Sun Life's Q4 2024 Earnings Call: Key Contradictions in Stop-Loss Loss Ratio and Dental Earnings Targets

These are the key contradictions discussed in Sun Life Financial Inc.'s latest 2024Q4 earnings call, specifically including: Stop-Loss Loss Ratio and Pricing Actions, and Dental Earnings Target:



Stop-loss Loss Ratio and Pricing Strategy:
- Sun Life Financial reported a full-year stop-loss loss ratio of 74% for 2024, higher than their pricing target of 73%.
- The elevated loss ratio was driven by an increase in claim severity, which surprised the company despite the return to pre-COVID utilization levels.
- Sun Life has taken pricing actions, including a 14% average rate increase effective January 1, 2025, and plans for additional pricing adjustments to address the severity trends.

Morbidity Experience Impact:
- Sun Life's U.S. Health and Risk Solutions business experienced a significant adverse morbidity experience in Q4 2024, primarily due to higher claim severity in medical stop-loss.
- The increased claim severity was observed across the industry and has persisted, impacting Sun Life's results.
- The company plans to manage this through underwriting actions and additional pricing adjustments to stabilize loss ratios.

Capital Raising and Asset Management Growth:
- SLC Management achieved record capital raising of $10 billion in Q4, contributing to record net inflows of $14.1 billion.
- Growth in assets under management was driven by strong fundraising across all affiliates, particularly in Crescent and BGO.
- The increased demand for real estate and fixed income funds, despite market pressures, has supported fundraising momentum.

U.S. Group Health and Protection Challenges:
- Underlying earnings for U.S. Group Health and Protection were lower by 46% year-over-year due to unfavorable morbidity experience in medical stop-loss.
- The decline in earnings was primarily due to higher claim severity, which affected group and dental results.
- Despite these challenges, Sun Life maintains strong sales momentum in the U.S., particularly in group businesses.