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Sun Life profit drops, but beats expectations

Sun Life Financial president and CEO Dean Connor

MARK BLINCH/REUTERS

Sun Life Financial Inc. has reported a first-quarter profit of $513-million, a 25 per cent drop from its $686-million earned a year earlier.

But even with the decline, the insurer's earnings beat analyst expectations as sales in business lines such as wealth management and Asia increased.

The earnings amounted to 85 cents per share, compared to $1.15 in the same period last year.

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The company noted in its earnings release Wednesday that equity markets contributed favourably to earnings.

The company posted an improved operating net income from its continued operations of $448-million, compared to $437-million in the first quarter of 2012. Sun Life uses this measure to express earnings excluding certain market-related factors that create volatility in earnings, such as interest rates. Operating earnings per share were up to 94 cents a share, which exceeded analysts' estimates of 66 cents.

Sun Life chief executive officer Dean Connor said in a statement that more favourable market conditions had contributed to better earnings for the company, with insurance sales growing by 5 per cent and wealth sales up 16 per cent.

Wealth management is an area of the company watched closely by investors.

"It appears to us that Sun Life is moving beyond the early stages of transforming itself from a life insurer focused on manufacturing and distributing protection products, to a wealth management company focused on investment products with a strong protection business on the side," analyst Peter Routledge wrote in a preview note before the earnings results.

At the company's annual investor meeting in Toronto on Wednesday, Mr. Connor outlined plans to address the biggest drivers of growth for insurance companies, including the country's aging demographics and the rise of middle-class Asia.

Sun Life's Asia division reported net income of $51-million, up from $29-million last year on the back of stronger market conditions in the Philippines and Hong Kong, as well as general growth of the business. However, sales in India and China saw drops.

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Mr. Connor also commended the government's continued support of Canada's insurance companies doing business in Asia, but said "taking the next step will be critically important – for example getting targeted foreign investment protection agreements in place; and working with Asian governments to create a level playing field for Canadian insurers to compete with local life insurers."

Mr. Connor said that the "trans-Pacific partnership negotiations must be conducted," referring to the free-trade agreement discussions the government is pursuing to strengthen partnerships in the Asia-Pacific region.

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About the Author
Financial Services Reporter

Jacqueline Nelson is a financial services reporter at the Report on Business. Prior to that she was a staff writer at Canadian Business magazine, covering news and writing features on a wide variety of subjects. More

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