Sun Life Financial Q4 2025 Earnings Call - Asset management consolidation and stop-loss hardening power earnings, but dental and market marks keep volatility in view

Rocco, Conference Operator: Good morning, and welcome to the Sun Life Financial Q2 2025 conference call. My name is Rocco, and I’ll be your operator today. All lines have been placed on mute to prevent any background noise, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press Star, then one on your telephone keypad. The host of the call today is Ms. Natalie Brady, Senior Vice-President, Capital Management and Investor Relations. Please go ahead, Ms. Brady.

Natalie Brady, Senior Vice-President, Capital Management and Investor Relations, Sun Life Financial: Thank you, and good morning, everyone. Welcome to Sun Life’s earnings call for the fourth quarter of 2025. Our earnings release and the slides for today’s call are available on the investor relations section of our website at sunlife.com. We will begin today’s call with opening remarks from Kevin Strain, President and Chief Executive Officer. Following Kevin, Tim Deacon, Executive Vice President and Chief Financial Officer, will present the financial results for the quarter. After the prepared remarks, we will move to the question-and-answer portion of the call. Other members of management are also available to answer your questions this morning. Turning to Slide 2, I draw your attention to the cautionary language regarding the use of forward-looking statements and non-IFRS financial measures, which form part of today’s remarks. As noted in the slides, forward-looking statements may be rendered inaccurate by subsequent events.

With that, I’ll now turn things over to Kevin.

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: Thanks, Natalie, and good morning, everyone. Turning to Slide 4, we delivered strong fourth quarter results driven by our disciplined execution, diversified business model, and our continued focus on our clients and our purpose. Underlying net income reached CAD 1.1 billion, contributing to underlying earnings per share growth of 17% over Q4 last year and underlying return on equity of 19.1%. Our diversified strategy continues to prove its strength with strong performances across all business groups. Notably, we saw robust protection growth in Asia, solid wealth sales in Canada, and meaningful progress at SLC Management, which exceeded its investor day earnings target. We’re also pleased with the earnings and sales growth in our U.S. stop-loss business. We ended the quarter with a LICAT ratio of 157%, demonstrating our strong capital position.

Turning to Slide 5, we saw continued strength across our asset management and wealth platforms. At SLC Management, we achieved CAD 242 million in underlying net income in 2025, which exceeds our investor day target of CAD 235 million. We also saw solid growth in fee-related earnings. We remain on track for the BGO and Crescent buyouts taking place in the first half of 2026. We’re also introducing a management equity plan for SLC. The management team at SLC will own up to 25% of the company, which is the best practice to motivate, retain, and attract talent in the alternative space. We’re pleased with the response we’ve had to the management equity plan. The vast majority of eligible employees are choosing to participate in the share offering. In Canada, we delivered strong performance in our wealth businesses.

Gross sales were up 46% year-over-year, driven by strong results in Group Retirement Services and individual mutual funds. Group Retirement Services sales doubled year-over-year, reflecting strong large case defined benefit solutions and defined contribution sales. Additionally, individual wealth sales were up 10%, driven by advisor productivity improvements and industry-wide momentum. And while there were net outflows at MFS, this is consistent with industry results, and MFS continues to play a strategic role in our overall business mix, consistently delivering strong margins and cash flow to Sun Life and supporting the growth of our asset management platform. In Q4, we saw net inflows in MFS ETF products and in fixed income, and 2025 institutional gross flows were up 59 over 2024 from continued large mandate wins.

Last quarter, we announced the formation of Sun Life Asset Management, which took effect on January first of this year. Work is currently underway to formalize our asset management capabilities under one pillar. In Asia, we maintain strong momentum driven by sustained distribution excellence. We delivered 50% year-over-year protection sales growth, including double-digit growth across all channels. Two standout markets for the year are Hong Kong and Indonesia. In Hong Kong, sales more than doubled year-over-year, with strong growth in all channels. In Indonesia, sales grew 43% year-over-year, reflecting strong execution of our expanded bank insurance partnership with CIMB Niaga that took effect at the start of 2025. We continue to capture growth and scale advantages in our core health businesses in both Canada and the U.S.

In Canada, Sun Life Health showed solid sales growth, and we launched a virtual health offering that helps 10,000 low-income Canadians access the care they need. Our U.S. Medical Stop-Loss business had a strong quarter, with robust sales growth of 58%. This quarter’s results reflect our underwriting discipline and scale advantages, which allowed us to capitalize on a hardening market. This quarter, Dental made a profit. We see this as a step in the right direction, recognizing this as a multi-year journey. Some of the steps include continuing to work with states to reprice and align the business to the higher claims environment, building out our commercial business, investing in straight-through processing, and actively managing our expenses. These steps, together with our confidence in David’s team, position us well to deliver on our priorities. We continue deploying digital solutions to drive meaningful client and business outcomes globally.

In Canada, we launched Sun Life Essentials, a fully digital group retirement solution that positions us to gain share in the attractive small to medium business market. This solution leverages automation to seamlessly onboard and serve clients. We are also pleased with the impact and results of our recently reimagined mobile app. We launched new engagement capabilities for wealth in the quarter, which drove 62% more traffic and 81% greater enrollments. We are also digitally transforming our claims and underwriting processes in the U.S. and in Asia to improve client experiences and drive efficiencies, leading to broad-based improvement in processing time for underwriting, onboarding, and claims processing, notably improving client satisfaction across both business groups. Overall, our digital initiatives will help us deliver on our purpose, support growth, and reduce expenses.

All of these factors will play an important role in delivering strong earnings growth aligned to our medium-term objectives. Underpinning our performance is a continued commitment to people and culture. We continue to believe our culture is a differentiator, led by our desire to deliver on our purpose and have impact on our clients’ lives. We achieved Great Place to Work recertification in nine countries, and for the sixth consecutive year, SLC Management was named one of the best places to work in money management by Pensions and Investments. Turning to page 6, we have a full year view. In 2025, Sun Life’s balanced and diversified growth strategy, prudent risk management capabilities, and strong capital position allowed us to advance on all of our medium-term objectives, with underlying EPS growth at 12%, underlying ROE at 18.2%, and a dividend payout ratio of 47%.

We closed 2025 with 9% full-year underlying earnings growth, strong sales and asset management, wealth, health, and protection, and a 17% increase in new business contractual service margin. We concluded the year with more than CAD 1.6 trillion in overall assets under management. In addition, our asset management platform ended the year with CAD 1.2 trillion of third-party assets under management and administration. We’re living during a truly transformative time. This past year pushed us to aim higher, act with intention, highlighting the ambition and perseverance that define who we are. For a company like Sun Life, this environment calls for purpose, clarity, and conviction. It’s our purpose, helping clients achieve lifetime financial security and live healthier lives, that guides us through uncertainty with confidence and focus.

Across our 28 markets around the world, we continue to bring a global mindset while delivering deep local understanding and impact. This approach allows us to remain agile, responsive, and attuned to the unique needs of each community we serve. As the world continues to grow more complex, we remain confident in the strength of our business mix, our disciplined execution of long-term business strategy, and our commitment to deliver on our purpose. With that, I’ll turn the call over to Tim, who will walk us through the fourth quarter financial results in more detail.

