Citigroup Analyst: Sun Life Financial's Slide Could Lead to Acquisition

Sun Life Financial's (SLF) underachieving U.S. annuity business makes for a challenging near to mid-term environment and could lead to future acquisitions, says Citigroup Global Markets analyst Colin Devine.

The analyst lowered his earnings per share estimate for the Canadian lifeco by C$0.30 to C$3.70 in 2008, and by C$0.45 to C$4.15 in 2009. In 2010, he expects earnings to reach C$4.75, down C$0.40 from his previous forecast. As a result of his earnings adjustments, Mr. Devine also lowered his price target on the stock from $50 to $40 and has a "hold" rating.

Mr. Devine said in a note to clients:

[The U.S. annuity business] continues to underachieve relative to the market segment’s above average growth potential. Sun Life is now at a crossroads where management must either pursue large scale M&A to build it into a top tier player, or exit the business and focus on the company’s other U.S. product lines, namely group insurance and high net worth life insurance.

The analyst told clients that he expects Sun Life to actively pursue parts of AIG, "specifically the U.S. annuity and/or Asian life/pension businesses."

He added that Sun Life's Canadian business, which represents about half of its total earnings, continues to perform well, but growth prospects and margin expansion are moderate.

Comments

[zi1948:]

Do I need toworry about my Sun Life Financial Masters Flex Annuity?I gave the company $212,500 in 2006.The death benefit is now234,814.24 as I have death benefit option EEB Prenier with 5%. Is there a risk that the company will not have the death benefit for my heirs?thank you.

2008 Nov 11 03:36 PM