Sun Life Financial Inc. (TO:SLF) reported second-quarter 2016 operating net income of $368 million (C$474 million), down 35.2% year over year. Howeer, operating net earnings per share of 69 cents beat the Zacks Consensus Estimate by a penny.
Soft performance across all the segments led to the underperformance. Nonetheless, the quarter witnessed higher sales in both individual insurance and Group Benefits as the life insurer continued to expand its protection businesses.
Adjusted premium and deposits were $29.3 billion (C$38.0 billion), up nearly 7% year over year. The improvement came on the back of a favorable currency impact from the weakening Canadian dollar, increased fund sales and higher net premium revenue, partially offset by lower segregated fund deposits. Adjusted premium and deposits increased 1.1% year over year on increased fund sales and higher net premium revenue, partially offset by lower segregated fund deposits.
Adjusted revenues came in at $5.2 billion (C$6.8 billion), up 7.9% year over year on higher premiums and investment income.
Total company wealth sales were $415.2 million (C$538 million), up 26% year over year.
Total company life and health sales were $25.2 billion (C$32.7 billion), up 3.2% year over year.
Segment Results
SLF Canada reported operating net income of $147 million (C$191 million), down 42.3% year over year. The decline was attributable to weaker-than-expected performance across Individual Insurance & Wealth, Group Retirement Services and Group Retirement Services.
SLF U.S. operating net income of $50 million, down 54% year over year. The segment suffered due to softness at Group Benefits and In-force Management.
SLF Asset Management reported operating net income of $118.1 million (C$153 million), down 11.6% year over year.
SLF Asia reported operating income of $52.5 million (C$68 million), down 26.7% year over year.
Financial Update
Assets under management increased 7% year over year to $664.7 billion (C$864.6 billion) as of Jun 30, 2016.
Sun Life Assurance's Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio was 214% as of Jun 30, 2016 compared with 233% as of Jun 30, 2015.
Sun Life Financial’s operating return on equity of 10.1% compared unfavorably with 16.5% in the year-ago quarter. Underlying ROE of 11.9% deteriorated from 13.9% in the year-ago quarter.
Cash, cash equivalents and short-term securities as of Jun 30, 2016 were $4.8 billion (C$6.3 billion), up 13.7% year over year.
Dividend Update
The board of directors of Sun Life Financial approved a dividend of 40.5 cents per share to be paid on Sep 30 to shareholders as of Aug 1.
Zacks Rank
Sun Life carries a Zacks Rank #2 (Buy).
Performance of Other Life Insurers
Earnings at Torchmark Corp. (NYSE:TMK) , Reinsurance Group of America Inc. (NYSE:RGA) and Genworth Financial Inc. (NYSE:GNW) beat their Zacks Consensus Estimate in the second quarter.
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