It has been about a month since the last earnings report for Sun Life (SLF). Shares have added about 7.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Sun Life due for a pullback? 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 drivers.
Sun Life Q4 Earnings Rise on Strong Business Growth
Sun Life delivered fourth-quarter 2018 underlying net income of $543.3 million (C$718 million), up 34.5% year over year. This improvement was fueled by strong segmental performances.
Insurance sales increased 14.1% year over year to $994.2 million (C$1.3 billion). Wealth sales dipped 1.4% year over year to $27.4 billion (C$36.2 billion) in the quarter under review.
Premiums and deposits were $31.4 billion (C$41.5 billion), down 2.5% year over year.
Net premiums increased 28.1% year over year to $4.1 billion (C$5.3 billion).
Segment Results
SLF Canada’s underlying net income inched up 1.3% year over year to $185.4 million (C$245 million) owing to a favorable expense experience, resulting from the ongoing expense management along with reduction in incentive compensation costs and policy administration updates. However, weak investment results partially offset this upside. Insurance sales deteriorated due to lower individual insurance sales, partially offset by a modest increase in Group Benefits sales. Wealth sales improved on the back of large case Defined Benefit Solutions (DBS) sales in Group Retirement Services (GRS) during 2018.
SLF U.S.’s underlying net income was $121 million, up 27.4% from the prior-year quarter owing to a favorable currency impact from the change in the Canadian dollar.
SLF Asset Management’s underlying net income of $227 million inched up 0.4% year over year.
SLF Asia reported an underlying net income of $105.9 million (C$140 million), which soared 68.1% year over year.
Financial Update
Global assets under management were $719.7 billion (C$951.1 billion), down 7.4% year over year.
Sun Life Assurance’s Minimum Continuing Capital and Surplus Requirements (LICAT) ratio was 131% as of Dec 31, 2018, having expanded 100 bps from the level as of Sep 30, 2018. While the LICAT ratio for Sun Life (including cash and other liquid assets) was 144%, down 100 bps from the level on Sep 30, 2018.
Sun Life’s return on equity of 5.5% in the fourth quarter contracted 350 basis points year over year. Underlying ROE of 14.1% grew 190 basis points year over year.
Leverage ratio of 21.2% at fourth-quarter end improved 240 basis points year over year.
Dividend Update
On Feb 13, 2019, the company’s board of directors approved a dividend of 50 cents per share for first-quarter 2019. The amount is payable Mar 29, 2019 to shareholders of record at the close of business on Mar 1, 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Sun Life has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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 B. 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 these revisions indicates a downward shift. Notably, Sun Life has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Sun Life Financial Inc. (SLF): Free Stock Analysis Report
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