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Sun Life Financial says continuing operations showed improved Q2 profit

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TORONTO - Sun Life Financial Inc. (TSX:SLF) says its continuing operations were more profitable in the second quarter than they were at the same time last year, although its Canadian arm provided less operating net income.

Overall operating net income, excluding certain items and discontinued operations, was $488 million or 80 cents per share, up from $431 million or 71 cents per share in the second quarter of 2013.

However, SLF Canada's operating net income fell to $197 million — down from $210 million a year earlier.

By contrast, its MFS Investments segment showed in increase to $145 million in Canadian currency (US$133), up from C$104 million (US$101 million) a year before.

The Toronto-based company's continuing operations exclude a U.S. annuities business and certain U.S. life insurance businesses that were sold on Aug. 1, 2013.

Sun Life's operating net income also excludes certain items that are reported under international financial reporting standards, such as the impact from fluctuating interest rates and equity markets and changes to management assumptions.

Under IFRS, Sun Life's reported net income from continuing operations was $425 million or 69 cents per share, up from $391 million or 64 cents per share in the second quarter of 2013.

Sun Life is one of Canada's largest providers of life insurance and wealth management services. It also has extensive operations outside the country.

Apart from its SLF Canada and MFS, Sun Life U.S. accounted for $92 million, Sun Life Asia provided $37 million and corporate activities that aren't included in other business segments provided $9 million of net income in the second quarter.

As of June 30, Sun Life had $684 billion of assets under management, up 16 per per cent from a year earlier due to favourable markets that increased the value of its holdings, stronger sales and a positive impact from currency fluctuations.

Barclays analyst John Aiken said that Sun Life's underlying earnings — a measure of profitability introduced by Sun Life in the first quarter — amounted to 81 cents per share, which was better than the estimate of 73 cents per share. But Aiken said most of the difference was at the corporate level, which had losses both a year earlier and in the previous quarter.

"Should investors discount this level of earnings, we are concerned that the view may be more that Sun Life simply met expectations and could reverse any early gains (in its stock price)," Aiken wrote in a research note issued Wednesday.

He said Sun Life's performance at the operating level was "mixed." While MFS, SLF U.S. and SLF Asia showed year-year improvement, "SLF Canada had a weaker performance, down seven per cent from the first quarter and 12 per cent from a year ago."

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