Why Is Sun Life (SLF) Up 5.6% Since Last Earnings Report?

A month has gone by since the last earnings report for Sun Life (SLF). Shares have added about 5.6% 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 Financial Q1 Earnings Decrease Year Over Year

Sun Life Financial Inc. delivered first-quarter 2022 net income of $858 million, which decreased 8.4% year over year.

The underlying net income of $665.4 million (C$843 million) was down 0.8% year over year. The downside was due to unfavorable mortality and disability, which included impacts from COVID-19 and lower available-for-sale (AFS) gains. It was offset by broad-based business growth, higher investment gains and lower corporate expenses.

Insurance sales increased 9.4% year over year to $630.7 million (C$799 million), attributable to increased sales in Canada, driven by large case group benefits sales in Sun Life Health.

Wealth sales and asset management gross flow decreased 12.1% year over year to $45.7 billion (C$57.9 billion) in the quarter under review due to lower sales in asset management. It was offset by higher sales in Asia and Canada.The value of new business declined 7.2% to $203.6 million (C$258 million).

Segment Results

SLF Canada’s underlying net income increased 4.5% year over year to $235.2 million (C$298 million), driven by business growth and new business gains.
SLF U.S.’ underlying net income was $93.1 million (C$118 million), down 31% from the prior-year quarter due to mortality and morbidity. It was partially offset by business growth.

SLF Asset Management’s underlying net income of $257.3 million (C$326 million) increased 12% year over year, driven by higher results in MFS and SLC Management.

SLF Asia reported an underlying net income of $120 million (C$152 million), which decreased 4.4% year over year due to a new business strain in Hong Kong, largely due to lower sales as a result of COVID-19 restrictions. It was partially offset by experience-related items.

Financial Update

Global assets under management were $1083.2 billion (C$1,352 billion), up 4.7% year over year.  Sun Life Assurance’s Minimum Continuing Capital and Surplus Requirements (LICAT) ratio was 123% as of Mar 31, 2022, down 100 basis points year over year.

The LICAT ratio for Sun Life (including cash and other liquid assets) was 143%, up 200 basis points (bps) year over year. Sun Life’s return on equity was 14.3% in the first quarter, contracting 260 bps year over year. Underlying ROE of 14% contracted 130 basis points year over year. The leverage ratio of 25.9% deteriorated 320 bps year over year.

Dividend Update

On May 11, Sun Life’s board of directors approved a 4.5% increase in the quarterly dividend to 69 cents per share.

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 a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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. It's no surprise Sun Life has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Sun Life is part of the Zacks Insurance - Life Insurance industry. Over the past month, American Equity Investment (AEL), a stock from the same industry, has gained 20.6%. The company reported its results for the quarter ended March 2022 more than a month ago.

American Equity reported revenues of $567.42 million in the last reported quarter, representing a year-over-year change of +14.1%. EPS of $0.92 for the same period compares with $0.43 a year ago.

For the current quarter, American Equity is expected to post earnings of $0.93 per share, indicating a change of -5.1% from the year-ago quarter. The Zacks Consensus Estimate has changed -9.1% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for American Equity. Also, the stock has a VGM Score of B.

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