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We are reiterating our Neutral recommendation on the shares of Sun Life Financial Inc. (SLF - Analyst Report), following fourth quarter earnings release. This life insurer with a Zacks Rank #3 (Hold) reported operating earnings in the fourth quarter 2012 reversing loss reported in the year ago quarter.
Why Reiterate?
Sun Life has intensified its approach to Asia, an area which is expected to provide higher returns and growth compared to the North American markets. The company plans to drive 12.5% of consolidated operating earnings from Sun Life Asia by 2015.
The company is also altering its business risk in the U.S. Market, by exiting from the U.S. individual insurance markets. It is looking to offload the variable annuities and Individual Life Insurance in U.S. The unlocked capital tied in this runoff business can be deployed somewhere else to generate a higher return on equity. 
Sun Life is aggressively seeking to grow its Global Asset Management Business, which has been witnessing growing asset base for the past many quarters. This business provides higher return on equity, lower capital and lower volatility, and has potential to provide earnings upside.
Along with doing away with high equity/interest rate risk products, the company has implemented hedging to reduce earnings and capital sensitivity to interest rates and equity markets. The company stands better than its peers in management of hedging these risks. 
However, low interest rate environment will continue to have a significant negative impact on the company’s operations. If current rates persist, the reinvestment impact would reduce earnings through 2015. Other players that continue to face headwinds from low interest rates include Prudential Inc. (PRU - Analyst Report) and MetLife Inc. (MET - Analyst Report). 
Following the earnings release, 4 of 7 estimates were revised though it pulled down the Zacks Consensus Estimate for 2013 by 2.6% to $2.59 per share. 
Other Stocks to consider
Life insurer Reinsurance Group of America Inc. (RGA - Analyst Report), among others, carry a favorable Zacks Rank #2 (Buy).

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