Tim Deacon, Executive Vice President and Chief Financial Officer, Sun Life Financial: Thank you, Kevin, and good morning, everyone. Turning to slide 8, we finished 2025 with double-digit earnings growth across all of our business types and strong sales growth in Asia, Canada, and the U.S. Our results this quarter underscore the strength of our balanced and diversified businesses. We reported Q4 underlying net income of CAD 1.1 billion, up 13% year-over-year, with underlying earnings per share of CAD 1.96, up 17% over last year and 12% for the full year, and ahead of our medium-term objective of 10%. Underlying ROE for the quarter reached 19.1%. Asset management and wealth underlying earnings of CAD 534 million was up 10% over the prior year. These results were driven by lower credit losses and higher fee income in Canada, and higher fee income from average net asset growth in MFS.

Group Health and Protection underlying earnings of CAD 308 million increased 16% year-over-year, as claims experience in our U.S. medical stop-loss business stabilized, and we delivered continued growth in our Canadian health businesses. Individual protection underlying net income of CAD 362 million was up 17%, driven by business growth and favorable mortality experience in Asia and in the U.S. Corporate underlying net loss increased by CAD 13 million to CAD 110 million, reflecting higher financing costs to support the upcoming buyouts of BGO and Crescent Capital. Going forward, we expect the corporate segment to generate a loss of approximately CAD 110-CAD 120 million a quarter. This will have no impact on our overall medium-term objectives.

Total company reported net income of CAD 722 million, was 34% lower than underlying net income, driven primarily by market-related impacts, including the impact of risk-free rates, swap and credit spreads, and other timing-related mark-to-market items from rate movements during the quarter. Real estate returns were flat this quarter compared to our expected long-term return assumption of approximately 2% per quarter. Other differences to underlying net income included intangible amortization, acquisition-related expenses, the impact of lower-than-expected tax-exempt investment income, and an ACMA charge. We had an excellent sales quarter in Group Health and Protection, with sales up 42% over the prior year, driven by the U.S. business, with strong Medical Stop-Loss sales, solid large case employee benefit sales, and higher dental sales. Individual protection sales were up 38%, driven by continued growth in Hong Kong.

Overall, new business CSM of CAD 440 million for the quarter increased 44% compared to last year. The SLF LICAT ratio is now at 157%, up 3 percentage points from Q3, driven by a debt issuance and strong organic capital generation, partially offset by shareholder dividends and CAD 400 million of share buybacks executed in the quarter. Turning to our business group performance, starting on page 10. MFS underlying net income of $224 million was up 4% from higher fee income from higher average net assets, partially offset by higher expenses.... Assets under management of $651 billion were up 8% year-over-year, but down slightly quarter-over-quarter as market appreciation was offset by net outflows of approximately $18.2 billion.

The net outflows included retail outflows of $9.8 billion and institutional outflows of $8.5 billion. Retail investor preference for passive index strategies and risk-free investments continue to impact the MFS retail flows in the quarter, in line with industry. Institutional net outflows were driven by several large mandate redemptions, mostly due to rebalancing. MFS had positive net flows of $1.9 billion in fixed income during the quarter, and continued to experience net inflows in its ETF products with an additional $500 million during Q4. On a full year basis, MFS had over $121 billion in gross flows, up $21 billion or 21% over 2024, delivered underlying and reported net income of over CAD 1.1 billion, and contributed CAD 1 billion in cash dividends and remittances for the organization.

SLC Management’s underlying net income was CAD 58 million in Q4, in line with the prior year, as higher fee-related earnings were offset by lower seed investment income. Full year earnings of CAD 242 million exceeded SLC’s underlying earnings target of CAD 235 million for 2025, set back in 2021. Fee-related earnings were CAD 99 million in Q4, an increase of 25% compared to the prior year, driven by capital raising and higher property management fees. Pre-tax fee-related earnings margin was 27.5%, an increase of 450 basis points year-over-year, driven by growth and scale benefits at BGO and SLC Fixed Income. Reported net income of CAD 16 million was lower than underlying net income due to market-related movements and acquisition-related charges.

Capital raising of CAD 6.4 billion in the quarter remained solid, with BGO, Crescent, and SLC Fixed Income continuing to see resilient fundraising, driven by key fixed income mandate wins and strong sales in Crescent’s flagship direct lending funds and BGO’s debt and equity real estate funds. Deployments of CAD 10.6 billion in the quarter were strong, driven by continued momentum in Crescent and BGO and Fixed Income. Fee earning AUM of CAD 200 billion was up 4% year-over-year, driven by net inflows, partially offset by distributions and asset value changes. We expect to complete the BGO and Crescent Capital buyups in the first half of 2026, further deepening our ownership in these high-performing businesses and strengthening our alternative asset management platform.

The final amounts to be paid, along with the impact of the new management equity plan and minority interests, will be reflected in our Q1 results. In Q4, Canada delivered underlying net income of CAD 417 million, up 14% over the prior year, driven by lower credit losses, higher fee income, favorable insurance experience, and strong business growth. Underlying ROE this quarter was a record 30.1%. Reported net income was CAD 307 million, an increase of 21% year-over-year, but lower than underlying net income due to market-related impacts. Asset management and wealth underlying earnings were up 41% year-over-year on lower credit losses and higher fee income from AUM growth.

Gross flows and wealth sales were up 46% year-over-year, driven by strong sales in DBS annuities, DC sponsor sales, rollover, and higher mutual fund sales. Group Health and Protection earnings were broadly in line with the prior year, as business growth and favorable mortality experience from smaller claims and lower claims volumes was offset by less favorable morbidity experience. Individual protection earnings were up 7% compared to the prior year, driven by favorable insurance experience. Group sales were up 8% year-over-year, reflecting higher health product sales, while individual protection sales were down 6%, driven by lower participating life sales, partially offset by strong non-par life sales. Sun Life U.S. Underlying Net Income increased 30% over the prior year.

In Group Health and Protection, underlying earnings were up 33%, driven by improved experience in medical stop loss, partially offset by higher distribution costs from strong fourth quarter sales results, as well as higher operating costs in dental. Medical stop loss earnings increased compared to both the prior year and prior quarter, driven by a lower loss ratio on 2025 business. Individual protection underlying earnings increased by 24% year-over-year, driven by favorable mortality experience from lower average claim size. U.S. Group Health and Protection sales of $1.2 billion were up 45% year-over-year, primarily driven by record medical stop loss sales, large case employee benefit sales and group benefits, and higher Medicaid sales in dental. In stop loss, we achieved record sales growth of 58% year-over-year, meeting our overall pricing objectives with record persistency.

In dental, the Medicaid loss ratio of 88.8%, down from 94.2% in Q3, demonstrated the benefit of our repricing actions in 2025, which helped offset elevated claims. Operational expenses were up compared to the prior year due to higher claims volumes, with actions underway to mitigate in 2026. Reported net income of $93 million was up from a loss of $1 million in the prior year, mainly driven by a prior year provision in dental. Asia’s Q4 underlying net income of CAD 207 million increased 19% over the prior year on a constant currency basis. Individual protection earnings were up 24%, mainly driven by continued sales momentum and in-force business growth and favorable mortality experience in our high net worth business, partially offset by lower contributions from joint ventures.

