While sales of individual life insurance and group benefits were up in Canada, Sun Life Financial reported net income for the second quarter of 2016 that was about 34% lower than the same period last year.

Sun Life released its financial results after the markets closed yesterday, and the company's reported net income in the second quarter of 2016 was $480 million, a decline of 33.88% from the $726 million reported for the same period in 2015. Year-to-date reported net income was down by about 12%, decreasing from $1.167 billion in 2015 to $1.020 billion in 2016.

“In the second quarter of 2016, declining interest rates resulted in unfavourable market related impacts,” reads a note in the financial statements. “Interest rates declined during the second quarter due to macroeconomic factors, including the U.K. referendum in which voters approved an exit from the European Union.”

Net income dropped 45%

In Canada, the company's reported net income dropped 45%, going from $337 million in the second quarter of 2015 to $185 million in the second quarter of this year. The company notes that sales of individual insurance products were up by 16% compared to Q2 2015 thanks to strong permanent insurance sales in the third-party channel. Although Sun Life saw a 37% increase in the sale of its own mutual and segregated funds, lower third-party mutual fund sales led to a 10% decline in total individual wealth product sales in Canada.

Group benefit sales were a bright spot, with Canadian results 12% higher than they were in the second quarter of 2015 due to more sales in the small and mid-market segments. However, group retirement sales decreased by 55% compared to the same period last year; the company points out that the results are skewed because this division saw particularly high sales in Q2 2015, including a significant asset transfer from the University of British Columbia's pension plan.

Acquisition of employee benefits business in the United States

The insurer’s Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio was 214% as at June 30, 2016, compared to 240% as at December 31, 2015. The decrease is mostly due to the acquisition of employee benefits business in the United States.

"Sun Life's strategy stood up well during the second quarter, delivering $554 million in underlying net income and an 11.9% underlying ROE in the face of a challenging environment," says Sun Life's president and CEO Dean Connor. "We made good progress at integrating our acquisitions announced last year; increased ownership in our Asian joint venture operations; and continued our investment in organic growth. Combined, these are reflected in a 26% increase in our insurance sales and a 3% increase in wealth sales."