Sun Life Financial Inc (SLF.TO)

All of the interest sensitives have been under pressure the last couple of months with rates rising.

He favours TD. Tightly regulated oligopoly, and a levered play on the growth of the Canadian, and increasingly US, economy. Surplus of excess capital. 10x earnings. Dominant personal and commercial banking franchise. Good-sized banking presence in the US. Shares are at a discount to average. Close to 5% yield, growing at 8% compound over 10 years.

Valuation and yield of SLF are similar to TD. But TD's competitive position in its industry is more advantageous than SLF.

Compared to CM, TD is more of a scale player with a stronger franchise on both sides of the border on its core banking business.

Insurers are much more difficult to analyze than banks, so he prefers banks, but this is a great one to own. High quality. Insurance and wealth management. Global presence with Canada (50% of revenues), US (17%), Asia (17%), and Europe (10%). Chinese business rebounding from Covid. Strong balance sheet, net cash. ROE above market average. 10x earnings, cheap. Yield is 4.5%.

Lifecos could do well in the coming period. Higher rates lower their long-term costs and help ratios. 

The insurance business is good in a bumpy market. It posted the best results of the other insurers. Its earnings per share growth is everywhere globally. It has a 4.5% dividend. If comparing lifecos and banks, there is more room for lifecos.      Buy 10  Hold 7  Sell 1

Middle of the range growth. High quality. Very well managed. Good dividend yield.

SLF currently trades around $64, which is $5 below its 52-week high. As for its peers, Manulife pays an attractive 5.57% dividend, but it can never break above $27.50 and shares are currently touching the top of its trading range. MFC is a fast trade at best. Great-West Life is in a similar boat, paying a 5.49% yield, but is a dollar away from returning to its historic ceiling of $39 that it hasn’t broken yet. In contrast, SLF’s chart a gradual rise since 2011 of higher highs and higher lows. Read Canadian dividend payers for our full analysis.

Underlying return on equity of 15.5% reflected the strong earnings in the quarter, approaching our medium-term objective of 16% plus. 
As mentioned earlier in my comments, capital also remained solid in the quarter, and we were pleased to announce a $0.03 increase to our common share dividend. 
In September, SLF announced intention to acquire a majority stake in Advisors Asset Management, or AAM, a leading independent U.S. retail distribution firm.
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He'd still recommend it at these levels. Extremely well capitalized at 127%. Interest rate increases hit bond portfolios of all insurance companies, should get better with rates stabilizing. Internationally diversified. Yield is 4.5%.

Better business model than ManuLife.
Well regarded CEO. 
Strong dividend yield.
Company will perform better with rising interest rates.
Unsure on growth prospects for company.
Tremendous opportunity to run business more efficiently. 

Both high quality, good balance sheets, strong management. Both attractive value right now. MFC is 8x earnings, SLF is 11x. Asian business is a differentiator, which both have. MFC is much more international, with 80% of revenues from outside Canada, and 50% from Asia. Covid has slowed Asia, but when it bounces back, MFC should benefit a bit more. MFC yield slightly higher. Long term, you'll do well in both. 

A better performing insurance stock has been SLF stock, which has rallied 25% in the past five years compared to Manulife‘s 3.25%. However, Sun Life pays a lower dividend yield of 4.34% (still nothing to scoff at) and trades at a higher PE of 12.19x. Like MFC, Sun Life has significant Asian operations and could enjoy tailwinds now that China has ended lockdowns. Most recently, SLF inked a C$260-million deal with Hong Kong’s Dah Sing Bank to supply life insurance to the latter’s 570,000 customers for 15 years. Last September, SLF spent US$214 million to buy Advisors Asset Management which will bolster its alternative investment business particularly to high-net worth Americans. Read 4 Insurance Stocks to Stay Safe in a Risky Market for our full analysis. 

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Strong performance in asset management. Growing profits despite higher mortality rates. Increased dividend by 20%. Premium valuation justified. Unlock Premium - Try 5i Free