Sun Life Financial eyes growing middle-class in Asia for future growth

TORONTO – One of Canada’s largest life insurance companies, Sun Life Financial Inc. (TSX: SLF), says Asia will remain one of its biggest markets for the foreseeable future.

“The distinguishing thing about Asian markets is that very few people are counting on their governments to look after them in retirement or health-care or other things that come along,” Sun Life president and chief executive Dean Connor said Thursday.

“The astonishing growth of the middle-class market is driving and will drive demand for decades to come.”

Sun Life currently operates in seven Asian countries, including the Philippines, Indonesia, Vietnam, Malaysia, China, India and Hong Kong.

Connor said the Toronto-based insurance and wealth management company is at a pivotal point in these regions, where the populations are shifting into the middle class and eager for ways to save and invest for the future.

“Asia is benefiting from this remarkable growth of the middle class and the movement of people from poverty into the middle class,” he said. “It’s just astonishing the pace of growth. When that happens, people are able to save money. In most Asian markets, people are prodigious savers. It also causes them to want them to protect the things they cherish and to save for the education of their children.”

On Wednesday, Sun Life reported a $435-million net profit in the third quarter, reversing last year’s net loss of $502 million amid a sharp increase in total revenue.

The net income amounted to 71 cents per diluted share, compared with a net loss of 84 cents in the prior-year period when it booked a $1.37 per share loss from discontinued operations.

Total revenue, which includes premium, fee and investment income, improved to $5.61 billion from $4.16 billion.

Net premium revenue increased to just under $2.7 billion from $2.4 billion a year earlier, while investment income improved to $1.8 billion and fee income to $1.11 billion versus $808 million and $940 million in the prior-year period.

Sun Life said net operating income from continuing operations, which adjusts for certain factors, was $467 million or 76 cents per share, up from $422 million or 69 cents in the comparable 2013 period.

Analysts surveyed by Thomson Reuters had, on average, expected adjusted net income of $452.9 million or 74 cents per share.

The company said the earnings were largely driven by its operations in Asia, which showed a 33 per cent growth in individual life insurance sales compared with last year.

Canadian operations continued to show strength in both insurance and wealth sales. Sun Life global investments more than doubled sales of institutional and retail funds compared to the same period last year.

Net income at MFS (Investment Management) in the U.S. also saw a 33 per cent increase driven by higher average net assets. On the flip said, U.S. operations reported a small operating loss of US$3 million in the quarter.

Robert Manning, chairman and chief executive at MFS, said although the results were positive, the company is braced to deal with volatility in the stock markets moving forward.

“The environment is very challenging for everybody in the asset management industry. October was a very volatile month. You had equity markets plunge around the globe, you had central banks moving in different directions ” he told analysts during a conference call.

“Everybody is in an environment right now that is challenging. And we don’t know what the rest of the year will look like.”

CIBC World Markets analyst Robert Sedran said MFS has long been seen as a key operating segment for Sun Life.

“Sun Life is far more than just MFS, but we have become accustomed to stronger performance from this part of the company. Without it, the near-term outlook becomes more muted,” he wrote in a note.

Meanwhile, Sun Life left its quarterly dividend remained unchanged at 36 cents per share, but said it was prepared to revisit the payout in 2015 if its financial position continues to be positive.

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