Sun Life Reverses Prior-Year Loss

The Canadian life insurer Sun Life Financial Inc. (SLF) announced operating earnings $457.1 million (C$453 million), compared to an operating loss of $216 million (C$221 million) in the fourth quarter of 2011.

Adjusted revenue was $5.7 billion (C$5.6 billion), compared to $4.6 billion (C $4.7 billion) in the year ago quarter. The increase in revenue came on the back of higher premium revenue from SLF Group Retirement Services in Canada and SLF Life and Investment Products businesses in the U.S., higher investment income and increased fee income from Mutual Fund Segment (:MFS).

Total benefits and expenses was $ 3.9 billion (C$3.9 billion) down from $5.4 billion (C$5.5 billion) in the year ago quarter.

Full Year Highlights

The company reported operating earnings of $1.6 billion (C$1.6 billion), compared to loss of $361 million (C$370 million) in 2011.

Adjusted revenue of $19.5 billion (C$19.5 billion) was up from $ 18.7 billion (C$19.1 billion) in full year 2011. The increase was driven by higher fee income from MFS and favorable impact from currency movements.

Segment Results

During the quarter SLF Canada reported operating income of $149 million (C$149 million), down 18% year over year, led by favorable impact of investment activity on insurance contract liabilities in Individual Insurance & Investments and Group Retirement Services, and positive morbidity and mortality experience in Group Benefits.

SLF U.S. operating income during the quarter was $93 million (C$93 million), compared to an operating loss of $75 million (C$77 million) in the year ago quarter. Results were favorably impacted by the refinement of certain actuarial assumption updates from the prior quarter, partially offset by unfavorable morbidity experience in Employee Benefits Group as well as an investment in voluntary benefits capabilities.

MFS Investment Management reported operating net income of $85 million (C$85 million) compared to $66 million (C$68 million) in the year ago quarter.

SLF Asia reported operating income was $50 million (C$50 million), compared to $43 million (C$44 million) in the year ago quarter

Corporate segment reported operating net loss of (C$44 million), compared to an operating loss of $6.8 million (C$7 million) in the year ago quarter

The company reported operating return on equity of 12.9%, compared to a negative 6.5% in the year ago quarter.

Sun Life Assurance's MCCSR ratio was 209% as at Dec 31, 2012, compared to 211% as at Dec 31, 2011. The decline in capital ratio was due to low interest rates and volatile equity markets.

In an effort to shed its variable annuity exposure, during the fourth quarter the company entered into an agreement to sell off its U.S. annuities business. It also made agreement to sell certain of its U.S. life insurance businesses including all of the issued and outstanding shares of Sun Life Assurance Company of Canada.

Results reflect the company’s consistent effort towards its growth strategy. We expect favorable results from the company going forward.

Other players in the same field StanCorp Financial Group Inc. (SFG), Lincoln National Corporation (LNC), Protective Life Corp. (PL) all reported fourth quarter earnings ahead of the Zacks Consensus Estimate.