TORONTO (Reuters) – Sun Life Financial Inc’s U.S. dental insurance business has improved from a loss in the most recent quarter and the company is on track to meet its target of achieving a $100 million profit for the unit in 2025, Chief Executive Kevin Strain said on Tuesday.
Shares in the Canadian insurer were up about 5 percent in midday trading in Toronto after the company reported better-than-expected second-quarter profit.
The dental division posted a loss in the second quarter as Medicaid redeterminations weighed on Medicaid and Medicare Advantage sales, causing core U.S. revenue to fall 5 percent.
As more Medicaid contracts are repriced and more widespread cost reductions are implemented, we expect to see improvements in this area.
The company said about 90% of its Medicaid contracts are scheduled to be repriced this year.
“We continue to see the U.S. as a promising long-term growth market for both MFS and SLC on the group benefits side and on the asset management side,” Strain said in an interview.
Sun Life acquired dental insurance provider DentaQuest as part of its strategy to expand its presence in the U.S., which now accounts for about one-fifth of the company’s total underlying revenue.
“We will look to expand our growth not only in Asia but also in the United States,” he said, adding that the U.S. is a potential growth area in both insurance and asset management.
Jefferies analyst John Aiken said while the U.S. dental business faces challenges, “there is room for easily discernible upside due to the management actions taken to date.”
Sun Life’s gains on Tuesday put the company in positive territory for the year. Shares of rival Manulife are up 18.8% so far this year.
(Reporting by Nivedita Bal in Toronto)
