Sun Life Tops Estimates on Lower Net Income, Better MFS Earnings

The life insurer says it will launch a new Canadian mutual-fund family in the fall

Sun Life Financial (SLF) on Wednesday, August 5, reported net income of $213 million for the second quarter of 2010, compared with net income of $591 million in the same period last year. Diluted earnings per share were $0.37 compared to $1.05 in the second quarter of 2009.

Analysts had expected the company to have EPS of $0.25.

The Toronto-based company said that volatile market conditions continued to impact its results and "reflected a much different capital market environment than the same period one year ago," according to a statement.

"We continued to execute on our growth strategies this past quarter, resulting in solid growth in sales and premiums and deposits across a number of our businesses and geographies," CEO Donald Stewart explained in a press release.

"Strong momentum continued in our Canadian businesses, spurred by a significant increase in sales of individual life and health insurance, fixed income products and annuities," he added.

"In the U.S., sales of variable annuities rose 7% compared to the same period last year due to improved productivity among wholesalers and our increased investment in marketing and brand," said Stewart in a press release. "Earnings at MFS, our U.S.-based asset manager, were very strong compared to the same period last year, primarily due to higher average net assets."

During the quarter, the company said it began forming a new mutual fund company to "bring a family of world-cla ss mutual funds to Canadians" -- Sun Life Global Investments (Canada) Inc. -- to be launched in the fall of 2010.

In June, the company launched a current-assumption universal life product in the U.S.

U.S. variable annuity sales in the second quarter of 2010 were $893 million, an increase of 7% from the same period a year ago. As anticipated, fixed annuity sales decreased in the second quarter of 2010.

Individual insurance U.S. sales were $33 million, representing a 40% decrease from the prior year "primarily due to lower sales of no-lapse guarantee universal life insurance and lower sales in non-core product lines," the company said in a statement.

"The company will exit the no-lapse guarantee market and continue to focus on new and existing individual insurance offerings, such as the recently launched current assumption universal life product, which have greater potential for sustainable and profitable growth," it explained.

In U.S. dollars, MFS earnings in the second quarter of 2010 were $46 million compared to earnings of $27 million in the second quarter of 2009.

"The increase in earnings from the second quarter of 2009 was primarily due to higher average net assets, which increased to $191 billion in the second quarter of 2010 from $140 billion in the second quarter of 2009 as a result of strong net sales and improved performance in financial markets," Sun Life said in a statement.

MFS says total assets under management as of June 30, 2010, were $183 billion compared to $187 billion in December 31, 2009. In addition, net sales of $6.8 billion were offset by weakness in the financial markets, which reduced asset levels by 11.1 billion in the first six months of 2010.

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