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Why Is Sun Life (SLF) Down 0.6% Since Last Earnings Report?

·4 min read

A month has gone by since the last earnings report for Sun Life (SLF). Shares have lost about 0.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sun Life due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Sun Life Financial Q1 Earnings Increase Year Over Year

Sun Life Financial delivered first-quarter 2021 net income of $937 million, which grew more than two-fold year over year.

Underlying net income of $671.1 million (C$850 million) was up 16.9% year over year. This improvement was driven by business growth, favorable morbidity experience in the United States and favorable credit experience in Canada, partially offset by lower investing activity gains in both the countries.

Insurance sales decreased 0.4% year over year to $576.4 million (C$730 million), attributable to a drop in sales in Canada. However, increased sales in Asia limited the downside.

Wealth sales increased 16.3% year over year to $52 billion (C$65.9 billion) in the quarter under review driven by higher sales in Asia.

Value of new business declined 22.5% to $219.5 million (C$278 million).

Segment Results

SLF Canada’s underlying net income increased 18% year over year to $225 million (C$285 million) driven by favorable credit experience, business growth, gains on the initial public offering of Dialogue of $9 million and favorable mortality experience. These factors were partially offset by lower investing activity gains and unfavorable morbidity experience.

SLF U.S.’ underlying net income was $135 million (C$171 million), up 12.5% from the prior-year quarter driven by favorable morbidity experience in medical stop-loss and long-term disability. This was partially offset by lower investing activity, lower AFS gains and unfavorable mortality experience.

SLF Asset Management’s underlying net income of $229.8 million (C$291 million) increased 28% year over year, driven by higher average net assets (ANA) in MFS.

SLF Asia reported underlying net income of $125.5 million (C$159 million), which rose 8.6% year over year owing to business growth and new business gains, partially offset by unfavorable mortality experience, primarily in International Hubs.

Financial Update   

Global assets under management were 1034 billion (C$1,304 billion), up 41.6% year over year.

Sun Life Assurance’s Minimum Continuing Capital and Surplus Requirements (LICAT) ratio was 124% as Mar 31, 2021, down 300 basis points from 2020 end level.

The LICAT ratio for Sun Life (including cash and other liquid assets) was 141%, down 600 basis points (bps) from 2020-end level.

Sun Life’s return on equity was 16.9% in the first quarter, up 970 bps year over year. Underlying ROE of 15.3% expanded 110 basis points year over year.

Leverage ratio of 22.7% improved 80 bps from 2020-end level.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Sun Life has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision looks promising. Notably, Sun Life has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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