Over 8% fall as US unit sees grim figures, Trump policy threats
Sun Life Financial’s U.S. group benefits operation is under scrutiny after the insurer scaled back expectations for its dental division - just three years after a US$2.5-billion acquisition intended to cement its leadership in the American Medicaid dental space.
Shares in the Canadian insurer fell by as much as 8.5 per cent after it announced on Friday that DentaQuest, its Boston-based Medicaid dental business, would fall short of its US$100-million profit target for 2025. The revision underscores the risks associated with operating in a heavily regulated, publicly funded segment of the U.S. health benefits market.
Sun Life works directly with U.S. state governments to administer Medicaid and Medicare Advantage dental benefits, which makes its revenue stream particularly sensitive to shifting public policy and budget negotiations. According to Mr. Strain, negotiations with state Medicaid agencies over coverage rates have slowed amid budget uncertainty, even as dental claims have risen sharply.
He noted that states have been slow to adjust reimbursement rates in response to inflationary pressures, leading to margin compression across the sector. “If we’re struggling, you can imagine that the smaller players are really struggling with it ... We’ll work our way through it,” he said.
Public policy and benefits planning
Analysts say the outlook for the U.S. group dental market is clouded by potential long-term effects of the One Big Beautiful Bill Act, legislation passed earlier this year that includes deep cuts to Medicaid funding. Tighter eligibility rules could lead to a contraction in the Medicaid dental enrolment base—one of the key drivers of business volume for Sun Life’s DentaQuest unit.
For benefits professionals managing U.S. or cross-border plans, the situation highlights the volatility that public program-linked benefits can introduce, even within large and seemingly stable providers.
National Bank analyst Gabriel Dechaine noted that the retreat from Sun Life’s 2025 profit target “has implications beyond the quarter,” warning that longer-term growth in U.S. dental may be more difficult to achieve under current policy constraints.
Despite this, Sun Life maintains a long-term view that its U.S. business can deliver 12 per cent or higher underlying net income growth, with dental remaining a major earnings contributor.
Quarterly results in context
Outside of dental, Sun Life’s second-quarter earnings showed stable performance. Underlying net income rose 2 per cent year-over-year to C$1.02-billion, with stronger results from Asia, asset management, and Canadian group benefits.
In the U.S., the Group – Health & Protection segment actually improved by US$11-million over the prior year, driven by repricing gains and favourable claims experience outside of the troubled dental unit. However, underlying net income for Sun Life U.S. fell 4 per cent overall to US$143-million, reflecting pressure in individual protection and adverse mortality experience.
The quarter also included a US$61-million impairment charge linked to the early termination of a group dental contract, further weighing on U.S. reported net income.
Meanwhile, the company reaffirmed its strong capital position, with assets under management climbing to C$1.54-trillion and AM Best affirming its A+ (Superior) financial strength rating in April.
Leadership transition at a pivotal time
Coinciding with the results, Sun Life announced that David Healy—currently head of its U.S. dental business—will assume the role of President, Sun Life U.S., effective September 1. Healy will take over from Dan Fishbein, M.D., who will retire in 2026 after assisting with the transition as executive chair.
Healy is a known quantity in the group benefits space, having led Sun Life’s U.S. group business during its post-Assurant integration phase and overseeing key digital transformation initiatives. His appointment is seen as a bid to stabilise and refocus the U.S. benefits operation amid a more complex funding and regulatory landscape.
The transition comes as Sun Life continues to integrate AI tools to streamline benefits administration and improve client servicing across all geographies. For group benefits professionals, the success of such initiatives will be closely watched—not just for their operational efficiencies, but for how they support sustainable pricing and risk-sharing in the face of rising utilisation and cost pressures.
