Earnings Labs

Sun Life Financial Inc. (SLF)

Q4 2019 Earnings Call· Thu, Feb 13, 2020

$70.70

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Transcript

Operator

Operator

Good morning, ladies and gentlemen. My name is Andrew, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sun Life Financial Q4 2019 Financial Results Conference Call. All lines have been placed mute to prevent any background noise. [Operator Instructions] The host of the call is Leigh Chalmers, Senior Vice President, Head of Investor Relations and Capital Management. Please go ahead, Ms. Chalmers.

Leigh Chalmers

Analyst

Thank you, Andrew, and good morning, everyone. Welcome to Sun Life Financial's earnings Conference call for the fourth quarter of 2019. Our earnings release and the slides for today's call are available on the Investor Relations section of our website at sunlife.com. We will begin today's presentation with an overview of our fourth quarter results by Dean Connor, President and Chief Executive Officer of Sun Life Financial. Following Dean's remarks, Kevin Strain, Executive Vice President and Chief Financial Officer, will present the financial results for the quarter. After the prepared remarks, we will move to the question-and-answer portion of the call. Other members of management will also be available to answer your questions on today's call. Turning to Slide 2, I draw your attention to the cautionary language regarding the use of forward-looking statements and non-IFRS financial measures, which form part of today's remarks. As noted in the slides, forward-looking statements may be rendered inaccurate by subsequent events. And with that, I will now turn things over to Dean.

Dean Connor

Analyst

Thanks, Leigh. Good morning, everyone. Turning to slide 4, we made good progress in the quarter. The company reported underlying net income of $792 million, up 10% over the fourth quarter of 2018. We generated an underlying return on equity of 15% in Q4, while continuing to deploy capital in a disciplined way, with the announcement of the InfraRed Capital transaction and a new 15 year bank assurance distribution arrangement in Vietnam. In the fourth quarter, we grew wealth sales by 24% over the prior year; insurance sales grew 7% over the prior year, including particular strength in Asia where we grew sales by 43% on a constant currency basis, with double digit growth in six of our seven local markets. The Value of New Business or VNB grew by 9%, reflecting higher sales, partially offset by changes in sales mix, pricing and the impact of lower interest rates. On a full year basis, underlying net income exceeded the $3 billion mark for the first time and underlying earnings per share grew 6% excluding the one-time impact of interest on Part C capital in Q1 of 2018, underlying EPS grew by 10% in 2019. For the full year, we achieved an underlying return on equity of 14.3% and returned over $1.8 billion of capital to shareholders through a combination of dividends and share repurchases. There were a number of notable achievements in the fourth quarter as highlighted on Slide 4. I will touch on some of these as I take just a few minutes to step back and reflect on the progress we made in 2019, moving Sun Life closer to our ambition of being one of the best insurance and asset management companies globally. Moving to Slide 5, our clients for life strategy puts clients at the center of…

Kevin Strain

Analyst

Thanks Dean, and good morning, everyone. Turning to Slide 7, we take a look at the financial results from the fourth quarter of 2019. We finished 2019 with strong reported and underlying net income. Underlying net income for the quarter was $792 million, translating to underlying earnings per share of $1.34, up 13% from the fourth quarter of 2018. Underlying return on equity of 15% was above our medium term objective of 12% to 14%. Reported net income of $719 million was up 24% on stronger underlying earnings and favorable market related impacts compared to the prior year, partially offset by higher MFS share based awards driven by growth in MFS during the year and a restructuring charge taken in the corporate segment relating to expense saving initiatives in the fourth quarter. Our underlying net income in the fourth quarter was driven by business growth across all pillars, higher tax benefits in corporate, favorable credit experience and higher investing activity gains. This was partially offset by unfavorable morbidity experience in Canada and unfavorable expense experience in corporate, mostly from higher incentive compensation costs. Book value per share remain relatively flat year-over-year, as growth and book value from earnings was offset by dividends, currency translation and accumulated other comprehensive income and equity reduction related to the close of our acquisition of a majority stake in BentallGreenOak in the third quarter. We continue to maintain a strong capital position with a LICAT ratio of 143% for Sun Life Financial Inc and 130% for Sun Life Insurance Company of Canada. The 3% change at SLF from the third quarter was driven by the redemption of the Sun Life exchangeable securities, as well as interest rate movements. For our LICAT sensitivities, interest rate move back up in the quarter as a result of risk…

Leigh Chalmers

Analyst

Thank you, Kevin. To help ensure that all our participants have an opportunity to ask questions on today's call. I would ask each of you to please limit your questions to one maximum two. And then to re-queue with any additional questions. With that I'd now ask the Andrew to please pool the participants for questions.

