Sun Life Earnings Fall Most Since ’17 as Virus Pares Investments

(Bloomberg) -- Sun Life Financial Inc. saw its biggest drop in net income since 2017 as the coronavirus pandemic pared investments at the Canadian life insurer.

  • The country’s life-insurance companies are expected by analysts to see a drag on profitability from record-low bond yields, weaker investment returns and higher claims from the outbreak. Chief Executive Officer Dean Connor cited “market declines, brought on by the Covid-19 pandemic” as the reason behind the 37% drop in first-quarter earnings.

Key Insights

  • The market upheaval from the pandemic wiped out more than $20 trillion in stock-market value globally from February’s peak to a low in March. Sun Life’s asset-management division had C$702.9 billion ($500.3 billion) in assets under management, an 8.6% decline from the fourth quarter, though up from C$698.4 billion a year earlier.
  • Asia has been one of the key areas of growth for Sun Life under Connor, and even with the coronavirus it had higher insurance and wealth sales in areas including Hong Kong and the Philippines. Underlying profit from Asia rose 27% to C$155 million from a year earlier, making it Sun Life’s best-performing division on an underlying basis.
  • Sun Life’s U.S. operations may face challenges from an increase in U.S. unemployment, though the division has been a recent “standout” with strength in its stop-loss and group benefits businesses, Cormark Securities analyst Meny Grauman said in an April 20 note. Underlying earnings from the U.S. division rose 7% to C$161 million from from a year earlier.
  • The Canadian division is Sun Life’s largest business, accounting for a third of overall profit last year. Underling net income in the domestic division rose 8% to C$256 million.

Market Reaction

  • Sun Life’s stock has fallen 24% this year, compared with the 23% decline of the S&P/TSX Composite Financials Index.

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  • Underlying earnings in the first quarter rose 7.4% to C$770 million, or C$1.31 a share, beating the C$1.11 average estimate of 14 analysts in a Bloomberg survey.
  • Net income totaled C$391 million, or 67 cents a share, down from C$623 million, or C$1.04, a year earlier.
  • Read more about Sun Life’s quarterly results here.

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