Currently have a $73.00 target. GLTA
SUN LIFE FINANCIAL INC
Q3 First Look: Core EPS In Line With Consensus
Our Take: Neutral. Core EPS came in line with consensus. Strong results in
Canada and Asia were offset by lower earnings in the U.S. segment.
Reported market-related impacts were a net positive versus our expectation
for a net negative, contributing to a reported EPS beat.
Overview of results: SLF reported underlying EPS of $1.59, higher than our
estimate of $1.55 and in line with consensus of $1.59. SLF increased its
dividend by 4%. Reported EPS came in at $1.48, higher than both our
estimate of $1.09 and consensus of $1.34. BVPS ended Q3 at $35.91, up
3% Q/Q and above consensus of $35.36. SLF’s LICAT ratio finished the
quarter at 147%, 1% below last quarter.
Sources of variance: The variance to our underlying EPS estimate is mostly
from better-than-forecast insurance experience and a lower tax rate (16% vs.
CIBCe 18%). Experience gains amounted to $81MM versus our assumption
of $40MM, with positive experience coming mostly from Canada (group
disability benefitted from higher margins and shorter claims duration).
Market-related impacts better than expected: Market-related impacts were
positive $23MM (after-tax) versus negative $361MM in Q3/22 and our
estimate of negative $230MM. Real estate returns were negative $83MM, but
that was more than offset by interest rate impacts of positive $127MM.
Canada segment delivers a strong result: Underlying earnings were up
15% Y/Y, driven by growth in short-term insurance profits, favourable
experience and higher expected investment earnings. Individual insurance
sales were up 24% Y/Y and group sales were +4% Y/Y.
U.S. segment profitability shows normalization: Underlying earnings of
US$140MM are down from US$160MM last quarter and US$173MM in
Q3/22. Insurance experience contributed only US$2MM, versus an average
of US$45MM over the last four quarters. The LTM after-tax profit margin was
9.9% versus 10.2% last quarter. SLF also cited the negative impact of
Medicaid redeterminations.
Asia produces another solid quarter: SLF Asia posted underlying earnings
of $166MM, up 8% Y/Y. Growth was driven by good sales momentum,
favourable mortality from lower claims volume, offset by higher expenses.
APE sales increased 60% Y/Y, driven predominantly by higher sales in Hong
Kong (increased roughly 4x Y/Y).
SLC supports a good quarter for Asset Management: Underlying
earnings came in at $330MM, up 11% Y/Y. MFS earnings were down 1%
Y/Y, while SLC earnings more than doubled ($53MM vs. $25MM). MFS’s
pre-tax net operating profit margin was 41%, in line with Q3/22. MFS net
outflows were US$9.3B, worse than $4B last quarter.
Conference Call: Tuesday, November 14 at 10:00 a.m. ET