Morningstar Expects Sun Life To Expand Presence Overseas

Sun Life Financial Inc.’s (SLF) domestic business is the firm’s “crown jewel,” but its international operations are where the growth is, says Morningstar analyst Chris Blumas.

The life insurance giant’s profits for the first nine months of 2007 were up 8% compared to last year at $1.7-billion. Profits from domestic business lines grew 7%, while the insurer’s business outside Canada was up 20% on a Canadian dollar basis.

“Looking ahead, we think Sun Life will continue to look for acquisitions abroad and that its international presence provides the firm with a greater opportunity set of potential targets when compared with rivals that are more focused on North America,” said the Morningstar analyst.

“With an extensive footprint across India and a developing footprint in China, Sun Life is well positioned to benefit from growth in Asia,” he said.

Downside potential for overseas operations includes price competition affecting Sun Life’s U.S. group benefits business, and a “joint venture arrangement in China that may prove to be cumbersome and limit the profit potential from the region,” Mr. Blumas said.

Overall, Sun Life’s third quarter was in line with Morningstar’s expectations. Morningstar says the fair value of Sun Life’s stock is US$50.

SLF 1-yr chart: