November 4, 2020
Sun Life Financial Inc.
Solid results continue with good Q3 Impact: Positive
SLF’s Q3/20 underlying EPS came in at $1.44, well above our estimate of $1.30 and consensus of $1.28. Better than expected results were largely driven by higher than forecast expected profit from in-force (EPIF) of $924 million (up ~13% YoY), compared to our estimate of $858 million. SLF also had relatively neutral after-tax credit experience of -$2 million compared to our assumed credit losses of -$58 million. This was partly offset by lower than expected earnings on surplus of $96 million compared to our $123 million estimate.
Underlying earnings from SLF Canada, U.S., and Asset Management were better than our forecasts. SLF Canada had underlying earnings of $293 million (up ~18% YoY), compared to our $247 million forecast, mainly driven by better than forecast EPIF. SLF Asset Management earnings increased ~17% YoY to $294 million, versus our estimate of $259 million, also driven by higher than forecast EPIF. SLF U.S. underlying earnings were relatively flat YoY at $136 million, versus our estimate of $116 million. Underlying earnings from Asia were largely in line with our forecast.
MFS’s total net flows were good, as mutual funds net inflows remained solid and institutional net outflows were similar to last quarter. Total net inflows were US$4.5 billion, compared to net inflows of US$5.4 billion last quarter and better than our estimated net inflows of US$3.0 billion. Mutual fund net inflows remained solid at US$6.0 billion (versus net inflows of US$6.6 billion last quarter) and institutional fund net outflows were -US$1.5 billion (versus -US$1.3 billion last quarter).
U.S. Group Benefits results were solid. Reported net income was US$97 million versus US$80 million last quarter. After-tax profit margin of 7.8% was up 30 bps QoQ and 60 bps YoY. Total sales were up ~4% QoQ and ~24% YoY.
SLF’s total LICAT ratio at the holding company remained solid at 144% (down -2% QoQ). At the operating company level, SLF’s total LICAT ratio was 127% (up 1% QoQ). Leverage ratio declined to 21.5% from 23.2% last quarter.
Overall, we view Q3/20 results positively. Underlying EPS was well above our estimate and consensus, as most major segments came in better than expected. SLF had strong EPIF growth, low credit losses, and MFS net flows remained solid.
SLF will host a conference call at 10:00AM ET on Thursday, November 5. The dial-in numbers are 602-563-8756 or 1-877-658-9101; conference ID 4449049