(Bloomberg) -- Sun Life Financial Inc.’s shares enjoyed a short-lived all-time high after fee-income gains in the Canadian insurer’s US segment helped third-quarter profit beat estimates.
Shares of Sun Life gained by as much as 4.3% early Tuesday, lifting the company’s stock price to C$80.82 shortly after the market opened in Toronto. That was the highest price since shares began trading in March 2000.
The life insurer’s underlying net income grew 9% from a year earlier to almost C$1.02 billion ($734 million), or C$1.76 per share. That beat the C$1.69 average estimate in a Bloomberg survey.
The company said US group sales gained 22% to $219 million, driven by higher dental and employee benefits sales. The dental segment earned $9 million in underlying net income, returning to profit in what analysts called a “seasonally adverse quarter” as the back-to-school season spurred parents to bring their children to the dentist before returning to the classroom.
Chief Executive Officer Kevin Strain said the dental segment had suffered from the end of the Covid-19 public-health crisis that prompted a “significant number” of members to drop off of Medicaid.
“You’re seeing that business starting to return to profitability at a small profit this quarter,” Strain said in an interview. “We’re signaling in the US $100 million in profits next year.”
Strain added it will take time to bring the business back to the company’s expectations, but that the pricing is going according to plan.
Meanwhile, the Canadian market’s profit grew 11% to C$375 million, driven primarily by higher fee income in the group health and protection segments.
Sun Life’s underlying return on equity reached 17.9%, close to the 18% target it set and prompting analyst speculation that the company may raise the target during its investor day next week. That gave the company room to raise its dividend three Canadian cents to 84 cents a share, management said.
Bank of Nova Scotia analyst Meny Grauman called the results a positive for the firm, saying the report builds on the momentum seen in the second quarter and “further hammers home the point” that an earnings miss in the first quarter “was an aberration.”
“With the shares selling off into reporting season, the market reaction to this result should be positive despite the boost coming from favorable insurance experience,” Grauman said in a note to clients Tuesday morning.
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