Sun Life Financial Inc T.SLF

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

Financial Services Insurance - Diversified

Sun Life Financial Inc. is an international financial services company. The Company is engaged in providing asset management, wealth, insurance and health solutions to individual and institutional clients. The Company’s segments include Canada, United States (U.S.), Asset Management, Asia, and Corporate. These business segments operate in the financial services industry. The Asset Management business group includes MFS Investment Management and SLC Management business units. Its business types include Wealth & Asset Management, Group-Health & Protection, and Individual-Protection. Its Wealth & Asset Management businesses focus on investment products. Its Group-Health & Protection businesses provide health and protection benefits to employers and government plan members. Its products and services include insurance, investments, financial advice, and asset management. It has operations in Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, and others.

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Sun Life Financial Inc

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Post by retiredcfon Nov 04, 2021 9:26am

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Post# 34085982

TD

Sun Life Financial Inc.

(SLF-T, SLF-N) C$71.34 | US$57.63

Q3/21 Results Event

SLF reported underlying Q3/21 EPS of $1.54, up 7% y/y, vs. our estimate of $1.55 and consensus of $1.52. The core (excluding Asset Management) tax rate was low, adding $0.07/share. Underlying ROE was 15.6% (estimate: 15.9%). SLF raised ROE guidance to 16%-plus (previously 12-14%) and BV/share was up 5% y/y. Relative to our estimate, strong Asset Management results and the tax gain offset weak policyholder experience. Our 2022E/2023E underlying EPS reflect growth of 9-11% (supported by DentaQuest acquisition).

Impact: MIXED

Asset management underlying earnings were up 23% y/y, reflecting strong market performance, seed capital gains on real-estate, strong net flows in alternative asset management, and positive operating-leverage. MFS, however, reported net outflows of US$2.2bln (forecast: +$500mm), reflecting material managed fund outflows and modest mutual fund inflows.
Total company insurance sales were down 8% y/y (Asia/U.S. particularly). Asian insurance sales were down 19% y/y, driven by weaker H.K. & international sales, reflecting COVID-19-related lockdowns. Our estimates reflect another quarter of weak Asian sales momentum, with a recovery in 2022. U.S. group sales were also surprisingly soft.
U.S. and Asia underlying earnings were hurt by weak P/H experience. Experience losses of $59mm this quarter were weaker than our forecast of a $45mm gain, reflecting weak morbidity (Canadian/U.S. group benefits), mortality (U.S. and Asia) and expense experience. Yield-enhancement gains were also materially lower than forecast, while credit experience remains very strong. We have lowered our experience gain forecast. The assumption review (including the URR charge) resulted in a $95mm gain.
LICAT was down 1-point q/q and the leverage ratio was down 250bps, reflecting the retirement of $700mm of leverage. The holding-company LICAT remained strong at 143%. SLF remains very well-capitalized.

TD Investment Conclusion

The premium valuation that we assign to SLF in setting our target price reflects: 1) lower interest-rate sensitivity (e.g., MFS and Group businesses); 2) industry-leading, very solid capital levels; 3) strong track-record of earnings stability; and 4) two of the company’s more important growth drivers — Asia and the U.S. Group Insurance — support strong growth and higher ROEs. The rationale for favouring MFC over SLF remains relative valuation. We continue to rate SLF BUY.