Operator

Operator

[Operator Instructions] Our next question comes from the line of Humphrey Lee with Dowling & Partners.

HumphreyLee

Analyst · Humphrey Lee with Dowling & Partners

Good morning. And thank you for taking my questions. My first question is related to the unfavorable mortality in the US this quarter. I was just wondering if maybe, Dan, can provide some color in terms of what he saw in the quarter. What is the frequency, severity or vintages?

DanielFishbein

Analyst · Humphrey Lee with Dowling & Partners

Yes, thanks, Humphrey, and good morning. This is Daniel Fishbein. Yes, we did see some unfavorable mortality in the in-force management or individual life business. And our study of that shows that much of that was due to a relatively small number of large claims. We think we will see this kind of volatility from time to time in this block. There are some larger policies in the block. We also increasingly have some claims that are not subject to reinsurance. So there was what we would view likely volatility in the quarter.

HumphreyLee

Analyst · Humphrey Lee with Dowling & Partners

With that as a backdrop, I guess so I think in the past, Kevin has mentioned that because the cash flow from this block of business is very attractive. So you like having -keeping it by keeping it and since then, like I think there's a lot of transactions in the US life insurance marketplace and some of the multiples seems to be pretty attractive to have those transactions change. How you think about this block kind of going forward?

DeanConnor

Analyst · Humphrey Lee with Dowling & Partners

Humphrey. It's Dean Connor. Thank you for your question. When it comes to our closed block businesses, we- our primary focus is to optimize them, optimize them for, do a great job for the clients but optimize them for capital and tax and operating efficiencies and so on, and reinsurance, all of the moving parts. We obviously keep an eye on transactions in the market that come and go. But our job one is to really run these businesses extremely well and optimize them for the benefit of all the stakeholders.

Operator

Operator

Thank you. And your next question comes from the line of Meny Grauman with Cormark Securities.

MenyGrauman

Analyst · Meny Grauman with Cormark Securities

Hi, good morning. Just a question about the unfavorable JV experience in Asia, if you could talk to that a little bit more and specifically talk about your expectations going forward?

LeoGrepin

Analyst · Meny Grauman with Cormark Securities

Hi, good morning, Meny. It's Leo here. Let me take the first part of your question around the unfavorable joint venture experience. As you know, we've got joint venture arrangements in China, India and Malaysia. The reference that I think you're referring to in the MD&A relates to our China joint venture, where we've had some small one-time items worth about a $0.01 per share in aggregate. And then your broader question of going forward and the results, when you take out some small one-time items we had in the quarter, our income growth would have been in the low teens. So, we still feel very good about our ability to achieve our medium term target.

MenyGrauman

Analyst · Meny Grauman with Cormark Securities

Can you give a little more detail in terms of what's the nature of those onetime items?

LeoGrepin

Analyst · Meny Grauman with Cormark Securities

Yes. So it's really a number of small item normal variances that you would see quarter-over-quarter. They were just all pointed in the same direction this quarter. As an example, last quarter we had mortality gain, a small mortality gain and this quarter we had a small mortality loss, were small on both sides but that's an example. We had slightly higher losses this quarter. So just a few small items like that, that just happened to point in the same direction.

Operator

Operator

Thank you. And our next question comes from the line of Gabriel Dechaine with National Bank Financial.

GabrielDechaine

Analyst · Gabriel Dechaine with National Bank Financial

Good morning, Dean, first question for you. You talked about the Coronavirus impact on your business and said could impact sales going forward and claim. I get the sales but maybe you can flush out the claims commentary where you'd expect that the show up. And then I'll throw in my group question in Canada. Morbidity was negative again in Canada that is. Jacques, could you give me a timeline for when you expect the repricing initiative which is underway to start translating into margin improvements and elimination of this issue?

DeanConnor

Analyst · Gabriel Dechaine with National Bank Financial

Gab, it's Dean. Thank you for your questions. Leo, why don't you start with the Cobit 19 question on claims?