Asset management and wealth earnings were down CAD 3 million from reduced fee income from the transition to the centralized eMPF platform in Hong Kong during the quarter. Reported net income of CAD 131 million was higher year-over-year, driven by the increase in underlying net income and an impairment charge in the prior year, partially offset by unfavorable market related and ACMA impacts.

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: ... Asia continues to see strong sales in individual protection, up 50% year-over-year, driven by sales growth across most of our markets and channels, including sales growth of 111% in Hong Kong, with strong sales increases across all channels. Asia’s total CSM of CAD 6.7 billion grew 18% year-over-year on a constant currency basis, driven by strong organic CSM growth. New business CSM of CAD 300 million increased 49% year-over-year from higher sales, primarily in Hong Kong. In summary, we are pleased with our strong Q4 results. In 2025, we demonstrated solid progress towards our medium-term objectives, with 12% year-over-year underlying EPS growth, underlying ROE of 18.2%, and a dividend payout ratio of 47%.

We generated CAD 4.2 billion in organic capital and returned CAD 3.7 billion to shareholders through dividends and share buybacks. With our attractive mix of diversified businesses, strong organic capital generation, and an industry-leading LICAT ratio of 157%, we are well positioned to capture growth and opportunities that lie ahead in 2026. With that, I will pass it back to Natalie to begin the Q&A portion of the call.

Natalie Brady, Senior Vice-President, Capital Management and Investor Relations, Sun Life Financial: Thank you, Tim. To ensure that all participants have an opportunity to ask questions this morning, please limit yourselves to one or two questions and then re-queue with any additional questions. I will now ask the operator to poll the participants.

Rocco, Conference Operator: Thank you. To join the question queue, you may press Star then one on your telephone keypad. You will hear a tone acknowledging your request. If you’re using the speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press Star then two. Our first question today comes from John Aiken at Jefferies. Please go ahead.

Speaker 5: Good morning. In terms of the stop-loss experience, I think the, the word that you used was stabilized, but with the pricing and other actions that are undertaken, are we hoping to see improvements in 2026 again?

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Yeah, John, it’s David. Thanks for the question. Yeah, we’re pleased with our improved results and also our strong sales at the end of the year. So in terms of experience, we did see a modest improvement in the loss ratio, the ultimate loss ratio for the 1-1-25 cohort that we had in shared in Q3. That was offset a little, but overall it was neutral, and you know, we’re in good shape heading into 2026.

Speaker 5: Thanks, David, and just a bit of a follow-on. In terms of the improvement that we’ve seen in stop losses as well as the improvement on dental, we did see an uptick in the sales in Q4. Now, I know there’s seasonality in there, but we are up year-over-year. You know, are we actually now opening the taps for sales along these, on these products?

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: So, we maintained our pricing discipline. Let me start with stop-loss first. While we’re pleased with our results, you know, we’ve maintained our discipline, and as Kevin noted at the top of the call, we’re benefiting from a hardening market. We achieved the rate increases we were seeking, and ultimately, we’ll remain disciplined in our pricing approach as we head into 2026. In terms of the dental business, yeah, we did see a modest improvement in sales as well year-over-year. That reflects, you know, seasonality a little bit, because the Q1 business, particularly for commercial, is when we write a lot of our business. And then we also saw one large Medicaid contract that returned to us in for 2026.

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: John, it’s Kevin. I wanted to reemphasize a few things on the stop-loss business. You know, we’ve managed an industry-leading stop-loss business for many years now, and in that business, we have the scale, the data, and underwriting advantages that have helped us create like a sustainable earnings business there. And we’ve built out our service model over the past few years to better help members who have serious illness to manage those illnesses. For example, we bought PinnacleCare, and that’s helping them. And we think that gives us strategic advantage when it comes to pricing and also to managing the risk here. This is an area that we’ve had long-term margins that have been ahead of our employee benefits target margin that we’ve talked about, and we expect that to return over the next little while.

David mentioned this, but, you know, the it has been a challenging environment where both severity of the claims and the price of the claims has been going up. But in 2025, we achieved fourteen percent increase in, in price. And, you know, we talked about that needing should have been maybe two percent higher at sixteen, but this year, we achieved a seventeen percent increase in price, and we think that that positions us really well. So the sales that we won in the fourth quarter, we see them as being priced appropriately, and giving given our scale and some of the advantages we have, we think that we’re well positioned in that business.

Speaker 5: Thanks for the color.

Rocco, Conference Operator: Thank you. Our next question comes from Gabriel Deschênes with National Bank. Please go ahead.

Speaker 4: Yeah, just to follow up on that stop loss, did I hear you correctly? You increased pricing by 17% in on the Jan. 1 block?

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Yes, David.

Speaker 4: Sorry, that should get you back to target margins fairly soon, I would imagine.

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Yeah. So Kevin’s referring 17%, that’s the price increase, average price increase we received on our renewal business. And yes, that was at our target margins.

Speaker 4: Okay. Now, excess capital. You have a 157% LICAT ratio, which is very comfortable, but oddly enough to say, you know, with that excess capital for a company giving us a 19% ROE, it is suppressing your returns, right? You know, M&A came up a lot on a previous call. I suspect your M&A appetite might be a bit more limited while you’re, you know, focused on getting that DentaQuest business back on track.

So, you know, if we look ahead to Q2, and I believe last year you did an early renewal of the program, didn’t necessarily upsize it, but, I’d like to know what you’re thinking about, you know, capital deployment broadly, and then, you know, the buyback, more specifically, what your thought process there is with regards to the, the renewal, which is, I guess, in May, right? Or the program expiry, rather, in May.

Tim Deacon, Executive Vice President and Chief Financial Officer, Sun Life Financial: Yeah, good morning, Gabe. This is Tim. Thanks for the question. We continue to take a disciplined approach in our capital deployment, and overall, our priorities have not changed. You referenced our LICAT ratio, where we finished the year with a very strong LICAT ratio, industry-leading, in fact, at 157. And that’s up over the last two quarters because of two debt issuances that we did to complete the purchases of the remaining interest that we have in our private asset affiliates that we plan to do in the, in the first half of this year. On a pro forma basis, if you were to reflect those buy-ups, our LICAT ratio would be around 150%.

Speaker 4: Still high.

Tim Deacon, Executive Vice President and Chief Financial Officer, Sun Life Financial: We took advantage of the excess leverage capacity that we saw, and we had an opportunity to take advantage of attractive rates and spreads in the market when we did those debt issuances. So then on your second part of your question, in terms of the priorities and the uses of capital, our priorities haven’t changed. Our first priority is organic. We continue to make investments in our business, scaling Asia and our asset management businesses in particular, and continued growth in our investments in digital and AI. On the inorganic side, which is our second priority, as I mentioned, our priority for the first half of the year is to complete the purchase of our private asset affiliates. So this is BGO and Crescent. And then beyond that, we wouldn’t be looking to make any transformative acquisitions.

Rather, we’d look at bolt-on type acquisitions where we could acquire adjacent capabilities to augment our existing platforms, for example, in Asia or in asset management or in wealth. And then finally, pending market conditions, we would expect to resume share buybacks later in the year. And so in light of the deployment priorities I spoke about, we typically don’t buy back shares at a rate that is higher than our organic capital generation. And as I said in my prepared remarks, this year, we generated CAD 4.2 billion of organic capital generation, so that’s well in excess of our guidance of 30%-40% of underlying net income.

