable tools to manage and improve their health. In Asia, we increased our strategic investments in bow ties. Hong Kong's first virtual insurer with a leading market share of approximately 30% in Hong Kong's direct sales channel. Together, Sun Life and Bowtie are committed to making insurance affordable and accessible in our Asia markets. Across the organization, we are doing more to think and act like a digital company. One example of this is that we are experimenting with several generative AI projects, including in our contact centers, and we were one of the first to pilot Amazon Bedrock on AWS. We are focused on opportunities to enhance our client impact through technologies like GenAI. We're expanding our distribution capabilities through strategic partnerships and investments to deepen our impact. This quarter marked the start of our 15-year exclusive bank insurance partnership with Dossing Bank in Hong Kong, which had a strong start from a sales perspective. In October, SLC Management entered into a strategic partnership with Scotiabank to distribute our alternative investment capabilities to the Canadian retail market through Scotia Global Wealth Management. Through this partnership, Canadian high net worth investors will gain access to our world-class alternative investment capabilities. This strategic partnership, coupled with our recent acquisition of Advisor Asset Management, or AAM, positions us well to meet the growing demand for alternatives alternative assets through high net worth investors. We continue to strengthen distribution across Sun Life, our affiliates and strategic partnerships to meet the investment needs of our clients. We also continue to support the communities in which we operate. In Canada, we expanded our partnership with Spirit North, a national charitable organization committing $1 million in funding over three years to deliver physical health programs and address health inequities in underserved Indigenous communities. We know this partnership will not only make a positive impact on the physical health of youth, but also have a tremendous impact on their emotional and mental health too. This quarter, SLC management provided another round of funding against its $110 million commitment to support 24 First Nation communities with connections to the provincial electricity grid to improve the quality of life of the residents and eliminate thousands and tons of annual greenhouse gas emissions. Finally, I want to discuss a new role we have recently created. Over the past few years, we've seen the success and importance of strategic partnerships on business growth and on delivering on our purpose. We are also seeing more opportunities to leverage partnerships for all of our business lines globally. To that end, we've created the new role of Vice Chair of Strategic Partnerships reporting to me to leverage the global partnerships opportunities that are in front of us. I've asked Ingrid Johnson to take on this role. Ingrid's wealth of experience in global relationships, in her relationship management skills, her work in supporting several Asia strategic partnerships, combined with her many years of P&L leadership, makes her an ideal leader to take on this executive role. In the interim, Chris Wei, Manjit, and I, along with Ingrid's support, will provide guidance and leadership to our team in Asia as I conduct a search for the new president of Asia, which I expect to announce over the next month or so. Despite its challenging external environment, our diversified mix of business continues to perform well, driven by our strategy and our people and culture. We remain focused on our purpose and executing our strategy, and this focus has served us well as we delivered positive results in the quarter.