We are initiating coverage on the shares of
Sun Life Financial Inc.
) with a Neutral recommendation.
Sun Life is a leading Canadian life insurance company, with an
active presence in the U.S. Over the long term we believe the
company will be able to generate superior returns for its
investors given a proactive approach to managing and mitigating
Sun Life is seeking to grow internationally. It is specifically
focusing on the emerging economies of Asia, which is expected to
provide higher return and growth compared to the North American
The company is also making business mix changes in its U.S.
segment to reduce the equity market exposure and limit its
interest rate exposure.
At the same time, Sun Life is aggressively seeking to grow its
Global Asset Management Business, which has been witnessing
growing asset base for the past many quarters. This business
provides higher ROE, lower capital, and lower volatility. It has
the potential to provide earnings upside.
Along with doing away with high equity/interest rate risk
products, Sun Life has implemented hedging to reduce earnings and
capital sensitivity to interest rates and equity markets. The
company stands better than its peers in terms of managing hedging
Nevertheless the historically low interest rate environment will
continue to have a significant negative impact on the company's
operations. The company's leverage ratio has also increased
due to requirement of additional regulatory capital.
Sun Life is expected to release fourth quarter and full year 2012
results on February 4, 2013. The Zacks Consensus Estimates fourth
quarter earnings of 55 cents, compared to an operating loss
of 38 cents per share in the year ago quarter. For the full
year 2012 earning of $2.47 is expected, compared to an operating
earning of 18 cents for full year 2011.
Sun Life retains a Zacks Rank #3 (Hold). Peers carrying a
Neutral recommendation are
Manulife Financial Corp.
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SUN LIFE FINL (SLF): Free Stock Analysis
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