Sun Life Financial Inc. (SLF) is a diversified financial services company, headquartered in Toronto, Canada. It is the third largest insurer in Canada. The company provides insurance, wealth and asset management solutions to individuals and corporate clients worldwide. Some of its products include:
- Term and permanent life, health, dental, critical illness, long-term care, and disability insurance
- Investment counselling and portfolio management
- Mutual funds and segregated funds
- Trust and banking services
- Real estate property brokerage and appraisal services
- Merchant banking services
And the company is well-diversified geographically, also.
Please insert pie charts from p 8 of the attached presentation:
Sun Life is a survivor. In 2021, the company will celebrate 150 years in business, evolving through many market, industry, and economic cycles. And in the past year, Sun Life—like the rest of us—is emerging from a year of challenges due to COVID-19.
And while the coronavirus rattled most industries, Sun Life—as evidenced by its first quarter—not only survived, but prospered!
For the quarter ending in March, the company’s net income came in at $937 million, heartily trampling the $391 million Sun Life earned in the same quarter last year. EPS was $1.45, compared to $1.31 in the first quarter of 2020.
Underlying net income (net income minus recurring or exceptional costs) of $671.1 million (C$850 million) was up 16.9% year over year, due to favorable morbidity experience in the United States and favorable credit experience in Canada.
Rising sales in Asia limited the small decline in Insurance sales in Canada, while total Wealth sales rose 16.3% year over year to $52 billion (C$65.9 billion), as a result of growing revenues in Asia.
Asia is a burgeoning market for Sun Life:
- Philippines: Ranked 1st in insurance sales; the #1 largest mutual fund provider based on AUM
- Indonesia: 9th in insurance sales; overall market share of 3%
- Vietnam: 6th in insurance, supported by newly launched partnership with Asia Commercial Bank
- China: 8th in insurance among foreign JVs, increase of 30% versus Q1 2020
- India: 7th in individual insurance, with an overall market share of 5%, 4th largest mutual fund provider in the country based on AUM
- Malaysia: 7th in insurance sales, 3rd in bancassurance, with a bancassurance market share of 12%
Source: Sun Life Financial Q1 Investor Presentation
In Canada, Sun Life’s underlying net income increased 18% year over year to $225 million (C$285 million), and in the U.S., was up 12.5%, to $135 million (C$171 million).
The company’s Assets under Management, currently U.S. $1.03 billion (C$1.30 billion) grew exponentially, by 41.6%, and produced underlying net income of $229.8 million (C$291 million), up 28% year over year.
That’s a pretty impressive picture! And the future looks bright, too. Seven analysts have increased their earnings estimates for Sun Life in the past 30 days.
But the company’s challenges are not over. The low interest rate environment produces rate risk in the insurance segment, and competitive pressures in the investment division.
As well, insurance is a traditionally paper-pushing industry and it’s being brought kicking and screaming into the tech-driven world of today—primarily due to the COVID challenges of 2020. For the first time, we are seeing widespread adoption of electronic applications, e-signatures, and electronic policy delivery. While the initial expenses for conversion may add up, the end result will keep costs down, grow premiums (due to the ease of getting insurance) and drive more money to earnings.
Further down the road, more complex technologies like artificial intelligence, robotic process automation, cognitive intelligence and blockchain should help insurers expand their margins—again, dropping more money to the bottom line.
Sun Life pays an annual dividend of $2.20 per share, for a yield of 3.42%, which is a nice addition to the expected share price appreciation.
Institutional holdings are around 55%, but recent purchases have outpaced sales by more than 10 million shares. The top five institutional holders are:
- Royal Bank of Canada, 8.06% of shares
- Vanguard Group, Inc. (The), 3.06% 1
- Price (T.Rowe) Associates Inc, 2.97%
- FIL LTD, 2.74%
- Bank of Montreal/Can/, 2.46%
At this level, shares of Sun Life look attractive. The shares appear undervalued, trading at a price-earnings ratio of 12.9. The average P/E for the financial services sector is currently 14.4.
|Sun Life Financial Inc. (SLF)
52-Week Low/High: $ 10.15 – 13.03
Shares Outstanding: 585.5 million
Institutionally Owned: 55.41%
Market Capitalization: $31.592 billion
Dividend yield: 3.44%, paid quarterly
|Why Sun Life:
Rising Assets under Management
Expanding rapidly in Asia
by Kate Stalter
Sun Life Financial (SLF)
Shares of Sun Life Financial have marched steadily higher since beginning their rebound out of the 2020 correction in April of last year. It’s pulled back into consolidations along the way and is currently trading between 53 and 54, down 3% from its May 10 high of 55.07.
Shares are up 21.71% year-to-date and 65.91% over the past year.
Its corrections over the past year have been fairly orderly, with no unusually sharp downturns. That’s in keeping with the broader character of the market.
Sun Life is currently trading below its 10-day moving average and above its 50-day line. If that level of support continues, the stock remains in a buy zone. It’s successfully tested its 50-day average throughout 2021 as it rallied to its high in early May.
Stop Loss: $45.00