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Sun Life (SLF) Q3 Earnings Rise Y/Y, Asset Management Grows

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Sun Life Financial (SLF - Free Report) reported third-quarter 2020 underlying net income of $632 million (C$842 million), up 4.1% year over year. Positive impacts of business growth, favorable results in Group Benefits (GB) in Canada, favorable morbidity experience in the United States, higher new business gains and increase in investing activity were partially offset by unfavorable tax impacts, credit experience and mortality experience as well as lower net investment returns on surplus, and lower available-for-sale gains

Insurance sales decreased 0.6% year over year to $511 billion (C$681 million) on the back of lower sales in SLF Canada. Wealth sales were up 27.9% year over year to $39.5 million (C$52.7 billion) in the quarter on higher sales in Canada, Asia and Asset Management.

Value of new business increased 3.6% year over year to $196 million (C$261 million).

Sun Life Financial Inc. Price, Consensus and EPS Surprise

Segmental Results

SLF Canada’s underlying net income increased 9% year over year to $220 million (C$293 million) driven by favorable results in GB and business growth, partially offset by lower net investment returns on surplus and lower AFS gains. Insurance sales declined 28% on lower sales in Group Benefit. Wealth sales increased 65%, driven by higher large case sales in Group Retirement Services (GRS) and higher guaranteed product sales in individual wealth.

SLF U.S.’ underlying net income was $102 million (C$136 million), up 1% from the prior-year quarter  as favorable morbidity experience in medical stop-loss, business growth and higher investing activity were partially offset by unfavorable mortality in Group Benefits, unfavorable expense experience and less favorable credit experience. Sales increased 25% year over year driven by higher sales across all businesses.

SLF Asset Management’s underlying net income of $220 million (C$294 million) increased 17% year over year, driven by higher average net assets (ANA), partially offset by changes in net investment returns and higher sales expenses in MFS. Sales improved 25% year over year.

SLF Asia reported an underlying income of $123 million (C$164 million), up 19% year over year, driven by new business gains, primarily in International Hubs, favorable expense experience and business growth, partially offset by less favorable credit experience. Insurance sales increased 2% year over year as increases, primarily in International Hubs, were partially offset by the Philippines as a result of the impact of COVID-19. Wealth sales increased 8%, driven by fixed income sales in India, partially offset by lower wealth sales in the Philippines.

Financial Update

Global assets under management were $886.5 billion (C$1,186.3 billion), up 11.6% year over year.

Sun Life Assurance’s Minimum Continuing Capital and Surplus Requirements (LICAT) ratio was 127% as of Sep 30, 2020 versus 130% as on Sep 30, 2019. The LICAT ratio for Sun Life was 144% versus 143% as on Sep 30, 2019.

Sun Life’s reported return on equity of 13.5% in the third quarter expanded 50 basis points (bps) year over year. Underlying ROE of 15.1% contracted 40 bps year over year.

Leverage ratio of 21.5% at quarter end deteriorated 30 basis points year over year.

Zacks Rank

Sun Life currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Life Insurers

Of the life insurance industry players that have reported third-quarter results so far, American Equity Investment Life Holding Company (AEL - Free Report) and Athene (ATH - Free Report) beat the respective Zacks Consensus Estimate for earnings while Lincoln National Corporation (LNC - Free Report) missed expectations.

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