LeoGrepin

Analyst · Gabriel Dechaine with National Bank Financial

Yes. Thank you, Gabriel. It's Leo here. So on Cobit 19 and potential impact on claims. First, I'd say it's too early to tell. It really, you are going to depend on the scale of the epidemic. From a claims standpoint a lot of expenses that are flowing through the system in the economies in Asia are getting captured by the public system. If you look at Hong Kong, China, the patients are getting sent to public hospitals. So you don't expect a significant impact on health insurance claims there. Obviously, if things deteriorate rapidly, you could see mortality claims increase in a material way. But I think it's just much too early to tell where this is going to end up.

GabrielDechaine

Analyst · Gabriel Dechaine with National Bank Financial

So that precautionary commentary, I guess.

LeoGrepin

Analyst · Gabriel Dechaine with National Bank Financial

That's right.

GabrielDechaine

Analyst · Gabriel Dechaine with National Bank Financial

Okay.

DeanConnor

Analyst · Gabriel Dechaine with National Bank Financial

And, Jacques, you want to comment on the morbidity in Canada?

JacquesGoulet

Analyst · Gabriel Dechaine with National Bank Financial

Gabriel thanks for your question. So right - the higher incident continues. It's in the disability part of group benefits as you're pointing out. And as I said last time, we have started, in fact, pricing action last year. We will be basically 100% done by the end of Q1 this year. Now the renewal cycle of these clients is such that it hits at different times so most of our book tends to renew January 1. So we're getting quite a bit; based on July 1. So when you look at it, Gabriel, I would say roughly 60% this year and 100% by next year. And that's where we are.

Operator

Operator

Thank you. Your next question comes from the line of Sumit Malhotra with Scotiabank.

SumitMalhotra

Analyst · Sumit Malhotra with Scotiabank

Thanks. Good morning. First question is for Leo and it's about your joint venturing in, sorry your distribution agreement in the Philippines. Looking at your sales numbers, Philippines has been one of the stronger geographies for individual life sales for the company in Asia over the last couple of years. I don't know if there's any economics you provided on the new relationship you have here. And more specifically, with growth already trending well, where exactly does this distribution agreement benefit the company in terms of sales going forward?

LeoGrepin

Analyst · Sumit Malhotra with Scotiabank

Hi, good morning, Sumit, Leo here. When you're referring to our new relationship, I think you're referring to Vietnam.

SumitMalhotra

Analyst · Sumit Malhotra with Scotiabank

Sorry. Did say Philippines? Yes. Vietnam, Vietnam. Sorry about that.

LeoGrepin

Analyst · Sumit Malhotra with Scotiabank

Yes. Okay. Thank you. So, yes, we signed a new partnership deal, banca partnership deal in Vietnam, late last year with Citibank. As you know, from a strategy standpoint, distribution excellence is a core pillar of our strategy in Asia. And we've been driving diversified strategy with strong growth and quality improvement in agency, bancassurance and brokerage. So across our markets, we're driving for expansion on all fronts. In the case of Vietnam, this was one of our few markets where we did not have banca partnerships in place. And we were very excited to team up with Citibank; Citibank is one of the fastest growing banks in Vietnam. It's also very well aligned with our strategy and that they are very client focused, very digitally oriented. And so we see that as a very positive step for us in that market and we expect it to be a meaningful contributor to our sales in Vietnam.

SumitMalhotra

Analyst · Sumit Malhotra with Scotiabank

And I think you answered some of there for me as I didn't, I wasn't sure if you had anything outside of the agency channel in Vietnam. So this is your first entry into bancassurance in that country?

LeoGrepin

Analyst · Sumit Malhotra with Scotiabank

That's right.

SumitMalhotra

Analyst · Sumit Malhotra with Scotiabank

And second question, final question is for, Dean. Dean, we spoke last quarter about the company's philosophy around share repurchases and you mentioned about the intrinsic value that management considers. Coincidence or not, you have not been active on repurchases for the first time in a while. I know there were a lot of things going on, let's call it off the field with the InfraRed acquisition and some debt redemptions, maybe other considerations. In thinking about capital allocation in 2020, our share purchases, something that our intrinsic value base still makes sense right now, or are there other factors that you think in terms of organic growth that take a higher priority as you think about the coming year?

