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Canadian life insurer, Sun Life Financial Inc. (SLF - Analyst Report) announced first-quarter 2013 net operating earnings $444 million (C$448 million), improving 2.5% over first quarter 2012.

Sun Life Financial’s reported net income came in at $406 million (C$410 million), up 1.2% year over year.

The improved numbers were driven by the continued successful execution of its growth strategy as well as the favorable impact from investment activity. Better equity markets conditions also contributed favorably.

Adjusted revenues of Sun Life Financial were $5.15 billion (C$5.2 billion), up 10% year over year. The increase was primarily driven by higher investment income and increased fee income from Mutual Fund Segment (MFS).

Total benefits and expenses of Sun Life Financial were $ 3.27 billion (C$3.3 billion), up 22.5% year over year.

While wealth sales improved 16%, insurance sales increased 5%. Assets under management increased 7% year over year to $561 billion (C$570 billion).

Segment Results

During the quarter, SLF Canada reported operating income of $261 million (C$263 million), up 10% year over year. The improvement was driven by favorable equity market experience in Individual Insurance & Investments, net realized gains on the sale of available-for-sale assets, positive morbidity experience in Group Benefits (GB) and gains from investment activities on insurance contract liabilities in Individual Investments and GB.

SLF U.S. recorded operating income of $65 million during the reported quarter, down nearly 55% year over year. Unfavorable movements in swap spreads, negative claims experience in Employee Benefits Group (EBG) and costs related to the strategic investment in EBG was partially offset by favorable impacts from better equity markets and interest rates

MFS Investment Management reported operating net income of $100 million, up 43% year over year.

SLF Asia reported operating income was $50.5 million (C$51 million), up nearly 76% year over year.

Corporate segment reported operating net income of $36.7 million (C$37 million), up 42% year over year.

Sun Life Financial reported operating return on equity of 15.8%, compared with 22.1% in the year-ago quarter.

Sun Life Assurance's MCCSR ratio was 214% as of Mar 31, 2013, compared with 209% as of Dec 31, 2012.

Divestiture Update

In an effort to shed its variable annuity exposure, in Dec 2012, Sun Life Financial entered into an agreement to sell off its U.S. annuities business. It also made an agreement to sell certain of its U.S. life insurance businesses including all of the issued and outstanding shares of Sun Life Assurance Company of Canada.

The transaction is expected to close before the end of the second quarter of this year.

Dividend

The board of Sun Life Financial approved a dividend of 36 cents per share.

Performance of other Life Insurers

While StanCorp Financial Group Inc. (SFG - Analyst Report) and Reinsurance Group of America Inc. (RGA - Analyst Report) reported operating earnings ahead of the Zacks Consensus Estimate, Protective Life Corp.’s (PL - Analyst Report) earnings fell short of the Zacks Consensus Estimate.  

Zacks Rank

Sun Life Financial carries a Zacks Rank #3 (Hold).

 

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