SLF’s Q3/23 underlying EPS came in at $1.59, above our estimate of $1.53 and in line with consensus. Underlying earnings were higher than we forecasted in all segments except for the U.S. SLF announced a dividend increase of 3 cents to $0.78 per share, in line with our expectations.
SLF Canada underlying earnings of $338 million (down ~-9% QoQ but up ~15% YoY) were better than our estimate of $307 million. Better than forecast earnings were primarily because of experience gains which came in at $74 million versus our estimate of nil, as experience is not a line that we typically assume/estimate. Experience gains were also high last quarter at $94 million and hence, we intend to spend some time analyzing these experience gains as they have been higher than we would typically expect. Expected earnings on short-term insurance also were stronger than we expected at $138 million compared to our $127 million estimate, and expected investment earnings were $164 million while we forecasted $156 million. SLF completed its acquisition of Dialogue Health Technologies Inc. on October 3, 2023, which will become part of the Canada segment in Q4/23 results.
SLF Asia underlying earnings of $166 million increased ~11% QoQ and ~8% YoY, higher than our forecast of $148 million. Stronger than expected results were primarily because risk adjustment release came in at $54 million, $14 million higher than our estimated $40 million for the quarter.
SLF Asset Management had underlying earnings of C$330 million (up ~11% QoQ and YoY), above our C$315 million expectation.
MFS underlying earnings increased ~10% QoQ to C$277 million (above our C$261 million forecast), while SLC Management underlying earnings were -C$1 million below our forecast at C$53 million (up ~20% QoQ). MFS had net outflows of -US$9.3 billion, versus net outflows of -US$4.0 billion last quarter. At MFS, institutional net outflows were -US$5.6 billion (versus net outflows of -US$2.3 billion last quarter) and mutual funds had net outflows of -US$3.7 billion (versus net outflows of -US$1.7 billion last quarter).
SLF disclosed that it has $1.4 billion in cash available at the holding company level (holdco), down from $2 billion last quarter.
SLF’s total holdco LICAT ratio decreased -1 percentage point QoQ to 147% but was higher than our estimate of 143%.
SLF’s book value per share including AOCI was $35.91, stronger than our estimate of $35.32. The Q3/23 underlying ROE was 17.7%, stable QoQ and 2 bps higher than our estimated 17.5%.
We have a positive view on Q3/23 results as underlying EPS was above our estimate and in line with consensus.
SLF will host a conference call at 10:00AM ET on Tuesday, November 14. Dial-in details are available when pre-registered.