Investment Q&A

EPS was $1.50, missing estimates of $1.65; revenue was $6.875B. SLF missed core profit estimates for the first time in 12 quarters, hurt by weakness in the U.S., a region where it has been expanding. The quarterly results were also affected by the sale of Sun Life UK and the end of the public health emergency in the United States. Sun Life has established more partnerships in Asia and other key regions as a part of its expansion efforts and acquired firms such as telemedicine company Dialogue Health and U.S. dental benefits company DentaQuest. However, earnings in the U.S. were hurt by lower dental results driven by the impact of Medicaid redeterminations and market-related impacts largely from real estate investments, the company said. The US business was a disappointing mostly related to unfavorable underwriting. Sun Life's 1Q results were pressured by elevated mortality, higher asset management expenses and weaker dental trends, but these impacts were likely largely isolated and the long-term earnings path remains solid. Sales in Canada were strong and believe Sun Life is building a competitive advantage with its health-related investments. In Asia, organic contractual service margin gains were about 16% in 1Q on robust Hong Kong sales, while demographic trends underpin growth. In the US, 1Q profit fell 20% but Sun Life expects its dental business to recover by 2025 from the pressure tied to Medicaid redeterminations. Medical stop-loss underwriting normalizing from a highly favorable 1Q23 contributed to the drop. The dividend was raised, but it was a surprise rare 'miss' and the stock dropped more than 6%. It's still up 10% over 52 weeks, and is very cheap at 10X earnings. We would still see it as more of a BUY; these results were disappointing but hardly fatal, and there is still growth potential ahead.