Toronto-based Sun Life Financial Inc. reported a stronger second-quarter profit on higher sales, changes to insurance product pricing and a boost from rising interest rates.
The company reported profit on continuing operations of $391-million after the market closed Thursday, which compared with $244-million in the same period last year.
Operating net income, which strips out interest-rate fluctuations and other market-related factors that create volatility in earnings, rose to $431-million, compared with $250-million in the second quarter of last year. Operating earnings per share were up to 74 cents a share, which exceeded analysts’ estimates of 66 cents.
Sun Life’s chief executive Dean Connor said the company “benefited from favourable market conditions” in the quarter. Wealth sales and insurance sales each recorded increases of 32 per cent, and assets under management grew almost $58-billion to over $590-billion, he said.
The insurer also updated investors on some expectations, lowering its profit target to $1.85-billion by the year 2015 as a result of the sale of its U.S. annuities business. Mr. Connor said in March of last year that the company would target $2-billion in annual profits by 2015. Changes to the company’s business, including the $1.35-billion sale of its individual life insurance and variable-rate annuities businesses, prompted the company to change the profit goal.
Still, modest increases in interest rates have reduced headwinds for the company. Sun Life cut by $100-million its expectations for a reduction in net income from continuing operations through 2015. The insurer now expects a $200-million reduction because of the prolonged period of low interest rates. But conditions appear to be improving - the benchmark 10-year U.S. Treasury rate has increased from a low of 1.6 per cent in early May to 2.6 per cent Wednesday.
At this time last year, Sun Life and the rest of the Canadian Insurers were struggling to maintain profitability amid lower stock markets and depressed interest rates. Now that the deal for the U.S. annuities business has closed, Sun Life is more clearly able to project its growth and has lowered its equity market risks.
“Our U.S. operations are now focused on our successful employee benefits business and our voluntary benefits business, which have achieved substantial growth during the past two years,” Mr. Connor said.
Sun Life’s other big highlight south of the border pertained to its money manager, MFS Investment Management, which now has $354-billion in assets under management. Net sales of the Boston-based firm came in at $5.9-billion.
In Sun Life’s core Canadian Market, individual insurance sales grew by 14 per cent over last year.
In Sun Life’s Asian operations, sales of insurance products in the Philippines, Hong Kong and Indonesia bolstered profits. But not all of the region performed well. Lower sales in India weighed on the results.
Sun Life’s stock has risen 50 per cent in the last year, although the stock closed down at $32.99 on Wednesday.
Manulife Financial Corp. will report its second-quarter results Thursday morning before markets open and analysts are expecting it to post 32 cents a share in adjusted profit.
Editor's Note: An earlier online version of this article incorrectly said MFS Investment Management had $591-billion in assets under management. That amount is $354-billion.