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Sun Life (SLF) Divests UK Unit, Focuses on Fee-Based Business

Sun Life Financial Inc. SLF divested SLF of Canada UK Limited (Sun Life UK) to Phoenix Group Holdings plc. The divestiture will help this Zacks Rank #2 (Buy) life insurer intensify its focus on growing its fee-based and capital-light businesses.

As part of the divestiture, Sun Life, the third largest insurer in Canada, will build a long-term asset management partnership with Phoenix Group. Phoenix Group, with £310 billion in assets under administration, is the largest long-term savings and retirement business in the United Kingdom. Thus, this transaction provides growth opportunities for Sun Life's asset management businesses. MFS and SLC Management will continue to manage about C$9 billion of Sun Life UK's general account.

Sun Life UK manages life and pension policies and annuity blocks for UK clients. Post the divestiture, Sun Life will retain its economic interest in UK's payout annuities business, which is estimated to generate about $30 million of annual underlying net income.

Also, this divestiture frees up capital that Sun Life can deploy to build long-term shareholders’ value. This apart, SLF estimates LICAT to increase 1-2%.

Sun Life is aggressively expanding its Global Asset Management Business. Its asset base has been growing for the past many quarters. As of Dec 31, 2022, assets under management were $1.3 trillion.  Sun Life Investment Management fosters its investment capabilities in private fixed income, mortgages and real estate by investing in pension plans and other institutional investors. This development further strengthens the company’s Asset Management pillar, which provides a higher return on equity, lower capital and lower volatility and has the potential for an earnings upside.

Phoenix Group has closed four buyouts over the last seven years. Its assets under administration have risen by more than 300% over the past five years along with organic growth. The addition of Sun Life UK will help Phoenix Group strengthen its portfolio further.

Phoenix Group aims to invest about $25 billion in North American public and private fixed-income and alternative investments over the next five years. Andy Briggs, Phoenix Group’s CEO stated, “This partnership will complement our existing relationships and further enhance our liquid and illiquid credit capabilities in North America by building on their strong presence in the region.”

Shares of SLF have gained 1% year to date against the industry’s decline of 1.3%. Sun Life’s focus on the expansion of its Asia business and global asset management business, favorable business mix, strategic acquisitions and solid capital position should help the stock gain momentum.

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Zacks Investment Research


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Other Key Picks

Some other top-ranked stocks from the insurance industry are Primerica PRI, Voya Financial VOYA and Brighthouse Financial BHF.

Primerica’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters. PRI sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for PRI’s 2023 and 2024 earnings per share indicates a year-over-year increase of 18.3% and 8.9%, respectively.  Year to date, PRI shares have gained 18.5%.

Voya Financial’s earnings surpassed the Zacks Consensus Estimate in all the last four quarters, the average earnings surprise being 38.68%. VOYA carries Zacks Rank #2.

The Zacks Consensus Estimate for VOYA’s 2023 and 2024 earnings per share indicates a year-over-year increase of 6.1% and 14%, respectively. Year to date, VOYA shares have gained 16.3%.

Brighthouse Financial’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, the average beat being 2.07%. BHF carries Zacks Rank #2.

The Zacks Consensus Estimate for BHF’s 2023 and 2024 earnings per share indicates a year-over-year increase of 29.4% and 12.6%, respectively.  Year to date, BHF shares have lost 17.3%.

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