The Sun Life Financial building in Toronto.MICHELLE SIU/The Globe and Mail
Sun Life Financial Inc.'s earnings fell in the third quarter of the year, but the company reduced risk by parting ways with a volatile U.S. division.
The Toronto-based insurer's final profit on continuing operations, stripping out its old U.S. annuities business, was $324-million or 53 cents a share, Sun Life said after the market closed Wednesday. That compared with $441-million or 74 cents in the same period last year.
Sun Life's operating profit from continuing operations, which measures results without some accounting adjustments and other considerations, fell to $422-million from $459-million in the third quarter of last year. Operating share profit share came in at 69 cents a share, down from 77 cents, but the share earnings still exceeded analysts' estimates of 64 cents.
Sun Life's chief executive officer Dean Connor said the company "benefited from favourable market conditions" in the quarter.
Across the business, wealth sales and insurance sales both increased – up 25 and 16 per cent respectively. Although, gains were not as strong as last quarter.
In early August of this quarter Sun Life closed the $1.35-billion sale of its U.S. annuities business to Delaware Life Holdings, LLC. Analysts generally viewed the deal, which took an usually long time to close, as a positive for the insurer as it reduces volatility and interest rate exposure. Sun Life put an end to sales of its U.S. variable annuity and individual insurance products in 2011.
Mr. Connor called the move a "milestone that has significantly improved Sun Life's risk profile."
The continued operations figures strip out that sale. If that sale was factored in, Sun Life would have posted a combined operations final loss of $520-million, down from a profit of $399-million in the third quarter of last year.
The company also reiterated its warning that the conditions in the global market could have an effect on the business.
If September's interest rate levels persist through the end of 2015, profit is expected to be reduced by about $50-million in the fourth quarter of this year, $100-million in 2014 and $50-million in 2015, "due to declines in assumed fixed-income reinvestment rates in our insurance contract liabilities," the insurer said.
Sun Life performed well in Canada as individual insurance sales increased 17 per cent from last year to $75-million.
Over in Asia, individual life insurance sales increased in the Philippines, Hong Kong and Indonesia, but were lower in India and China.
Sun Life's stock has risen 34 per cent so far this year, and the stock closed at $35.43 on Wednesday, up 11 cents.
Canada's other two largest insurers, Manulife Financial Corp. and Great-West Lifeco Inc. will report their quarterly results on Thursday morning before markets open.