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Sun Life Financial president and CEO Dean ConnorMARK BLINCH/Reuters

Sun Life Financial Inc. reported fourth-quarter profit of $395-million, up from a steep loss of $525-million a year earlier, as the company reduced its risk profile and posted solid gains from investment activity.

The company's profits amounted to basic earnings per share of 66 cents, which exceeded analyst expectations of roughly 42 cents per share.

Sun Life chief executive officer Dean Connor called the year "transformational" in the release accompanying the earnings report. "We significantly reduced our risk profile and made important strides in implementing our four-pillar growth strategy," he said.

For the full year, Sun Life posted earnings of $1.5-billion, a big turnaround from the $370-million loss it posted in 2011.

December marked the first anniversary that Mr. Connor has been with the company – he took over in 2011 after Don Stewart retired.

At that time, Sun Life was struggling under the pressure of a shaky global economic picture and low interest rates – conditions that still weigh on Canada's insurers today. At Sun Life's investor day in March last year, Mr. Connor committed to boost the company's profits to about $2-billion per year by 2015.

The year brought a few changes for Sun Life, most notably selling its U.S. annuity and life insurance operations to Guggenheim Partners in December of 2012. Analysts generally agreed that the $1.35-billion deal improved the company's risk profile as well as freeing up capital.

The insurer put some of that capital to work in January, when it entered is seventh Asian marketplace through a joint-partnership purchase of a Malaysian insurance business, CIMB Aviva Assurance Bhd.

Canadian Life insurers have exhibited strong stock performance through 2012, up an average of 26 per cent over the year. Sun Life has contributed to that, with its stock rising 35 per cent over the course of 2012. These figures also beat both the S&P/TSX index, as well as U.S. life insurers.

Sun Life is the third of the large Canadian life insurers to report earnings. On Feb. 7, Manulife Financial Corp. swung back to profitability with earnings of $1.1-billion in the fourth quarter. Great-West Lifeco Inc. also reported that day, with a profit that fell to $353-million, in part because of money set aside for litigation.

Sun Life's Canadian operations earned $143-million for the quarter, up from $38-million a year ago, due in part to gains made through some investment activity on insurance contracts, although the interest rate environment continues to be a drag on profits.

The U.S. business posted a $202-million gain, which was a big boost from the $601-million loss it sustained in the same quarter of 2011, while the Asian operations hit a net income of $50-million, up from just $38-million one year ago.

Sun Life's Boston-based money manager, MFS Investment Management, earned $46-million in the fourth quarter, up from $31-million a year ago. Mr. Connor noted in the release that MFS recorded the strongest net inflows in the firm's history. By the end of 2012, it recorded its highest ever assets under management of nearly $325-billion (U.S.).