Sun Life Financial Inc T.SLF

Alternate Symbol(s): T.SLF.P.H | T.SLF.P.J | T.SLF.P.K | SNLFF | SUNFF | SLFIF | SLF | SNLIF | T.SLF.P.C | T.SLF.P.D | T.SLF.P.E | T.SLF.P.G

Financial Services Insurance - Diversified

Sun Life Financial Inc. is a Canada-based international financial services company, which offers asset management, wealth, insurance and health solutions to individual and institutional clients. Its segments include Canada, United States (U.S.), Asset Management, Asia, and Corporate. The Canada segment provides protection, health, asset management and wealth solutions. It also offers a premier health and wellness virtual care platform. The U.S. segment provides employee and government benefits in the United States. Its business units include group benefits, dental and in-force management. The Asset Management business group includes MFS and SLC Management. MFS is an asset manager offering a comprehensive selection of financial products and services. The Asia segment consists of two business units: Local Markets and International Hubs. It has operations in a number of markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, India and others.

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Sun Life Financial Inc

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Post by retiredcfon Aug 09, 2023 8:49am

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Post# 35579124

TD

As can be seen, this analyst has never been a big fan with a modest $71.00 target. GLTA

Sun Life Financial Inc.

(SLF-T, SLF-N) C$68.52 | US$51.05

Q2/23: U.S. Group Business - Another Strong Quarter Event

SLF reported Q2/23 underlying EPS of $1.57, up 14% y/y vs. our estimate of $1.59 and consensus of $1.54, reflecting the acquisition of Dentaquest, resilient Asset Management earnings (up 4% y/y despite challenging equity markets), and higher investment income (rates). From a Drivers of Earnings perspective, strong group insurance results (U.S., particularly) drove the sharp increase in expected earnings from S.T. insurance business, and insurance experience gains (mortality was exceptionally strong) were much higher than expected. Higher mortality offset elevated expenses (incentive compensation) in the quarter.

Underlying ROE was a strong 17.7% and BV/share was down 1% q/q. SLF's strong ROE and generally stable book value growth support the company's industry-leading P/B of 2.0x. However, at this time, we favour the insurers trading well below SLF with an ROE ~200bps-300bps lower.

Impact: NEUTRAL

Key takeaways

U.S. underlying pretax earnings were up 59% y/y, reflecting strong group

health/protection results associated with good claims experience (stop-loss and group disability) and the DentaQuest acquisition. Individual mortality was favourable this quarter. Reflecting the DentaQuest deal and good stop-loss sales, group sales were up $271mm to $484mm compared with Q2/22. SLF's U.S. group business is a clear positive differentiator relative to the company's Canadian insurance peers. The business supports strong, consistent earnings growth with healthy ROEs and limited risk of material charges.
Asset Management pretax earnings were down 3% y/y, reflecting lower earnings at MFS. At MFS, average net assets were down 2.5% y/y, reflecting weaker markets and outflows. MFS pre-tax margin was 37%, up from last year despite the decline in average AUM. MFS remained in net outflows, at US$4.0bln, while SLC Management generated inflows of $2.0bn. Net flows at MFS were in line with estimate, and SLC Management flows were lower. We expect MFS to remain in outflows over the next 12-18 months.

TD Investment Conclusion

In our view, the following support a premium valuation for SLF: 1) lower interest-rate sensitivity; 2) solid capital levels; 3) track record of earnings stability; and 4) strong ROE (low capital-intensity business mix). However, we rate SLF HOLD and continue to favour MFC over SLF, mostly reflecting relative valuation.