DeanConnor

Analyst · Sumit Malhotra with Scotiabank

Sumit, it's Dean. Thank you for your question. First, remind investors that our priorities for capital allocation are first and foremost to fund organic growth that includes C capital for investment strategies, but driving organic growth. And then second of all acquisitions, acquisitions that are aligned to our strategy meet our hurdles. And thirdly, share buybacks. On buybacks, there are a number of factors that we do take into consideration, including our capital position or excess cash, the M&A pipeline as we look forward and expected returns on buybacks versus alternative uses of capital, and valuation and so on. So the number of things that we consider at any point in time. So we have done buybacks in the past, obviously, we expect to do them in the future. We don't comment on any particular quarter's buyback activities, so, I won't answer your question perhaps as directly as you'd like but I would just say it's a continuous to be a very important part of our stable of levers to allocate capital and you'll just need to stay tuned as we go forward.

SumitMalhotra

Analyst · Sumit Malhotra with Scotiabank

I got to get you to share your intrinsic value model with me; I need to maybe make that into my own considerations. Thanks for the time.

Operator

Operator

Thank you. And our next question comes from the line of Doug Young with Desjardins Capital.

DougYoung

Analyst · Doug Young with Desjardins Capital

Hi. Good morning. Just maybe following on the capital question, Dean or Kevin, I think in the past, you've talked about Sun Life's ability to generate excess capital in and around $800 million per year, and that's after dividends and funding organic growth. Has that changed at all?

KevinStrain

Analyst · Doug Young with Desjardins Capital

Hi, Doug, it's Kevin. Our view on that is still the same. We're generating between $800 million, plus or minus with each year. And the idea would be to maintain our capital flexibility and to look at it that way. So the $800 million per year continues to be roughly the additional capital, we're generating.

DougYoung

Analyst · Doug Young with Desjardins Capital

I think along the same line as the previous question, I mean, I think you kind of signaled maybe $200 million of buyback per quarter. But and I know it's not going to be even but it doesn't sound like that's necessarily going to be ongoing or consistent. Is that fair to kind of read that into?

KevinStrain

Analyst · Doug Young with Desjardins Capital

I think, Dean, addressed too well, right. It's going to depend on a number of factors, what we see on the M&A front, what we're having to do, Dean mentioned C capital, what we see in terms of organic growth. So there's a bunch of factors that go into our decision each quarter whether we do the buyback including intrinsic value, but we're not going to comment on which one of the factors is driving us not to buy in a particular quarter, right. Like there's a lot of sensitive information inside of that on the M&A front and those types of things. So we're very disciplined. We look at it every quarter. If we're not buying, it could be any one of those factors from organic growth to M&A to other things.

DougYoung

Analyst · Doug Young with Desjardins Capital

Okay. Just second, I mean, Dan, the integration of assurance group businesses done the earnings growth has been strong and you've gotten into that margin range in which you targeted. So maybe I can phrase it this way what's next? I mean is there room to push that margin target higher in the US Group Insurance business? Because it feels like some of your peers out there are targeting higher margins. And I know the stop-loss seems to be maybe above target, but there seems to be opportunity on the group employee benefit side. So just hoping to get some color.

DanielFishbein

Analyst · Doug Young with Desjardins Capital

Yes. Thanks. As you know, we're as you noted, we're above the target that we said at the Investor Day of 7% or higher. And we seemed -we're staying above that target. Of course, there's a composition of businesses there. There's our stop loss business which especially the past two years has performed actually above our pricing targets. And there is some reversion back to the pricing targets that's happening and inevitably will happen. But at the same time as you noted, we're continuing to improve the margins in our core group business, that's the life, disability, dental and voluntary. So we're seeing some shift in the mix there. The margins have been coming up in the group business and there's still more opportunity for that margin to come up. A big part of our opportunity is also growth. We had significant growth 17% for example in business in-force year-over-year in the stop-loss business. And as we put the integration in the group business in the rearview mirror, which and any conversion process obviously dampen your growth and can lead to some additional lapses. With that now in the past, we think that we should start to see some good growth in the group businesses as well. There's also significant growth opportunity from what we refer to as closing the coverage gap. Schools like Maxwell and others that were employing to encourage people to enroll for the right amounts of coverage and to have the employer partners we work with offer more of our products. And then finally in our full scope business, we have nice growth happening there and we are launching new lines of business. For example, in the quarter we introduced our stop-loss offering to health plans; our first partnership around voluntary products and we expect that to add to our growth going forward.

