Key Morningstar Metrics for Sun Life Financial
- Fair Value Estimate: C$66.00
- Morningstar Rating: ★★
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: Medium
What We Thought of Sun Life Financial’s Earnings
Sun Life Financial SLF reported lackluster numbers in the fourth quarter, as underlying net income came at C$0.97 billion or $C1.68 per share during the quarter—flat compared with the previous year. The firm reported an adjusted return on equity of 16.5%.
Why it matters: The company’s asset management arm reported strong capital raising and impressive growth on buoyant asset valuations, but the US business had subdued profitability.
- Overall, assets under management grew by around 10% during the fourth quarter compared with the previous year’s C$1.54 trillion. Profitability in the wealth and asset management business was around 11% higher on a year-over-year basis due to higher fee income.
- The US business reported underlying profits of C$161 million during the quarter compared with an average of C$216 million in the past four quarters. The decline can be attributed to unfavorable morbidity experiences in the medical stop-loss business, driven by claims severity.
The bottom line: We are maintaining our fair value estimate of C$66 per share and continue to believe that the stock is slightly overvalued.
- Higher interest rates have been a tailwind for the company in the past few quarters, resulting in higher investment earnings. Lower rates would be a net negative.
- Any significant correction in capital markets would also substantially impact the company, given its high exposure to the asset and wealth management business.
Key stats: The company reported an impairment charge of C$186 million on intangible assets related to bancassurance in Vietnam due to changes in regulatory and macroeconomic factors in the country.
- Sun Life paid a quarterly dividend of C$0.84 per share in the fourth quarter, up 3.7% sequentially, representing a 4.4% dividend yield, per the current stock price.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.