We’ve returned CAD 3.7 billion of that back to shareholders through share buybacks and common shareholder dividends, and we also did CAD 500 million of M&A in the first quarter of 2025, with the extension of our bank insurance agreement in Indonesia. And all that, it still maintained a dividend payout ratio at 47%, which is well within our medium-term objectives. So you can see our discipline, and, and we’ll continue to be disciplined going forward.

Speaker 4: All right, I’m good-

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: Gabe, sorry, Gabe.

Speaker 4: Yeah.

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: It’s Kevin. I just want to add, you mentioned that it might be suppressing our returns. A big chunk of our capital position is the CSM, and we’re actually quite proud of how quickly we’ve been growing the CSM, and it’s an important part of our capital. And of course, that’s not in the book value, and it is supporting our... So it’s not part of that ROE calculation. So that’s an important part of capital. It’s also an important part of future income, and the growth in that reflects our growth in Asia and Canada as we’re growing the business. And so you have to look at those pieces, but it’s not that additional capital position is not really impacting the ROE.

Speaker 4: Right. Oh, no, I acknowledge it’s a weird way of, weird sort of question when you’re generating a 19% ROE, and, but it’s mathematical regardless. Anyway, enjoy the rest of your day. Thanks.

Rocco, Conference Operator: Thank you. Our next question today comes from Mike Ward at UBS. Please go ahead.

Speaker 9: Hi, guys. Thank you. Good morning. I guess I’m just trying to interpret the strategy at stop-loss, and I guess, you know, it certainly seems like a hard market across that space. But some of, you know, some of your peers are either getting out of the business or shrinking the business. And 25 was another challenging claim year for them, at least based on what they see. So I’m just trying to sort of, you know, compare that to what you guys are seeing, where it’s a little bit more optimistic and you’re potentially growing, which is another strategy, right? To grow into a hard market when there’s less capacity. The employers still need that coverage, so you’re there to be able to provide that to them.

Is it possible that, you know, that growth is a longer-term focus of yours, and maybe we’ll see, you know, elevated margin volatility as we move through this medical inflation environment with, you know, higher severity?

Tim Deacon, Executive Vice President and Chief Financial Officer, Sun Life Financial: Hi, Mike, it’s David. Thanks for the question. You know, as Kevin noted, we have a long track record of success in this business, and we have historically, our loss ratios are among the lowest in the industry, and they have been. We are a leading independent writer, we have a talented team, and, and as Kevin noted, also with many capabilities, including our risk selection approach, our ability to price, through many different cycles, our clinical programs and our cost containment programs. So we feel really good about this business and, the path that we’re on. It’s something that we have a strong reputation in the market for, and, and certainly we’ve taken into consideration a medical trend and leverage trend, and of course, the historical claims experience that we’ve seen to date.

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: Mike, it’s Kevin. Can I add to that? If you don’t have scale in this business, the individual claims amounts can be punishing to you as well. And so I think it’s really important that we have had that scale.

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: ... and that history of the positive experience. So I just wanted to put out that some of those players that you’re hearing about don’t have the same scale that we have.

Speaker 9: Got it. Okay. No, that, that’s helpful. And then just on the dental and the dental side, on the corporate side, of the dental market, you know, it seems like that’s an area of focus even for the U.S. incumbents. So I’m just wondering if you can comment on your strategy for distribution to really enter that market, just because it’s so competitive.

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Yeah, thanks for that question. So you’re really referring to what we call our commercial dental segment within our dental business. So, that’s an important part of our focus for growth of the dental business. We actually grew 7% in premium volume versus 2024, and that segment overall has grown 20% since we acquired the DentaQuest business. We’re already in the market actively. We have a strong distribution footprint that is part of our employee benefits business, and these products, the dental products specifically, are very often bundled with our other employee benefits products. So, it’s an area of strength for us in terms of our distribution footprint, and over time, we expect to continue to grow it out.

Speaker 9: Thank you.

Rocco, Conference Operator: Thank you. Our next question today comes from Alex Scott at Barclays. Please go ahead.

Speaker 0: Hi, first, I wanted to just ask on the 17% rate you mentioned on stop-loss, is that, you know, sort of what some peers are calling an effective rate? Like, does that include, you know, the benefit of changes in terms and conditions, like attachment points and so forth, that you might be doing? Yeah, that’s my first question.

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Yeah, so the 17% rate increase on our in-force renewed business really reflects, both, the expected medical cost trend increases and our claims experience to date. Obviously, as you know, medical trend has been in the U.S. in the high single digits last year, and we expect it to stay there in 2026. But leverage trend is, can be quite a bit larger than that because, you know, it-- that really reflects how our increases flow through plan designs. It includes things like you mentioned, deductibles, attachment points, and coverage layers. So as I said, you know, we have really strong and disciplined pricing approach. We have really good risk selection, and it is reflected in our 17% renewal rate increase.

Speaker 0: Got it. Okay, that’s helpful. And then two premium growth questions. One, if you could opine on, like, how much the stop loss sales growth will contribute to premium growth. I assume just retention side, too. So wanted to get a feel there. And then also, if you could maybe touch on Asia growth and just kind of coming up on some of these tough comps in Hong Kong, what we should expect. Thanks.

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: So it’s David. I’ll just start with the U.S. growth. So, as you know, you do see the headline numbers in terms of our sales growth in the, in the stop loss business, and we’re pleased with those results. We did also see, strong and record persistency in our in-force book as a result of, you know, this hardening market that we’re experiencing. So when you put the two together, you know, we feel good about our premium flows going into 2026.

Manjit, Asia Business Leader, Sun Life Financial: Hi, it’s Manjit. On the Asia side, you’re right. I think we had a phenomenal year in Hong Kong in 2025. We expect some moderation in the growth rate, but we still expect to continue to deliver good performance in Hong Kong. And then, of course, we have other markets that are coming up, too, notably, as Kevin had in his remarks, Indonesia. So overall, we’re still feeling good about the diversified nature of business in Asia and continuing to deliver good growth.

Speaker 0: Got it. Thank you.

Rocco, Conference Operator: Thank you. Our next question today comes from Doug Young at Desjardins Capital Markets. Please go ahead.

Speaker 3: Hi, good morning. I just want to go back to one comment that Tim or Kevin made, just about, you know, on the buybacks. You know, you buy back essentially the organic capital generation in any particular year. And maybe I’ll challenge it, like, why not buy back more? By my math, you’re sitting on CAD 6 billion of excess capital, and I get the argument about book value and CSM, but you’ve got a lot of capital flexibility. You’re not looking to do anything transformative acquisition-wise. You’re moving to capitalize businesses. You know, why not be more active in the buyback side?

