Wednesday, June 24, 2009

Sun Life Financial

I am reviewing this stock (TSX-SLF) today as I have received its annual report. I updated all my spreadsheets as I received the proxy notices and I am gradually reviewing all these stocks in my blog. Since most companies have the end of December as the annual statement date, it takes some time to review them all.

I first bought this stock in 2000 not long after it demutualized. I have added to what I have in 2001 and 2003. To date, including dividends, I have only earned a return of 3% a year. I have it in two accounts and for my pension account, for which I have had this stock since 2000 and got some more in 2001; I have a more decent return of 7.25% per year. I have no intentions of selling my shares, as I continue to believe in the long term prospects of this stock.

Both this insurance company and Manulife are going through a rough time. Investors are worried about the guarantees on segregated funds, which is basically a bet by the insurance companies that the stock market will not have 10 year periods of stock market loses. Segregated funds sold by insurance companies are the equivalent of mutual funds. However, they usually have some sort of guarantee attached. However, these guarantees are not cheap and usually increase the management fees by around 1% per year.

The TSX Index has been around in some form since 1956. I found only one year when there was a 10 year period of negative returns and this was the 10 year period ending in 1974. Although 2009 has also flirted with being 10 year negative return year, currently it is not. The 10 year return to June 23, 2009 stands at 17.6%. (See my site for information on my analysis of this question.)

For this company, the growth figures I follow are not good. Some the 10 year figures are not bad, but most of the 5 year figures are awful. The bright spot was the dividend increases, but this company did not raise their dividends for 2008 and, so far, in 2009 there have been no increases. 2007 was a so-so year for this company. 2008 was not a good year and 2009 looks like the same. No one seems to feel that this company will pick up until at least 2010.

The Asset/Liability Ratio for this stock is 1.17 at the end of 2008 and 1.16 at the end of March 2009. This is a financial stock and they tend to have lower A/L ratios than other types of stock. However, this ratio shows that they have enough assets to cover their liabilities. The problem, of course, is any liability occurred because of their segregated funds guarantees is not included in this ratio.

The Return on Equity (ROE) also took a dive in 2008 and was only 5%. For the quarter ending in March 2009, the ROE is negative. However, most analysts feel that by the end of the year, there will be a positive return in earnings for this stock.

The really bright spot is the Accrual Ratio. The total accruals were negative for the end of December 2008 and for the end of March 2009, they are even better. The Accrual ratio for the end of December 2008 was “-2%” and for the end of March 2009 is “-5.23%”. Anything below -5% is great. And, as I have stated, I intend to hold on to my Sun Life shares at the present time.

This is an insurance company. It provides a diverse range of protection and wealth management products and services to individuals and corporate customers. It operates internationally. Its web site is See my spreadsheet at

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets.

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