Canadian insurer Sun Life's shares rise after profit beat, US recovery

By Nivedita Balu

TORONTO, May 9 (Reuters) - Sun Life Financial's SLF.TO shares rose more than 5% on Friday as the Canadian insurer topped analysts' profit estimates, powered by strong results in Asia and the United States, a key market where it has faced challenges.

Sun Life's business in the United States had struggled due higher dental claims and the impact of Medicaid re-determinations while its stop-loss business saw higher claims last quarter.

The U.S. business benefited from improved pricing, claims and retroactive premium payments in the first quarter ended March 31.

Sun Life's Medicaid business, in which it works with U.S. states, saw some states making retroactive payments to cover higher than usual claims. Now, the company is working with the states on repricing contracts on an annual basis, CEO Kevin Stain said in an interview on Friday.

"The bigger piece we're working with right now is that the US is looking at Medicaid costs as a way to control their deficit and their own costs," Strain said.

"Being part of Medicaid will get additional scrutiny and has some secondary impacts, where states are looking at this and are probably a little bit more hesitant to increase benefits because they're trying to manage what's coming down from the federal government."

The insurer, Canada's second biggest, reported on Thursday underlying earnings of C$1.82 per share, topping analysts' average estimate of C$1.71, according to data complied by LSEG.

Asked about tariffs on Asian countries, Strain said there was resilience in Asian countries where it operates.

"It's hard to say exactly what's going to happen in the future.. (but) they're (Asian countries) actively working on building that resilience."

Underlying net income from the U.S. business rose 7% while in Asia it rose 6%.

"After a string of earnings challenges, results here look to be getting back on track which is an important positive for both SLF’s earnings power and sentiment on the name," Scotiabank analyst Meny Grauman said.

Sun Life's shares have gained about 2% so far this year, while bigger peer Manulife Financial Corp's MFC.TO shares have lost 3% of their value.