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Thanks, Doug. This is Tim. Yeah, as I spoke about earlier, this really comes down to our disciplined approach. Anytime that we have been active in the buyback program, we fully utilized it. So you saw that we were very active in the fourth quarter. We repurchased about 4.7 million shares. That was nearly CAD 400 million. On a year-to-date basis, it was CAD 1.7 billion or almost 20.8 million shares. So we’ve demonstrated the capacity and willingness and ability to use a share buyback program. But I also spoke about our priorities in the near term, and that’s really getting through the final purchases of those private asset affiliates. We have a liability on our books of about CAD 2.2 billion. As I said, we’re still going through the buyout process there. We expect there’ll be final adjustments.

We think that could be at least another CAD 150 million more. I talked about where we might see opportunities beyond that. So we still will continue to be active in the program, but we just wanted to get through those priorities first. I would say historically, our approach really has been to not get ahead of our organic capital generation, and that discipline’s helped us along. You know, as I said, pending market conditions, we’d expect to resume share buybacks later in the year.

Speaker 3: I’ll maybe kind of say this, but, like, so you’re not seeing any impediment to holding this excess capital or the leverage ratio to getting to your 20% underlying ROE target? Because if you do take the excess capital down, like, that our 20% of the line, our, our ROE target starts to look kind of very conservative. Like, what’s maybe, maybe any thoughts on that?

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: Yeah, our capital deployment is, as I outlined, our medium-term objectives aren’t dependent on M&A or features like that, that would be all upside and incremental. The flexibility that we have has served us well, and I think that gives us a lot of dry powder and optionality as the opportunities present themselves in 2026.

Speaker 3: Okay. Maybe I’ll move over to, just to, like, maybe a two-part question on the asset management side. I mean, maybe Tim, you know, you, you’re doing the buyups for SLC minority interest. Like, what impact should we think about having on the underlying earnings for SLC? And then, you know, you’re putting all these businesses under one roof, under the asset management roof. Just what’s the hope? What do you hope to get from this? Is this something where, you know, you’re hoping that SLC and MFS are gonna work a little bit more closer together? If you can flesh that out. Thank you.

Steve Peacher, Asset Management Executive, Sun Life Financial: Hi, it’s Steve Peacher. Let me make a couple of comments. In terms of, you know, as we get through the put call, there are a number of puts and takes, you know, no pun intended, I suppose, as it relates to the impact on income. We’ll be buying up the, you know, the minority interest. We’re also implementing a management equity plan that we’ve had. I think it was mentioned in Kevin’s remarks. We’ve had the—We’re offering to certain employees the opportunity to buy equity, which we think is really important, to be competitive in the alternative asset management world. We think, employee ownership will be over 20%. We’ve had an extraordinary response to that, so that will go the other way because we’ll have employees participating.

We think that that will drive culture and you know, enhance the growth rate. And so, you know, so those, those forces will, you know, will work to then combine what the impact is on underlying net income. It really doesn’t. We, we at the Sun Life Investor Day in 2024, we put medium-term targets out of 20% growth in fee-related earnings in you and I, and we stand behind those. We think we’ll achieve that. And, you know, Tom may want to comment. I think that, you know, I’m really excited about having this Sun Life asset management overlay across the various asset management operations of Sun Life. I think it’s gonna open doors to growth that, that at least at SLC, we couldn’t have necessarily opened ourselves.

And so I think it’s gonna help us enhance our growth rate as we connect dots across relationships that Sun Life has and capabilities that Sun Life has with investment capabilities that SLC has. But Tom, you may want to make some comments.

Tom Murphy, Asset Management Strategy Executive, Sun Life Financial: Yeah. Thanks, Steve, and good morning. So our focus on growing AUM opportunities is right across the enterprise, and we’re specifically focused on the intersection between our global insurance company, our wealth businesses, and our asset management businesses, the so-called flywheel effect. And maybe it’s useful to give you some examples. So, you know, touching on SLC, SLC and any alternative asset management business, really a big part of their future growth trajectory is based on access to seed capital and permanent capital. And we believe, if we look internally into our insurance company balance sheet, we think that there’s more room for us to leverage the balance sheet to help Steve grow his alternative asset management business.

Specifically, we believe that there’s a significant opportunity to collaborate between SLC and our pension risk transfer business, and that was why you saw us move our pension risk transfer business into our asset management pillar so we would get better collaboration and, quite frankly, grow both businesses at the same time. And then external partnerships. We’ve been talking to a number of external or potential external partners who we think can be a good long-term source of seed and permanent capital. If I, if I flick quickly to MFS, MFS already works very closely with our wealth businesses, SLGI, GRS, and our MPF business in Hong Kong. We think that MFS can grow on the back of the growth of those wealth businesses. We also think MFS can grow by further penetrating those wealth businesses and managing a greater share of wallet.

And then I’ll touch on Asia, and then I’ll pause. But from an Asia perspective, I think we’re number three player in the MPF market in Hong Kong. We think there’s room to grow. We think there’s room to grow in Asia in the high net worth market. And India, the most populous market on the planet, India has a very interesting stage in the alternative asset management sector, which is emerging and growing really, really quickly. I think we’re the only provider globally who has a really, really strong local partner with Aditya Birla, and a really, really strong global alternative franchise with SLC, and the combination of those two can help us grow in that marketplace. So I’m not sure if that was too much, but I wanted to give you some tangible examples.

It’s early days, and we’ll share more as we progress through the year.

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: Doug, it’s Kevin. I just want to add just a quick comment that Steve couldn’t add for himself. I mean, Steve has worked extremely hard over the past 12 years, building out these incredible capabilities we have across the alternatives business, from the real estate of Bentall Kennedy, merging with GreenOak and BGO and Crescent and InfraRed, and then taking our PFI capabilities to third party. We’ve been consistently in positive flows at SLC. And now, as we transition into the new world where we’re gonna own more, we’re going through the put calls. We’ve aligned the management team there with the shareholders, with, as he referred to, the 20% equity interest that they’re gonna have.

We’ve kept the top talent there, and we’re really looking forward to that new stage of SLC, and Steve done a great job of preparing us to get there. 2026 is gonna be a transition year, but we do see ourselves getting to that 20% growth and earnings that we talked about earlier, and Steve mentioned they hit their investor day target, so I have full confidence that they’ll continue to deliver on that. And when we created SLAM, part of that was to help create more opportunities for all of our asset management and to think about asset management in a more strategic way. And under Tom’s leadership, I think that that’s gonna add even additional capabilities to SLC.

So we’re feeling quite good about the positioning of our overall asset management pillar, and in fact, MFS’s role in that. So, this is a big step forward for us this year, and I think it really positions us well.

Steve Peacher, Asset Management Executive, Sun Life Financial: I appreciate the color. Thank you.

Rocco, Conference Operator: Thank you. Our next question comes from Tom Gallagher at Epicure. Please go ahead.

Speaker 16: Good morning. A couple of other questions on stop-loss. I guess whenever I see 50% plus growth in an insurance business, the presumption is usually you may have either mispriced the business or maybe the market is just getting really disrupted by either peers withdrawing or maybe there’s increased demand. Can you provide a little more color on what you saw on January renewals? Because this is, you know, obviously, it’s getting a lot of attention, and I think questions in terms of, like, what were the terms and conditions that led to this outcome? Thanks.

