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Sun Life exec: Many life insurers will use tax cuts to pad margins

Insurers offering group plans are more likely to use benefits from tax reform to fulfill their margin targets before passing savings onto consumers, according to one Sun Life Financial Inc. executive.

Daniel Fishbein, president of Sun Life's U.S. segment, during the company's fourth-quarter 2017 earnings call said that, over the short- and medium term, he expects most companies will use savings from recently enacted tax reform to expand their margins rather than lowering premiums.

"Most of the insurers active in the group market today are not yet at their target margin," Fishbein said.

President and CEO Dean Connor during the call said the U.S. economy is improving and called tax reform a "catalyst" to that macroeconomic environment. Employment growth will contribute to the company's corresponding growth, Connor said, adding that Sun Life is also observing wage inflation in the U.S., which will lead to corresponding group rate increases.

For Sun Life, there will be an impact in after-tax margins from a lower tax rate of about 75 basis points, the CEO said.

Sun Life recorded fourth-quarter common shareholders' net income of C$207 million, or 34 Canadian cents per share, compared with C$728 million, or C$1.18 per share, in the year-ago period. The decrease was driven mainly by a C$251 million net charge as a result of tax reform, CFO Kevin Strain said.