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May 6, 2020

Sun Life CEO says more deals may hit market due to pandemic

Signage is illuminated on the Sun Life Financial Inc. headquarters in Toronto, Ontario, Canada, on Sunday, Aug. 11, 2019. Sun Life reached its lowest ever coupon for any of its bonds with the issuance of its first sustainable notes in a fresh sign that demand for such debt is increasingly driven by general investors scratching for some yield above inflation. Photographer: Brent Lewin/Bloomberg

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Sun Life Financial Inc. Chief Executive Officer Dean Connor expects that more takeover opportunities may arise because of the coronavirus pandemic — and the Canadian insurer is ready to act.

“We continue to be interested in acquisition candidates across all of our pillars that fit our criteria — I don’t think the COVID-19 crisis has changed that at all,” Connor said in an interview Wednesday. “It might change the set of things that become available, but it hasn’t changed our focus and our appetite.”

Connor’s comments follow Sun Life’s announcement late Tuesday of first-quarter results, including a 7.4-per-cent increase in underlying earnings that topped analysts’ estimates. Still, Sun Life saw its biggest drop in net income since 2017, with a 37-per-cent decline that Connor attributed to market declines brought on by the pandemic.

“We came into 2020 with a lot of momentum across all of our businesses,” Connor said, citing strength at MFS Investment Management and its institutional asset manager. “So far Covid has had some impact on our business, but it has been quite modest so far.”

The pandemic is leading Sun Life to employ extra stress-test criteria for any potential takeovers, beyond what it would have used during normal times, he said. “We have a severe stress-test scenario, recognizing that there’s some higher degree of uncertainty right now than there was a year ago,” he said. “That’s an additional lens that we’ll apply to any acquisition opportunities we’ll look at.”

‘Mixed’ Sales

Coronavirus impacts were felt in April at Sun Life. Regional results were “mixed” for the month, with total individual insurance and wealth sales at about 80 per cent and 90 per cent, respectively, of year-earlier volumes, the company said Tuesday. Premium volumes and assets in force in group benefits and group pension were “relatively unchanged” from the first quarter.

COVID-19 had a “small” impact on morbidity claims, the insurer said, at less than five per cent of the monthly average for mortality and disability claims paid. Sun Life’s MFS unit had an eight-per-cent rise in assets under management, reflecting market growth, fund performance and flows.

Sun Life is “very well positioned” from a capital standpoint for any downturn ahead, with $2.4 billion of cash on hand, Connor said. “Just like every other company we will face challenges because our clients will face challenges.”