Sun Life shares plunge as Medicaid uncertainty prompts US dental forecast revision

TORONTO (Reuters) - Sun Life Financial's (SLF.TO), opens new tab shares plunged as much as 8.5% on Friday, a day after the Canadian insurer said it would miss a 2025 profit target for its dental business in the U.S. due to uncertainty over Medicaid funding.

Sun Life, which bulked up its dental business through the $2.5 billion acquisition of DentaQuest in 2022, said underlying net income for the dental business, which has struggled in past quarters, is expected to be below $100 million in 2025.

The forecast revision was driven by uncertain Medicaid funding resulting in slower negotiations with states on coverage rates and higher Medicaid claims, the company said.

Sun Life works with U.S. states to administer Medicaid and Medicare Advantage dental benefits through the DentaQuest business and is dependent on government funding.

"The claims are also increasing at a faster pace, which I partially think is because people are seeing that they may lose their Medicaid benefits. So they're going to the dentist more quickly," CEO Kevin Strain said in an interview on Friday.

Strain noted that the states have been reluctant to pass on the increased claims costs, something he expects to sort itself out over the next few years.

"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.
The U.S. remained one of the company's fastest growing and least capital-intensive regions, Strain added.