Why You Should Hold onto Sun Life (SLF) Stock Right Now

Shares of Sun Life Financial Inc. SLF gained 14.5% over a one year period. Though the stock underperformed Zacks categorized Life Insurance industry’s gain of 28.11%, the Zacks Rank #3 (Hold) life insurer’s diversified business profile positions it well for the long term.

In a bid to expand internationally, Sun Life – the third-largest insurer in Canada – has been focusing on the emerging economies of Asia. Also, the company believes that these markets are likely to provide higher return and growth than the North American markets. The company has a strong presence in China, Philippines, India, Hong Kong and Indonesia. It has forayed into Malaysia and Vietnam in recent times, increasing its presence to seven markets. No wonder, this has been supporting the company’s bottom-line growth.

We note that the company often undertakes strategic buyouts to expand its footprint. It had adopted the same strategy to expand its presence in Vietnam, India, and Hong Kong.

Sun Life has consciously revamped its business mix to increase profitability. The company deploys capital in businesses that have the potential to generate a higher return on equity. It also engages in shareholder-friendly moves to cement investor confidence on the stock.

Sun Life is shifting its focus toward products that require lesser capital but offer more predictable earnings, such as mutual funds and group benefits. The company is also growing its voluntary benefits business (came up with new products in this line) and targeting a place among the top five players.

Sun Life is concentrating on the growth of its Global Asset Management Business, which has been witnessing an increase in asset base over the past many quarters. The life insurer targets Sun Life Investment Management asset under management of approximately $100 billion over the next five years.

Banking on its operational strength, Sun Life reiterated its medium-term financial objectives. The company still expects earnings per share to increase 8–10%. Return on equity is estimated between 12% and 14%, while the dividend payout ratio is likely to be 40–50% of the underlying net income. Sun Life Financial remains focused on expanding the U.S. Group margins to a range of 5–6% in the medium term. The company is also on track to integrate and deliver on the synergies of its employee benefits acquisition.    

Stocks to Consider

Some better-ranked stocks from the insurance are American Financial Group, Inc. AFG, Argo Group International Holdings, Ltd. AGII and The Progressive Corporation PGR.  Each of these stocks flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

American Financial Group engages primarily in property and casualty (P&C) insurance with focus on specialized commercial products for businesses. Shares of the company gained 31.93% in a year’s time.

Argo Group underwrites specialty insurance and reinsurance products in the P&C market worldwide. Its shares rallied 26.12% in a year’s time.

Progressive offers personal and commercial P&C insurance, and other specialty P&C insurance and related services, primarily in the U.S. Shares of the company gained 12.74% in a year’s time.

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Sun Life Financial Inc. (SLF): Free Stock Analysis Report
 
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