Operator

Operator

Your next question comes from the line of Tom MacKinnon with BMO Capital.

TomMacKinnon

Analyst · Tom MacKinnon with BMO Capital

Yes. Thanks very much. A couple questions just to start off with respect to Asia. We see nice growth and expected profit. We've seen strain coming down. I think you talked about whittling away the expense gap here, but was this an exceptionally strong quarter or do you think you've got things in motion here to be able to sort of continue at a 15% kind of underlying earnings growth rate for Asia? Have you built sufficient scale to be able to do that? Do we have to have what kind of sales growth momentum do we need in order to be able to kind of hit that targeted 15% growth rate for that segment?

LeoGrepin

Analyst · Tom MacKinnon with BMO Capital

Yes. Hi, Tom. Leo here. So, yes, you're right to highlight that we had a good quarter in terms of expected profit growth and reduction in new business strain; 14% improvement in expected profits quarter-over-quarter. New business strain reduced by about $7 million. So taken together that's about 25% growth year-over-year. So good quarter in that respect and so as a result that gives us some good confidence that the 15% underlying earnings growth year-over-year is something that we were quite confident in delivering.

TomMacKinnon

Analyst · Tom MacKinnon with BMO Capital

Okay. Thanks. And then a follow up just with respect to the $800 million in free capital annual generation. I assume this -in that guide you have some measure of organic growth because obviously you didn't want to grow organically and that number would probably be bigger. So what kind of level of organic growth is embedded in that $800 million? Is that your 8% to 10% underlying earnings growth guidance? Is that embedded in terms of organic growth in that $800 million?

KevinStrain

Analyst · Tom MacKinnon with BMO Capital

You're right, Tom. The $800 million does include the organic growth. The organic growth you're talking about is capital growth they are not just EPS growth. So it would be slightly different than that, but we -it's based on our plans and how we see the business growing.

TomMacKinnon

Analyst · Tom MacKinnon with BMO Capital

Right. So if you assume your underlying earnings are going to grow in the 8% to 10% range you could still see $800 million in free capital generated annually?

KevinStrain

Analyst · Tom MacKinnon with BMO Capital

Yes. That's correct. That's embedded into those numbers.

TomMacKinnon

Analyst · Tom MacKinnon with BMO Capital

It's just when you talked about using that money to fund organic growth that would be, I assume that would be above and beyond the 8% to 10% you're trying to get at, right?

KevinStrain

Analyst · Tom MacKinnon with BMO Capital

Yes. That's correct.

TomMacKinnon

Analyst · Tom MacKinnon with BMO Capital

Okay and then finally the taxes were lower and you're talking a more tax exempt help in the quarter. Is that tailwind going to continue or how should we be - should we be thinking about moving towards the lower end of your 15% to 20% guide or how should we be thinking?

KevinStrain

Analyst · Tom MacKinnon with BMO Capital

It's - we benefit from a balanced business model across a number of geographies, right. And that's what supports our effective tax rate of 15% to 20%. And when you think of where we are in any given quarter, it depends on where the income is coming from and what that looks like. So I would say, we still feel like 15% to 20% is the right range, but what happens in any given quarter depends on where the income is coming from and drives us sort of up and down in that range.

TomMacKinnon

Analyst · Tom MacKinnon with BMO Capital

Okay. And if I get to squeeze the last quick one here, the $30 million restructuring charge. I think you said you are going to translate that's pretax going to translate into $30 million pretax expenses starting to work towards the end of 2020. What's size -?

DeanConnor

Analyst · Tom MacKinnon with BMO Capital

Right. The expense stage will start in 2020 and by 2021 we'd expect to be at the full level, but it's roughly in that neighborhood of - the charges $33 million pretax, the savings would roughly in the neighborhood of $33 million.

TomMacKinnon

Analyst · Tom MacKinnon with BMO Capital

And what segment where we get those savings in?

DeanConnor

Analyst · Tom MacKinnon with BMO Capital

The majority of what we did this quarter was in the corporate segment. So that's the majority of where the restructure charges were.

Operator

Operator

Your next question comes from the line of Paul Holden with CIBC.

