Sun Life Earnings: Higher Asset Valuations and Favorable Underwriting Resulted in Strong Profits

No-moat-rated Sun Life Financials’ profitability continued to remain strong on the back of buoyant asset valuations and favorable underwriting experience. The company reported underlying net income of CAD 1.016 billion or CAD 1.76 per share in the third quarter, up 11% versus CAD 930 million or CAD 1.59 per share in the third quarter of the previous year. The third-quarter results equated to an annualized underlying return on equity of 17.9%, which is in line with management’s medium-term guidance of 18%. The company paid a quarterly dividend of CAD 0.81 per share in the third quarter, which represents a 4.0% dividend yield as per the current stock price. We are maintaining our CAD 66 fair value estimate for Sun Life after incorporating the third-quarter results and believe that the shares are slightly overvalued.