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Yeah, sure, Tom. Thanks for the question. It’s David again. Yeah, so first of all, it is a hardening market. We are seeing some changes in disruption in the U.S. healthcare system more broadly. That is affecting, as Kevin noted, in particular, some of our competitors who don’t have as much scale, and maybe the same capabilities that we see in our business. So that’s certainly the case. I talked about the 17%, renewal rate increase. That is the gross amount, but obviously, there’s risk selection involved. There are other factors as well. And we have, historically had very strong capabilities and a long track record of, of success managing through this, you know, various cycles that we see in this business.

This is not the first time we’ve seen this, but certainly, you know, as I’ve mentioned before, we do have historically low loss ratios, among the lowest in the industry consistently. We do, you know, we recognize this market emerging, and in fact, we started to take pricing action well before that of our competitors. So, what you’re seeing a little bit is the changes that we had to make in 2026 are less than what our competitors had to make because, the gap that we, you know, had to make up was not nearly what it might have been for others.

Speaker 16: Gotcha. And then my follow-up is, can you just remind us, I think you were running 2-3 points behind of your target margin. Is that what you priced for, or just given the uncertainty, increased volatility, did you look to restore more than 2-3 points in the way you repriced?

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Yeah, so our pricing, you know, we were seeking rate increases that included expected medical cost trend increases and, of course, the claims experience that we’ve had to date. And so those are reflected in the pricing approaches that we took. Obviously, you know, we’ll pay attention to emerging claims costs in 2026, as we always do, but they are fully reflected. Those things are fully reflected in our pricing.

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: Tom, I think it was I just wanna point out that inherent in David’s question was, because of our scale and our consistency, we were able to be somewhat selective in our selection of risks that we took on as well. And I think that that’s really an important component, that our deep understanding and our capabilities allowed us to be selective in how we approach the client base. And that’s something we’ve done historically, for example, in the pension risk transfer business in Canada as well. So if you have that scale and that deep knowledge, it gives you an advantage.

Speaker 16: Gotcha. Thank you.

Rocco, Conference Operator: Thank you. And our next question comes from Mario Mendonca with TD Cowen. Please go ahead.

Steve Peacher, Asset Management Executive, Sun Life Financial: Good morning. Kevin, in response to your question, the questions around SLC and the moving parts and where earnings could fall out in 2026, you used the word transition. It’s a transition year, which in this industry is a euphemism for shrinking. Can you be clear with us? Is that what you’re telling us, that in 2026, that business will generate lower earnings than it did in 2025? Is that the message?

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: No, we’re not suggesting that it’s gonna shrink next year, Mario. I’m just saying that it’s the year that we’re transitioning into the new ownership percentages, and it will, the medium-term objective is the 20%, but Steve may wants to add a little bit more detail.

Steve Peacher, Asset Management Executive, Sun Life Financial: Yeah, no, Mario, this is Steve Peacher. You know, we’ve shown good growth in AUM and earnings this year, where we expect that to be the case next year. We will have a mix in kind of the percentage of ownership as we go from the current minority interests that are outstanding, buying those up, and then, you know, and then allowing employees to buy back in. So there’s kind of a financial transition there. I think more importantly, when I think of transition, you know, we’re the opportunity we have is, to date, because of how we built this through acquisition, this has been a kind of a siloed entity.

You’ve had BGO and Crescent and InfraRed and our fixed income business, and while there’s been some connections between those, it’s really operated as a bunch of businesses kind of moving forward side by side. And that’s been necessary because they haven’t been fully owned. Now, all equity interests are at SLC, and you’ve got everybody aligned around how do you harness the power of this platform to increase margin and to grow faster? And getting ourselves lined up to do that, which we really can’t take full action on until after the buyouts, is really a big focus for us this year. So when I think about transition, I think it’s about transitioning the business to harness the power of the platform in a way that we haven’t been able to do before.

Speaker 16: Okay, um...

Speaker 8: ... Another question, perhaps for David, in stop-loss. I appreciate Sun Life scale and, and expertise in the business, and it’s certainly been helpful in the past, but that didn’t prevent Sun Life from having some, some sloppy quarters over the last couple of years, like the experience losses in Q4, Q2, Q3 this year. So where, I guess, where I’m going with this first, David, if you could help us understand what’s in that CAD 17 million experience loss this quarter? Like, maybe break that down between dental and stop-loss or in force. And then as a follow-up to that, what would be a reasonable level of experience, either gain or loss, going forward?

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: So you know, obviously, the majority of the miss is in the stop loss business because we were off our original plan. Part of it, we went into the year with, we know we had a pricing gap that continued throughout the year. Q3, that you mentioned, was really, we’ve had a couple of quarters where we’ve had to restate our loss ratios for the, you know, prior periods because of emerging experience, and that did happen in Q3 and was reflected, and it was three quarters reflected in that quarter. But of course, you know, we saw that loss ratio stabilize in Q4 and really remain the same.

So, we know we stay focused on understanding the underlying risk that we have, and certainly we’re confident in where we are now because the 2025, Q1 25 cohort is now 65% complete. And it’s much more credible and, like, the loss ratio has been stable. So, that gives us a lot of confidence in where we’re headed.

Speaker 8: But for obvious reasons, it’s, I guess the point I’m taking from your answer is that it’s not really possible to give us an outlook on experience going forward because it’s experience. We don’t know yet. Is that the point, you’re not prepared to discuss that just yet?

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: That’s right. I mean, obviously, we have our own view of it, and we have a great projection for experience, you know, but we don’t comment on future experience at this point.

Speaker 8: Okay, then finally, Kevin, so let’s go back to MFS for a moment. Your comments about MFS producing a lot of cash flow, those are, that’s an important comment for me. I paid a lot of attention as you described that, and I can see that as an immense positive for Sun Life. On the flip side, you’ve got a business that is a meaningful part of Sun Life’s overall earnings that isn’t growing. I think looking at underlying earnings at MFS in U.S. dollars, it was down 1% in 2025 relative to 2024. And again, this is in a year where markets were super strong. So how do you balance those two? On the one hand, it’s a cash machine, on the other hand, it’s not growing anymore. Is that a dynamic you can live with?

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: Yeah. Well, thanks for the question, Mario. And if you, you step back and you look at where Sun Life is today, we’re a top 25 asset manager globally by assets under management, and we believe strongly in being both in public and private markets. And we talked about the build-out of SLC, and MFS is our vehicle in the public markets. And we think that being in both is an important success factor to the long-term success of an asset manager. I talked earlier about how we built these capabilities out in SLC over the past 10 years, and we’ve now created Tom’s role, and I think that’s important. But having MFS as part of our strategy and asset management is a strategic choice, and we believe it’s the right choice.

Market cycles will change over time, and this has been indeed a more challenging time for active asset management. But long term, we believe that active asset managers add value to their clients, and I think this is critically important. And for MFS, we see MFS as being a leading global player in active asset management. In fact, they invented the mutual fund, and they continue to have leading investment capabilities and distribution capabilities. The issues that the industry are experiencing over the past few years have allowed them to also pick up talent, and Ted and I were talking about this the other day, and that additional talent is critical to the long-term success of MFS.

Their outflows at MFS are in line with the market, and so we continue to have confidence in their ability to deliver, and I fully support Ted and the MFS team in this. We spend a lot of time with them. They’re doing the right things for their clients, and they’re doing the right things for the business. As Tom mentioned, we think the build-out of our wealth businesses in both Canada and Asia will help support MFS and SLC. We have, in Canada, we have over CAD 200 billion in wealth assets and wealth businesses, and Jessica is looking at growing that. In Asia, we have a rapidly growing business as well.

