EUR 850.00 For Business Accounts Only

Morningstar | We continue to be impressed by Sun Life's transformation into a safer company.

We believe Sun Life has effected several key positive changes in its business operations since the financial crisis. The biggest decision was the cessation and eventual sale of its lagging U.S. life insurance and annuities business. This segment had been a key exposure for Sun Life, and the difficult-to-price and -manage variable-annuity products stung many insurers in the aftermath of the crisis. The firm is now increasingly focused on limiting the drags on returns from its primary insurance and group benefit businesses in Canada and the United States, where returns have marginally exceed the cost of capital for the past couple of years. That said, we like that its group benefits business has undergone some repricing. Some weaker-performing businesses have terminated coverage, which should positively affect loss ratios and margins. The firm should also benefit from a broader portfolio of offerings to potentially cross-sell relative to its other counterparts. Of its cohorts, we see the firm as the most dedicated to introducing digital offerings to customers in order to sell additional products. Sun Life has also gradually shifted toward higher-return businesses, notably SLF Asset Management, which is its most attractive segment from a return standpoint and the one area that we view as potentially moaty.Canada and the U.S. continue to have several demographic trends working in favor of insurers, especially with wealth- and asset-management businesses, as an aging population increasingly looks to manage its savings. That said, we expect competition to remain fierce as other large Canadian insurers, as well as Canadian banks, are eyeing the same opportunities, including expanding their asset-management capabilities. However, areas of growth remain fiercely competitive and life insurance will remain structurally difficult, making it hard for Sun Life to sustain any excess returns over time.Sun Life is also focused on expanding its operations in Asia. While Asia does tend to offer higher top-line growth, we are wary that such a difficult environment can provide value-creative growth for the firm in the long run.