PaulHolden

Analyst · Paul Holden with CIBC

Thank you. Good morning. Two questions for me. One is going back to Asia and maybe getting a little bit more specific on the improvement and new sales strain. You mentioned that came from improve scale. Are there certain geographies where this scale improved driving that change? And sounds like you assume that will or you expect that will be sustainable, so maybe talk about the reasons why that improvement scale should be sustainable as well.

LeoGrepin

Analyst · Paul Holden with CIBC

Hi, Paul. It's Leo here. So you are right to highlight, we're improving our new business strain. As you've seen we're driving some good growth across the region really across all of our markets on the back of strong focus on distribution and both scale and quality. And we've also got some strong products in the market, a good product mix. We feel good about the profitability of these products. As you know, Asia is a highly under penetrated market when it comes to insurance. And so it's really a distribution game. It's not a pricing game in Asia. So we feel good about the profitability of the products. And so as the scale continues to come through, we're expecting to see this benefit of scale flowing through in our new business strain. In terms of where it comes from you, as you can imagine our bigger markets are Hong Kong and the Philippines and they're both profitable markets and as we continue to build scale there in particularly you would expect some of the benefits to come from there in particular.

PaulHolden

Analyst · Paul Holden with CIBC

Okay. Second question is follow-up on potential capital optimization. I think both Dean and Kevin mentioned potential M&A and M&A pipeline. So would appreciate any thoughts there. I think the commentary in the past was certainly your willingness to deal is there but you for certain larger deals pricing was a challenge in terms of financial hurdles. So wondering if there's any update there and then just generally how robust do you think the potential pipeline looks?

DeanConnor

Analyst · Paul Holden with CIBC

Paul, it's Dean here. Thank you for your question. I'll just take you back to the way we think about M&A. We've talked about this before. There are a number of areas and opportunities we see. The first is can we assume a larger share of the joint venture we are already in. You've seen us act on that in the past in India and Vietnam and Indonesia. So as we look forward that's one set of conversations. And then there are lots of conversations going on at any point in time around things that will strengthen all four pillars. So new capabilities, so think of Greenoak and InfraRed as squarely in that category. New growth opportunities, so think of the acquisition of the Malaysia business as in that category or in some cases combinations of capability and growth. So think of the AEB acquisition is driving both new capabilities and growth. So we keep looking at a pipeline of opportunities that are on strategy. We ask ourselves what we bring beyond a checkbook to this business. What does it bring to us? Why is the combination? Why is this business better off in our hands? How do we grow faster together? And obviously, it has to clear our economic hurdles. So it's a pretty disciplined framework for evaluating acquisitions. I think we've been successful at identifying opportunities and then executing on them and bringing them in and achieving our targets. And they've added a lot of value to the business and to the growth potential for the company. So it's difficult to talk about any -obviously, we don't talk about any particular specific opportunities at any point in time or about things that have come and gone in the past. But I'll just kind of a general answer to your question around how do we think about it. I would just say we continue to be actively engaged in a robust pipeline of opportunities that fit the kind of criteria I just described.

Operator

Operator

Our next question comes from the line of Nigel D'Souza with Veritas Investment Research.

NigelD'Souza

Analyst · Nigel D'Souza with Veritas Investment Research

Good morning. Thank you. I actually had a follow up question on the tax item this quarter. So you pointed out investment income from tax exempt assets. And I was wondering if you could provide more color on what those underlying assets represent in terms of equity or fixed income? And how we should think about that going forward? So if market conditions continue to be favorable, strong do you expect the benefit to continue in and vice versa if we see softening of market conditions, does that benefit go away?

DeanConnor

Analyst · Nigel D'Souza with Veritas Investment Research

We've had these assets invested in this the tax exempt sort of basis for a number of years now. And it really depends on investment returns. So to quarter-by-quarter and we had strong investment returns this quarter which is the primary thing that drove us below our range. So I won't say -I can't predict what the investment incomes going to be on those assets that are going forward, but to the extent we do have strong investment income, you'll see a lower tax rate related to that. And that's what happened during the quarter.

NigelD'Souza

Analyst · Nigel D'Souza with Veritas Investment Research

Okay. And then last question related to taxes, in the last quarter you also had the resolution of two favorable, favorable resolutions of two tax related items. I believe you highlighted an expectation for a $0.03 benefit from those items. So did that have any benefit this quarter and do you expect those items from last quarter continue to benefit your effective tax rate going forward?

