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Sun Life’s (SLF) Q4 Earnings Grow on Solid Wealth Businesses

Zacks

Sun Life Financial Inc. SLF reported fourth-quarter 2017 underlying net income of $404 million (C$641 million), up 14.5% year over year. This improvement was driven by wealth businesses and a favorable morbidity and mortality experience.

Sun Life Financial Inc. Price, Consensus and EPS Surprise

Sun Life Financial Inc. Price, Consensus and EPS Surprise | Sun Life Financial Inc. Quote


Insurance sales increased 3.3% year over year to $0.871 billion (C$1.106 billion) while wealth sales were down 5.2% year over year to $27.8 million (C$35.3 billion) in the quarter.

Premiums and deposits were $32.2 billion (C$40.9 billion), down 3.4% year over year on lower net premium revenues, segregated fund deposits and mutual fund sales.

Net premiums decreased 7.7% year over year to $3.2 billion (C$4.1 billion), attributable to decreases in group retirement services (GRS) in SLF Canada, Hong Kong and the currency impact from the change in the Canadian dollar. However, higher premiums in SLF U.S. and group benefits in SLF Canada limited this downside.

Segment Results

SLF Canada’s underlying net income decreased 5% year over year to $183 million (C$232 million) due to release of a litigation provision that shored up the underlying net income, a year ago . The quarter witnessed increased insurance sales. Wealth sales decreased primarily due to GRS sales, largely reflecting a large client sale in the year-ago quarter.

SLF U.S.’s underlying net income was $126 million, up 45% from the prior-year quarter. This increase stemmed from an improved underwriting experience in the group life and disability businesses plus a progress on the integration of the U.S. employee benefits business acquired in 2016.

SLF Asset Management’s underlying operating net income of $174 million increased 29% year over year, banking on higher average net assets and lower taxes.

SLF Asia reported an underlying income of $63 million (C$80 million), up 43% year over year. Insurance sales declined in the fourth quarter, attributable to strengthening of the Canadian dollar and lower sales in Hong Kong. Wealth sales improved, driven by continued growth in equity and fixed income funds in an Indian joint venture mutual fund company.

Financial Update

Global assets under management were $777 billion (C$975 billion), up nearly 8% from the level at 2016-end.

Sun Life Assurance’s Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio was 221% as of Dec 31, 2017 compared with 252% as of Sep 30, 2017. The MCCSR ratio for Sun Life (which includes cash and other liquid assets) was 246%.

Sun Life reported operating return on equity of 10.7% in 2017, contracting 230 basis points year over year. Underlying ROE of 12.7% expanded 50 basis points year over year.

Leverage ratio of 23.6% at 2017-end improved from 25.2% at 2016-end.

Dividend Update

The board of directors of Sun Life approved a dividend of 45.5 cents per share, payable on Mar 29, 2018 to shareholders of record on Mar 1.

Zacks Rank

Sun Life carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Life Insurers

Among other players from the life insurance industry that have reported fourth-quarter earnings so far, the bottom line of Lincoln National Corporation LNC and Torchmark Corporation TMK beat the respective Zacks Consensus Estimate while Reinsurance Group of America, Incorporated RGA missed the mark.

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