November 28, 2022

Y M L P-211

Business – Once You

Manulife or Sun Life: Which Life Insurer is Better Placed?

Life insurers invest a big chunk of the premiums so that they have enough funds at the time of claims payment or upon maturity. Thus, a low interest rate environment makes life insurers prone to interest rate risks, affecting their earnings, capital, and reserves and liquidity. The rate environment is expected to remain low in a range of 0-0.25%. No improvement in rates is expected before 2023 as outlined in the September FOMC meeting.

Spike in mortality due to increasing cases of COVID-19 will induce higher claim payments, which might drain life insurers’ underwriting incomes.

The industry has lost 24.3% year to date, wider than the Finance sector’s decrease of 21.2% and in contrast to the Zacks S&P 500 composite’s increase of 2.9%.

Nonetheless, life insurers are working hard to find new ways of maintaining sales and profitability. To that end, they are refraining from selling long duration term life insurance. They are also moving away from guaranteed savings products toward protection products of unit-linked savings products, which pass the investment risks to policyholders. Further, increased automation is expected to drive premium growth and boost efficiency. Adoption of technologies like artificial intelligence, robotic process automation, cognitive intelligence or blockchain should help life insurers curb operational costs and aid margin expansion.

The Zacks Life Insurance industry, within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #65, which places it in the top 26% of 253 Zacks industries. The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. The industry’s earnings estimate for 2020 has gone up nearly 6% since June end.

Here we focus on two life insurers, namely Manulife Financial Corporation MFC and Sun Life Financial Inc. SLF. Both the insurers carry a Zacks Rank #2 (Buy) and are among the top three life insurers in Canada. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Manulife provides financial advice, insurance, and wealth and asset management solutions in Asia, Canada, the United States, and internationally while Sun Life provides insurance, wealth, and asset management solutions in the United States, the United Kingdom, Canada, and internationally.

Let’s now see how these life insurers have fared in terms of some of the key metrics.

Price Performance

Sun Life has outperformed both Manulife and the industry year to date. While shares of Sun Life have lost 12.9%, Manulife has lost 33%.

Return on Equity (ROE)

Sun Life with a return on equity of 13.8% exceeded Manulife’s ROE of 11.5% and the industry average of 11.8%. Sun Life thus has an edge.


Compared with the life insurance industry’s P/E F12M ratio of 7.29, Sun Life with a reading of 10.02 is overvalued compared to Manulife with a reading of 6.32. Manulife thus has an edge.

Dividend Yield

Manulife with dividend yield of 6.2% betters Sun Life ’s 4.1% as well as the industry’s average of 3.6%. Manulife thus has an edge over Sun Life in this context.


Manulife’s debt-to-equity ratio of 10.7 is lower than the industry average of 13.4 and Sun Life’s reading of 19.8.  

Earnings Surprise History

Sun Life outpaced expectations in the four trailing quarters, delivering an average surprise of 11.58%. Manulife surpassed estimates in two of the last four quarters, the average surprise being 6.79%.

Sun Life has an edge in this respect.

Growth Projections

For Manulife, the Zacks Consensus Estimate for 2020 earnings per share and revenues indicates a year-over-year decline. The long-term earnings growth rate is pegged at 2%

For Sun Life, the Zacks Consensus Estimate for 2020 earnings per share indicates a year-over-year decline while the same for revenues implies an increase. The expected long-term earnings growth rate is 9%.

Sun Life has an edge over Manulife in this regard.

VGM Score

Sun Life has a favorable VGM Score of B while Manulife has a VGM Score of D. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors. Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 or #2 are the best investment bets.

To Conclude

Our comparative analysis shows that Sun Life has an edge over Manulife with respect to price performance, return on equity, earnings surprise history, growth projection, and VGM Score. Meanwhile, Manulife scores higher in terms of valuation, leverage, and dividend yield.   

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Manulife Financial Corp (MFC): Free Stock Analysis Report

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

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.