Sun Life Financial (SLF) Q2 Earnings Beat Estimates, Fall Y/Y

Sun Life Financial Inc. SLF delivered second-quarter 2022 underlying net income of $1.19 per share, beating the Zacks Consensus Estimate by 10.2%. The bottom line decreased 2.4% year over year.

The underlying net income of $837.3 million (C$892 million) was up 16.5% year over year. This improvement was driven by business growth, new business gains, contribution from the DentaQuest acquisition and lower incentive compensation expenses.

Insurance sales increased 19.5% year over year to $690.8 million (C$736 million), driven by increased sales in Canada and United States.

Wealth sales increased 20% year over year to $53.8 billion (C$57.4 billion) in the quarter under review.

Value of new business improved 10% to $254.4 million (C$271 million).

Sun Life Financial Inc. Price, Consensus and EPS Surprise

Sun Life Financial Inc. Price, Consensus and EPS Surprise

Sun Life Financial Inc. price-consensus-eps-surprise-chart | Sun Life Financial Inc. Quote

Segment Results

SLF Canada’s underlying net income increased 36.8% year over year to $322.9 million (C$344 million), driven by business growth, higher new business gains and experience-related items.

SLF U.S.’ underlying net income was $144.5 million (C$154 million), up 7.8% from the prior-year quarter.

SLF Asset Management’s underlying net income of $253 million (C$270 million) was flat year over year.

SLF Asia reported an underlying net income of $138.92 million (C$148 million), which rose 12.3% year over year.

Financial Update

Global assets under management were $979.25 billion (C$1,261 billion), up 12.3% year over year.

Sun Life Assurance’s Minimum Continuing Capital and Surplus Requirements (LICAT) ratio was 124% as of Jun 30, 2022, down 100 basis points year over year.

The LICAT ratio for Sun Life (including cash and other liquid assets) was 128%, down basis points year over year.

Sun Life’s return on equity was 13.1% in the second quarter, down 320 basis points year over year. The underlying ROE of 14.9% contracted 110 basis points year over year.

The leverage ratio of 25.7% deteriorated 100 basis points year over year.

Dividend Update

On Aug 3, the company’s board of directors approved a dividend of 69 cents per share. The amount will be paid out on Sep 29, 2022 to shareholders of record at the close of business on Aug 24.

Zacks Rank

Sun Life currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Some Other Insurers

Of the insurance industry players that have reported second-quarter results so far, The Hartford Financial Services Group, Inc. HIG, NMI Holdings NMIH and American Financial Group, Inc. AFG beat the respective Zacks Consensus Estimate for earnings.

The Hartford Financial Services Group reported second-quarter 2022 adjusted operating earnings of $2.15 per share, which beat the Zacks Consensus Estimate by 41.5%. The bottom line, however, decreased 8% year over year.

Hartford Financial’s operating revenues amounted to $3,765 million, which improved from $3,568 million in the second quarter of 2022. Also, the top line beat the consensus mark by 1.5%. The total earned premium of $4,810 million beat the consensus mark of $4,776.3 million and increased from $4,460 million a year ago. Net investment income of $541 million declined from $581 million a year ago due to lower annualized return on alternative investments. The reported figure was below the Zacks Consensus Estimate of $564.5 million.

NMI Holdings reported second-quarter 2022 operating net income per share of 86 cents, which beat the Zacks Consensus Estimate by 11.7%. The bottom line increased 28.4% year over year.

NMI Holdings’ total operating revenues of $132.2 million increased 9.5% year over year on higher net premiums earned (up 9%) and net investment income (up 16.4%). Revenues beat the Zacks Consensus Estimate by 1.3%.

Primary insurance-in-force increased 23% to $168.6 billion. Annual persistency was 71.5%, up 1760 basis points year over year. New insurance written was $16.6 billion, down 27% year over year, reflecting a decline in refinancing origination volume year on year.

American Financial Group reported second-quarter 2022 net operating earnings per share of $2.85, which surpassed the Zacks Consensus Estimate by 27.2%. The bottom line improved 19% year over year. Total revenues of $1.6 billion increased 11.1% year over year in the quarter. The growth came on the back of higher P&C insurance net earned premiums, net investment income and other income. The top line missed the Zacks Consensus Estimate by 3.9%.

Net investment income climbed 2.4% year over year to $168 million in the quarter under review driven by strong earnings from alternative investments, with an annualized return of approximately 12.4%. The figure was lower than our estimate of $237.8 million and missed the Zacks Consensus Estimate of 174.26 million.

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