Sun Life Financial (SLF) Q1 Earnings Decline, Dividend Raised

Sun Life Financial Inc.’s (TO:SLF) first-quarter 2017 underlying net income of $423 million (C$573 million) declined 1.5% year over year.

Sun Life’s Canadian and Asia operations delivered improved results. However, the U.S. business remained soft. MFS too experienced net outflows. The company also witnessed favorable mortality experience in SLF Canada and SLF U.K. as well as gains from investing activities on insurance contract liabilities. However, unfavorable mortality experience in SLF U.S. weighed on the upside.

In the quarter, Sun Life witnessed strong revenue growth with insurance sales increasing 58% and wealth sales rising 13%.

Total premiums and deposits were $31.9 billion (C$42.3 billion), up 11.8% year over year.

Adjusted revenues came in at $5.5 billion (C$7.3 billion), up 7.7% year over year. Higher premiums and fee income in SLF U.S. and SLF Asia drove the upside.

Segment Results

SLF Canada’s underlying net income increased 5% year over year to $173 million (C$229 million). The company recorded positive mortality experience in individual wealth business and GRS alongside investment activity on insurance contract liabilities. Higher expenses, including investment in wealth businesses, partially offset the improvement.

SLF U.S. underlying net income was $77 million, down 30.6% from the year-ago quarter. The company recorded unfavorable mortality experience in In-force Management and Group Benefits, unfavorable policyholder behavior in International and In-force Management. However, favorable morbidity experience in disability and dental limited the downside.

SLF Asset Management’s underlying operating net income of $132.8 million (C$176 million) increased 7.3% year over year.

SLF Asia reported underlying income of $59.7 million (C$79 million), up 16.2% year over year. Business growth, partially offset by unfavorable impact of foreign exchange, favored the quarterly performance.

Financial Update

Global assets under management was $695.6 billion (C$927 billion), up 2.6% from the 2016-end level.

Sun Life Assurance's Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio was 249% as of Mar 31, 2017 compared with 226% as of Dec 31, 2016.

Sun Life Financial reported operating return on equity of 11% in the first quarter of 2017 as against 11.5% in the prior-year quarter. Underlying ROE of 11.5% deteriorated from 12.4% in the year-ago quarter.

Dividend Update

The board of directors of Sun Life Financial approved dividend of 43.5 cents per share. This represents a 4% increase over the prior payout. The dividend will be paid on Jun 30, to shareholders on record as of May 31, 2017.

Zacks Rank

Sun Life carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of other Insurers

Among the other players that have reported first-quarter earnings so far, Chubb Limited (NYSE:CB) beat the Zacks Consensus Estimate but RLI Corp. (NYSE:RLI) and The Progressive Corporation (NYSE:PGR) missed expectations.

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