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Sun Life Financial Inc. (SLF) is a leading international financial services organization, offering a diverse range of life and disability insurance, savings, investment management, retirement, and pension products and services to both individual and corporate customers.

*all amounts are in Canadian dollars unless otherwise noted.

Sun Life is Canada's third largest insurance company by revenue with FY 2011 coming in at $22.5 billion. The company also had over $514 billion of assets under management as of Sept. 30 2012. North America is the primary driver of revenue, providing over 80%.

The company suffered through a challenging 2011 with key metrics deteriorating. Operating net income for FY 2011 was 104 million. Operating return on equity was a 0.8%.

Even more concerning was a decline of the Minimum Continuing Capital and Surplus Requirements ratio MCCSR from 228% to 211%.

Quoting the globe and mail: source
The bare minimum that Canada's financial regulator allows is 150 per cent, but nobody wants to get close to that, and the regulator would be on an insurer's back to raise capital long before the ratio actually got there.

Luckily for Sun life, the bleeding stopped and 2012 has been a profitable year.

Operating net income was $1.2 million for the nine months ended September 30, 2012, compared to $325 million for the same period in 2011. Net income for the first nine months of 2012 was positively impacted by improving equity markets, favourable investment activity on insurance contract liabilities due to investment in higher yielding and longer dated debt securities, net realized gains on sales of available-for-sale ("AFS") assets and favourable swap spread movements. These items were partially offset by the unfavourable impact of declining interest rates, which resulted in lower fixed income reinvestment rates in insurance contract liabilities, and negative impact from credit spread movements.

Net income for the nine months ended September 30, 2011 was unfavorable impacted by declines in equity markets and interest rate levels, assumption changes and management actions, higher levels of investment in growth and service initiatives in our business and losses in our Corporate segment. This was partially offset by increases in the fair value of real estate classified as investment properties and the favourable impact of investment activity and experience on insurance contract liabilities.

Reported ROE was 11.0% for the first nine months of 2012, compared to 2.1% for the first nine months of 2011.

Sun Life Assurance's MCCSR ratio was 213% as at September 30, 2012, compared to 211% as at December 31, 2011. The MCCSR ratio increased primarily as a result of net income (net of dividends) and favourable equity markets, partially offset by business growth and the phase-in impact of the conversion to IFRS.

The following tables set out the estimated immediate impact or sensitivity of Sun Life's net income, OCI and Sun Life Assurance's MCCSR ratio to certain instantaneous changes in interest rates and equity market prices as at September 30, 2012 and December 31, 2011.
Their interest rate sensitivities have decreased since December 31, 2011. Approximately two thirds of this reduction in sensitivity is the result of increased hedging done throughout the first three quarters of 2012 in variable annuity, segregated fund and universal life lines of business. The balance results primarily from changes in actuarial methods, assumptions and modeling, which reduce the sensitivity of their liabilities and net income to interest rates.

Interest rate and equity market sensitivities

As September 30, 2012at   
 Net income
($ millions)(3)
Increase/(decrease)
in after-tax OCI
($ millions)(4)
MCCSR(5)
Changes in interest rates(1)   
50 basis point increase$ 100$ (200)Approximate 1 percentage point increase
50 basis point decrease$ (200)$ 200Approximate 3 percentage point decrease
    
100 basis point increase$ 200$ (400)Approximate 2 percentage point increase
100 basis point decrease$ (400)$ 400Approximate 5 percentage point decrease
    
Changes in equity markets(2)   
10% increase$ 100$ 50Approximate 4 percentage point increase
10% decrease$ (150)$ (50)Approximate 3 percentage point decrease
    
25% increase$ 200$ 150Approximate 4 percentage point increase
25% decrease$ (400)$ (150)Approximate 8 percentage point decrease
    
As at December 31, 2011   
 Net income
($ millions)(3)
Increase/(decrease) in
after-tax OCI
($ millions)(4)
MCCSR(5)
Changes in interest rates(1)   
50 basis point increase$ 250$ (150)Approximate 3 percentage point increase
50 basis point decrease$ (300)$ 200Approximate 3 percentage point decrease
    
100 basis point increase$ 500$ (350)Approximate 7 percentage point increase
100 basis point decrease$ (700)$ 350Approximate 9 percentage point decrease
    
Changes in equity markets(2)   
10% increase$ 100$ 50Approximate 3 percentage point increase
10% decrease$ (150)$ (50)Approximate 2 percentage point decrease
    
25% increase$ 200$ 150Approximate 4 percentage point increase
25% decrease$ (350)$ (150)Approximate 6 percentage point decrease
(1) Represents a parallel shift in assumed interest rates across the entire yield curve as at September 30, 2012 and December 31, 2011, respectively. Variations in realized yields based on different terms to maturity, geographies, asset class types, credit and swap spreads and ratings may result in realized sensitivities being significantly different from those illustrated above. Sensitivities include the impact of re-balancing interest rate hedges for variable annuities and segregated funds at 10 basis point intervals (for 50 basis point changes in interest rates) and at 20 basis point intervals (for 100 basis point changes in interest rates).
(2) Represents the respective change across all equity markets as at September 30, 2012 and December 31, 2011, respectively. Assumes that actual equity exposures consistently and precisely track the broader equity markets. Since in actual practice equity-related exposures generally differ from broad market indices (due to the impact of active management, basis risk and other factors), realized sensitivities may differ significantly from those illustrated above. Sensitivities include the impact of re-balancing equity hedges for variable annuities and segregated funds at 2% intervals (for 10% changes in equity markets) and at 5% intervals (for 25% changes in equity markets).
(3) The market risk sensitivities include the estimated mitigation impact of our hedging programs in effect as at September 30, 2012 and December 31, 2011, respectively, and include new business added and product changes implemented prior to such dates.
(4) A portion of assets designated as AFS are required to support certain policyholder liabilities and any realized gains (losses) on these securities would result in a commensurate increase (decrease) in actuarial liabilities, with no net income impact in the reporting period.

(5) The MCCSR sensitivities illustrate the impact on Sun Life Assurance as at September 30, 2012 and December 31, 2011, respectively. This excludes the impact on assets and liabilities that are in SLF Inc. but not included in Sun Life Assurance.

For income investors, SLF offers a compelling 5.47% yield. The stock was also recently upgraded to a buy at TheStreet on Nov. 09 2012. source

SLF has had a great 2012 compared to 2011. This little followed stock has made quite the turnaround.

Source: Sun Life Financial Bounces Back To A Profit