UPDATE 3-Sun Life Q4 profit surges, misses expectations

* Q4 EPS C$0.52 vs C$0.23 yr-earlier

* ROE up to 7.6 pct vs 3.3 pct yr-earlier

* Misses expectations for C$0.65 EPS
(Recasts with analyst comment, details)

By Andrea Hopkins

TORONTO, Feb 11 (BestGrowthStock) – Sun Life Financial (SLF.TO: )
said on Thursday quarterly profit more than doubled, aided by
stock market gains and improved sales, but the results came in
below market expectations.

Sun Life said net income surged to C$296 million ($279
million), or 52 Canadian cents a share, in the fourth quarter,
below the 65 Canadian cents a share expected by analysts,
according to Thomson Reuters I/B/E/S.

While the profit was more than double the year-earlier
income of C$129 million, or 23 Canadian cents a share, RBC
Dominion Securities analysts said the lower-than-expected
profit was slightly negative for the stock.

“There was a shortfall in expected profit, impact from new
business and earnings on surplus, a good part of which we
expect to turnaround in the first half of 2010,” the analysts
wrote in a note to clients.

Two key metrics showed Sun Life has strengthened after a
tough 2009, when the fallout from the financial crisis and
plunging stock markets was felt.

Return on equity, a key measure of profitability, was 7.6
percent, up sharply from 3.3 percent a year earlier, while the
minimum continuing capital and surplus requirement was a
healthy 221 percent.

“We believe Sun Life remains better capitalized than its
peers and has additional capital at the holding company level,”
RBC said in its note.

Strong capital gives the company flexibility to absorb
market jolts, and leaves Sun Life well-positioned to make big
investments once the financial uncertainty is passed, either
through acquisitions or organic growth.

While the results were below expectations, the quarter was
a sharp contrast to the struggles of a year earlier, when
market turbulence and exposure to ailing equity and credit
markets sideswiped profits.

Canadian insurers are still wrestling with repercussions
from the drop in value of their long-term assets, but stock
market gains, a brighter economic outlook and a rebalancing of
long-term liabilities should see a brighter 2010.

The company did not make any year-end adjustments to its
economic assumptions, having taken a big hit by doing so in the
third quarter. Life insurers typically adjust the assumptions
on which they base their long-term liabilities on a regular
basis, which can dramatically affect earnings.

Based on the assumptions unveiled in the third quarter, Sun
Life reiterated its expectation that adjusted earnings from
operations in 2010 will be in the range of C$1.4 billion to
C$1.7 billion.

That’s sharply up from the full-year operating profit of
C$561 million notched in 2009, but still below levels reached
before the financial crisis.

From 2005 to 2007, the company generated average annual
operating earnings of C$2.1 billion.

In the fourth quarter, Sun Life saw marked improvement in
both its Canadian and U.S. business segments.

Canadian operations had net income of C$243 million in the
final three months of 2009, reversing a C$55 million net loss
in the same period a year earlier.

U.S. operations also improved, though were not yet
profitable. Sun Life posted a loss of C$9 million at its U.S.
segment, compared with a loss of C$679 million in the same
quarter a year earlier.

Shares of the Sun Life closed at C$31.36 Wednesday on the
Toronto Stock Exchange.

Sun Life is the first of Canada’s big three life insurance
companies to report results. Manulife Financial Corp (MFC.TO: ),
North America’s largest life insurer, and Great West Lifeco Inc
(GWO.TO: ), Canada’s No. 2, are due to report later on Thursday.
($1=$1.06 Canadian)

Stock Market Investing

(Additional reporting by Anurag Kotoky in Bangalore; Editing
by Derek Caney, Bernard Orr)

UPDATE 3-Sun Life Q4 profit surges, misses expectations