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Sun Life Financial (SLF) Gains 25% YTD: More Room for Upside?

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  • SLF
  • AFL
  • AEL-PB

Shares of Sun Life Financial Inc. SLF have rallied 25.1% year to date compared with the industry’s increase of 5.5% as well as the Finance sector’s rise of 22%. With a market capitalization of about $32.7 billion, the average volume of shares traded in the last three months was 0.7 million.

Focus on Asia operation, growing asset management businesses and strong financial position continue to drive Sun Life. It has a solid track of beating earnings estimates in the last nine quarters, the average surprise being 11.85%.

Zacks Investment Research
Zacks Investment Research

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Return on equity in the trailing 12 months was 14.1%, better than the industry average of 11.4%, reflecting the company’s efficiency in utilizing shareholders’ fund. Sun Life targets medium-term ROE 12% to 14%.

The Zacks Consensus Estimate for Sun Life’s 2021 and 2022 earnings has moved up 1.5% and 1.6%, respectively, in the past 30 days, reflecting analysts’ optimism.

Can it Retain the Momentum?

The Zacks Consensus Estimate for 2021 and 2022 indicates a year-over-year improvement of 15.4% and 9.1%, respectively. The expected long-term earnings growth rate is pegged at 9% while Sun Life targets bottom-line growth of 8-10% per annum over the medium term.

In its effort to continually expand in Asia, Sun Life has been strengthening its presence in China, Philippines, India, Hong Kong, Indonesia, Malaysia and Vietnam. The Asian market provides higher return and growth than the North American markets.

Sun Life Investment Management’s continued efforts to accelerate investment capabilities in private fixed income, mortgages and real estate by investing in pension plans and institutional investors ensures expansion of Wealth and Asset Management business.

This Zacks Rank #2 (Buy) life insurer has an impressive inorganic growth story. While the acquisition of Pinnacle Care in July 2021 was intended to consolidate Sun Life's U.S. Stop-Loss & Health business, the pending buyout of DentaQuest is likely to boost health and group benefits in the United States. This largest independent provider of medical stop-loss insurance in the United States is shifting its growth focus toward products that park lower capital and offer more predictable earnings, such as mutual funds and group benefits. The company is also growing its voluntary benefits business and targeting a place among the top five players.

Sun Life is looking to make an investment in the private credit domain, which ensures a greater yield, thus creating an opportunity to generate higher income. The buyout of the majority stake in Crescent Capital Group in January 2021 is in tandem with the strategy.

Sun Life boasts a strong capital position. It targets a leverage ratio of 25% over the long term and a 30-40% dividend payout over the medium term.

Other Stocks to Consider

Some other top-ranked stocks from the insurance space include American Equity Investment Life Holding AEL, Athene Holding ATH and Aflac AFL.

American Equity carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2021 and 2022 has moved up 3.9% and 5.1% in the past seven days. American Equity delivered a four-quarter average earnings surprise of 31.49%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for 2021 earnings of Athene, carrying a Zacks Rank #2, has moved up 9.9% in the past 30 days and implies 123.7% year-over-year growth. Athene delivered a four-quarter average earnings surprise of 46.12%.

Aflac carries a Zacks Rank #2. The Zacks Consensus Estimate for 2021 and 2022 has moved up 5% and 1.3% in the past 30 days. Sun Life delivered a four-quarter average earnings surprise of 18.32%.

Shares of American Equity, Athene and Aflac have gained 17.7%, 15% and 22.4%, respectively year to date.



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Aflac Incorporated (AFL) : Free Stock Analysis Report

American Equity Investment Life Holding Company (AEL) : Free Stock Analysis Report

Sun Life Financial Inc. (SLF) : Free Stock Analysis Report

Athene Holding Ltd. (ATH) : Free Stock Analysis Report

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