Sun Life Financial Inc. (SLF) announced impressive second-quarter 2024 results, exceeding analysts’ expectations with strong underlying net income growth. The company reported underlying net income of $1.25 per share, surpassing the Zacks Consensus Estimate by 5.9% and marking a 6.8% year-over-year increase. This positive performance was driven by continued solid growth in both Canada and Asia.
The company’s total underlying net income reached $730.8 million (C$1 billion), reflecting a 9% year-over-year increase. While the U.S. market showed favorable experience in Group Benefits, it also experienced residual headwinds in the dental segment. Sun Life’s total revenues for the quarter amounted to $6.5 billion, representing a 14.2% year-over-year increase, but falling slightly short of the Zacks Consensus Estimate by 3%.
Sun Life’s Wealth & Asset Management segment saw significant growth, with sales and asset management gross flows reaching $33.8 billion (C$46.3 billion), a 9.1% increase from the previous year. However, the Group – Health & Protection segment experienced a 17.7% year-over-year decline in sales, reaching $362.5 million (C$496 million). In contrast, the Individual – Protection segment witnessed a strong 24.7% jump in sales, reaching $550.3 million (C$753 million).
Sun Life’s new business contractual service margin (CSM) climbed 61.9% year-over-year to $319.4 million (C$437 million).
Regional Performance
In Canada, Sun Life’s underlying net income rose 8% year-over-year to $294 million (C$402 million). The region benefited from strong performance in both Wealth & Asset Management and Individual – Protection segments. Notably, Wealth sales and asset management gross flows soared 72% year-over-year to $3.6 billion (C$5 billion). However, while Group – Health & Protection sales increased, Individual – Protection sales declined.
The U.S. market saw a 5% decline in underlying net income to $149 million, attributed to lower results in both Individual – Protection and Group – Health & Protection segments. Group sales in the U.S. decreased by 22% to $243 million, mainly due to lower Medicare and Medicaid sales in Dental, stemming from large institutional sales in the previous year. This decline was partially offset by higher medical stop-loss sales.
Sun Life’s Asset Management segment reported a 4% increase in underlying net income to $224.3 million (C$307 million), driven by stable performance in MFS. At the end of the quarter, the company’s Asset Management segment managed $0.8 trillion (C$1.072 trillion) in assets under management (AUM), including $618 billion in MFS and $165.9 billion (C$227 billion) in SLC Management.
In Asia, Sun Life’s underlying net income grew by a strong 19% year-over-year to $130.8 million (C$179 million). This growth was fueled by robust performance in both Wealth & Asset Management and Individual – Protection segments. Individual sales surged 30% year-over-year to $428 million (C$586 million), while Wealth sales and asset management gross flows climbed 24% year-over-year to $1.5 billion (C$2 billion). New business CSM in Asia reached $160.8 million (C$220 million), reflecting an 86.4% increase year-over-year, primarily driven by strong sales in Hong Kong.
Financial Highlights
Sun Life’s global assets under management (AUM) increased by 7% year-over-year to $1.1 billion (C$1.465 trillion). As of June 30, 2024, Sun Life Assurance’s Life Insurance Capital Adequacy Test (LICAT) ratio stood at 142%, a 300 basis points (bps) improvement from the same period in 2023. The LICAT ratio for Sun Life (including cash and other liquid assets) reached 150%, expanding by 20 bps year-over-year.
Sun Life’s return on equity (ROE) in the second quarter of 2024 was 11.7%, contracting by 100 bps from the previous year. However, the underlying ROE expanded by 40 bps year-over-year to 18.1%. The company’s leverage ratio improved by 70 bps from the same period in 2023, reaching 22.61%.
Dividend Update
Sun Life’s board of directors approved a quarterly dividend of 81 cents per share, payable on September 27, 2024, to shareholders of record at the close of business on August 28.
Zacks Rank
Sun Life currently carries a Zacks Rank #4 (Sell).
