Sun Life Financial CEO Touts 12% EPS Growth, Eyes 20% ROE as U.S. Dental Volatility Looms
Sun Life Financial logo
Strong 2025 results: Sun Life reported 12% EPS growth and ROE just over 18%, tracking toward its 20% ROE target and exceeding its 10% EPS growth goal for the year.
U.S. dental reset: The company kept its $5 billion premium goal but extended the timeline and shifted the mix from ~75% state/25% commercial toward a roughly 50/50 mix, directing management to “optimize” the ~$2.5 billion state book rather than prioritize growth.
U.S. stop-loss repricing and resilience: After consecutive price increases (about 14% and 17%) and a Jan. 1 repricing covering two‑thirds of the book, stop-loss claims ran in the mid‑70s with margins above target and Sun Life sold a record number of policies for Jan. 1 effective dates.
Sun Life Financial (NYSE:SLF) President and CEO Kevin Strain said the company delivered a “good year in total” in 2025, pointing to earnings per share growth of 12% and return on equity (ROE) “just over 18%,” which he said tracks toward the company’s 20% ROE target. Speaking in a year-in-review discussion, Strain also highlighted leadership changes across key business lines and outlined actions underway to address volatility in the company’s U.S. dental business while expressing confidence in its U.S. stop-loss operations.
Strain said 2025 “ended on a strong note” and described the year’s results as exceeding the company’s 10% EPS growth target. He also cited progress against a five-year investor target in the company’s “SOC” metric, saying it reached “just over 240” versus a target of 235.
He emphasized several leadership appointments in profit-and-loss roles, including:
Manjit Singh leading Asia
Jessica Tan leading Canada
Ted Maloney at MFS
Sunny joining SLC
Tom Murphy in a new role overseeing asset management
David Healy leading the United States
Strain said Canada and Asia performed strongly, while the U.S. business was “a bit more volatile,” reflecting what he described as structural changes in the U.S. healthcare system that affected results differently across quarters.
Strain said Sun Life has “reset” goals for its U.S. dental business after learning more about how Medicare and Medicaid dynamics are evolving. He referenced an earlier target discussed on an investor call: $5 billion in premium at a 5% margin, or $250 million in profit. While he reiterated the $5 billion premium goal, he said it “may take a little bit longer” than originally expected.
He described a shift in expectations for the business mix. When the goal was first set, the company expected state-based business to represent about 75% of the target and commercial business 25%. Now, he said he would like state business to be closer to half, adding that pressure in the state segment is likely to keep margins below 5%.
Strain gave specific figures for the current premium mix, saying the business sits at “just under $3 billion in premium,” with nearly $2.5 billion in state and about $500 million in commercial. He said he has directed Healy not to prioritize growth in the $2.5 billion state book, but instead to “optimize it” by focusing on states where partnerships, efficiency, and economics are more sustainable, while putting more emphasis on building the commercial business.
In discussing how the company may approach state business, Strain said it could involve a combination of intermediary relationships and more direct conversations with states, depending on whether margins can be sustained. He also tied optimization to operational execution, including claims management and how the business interacts with states and plan sponsors, describing it as part of a digital transformation effort.
Turning to U.S. stop-loss, Strain said the company has implemented two consecutive years of significant price increases, citing 14% and 17% moves, and noted another repricing impacting “2/3 of the book” that took effect January 1. He said the stop-loss business has continued to run claims in the “mid-70s” and deliver profit margins above the broader employee benefits margin target of 7%.
Strain also addressed the optics of volatility in late 2024, saying the fourth quarter of that year saw severity that “basically wiped out all the profit in the fourth quarter,” even though full-year performance still came in near targeted margins. He emphasized the company’s long history in the business—“we’ve done this business for 40 years”—and said scale and expertise support its ability to reprice as healthcare costs rise.
He said the company sold “a record number” of stop-loss policies effective January 1 after what he described as a combined “31% pricing and claims adjustment increase.” He added that volume was strong enough that the company became more selective late in the selling season. Strain attributed demand in part to competitors facing worse claims experience—he referenced some competitors running in the “mid-nineties” on claims versus Sun Life in the mid-70s—making their needed price increases steeper.
He also cited added capabilities such as PinnacleCare, which he described as helping members navigate significant health events and the U.S. healthcare system.
Strain said he does not view MFS as being in decline, despite acknowledging it had “a tough year for flows” while still generating income and cash flow back to the company. He described Sun Life as both an asset management and insurance company, and said having a full-service asset management platform spanning public equities/fixed income (primarily MFS) and alternatives (through SLC) creates a stronger overall business.
He said Sun Life has approximately CAD 1.6 trillion in assets under management and expects SLC to grow at a 20% compound annual growth rate. Strain also said the company could deploy capital into bolt-on acquisitions for SLC, but does not expect MFS to pursue M&A.
He added that the company also has sizeable wealth management operations, including a Canadian DC/GRS business with CAD 175 billion in assets under management, and described opportunities to better align wealth and asset management efforts as part of Murphy’s remit.
On SLC ownership transactions involving BGO and Crescent, Strain said buyouts were “imminently” approaching and that the structure—including earn-outs and put/call terms—had been established when the original deals were done. He said the put/call payments will be funded with debt already issued. He also described efforts to structure management ownership in SLC, with an expectation that management will own 20%–25% through a combination of founders rolling equity, stock grants for key personnel, and an equity buy-in program.
In Canada, Strain said an economic slowdown and stalled job growth would affect employee benefits providers broadly, including Sun Life. He noted the company’s market share in Canadian employee benefits is “just under 25%,” similar to major peers, while its group retirement services (GRS) share is closer to 40%. He pointed to rollovers as a partial offset when people leave plans, and said the company is considering how changes such as AI could reshape employment while creating new industry opportunities over time.
In Asia, Strain described long-term growth from roughly CAD 100 million in income when he moved to the region to “close to CAD 900 million today.” He said the company has committed to building scale in key markets such as Hong Kong, India, and the Philippines, and has built distribution capabilities across bancassurance, agency, brokerage, and digital channels. He characterized Asia as an increasingly important contributor to overall ROE improvement.
On capital deployment, Strain said management is focused primarily on organic growth and maintaining a “strong, sustainable buyback program,” which he said can contribute roughly 0.5%–2% to annual earnings growth. That emphasis, he suggested, leaves room mainly for bolt-on acquisitions—potentially in Asia or within SLC—generally under CAD 500 million.
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.