So you know, if you step back and look at MFS, in addition to the contribution to earnings and contributions to ROE and to cash flow, they’re an important part of our asset management business, and we think they have the right capabilities to be successful. So that support from us, we think is critical to the ongoing support and success of our asset management pillar.

Speaker 8: Okay. Thanks for that, Kevin.

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: Yep.

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Thank you. Our next question comes from Paul Holden at CIBC. Please go ahead.

Speaker 12: Thank you. Good morning. So lots of questions on stop loss. Let’s instead ask about U.S. Dental. Maybe give us a sense of the outlook for 2026, just in terms of if there’s any kind of positive movement at all in terms of improvement and pricing, cost actions you might be taking to help bring operating expenses down in line with the revenue outlook. And should we be expecting any acceleration in commercial premium growth? I hear you at 7%, but is that enough to really change the mix favorably over time, or should we want to see something higher?

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: ... Hi, Paul, it’s David. Thanks for the question. Well, we expect to make modest progress in 2026 in the dental business. Obviously, if you look back at 2025, higher claim utilization did offset much of the pricing increases that we had achieved coming into the year. But we continue to stay focused on the business, and, and we expect to make gradual progress as, as we move forward. We are seeing states that are beginning to reflect the higher utilization in their forward pricing, but at the same time, the Medicaid headwinds will persist. We do have a number of actions underway. Certainly, we continue to focus on repricing and working with states and health plans to do that.

We’re also looking at, you know, changing some of our risk agreements and ARAs to ASO, you know, depending on what the clients might be looking for. And also just overall, working with states and health plans around our cost containment capabilities, and as you mentioned, managing expenses. So, we are very focused on continuing to improve this business, but it will be something that we will improve gradually over time.

Speaker 12: Okay. And then just, again, in terms of reasonable expectation for growth in the commercial business, 7%, the right bogey, or would you like to accelerate that to something higher?

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Yes, sorry, thanks for that follow-up. We, we continue to focus on opportunities in the commercial space, in terms of both extending our reach into new segments of the market and also, adding more products, when we sell dental through our employee benefits distribution as well. So we’re not just looking at it as a standalone dental opportunity, but also how can we accelerate the overall growth of our employee benefits business. So ultimately, yes, we have a, a strong aspiration, but, but we have to be careful about the pace in which we build this out as well, because it’s a competitive market, and we have to do that carefully, which we’ll do.

Speaker 12: Okay. Okay, got it. And then my second question is for Ted. And just, you know, I guess, again, it’s probably a two-part question. So trying to look to see if there’s any early evidence of potential change or improvement in flows here. Obviously, they’ve been challenged. Well, they’ve been challenged again in Q4. But I think about a couple potential inflections for the business. One is, you know, it’s no longer so much about the dominance of U.S. public equity markets. There’s actually demand for other things now, and MFS, I think, historically, has done a very good job running ETF mandate. So wondering if you’re seeing any signs of demand there.

And then the second thing, and I know you really don’t like short-term focus on short term, but we’ve talked about performance versus MAG seven, and sort of same thing. It’s no longer so much the dominance of MAG seven versus other parts of the market. So wondering if you’re seeing early indications of better relative performance with some of your U.S. equity mandates on that basis. Thank you.

Ted, MFS Executive, Sun Life Financial: Hi, thanks for the question. This is Ted. So on the, on the EFA strategies, yes, that has been for the trailing period where we’ve, in general, been in outflows. That has been a net flow driver. In the fourth quarter, it wasn’t, but, but, through, through time, it has been. We do have a strong franchise there. And as you said, there’s been increased interest in that, precisely because of the dominance of U.S. companies in global markets. A number of our global clients are looking to shift exposures, and our international strategies are a nice way to do that. As it relates to the MAG seven impact on a shorter term, you, you correctly predicted, we, we don’t like to make short-term predictions, and we won’t.

However, yes, as that has been a dominant factor, we would expect that if it ceases to be a dominant factor, it will cease to be a headwind. We don’t want to say that there that we’re a one factor investment shop that has one headwind that can turn to a tailwind. There’s multiple tailwinds, there are multiple headwinds at any given period of time. So, you know, it’s not as simple as which way the MAG seven goes, and hopefully, that’s clear for everyone. But certainly, the concentration of global and U.S. markets has been both a performance and a flow headwind for us over the last number of years.

Speaker 12: Okay. Okay, I will leave it there. Thanks for the time.

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Thank you. Our next question comes from Tom MacKinnon with BMO Capital Markets. Please go ahead.

Speaker 17: Yeah, thanks. Still good morning here. With respect to SLC, as you end up buying in, you know, the minorities here at BGO and Crescent, just wondering how we should be looking at NCI going forward then, and how that will be handled when we have that, management equity, plan in there as well. Will that kind of just replace this NCI? Just curious as to, how we should be thinking about that, and I’ll follow up.

Ted, MFS Executive, Sun Life Financial: Hi, Tom, it’s Tim. Maybe I’ll take that one. The buyout process that we’re going through is to buy out the remaining equity interests that we don’t own, and as Steve was outlining, you know, that, that’ll be happening in the first part of next—of this year, in 2026. But that will be replaced with the management equity plan, so where the employees and key participants will own shares in SLC. So it’ll—you can think of that as a substitution of existing non-controlling interests with a new non-controlling interest of the employee base. And we think that’s going to be up to about 25% of ownership that will be in minority interests after the buyups.

So we’ll continue to have the reported net income reflect that difference, but our underlying income, we would expect to be showing at 100%. I think as we get through the movements of the buyups, that we will have an opportunity to share

Tim Deacon, Executive Vice President and Chief Financial Officer, Sun Life Financial: ... through enhanced disclosures, both the Sun Life Asset Management pillar as well as, the impacts of this buy-up process.

Speaker 17: So you’re going to pay them CAD 2.5 billion, and then they’re going to put CAD 2.5 billion back into the business? But is that the way we should be thinking of just the cash?

Steve Peacher, Asset Management Executive, Sun Life Financial: Well, I think, there’ll be the employees will be, it’s a combination of things that, you know, but if you think about employees buying in, they’ll be putting in cash. There’ll be-- that’ll be supplemented with some, what we’re calling preferred equity, from Sun Life, to enhance that from their standpoint. But we will have, not to the extent--maybe to the extent of the numbers you just threw out, but we will have employees putting up cash to the tune of hundreds of millions CAD as they buy into the equity of SLC.

Speaker 17: But the NCI now is worth $2.5 billion, and then they’re going to get 25% ownership at just $hundreds of millions? What am I missing there?

Tim Deacon, Executive Vice President and Chief Financial Officer, Sun Life Financial: So, Tom, this is Tim again. That’s the net impact of in terms of the cash flow exchange. So there’s-- you can think about it, there’s the agreed purchase price. It’s a formulaic amount that’s based on the, the trailing average of the trailing twelve months EBITDA for, for both 2025 and 2024. So that’s the amount of the, the purchase, and then that creates a new valuation for going forward. So it’s the net of the two that Steve was, was talking about.