DeanConnor

Analyst · Nigel D'Souza with Veritas Investment Research

Yes. Nigel, that's correct. We did have that and we experienced the quarter benefit that we expected to experience. And you would see that going forward as well, but that's included in our 15% to 20% target.

Operator

Operator

Your next question comes from the line of Scott Chan with Canaccord Genuity.

ScottChan

Analyst · Scott Chan with Canaccord Genuity

Good morning. Dean, just going back to your comment on the robust pipeline on the M&A side. Does that involve potential opportunities with SLGI? That's one of the asset management entities that kind of lack scale I guess in terms of assets, but it's also growing a lot faster than your more scalable businesses, just kind of thoughts there. I know you didn't excel acquisition in the past but I just kind of curious your thoughts on that platform.

DeanConnor

Analyst · Scott Chan with Canaccord Genuity

Scott, thank you for your question. It's Dean. Yes, first of all, I'd say we're really pleased with SLGI. It's - starting a business from scratch is one of the hardest things to do in business. And the team has done I think just a terrific job building this business up to $30 billion of AUM. And as I said one and we talked about this over the years, but it is making a profit; it's making a nice profit and of course, as you know, once you went you kind of passed through that zero number and start earning a profit, there's good leverage there. So we're really pleased with the progress. I have said before, we have said before that if there was some way to add more scale to SLGI through M&A that could be of interest to us. As you know, the reality is the market is already quite concentrated in Canada. It is not- not lot of opportunities in that category and just as a reminder SLGI is a solutions oriented business. It's got alpha generation capabilities to tactical asset allocation and other means. The majority of the platform is a sub advice platform. So then when you go and say that is the model that we've got when you think about acquisition opportunities, it's not a big set. So I, we see a lot of opportunity to grow SLGI organically that's our first priority. I think we've made great progress and it feels like we've just begun. We've just begun to really hit some momentum here. And the best is yet to come.

ScottChan

Analyst · Scott Chan with Canaccord Genuity

Great. And just a small question on Asia. Does Sun Life have any offices in new Wuhan or Hubei?

DeanConnor

Analyst · Scott Chan with Canaccord Genuity

Leo, you want to take that one?

LeoGrepin

Analyst · Scott Chan with Canaccord Genuity

Yes. Hi, Scott. Leo here. So in our China business, Sun Life Ever Bright, we have a branch in Wuhan.

Operator

Operator

Your next question comes from the line of Humphrey Lee with Dowling & Partners.

HumphreyLee

Analyst · Humphrey Lee with Dowling & Partners

Thank you for taking my follow up question. Just around the topic of M&A. I know, Dean, you talked about you're not going to comment on anything specific, but looking back at SSCM. You've done couple transactions, they're gradually building up your product suite. If you were to look at Sun Life capital again, like if you look at the overall product suite that you have there, is any capability or kind of solutions that you would like to add to that platform?

DeanConnor

Analyst · Humphrey Lee with Dowling & Partners

Humphrey thanks for your question. Steve Peacher is going to take it.

StevePeacher

Analyst · Humphrey Lee with Dowling & Partners

Humphrey, thank you for the question. It's Steve. One of the areas that we are very strong in and have done very well in terms of building a third-party business is private fixed income on the investment grade size, particularly strong for us, the strength for the company, it's worked well for the balance sheet over the years and we've as a result attracted a lot of investment interest from third party, institutional clients. We don't have a large capability in the below investment grade private credit space which is obviously of increasing interest to institutional investors around the world. And that is an area of interest we mentioned that, I mentioned that in before publicly along with infrastructure equity we couldn't be more excited about the InfraRed acquisition which fills that bucket. And so if there was a kind of one area that I would be interested in and it would be the area in private credit below the investment grade line.

Operator

Operator

Thank you. We have no further questions at this time. I'll now turn things to Chalmers for closing remarks.

Leigh Chalmers

Analyst

Thank you. And I would like to thank all of our participants today. And if there are any additional questions, we are available after the call. Should you wish to listen to the rebroadcast, it will be available on our website later this afternoon. Thank you, and have a good day.

Operator

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participation. And you may now disconnect.