Barclays Maintains an 'Underweight' on Sun Life Financial (SLF); Exits U.S. Variable Annuity and Individual Life Business

Barclays maintains an 'Underweight' on Sun Life Financial (NYSE: SLF) price target of C$23.

Barclays analyst says, "Yesterday, Sun Life announced the completion of its strategic review; it will be closing its U.S. variable annuity (VA) and individual life insurance businesses. Sun Life expects one-time transition costs of ~$75mn-$100mn pre-tax, with a portion expected in Q4-11. $97mn of goodwill could be written down as a result. Management estimates savings of $170mn/yr which should reduce expected strain by roughly $10mn-$15mn/qtr and posted capital by $300mn on an MCCSR basis and $100mn on an RBC basis."

"Transition Likely Immaterial in Near Term: While we agree that SLF should be transitioning its focus to higher-ROE areas and the savings and impact on capital are positive, the in-force blocks of business are still on the books and are susceptible to swings in equity markets and interest rates. In addition, the duration of these products is long and the impact on sensitivities as well as the capital to be released will likely take a number of years. However, long term, we view this as a positive for Sun Life."

For an analyst ratings summary and ratings history on Sun Life Financial click here. For more ratings news on Sun Life Financial click here.

Shares of Sun Life Financial closed at $19.30 yesterday.

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