Speaker 17: Okay.

Tim Deacon, Executive Vice President and Chief Financial Officer, Sun Life Financial: As I said, I think we’ll have a chance to walk through the mechanics of this and lay that out so it’s clear, so that everyone can understand what the current treatment is and how that’s showing up in our financials today, and then post the buyups and the management equity plan. I think that will help make it a lot clearer. That’s all taking place. That’s effective Q1, so that’s not obviously in our Q4 results just yet, but we’ll have a chance to update our disclosures.

Steve Peacher, Asset Management Executive, Sun Life Financial: Yeah. The only thing, if I could add, you know, everyone will want to understand exactly how the numbers work, and we’ll walk everybody through it. I just want to also make sure, you know, it’s an extraordinary from my standpoint, and I think from the standpoint of the employees, as we’ve been going through the process of getting people’s interest, it’s incredibly impactful to have employees now putting up their own money to be holders at SLC, not within the business that they’re used to, but to say we buy into the platform. It’s. I can see it impacting behavior as people are saying: How do we now work together to enhance the growth rate of this platform? So I think it’s going to be a really important part of this business going forward.

It also is important in terms of attracting people, because if you look at the businesses, you know, that we compete with, you know, they have this kind of structure, and we work with a lot of comp consultants to make sure we were designing something that was very competitive. So I think when you step back for this, this is an important part of our future success.

Speaker 17: Yeah, and as you look at sort of a more holistic approach here in terms of kind of revenue sharing between Sun Life and MFS and SLC, is there any opportunity between maybe MFS and SLC for operating expense synergies, maybe procurement or what have you? Is that being analyzed, and what can we see there?

Tom Murphy, Asset Management Strategy Executive, Sun Life Financial: It’s Tom Murphy here. Hopefully, I did a reasonable job giving you a sense of the growth opportunities in front of us, and that’s really where we’re focused. We’re not focused at all on expense synergies. Traditional asset managers and alternative asset managers, they have very, very different operating models. They also have completely different buying centers, and so we’re looking forward to growing the business, and that’s where 100% of our focus will be.

Speaker 17: Okay, thanks. And then one final quick one is on... In the Asia division, maybe for Manjit, the joint ventures and other, this thing jumps all over the place. I assume these are your shares from your JV in India and in China. You know, it was elevated last quarter, certainly the lowest we’ve seen in about eight quarters. This quarter, how should we be thinking about that going forward?

Manjit, Asia Business Leader, Sun Life Financial: Yeah. Good morning, Tom. Thanks for your questions. Manjit. As you noted, the joint ventures line includes, largely includes the joint ventures that we have in India, China, but also in Malaysia and the Philippines. And one of the elements of the joint venture income is securities gains that our joint ventures incur from balance sheet management and other activities, particularly in China and in India. And I noted on the call last quarter that these can bump around quarter-over-quarter, and in Q3, we had elevated gains, in this quarter, we had some moderate losses. So you’re seeing a variance that’s reflected in the quarter-over-quarter change. For the full year, earnings were up just over 10%.

So we think, I think going forward, that’s a decent rate to look at, and we’re optimistic that our joint ventures will continue to deliver good growth over the medium term.

Speaker 17: Okay, thanks.

Tim Deacon, Executive Vice President and Chief Financial Officer, Sun Life Financial: Thank you. And our next question today comes from Darko Mihelic with RBC Capital Markets. Please go ahead.

Speaker 1: Great. Thank you very much. Just the two questions. My first one is a bit of a clarification question on stop loss. I just want to be 100% sure that I understand this. Last quarter, you assumed a higher loss ratio, and you built a reserve, and you’d mentioned at the time it was for three quarters. This quarter, it sounds stable. So, you know, did that result in a reserve build this quarter or no, or was it a release? And maybe just ultimately, like, what was the loss ratio on the 25? Was it 74%, 73? So just those clarifications to help me understand. And my-- I have a follow-up.

Manjit, Asia Business Leader, Sun Life Financial: Yeah. So as you recall, in Q3, thanks for the question, it’s David here, that we did make an update to the ultimate loss ratio on that 1/1 25 cohort in Q3, and it then reflected back for the first two quarters as well in Q3. Essentially, in Q4, the loss ratio held. It was marginally improved, actually, but almost identical to what we had projected in Q3. So, that was the experience that is reflected in our Q4 results.

Speaker 1: ... and what was the final loss ratio for the 25?

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Yeah, so our loss ratios historically have been in the mid-seventies, and you know, we’ve continued to operate, like I said, at that range, and that those are our targets going forward.

Speaker 1: Okay. And maybe just my final question on this, just so I understand this a bit better. There’s one of your competitors in the U.S. had a fairly extensive call with respect to stop loss, and one of the things that they mentioned that caught my ear was that they’re talking about a wider range of outcomes now, and you know, just given the environment and cost trends. And so my question is, do you concur? Is there potentially a wider range of possible outcomes as you look forward, and are you reserved for that? And could we expect perhaps more volatility as a result of a wider range of possibilities here on stop loss?

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Yeah. So thanks for that follow-up question. So first of all, in terms of experience, you know, medical costs include inflation, utilization, advances in technology, the aging population, new treatments, new medications, things like drug, you know, cell gene therapies. So there are quite a number of different things that drive costs. Kevin mentioned earlier, but, you know, we have a lot of scale in our business, and, some of the maybe, I can’t comment on competitors, but perhaps you’re, you know, referring to those that maybe not do not have as much scale, and therefore, the volatility might feel greater, in light of, you know, there are large claims involved in this business, and scale really matters.

So, obviously, with the amount of book we have, with the experience we have, and with our risk selection and pricing approaches, we feel good about our approach to the business and how we’re managing through this cycle, and we’re certainly seeing a hardening market that is benefiting us right now.

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: Darko, it’s Kevin.

David, Senior Executive (Likely U.S. Business Leader), Sun Life Financial: Go ahead.

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: Just really quickly, the rising cost trend in the U.S. healthcare space has been many, many, many years. I think it’s so it’s something that we’re quite used to. The severity increased a little, probably coming out of COVID, but we think we’ve adjusted for that. So it’s an area that I think... I just wanna reinforce David’s comment that scale really matters and allows you to absorb some of those higher claims.

Speaker 1: Okay. And so no change to reserving methodologies either for a wider outcome either. That’s what I’m sensing from you. Is that a fair assessment?

Steve Peacher, Asset Management Executive, Sun Life Financial: That’s correct. It’s Brendan Kennedy. That’s correct. At this point, no, no reserving changes to highlight.

Speaker 1: Okay, great. Thank you very much.

Rocco, Conference Operator: Thank you. We have no further questions at this time. I’ll now turn things back over to Mr. Strain for closing remarks.

Kevin Strain, President and Chief Executive Officer, Sun Life Financial: I wanted to end the call with a few thoughts on Tumbler Ridge, BC. We were all heartbroken to hear about the tragedy a few days ago. The first responders and healthcare workers are the true heroes there, and I’ve personally been touched by how the community has pulled together and supported each other. Our thoughts and prayers are with everyone affected. Thank you.

Rocco, Conference Operator: Thank you. This brings to an end today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.