Over half of Sun Life’s record earnings generated outside Canada

By Hubert Roy | June 27 2007 08:32PM

Sun Life Financial passed two major milestones in 2006: net earnings exceeded the $2 billion mark to reach $2.2091 billion, and earnings from business outside Canada squeezed past earnings from domestic operations, at 52% and 48% respectively.

Return on shareholders’ equity climbed to 13.8% in 2006 compared with 12.6% in 2005.

Sun Life openly admits that its development is fuelled by international business. Michel Leduc, vice-president, public affairs, at Sun Life says the insurer wants to cultivate the Asian market over the long term.

“We’ve experienced a tremendous growth in Asia (India, China and other countries), considering that five years ago, we were just entering there. Now, we think it’s where there will be significant growth opportunities,” he said.

Sun Life already has nearly 6000 employees in Asia, mainly in India, China and Hong Kong. In India alone, Birla Sun Life affiliated advisers ballooned from 34,000 at the end of 2006 to 41,000 in Q1 2007.

In Hong Kong, Sun Life catapulted from 19th to 7th place among insurers thanks to an acquisition completed in 2005. In China, purchases (premiums) of life insurance and individual and group medical insurance of Sun Life Everbright Financial rose by 108%.

The Asian market, however, accounts for only 5% of Sun Life’s total net earnings. In fact, net earnings on that continent have increased dramatically, posting staggering 140% growth since 2005. They now exceed $100 million.

Mr. Leduc points out that there is not much room left in the mature Canadian market to grow or to make acquisitions. Sun Life’s next acquisitions will probably be outside Canada, he predicts, adding that the insurer is particularly keen on the United States and China.

U.S. business, where Sun Life, operates under the name Sun Life and McLean Budden, represented 21% of total earnings in 2006. Because it sees the American market as the largest insurance market in the world by far, Sun Life will seek out many opportunities to expand asset management there, Mr. Leduc says.

In Canada, Sun Life saw its individual life and health insurance premiums increase by 8%, from $151 million in 2005 to $163 million in 2006. The brokerage network generated $34 million in premiums, a 70% increase over 2005. Sales produced by the Clarica (now called Sun Life) agent network remained close to the 2005 volume, although the number of agents decreased. Sun Life mentioned recruitment problems in its annual report.

In Canada, Sun Life will now focus on asset management and wealth management, particularly to capitalize on demographic trends (aging population, wave of retiring baby boomers). In wealth management, retail product sales advanced by $171 million between 2005 and 2006, for growth of 7%. Sun Life’s total assets in this sector surpassed $2.5 billion in 2006.

In addition, Sun Life’s group insurance grew sharply, while net purchases in this sector increased by 30% from 2005 to 2006, for a total of $224 million.